LONDON--Pearson PLC (PSON.LN), publisher of the Financial Times
newspaper and educational books and materials, Monday cut its
earnings forecasts for 2012 after changes to apprenticeship
programs in the U.K. forced it to close a business, and it flagged
a continuing tough outlook for the year ahead.
Pearson said two weeks ago it would close Pearson in Practice,
an apprenticeship business it bought for GBP112 million in 2010,
and would write down roughly GBP120 million, because government
changes to the rules on hiring apprentices have made its business
model unviable. Companies previously needed to use companies like
Pearson in Practice in order to bid for government funding for
apprenticeship programs and to manage those programs, but new rules
have allowed them to manage the process independently.
The U.K.-based group now expects 2012 earnings per share,
excluding some intangible items such as goodwill, to be around 84
pence a share, down from 84.9 pence a share previously. In 2011,
the group posted adjusted EPS of 86.5 pence a share.
Pearson's shares fell in early London trading. By 0922 GMT they
were trading around 3.4% lower at 11.96 pence, the biggest faller
on the FTSE100 blue-chip index. The company's share price has
remained range-bound at around this level for the past year.
The publisher added it was experiencing "tough market conditions
and structural industry change" across its core markets through the
fourth quarter, which it expects to continue through 2013. But it
expects modest revenue growth for its North American education
business -- its largest business unit -- and foresees market share
gains despite the tough environment.
Pearson said operating profit last year should reach GBP935
million, below the GBP942 million it delivered in 2011 but broadly
level at constant exchange rates.
The Financial Times Group saw advertising revenues weaken in the
fourth quarter, Pearson said, but it still expects to report good
full-year revenue growth. However, the FT Group's annual profit
will be significantly lower than 2011 due mainly to the sale of its
share of FTSE International, the owner of London's blue chip
FTSE-100 index to London Stock Exchange Group PLC (LSE.LN). Book
publisher Penguin performed well in the fourth quarter, Pearson
said.
Pearson's 2012 results are the last under Marjorie Scardino,
Pearson's long-term chief executive, who stepped down at the end of
December after 16 years at the helm. She has handed the reins to
John Fallon, head of Pearson's international education unit.
The company has extensive educational publishing operations,
including business and finance publisher FT, Prentice Hall, Longman
and York Notes. Under Ms. Scardino's leadership the company has
changed from a media conglomerate with diverse entertainment and TV
interests, including Madame Tussauds wax work museums, to a company
more focused on education and information technology.
While the large North American education business remains a
focus, the group is looking to emerging markets such as Brazil and
India for growth.
Ms Scardino's last major deal before leaving Pearson was
striking a joint venture between Penguin and Bertelsmann's Random
House in October to create the world's biggest book publisher with
annual revenues of about GBP2.5 billion ($3.97 billion) and a
quarter share of the English language book market.
Pearson will report its annual results in full on Feb. 25.
-By Jessica Hodgson, 44 7561 424788,
jessica.hodgson@dowjones.com; Lilly Vitorovich, -0-207 842 9290;
lilly.vitorovich@dowjones.com
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