Pearson said operating profits at its FT Group division would fall 10-15 per cent this year but its education and consumer publishing business was poised for good revenue and earnings growth.
“Pearson makes most of its sales and almost all of its profits in the second half of the year. We are on course to deliver a significant recovery in adjusted earnings per share in 2002,” the firm said.
But the group, which also publishes France’s Les Echos and relies on advertising for just under 10 per cent of its total group revenues, said it had still not seen any sign of an advertising recovery as clients like technology companies and banks slashed budgets.
The stock has underperformed London’s media and photography sector by more than 10 per cent during the last 12 months.
“These are a broadly positive set of results,” said Kingsley Wilson, analyst at Investec Securities. “If things don’t get any worse at the FT, and they keep their targets for education, they should be able to hit rebased expectations.”
Investors and analysts said much of the share price rally was on relief there were no horror stories in the results.
“The media sector is very much in the eye of the storm. Anything that breaks the cycle of bad news could see a disproportionate bounce in share prices,” John Hatherly, head of global analysis at M&G Asset Management, told.
Pearson said it expected its education business, responsible for more than half of the group’s revenues, to increase underlying revenues by about three to five per cent in the full year.
This is despite expectations that revenues for the division’s biggest contributor — US school, which publishes educational material such as textbooks — would be flat year on year after an eight per cent drop in the first half.
“We’ve always said that the US schools business would beflat for the year,” finance director Rona Fairhead said.
Pearson posted a pre-tax profit before goodwill, integration costs and non-operating items of 26 million pounds ($40.8 million) for the six months to end June, compared to a previous loss of 28 million pounds. Revenues in the latest period were 1.813 billion.
Post-tax, the firm reported a loss of 280 million pounds for the period, swollen from the 188 million posted for the year-ago period.
Once applauded for transforming Pearson from a jumble of assets into a streamlined publisher, Texan-born chief executive Marjorie Scardino has been taking the rap recently as the media group’s profits tumbled and shares slid to levels not seen since she took over in 1997.
In particular, pledges she made in the summer of 1997 to double the company share price over the next five years have come back to haunt her. But she told reporters at a news conference on Monday she did not regret making those remarks.
“We didn’t hit the target for one reason — advertising fell like a rock,” she said. “Suddenly we had a downturn the likes of which we’D Never seen before. I don’t think anybody could have predicted the circumstances under which we were trading.”
The future of the advertising-ravaged The Financial Times has been a source of speculation amid suggestions it may be sold off but most analysts believe that would be unlikely. Rival publisher Dow Jones & Co Inc, home to the Wall Street Journal, warned earlier this month its third-quarter results could Miss Wall Street estimates by a wide margin due partly to a dive in technology and Financial advertising.