Pearson plc's (LON:PSON) digital services improving and dividend raised 7%.
Pearson (LSE: PSON) (NYSE: PSO.US), the publisher responsible for the Financial Times and Penguin books in addition to Pearson Education, saw sales increase by 5% to £6.1bn and operating profits up 1% to £936m in preliminary 2012 results released today. Digital services and business now contribute 50% of sales, which will help to alleviate concerns that a print publisher such as Pearson would suffer the same fate as the likes of HMV and Blockbusters who neglected to move with the times.
The increased operating profit will be of comfort although earnings per share decreased to 84.2p from 86.5p in 2011 and operating cash flow dropped to £788m compared to £983m the previous year. Encouraging news came in the shape of an increased dividend, up 7% to 45p. This continued the trend for Pearson of increasing its dividend every year since 2001. Investors were overall not particularly enamoured with the results, though, with shares falling 4% or 51p in early trading.
The company signalled the changing market conditions with demand for print publishing weakening in the developed world and strong in emerging markets, while digital services gained momentum. International Education revenues were up 13% with emerging market revenues up 25%. FT Group revenues were up 4%. This was driven in large part by digital subscriptions, which now exceed print circulation for the first time. Penguin book revenues also saw digital lines taking hold, with eBooks at 17% of sales.
Commenting on the results, John Fallon, chief executive, said:
"Pearson has a sound, successful strategy: now we are significantly accelerating its implementation. Trading conditions are tough and structural changes mean many of our traditional publishing activities are under pressure. But the underlying demand for effective education remains immensely powerful and our developing world and digital services businesses have real scale and momentum. The restructuring of the company that we are announcing today is designed to strengthen dramatically Pearson's position in digital education services and in our most important markets for the future - and to enable us to capture the once-in-a-generation opportunity that comes with being the world's leading learning company."
Pearson's restructuring program is expected to cost a net of £100m in 2013 in order to generate annual costs saving of approximately £100m from 2014. These savings are earmarked to be invested into developing further organic growth.
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> Barry does not own shares in Pearson.
