Pearson interims

An international media and education company, providing educational materials, technologies, assessments and related services to teachers and students.  Owner of The Financial Times and part owner (47%) of Penguin Random House.  I have a holding in my income portfolio (epic code: PSON).

Pearson announced their interim results today.  Sales on continuing operations were £2,243m up 5% and at constant exchange rates growth was 3% with underlying growth of 1%.  North America Education performed well, with sales up 5% and developing markets growing by 9%.  Also of note was the 14% increase in FT digital subscriptions.  Penguin that was sold to the joint venture Penguin Random House on July 1 2013, grew sales at an underlying rate of 6% (16% on a reported basis) to £513m.   

 

Operating profit was £20m compared to £50m last year and on an adjusted (eliminating amortisation of intangibles and acquisition costs) and continuing basis was £109m down 34% from last year, partly due to £29m of restructuring charges.

 

Net debt has increased by £867m, mainly due to negative free cash flow of £370m and payment for £242m of dividends, this leaves gearing at 36% compared to 21% at the year end.

 

The interim dividend was increased by 7% to 16p.

 

The company has initiated a process to explore a possible sale of Mergermarket that provides financial intelligence, data and analysis to the M&A market.

 

In one of the most dramatic positive improvements I've seen over such a short period for defined benefit pension plans, the overall deficit on the UK group plan of £19m at the end of 2012 has become a surplus of £99m at 30 June 2013.

 

Their guidance for the year essentially remains unchanged; excluding the accounting treatment relating to Penguin Random House, where in the future it will be dealt with as an associate.  They continue to expect adjusted EPS to be broadly level with 2012 (82.6p) before expensing £100m of net restructuring costs.