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Pearson 4 interim results

Rebound in earnings, strong competitive performances, focus on cash and returns. Maintain balance sheet strength, increase cash flow, protect margins. Key financial highlights, business priorities, and outlook for the year.

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Pearson 4 interim results

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  1. Pearson4 interim results

  2. Financial highlights

  3. Headlines • Earnings rebound on track • Competitive performances strong • Cash and returns a major focus

  4. Pearson4 financial performance

  5. Financial priorities for 2002 • Protect margins • Maintain balance sheet strength • Increase cash flow

  6. Sales

  7. Operating profits

  8. Operating profits

  9. Internet enterprises – losses 112 Education FT Group 85 81 55 37 32 7

  10. Deferred taxation

  11. Adjusted earnings per share

  12. P&L

  13. Balance sheet

  14. Balance sheet – key ratios

  15. Cash flow

  16. Average annual working capital FT £1.1bn 100% Pre-publication/authors’ advances Education Inventory Penguin Receivables/payables by value2002 by business2002

  17. Average annual working capital £(17)m £1,115m £1,098m +£48m Pre-publication/authors’ advances £(61)m Inventory Receivables/Payables £(4)m 2001 2002

  18. Progress on 2002 financial priorities • Protect margins • Lower cost base in all businesses offsets advertising downturn at profit line • Maintain balance sheet strength • Improvements on all key ratios • Increase cash flow • Good cash generation and reduced working capital

  19. First half performance • Management agenda • Full-year outlook Pearson

  20. Business priorities for 2002 • Secure earnings rebound • Drive performance in future years • Benefit from more cohesive company

  21. 19%

  22. h1 performance4 management agenda 4 fy outlook Operating profits

  23. advertising revenues (at constant prices) advertising volumes h1 performance4 management agenda4 fy outlook FT NewspaperLong term trends worldwide circulation, 000s - 500 - 400 1987 = 100 - 300 100 - - 200 - 100 0 - - 0 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 H102

  24. International business titlesvolumes, 4 months to April 2002 h1 performance 4 management agenda4 fy outlook FT display advertising volumes 2001 by category Corporate finance 28% 15% B2B 29% Technology 12% 16% Personal finance Other Technology - 40% Corporate finance - 37% Business to business - 35% SOURCE: CMR

  25. h1 performance 4 management agenda4 fy outlook • Manage the cost base • Build the FT’s reach and brand • Make online investments pay • Develop Interactive Data • Broaden into education and books

  26. h1 performance 4 management agenda4 fy outlook Manage the cost base FT NEWSPAPERIndex: H2 00 = 100 circulation486,000 circulation469,000

  27. h1 performance 4 management agenda4 fy outlook Build the FT’s reach and brand FT.COMUNIQUE USERS 2.8m FT CIRCULATIONsix months to June (000’s) JAN 247,743 SOURCE: ABC/ FT.COM

  28. h1 performance 4 management agenda4 fy outlook Make online investments payFT.com revenue sources 2000 content sales 15% advertising 85% 2002E subscriptions 5% content sales 45% advertising 50%

  29. h1 performance 4 management agenda4 fy outlook Develop Interactive Data • Subscription based ‘must-have’ premium services • fixed income as well as equities • 95% renewal rates • Integration on plan • Set for double digit profit growth

  30. h1 performance 4 management agenda4 fy outlook Broaden into education and books • Linking up on campus • Creating new publishing franchises

  31. h1 performance 4 management agenda 4 fy outlook Outlook 2002 • No sign of an advertising recovery • Benefits of a lower cost base • FT.com to meet breakeven target • Double digit growth at Interactive Data

  32. 19%

  33. h1 performance 4 management agenda 4 fy outlook Operating results

  34. h1 performance 4 management agenda4 fy outlook • Work capital harder • Make Dorling Kindersley profitable • Sustain bestseller performance • Deliver back-office savings

  35. h1 performance 4 management agenda4 fy outlook Make DK profitable

  36. h1 performance 4 management agenda4 fy outlook Deliver back office savings • Operating as one company in Australia and Canada • Combining back offices in US and UK

  37. Revenue growth ahead of market DK on track for 5% margin this year Growth in double digits across Penguin h1 performance 4 management agenda 4fy outlook Outlook 2002

  38. USSchool 23% USCollege 14% 11% US Professional 14% International

  39. h1 performance4 management agenda 4 fy outlook Sales

  40. h1 performance 4 management agenda4 fy outlook International • Restore profitability in Latin America • $25m benefit in ’02 • Capitalise on demand to learn English • good growth outside the US • Grow in College and School publishing • strong in Asia and Europe; very strong in Canada and Australia • Enlarge global testing business • UK, Canada and Australia the major priorities

  41. h1 performance 4 management agenda4 fy outlook US Professional • Protect margins in technology publishing • cost management sustains margins • Make corporate training profitable • losses falling in ’02 • Expand certification contracts • sales up 20% at H1 • new testing centers open; more professions moving online • Exploit surge in federal testing and training • $150m in new contracts in ’02 • new opportunities in ’03

  42. h1 performance 4 management agenda4 fy outlook US College • Keep growing market share • on track to outperform industry • Use technology to increase adoptions and sell-through • CourseCompass driving sales • Increase lead in custom publishing • 20%+ growth is achievable

  43. h1 performance 4 management agenda4 fy outlook Our US School business • Basal & supplemental publishing • Testing & assessment • Software & online learning

  44. h1 performance 4 management agenda4 fy outlook Our US School business • Market growth through the cycle? • Market prospects for ’02 and ’03? • Our performance?

  45. h1 performance 4 management agenda4 fy outlook Standards movement drives school spending

  46. h1 performance 4 management agenda4 fy outlook US School market 2002 – 2003 • The adoption cycle • Budgets under pressure • Education remains the #1 priority • Services that deliver results being protected: • curriculum • testing • assessment and learning tools

  47. h1 performance 4 management agenda4 fy outlook US School • Gain share profitably in publishing • Build on leadership in testing • Target early learning revenues • Make leadership in online learning pay

  48. h1 performance 4 management agenda4 fy outlook US SchoolGain share profitably in publishing – ’02 • Match market growth in open territories • Stronger growth in supplemental publishing • 35%+ share of adoption dollars competed for

  49. h1 performance 4 management agenda4 fy outlook

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