Pearson 4 2001 results presentation

1. Pearson42001 results presentation Monday 4 March 2002

2. Financial highlights

3. Headlines • Advertising was the main reason for profit downturn – Ad related profits down by £116m • Other businesses did well • Earnings will rebound in 2002 – whether the economy does or not

4. Pearson4 financial performance

5. Actions to address economic downturn • Costs cut • Acquisitions integrated • Balance sheet strengthened • Working capital contained

6. Sales

7. Operating profits

8. P&L

9. Dividend

10. Capital base

11. Priorities for 2002 • Protect margins • Maintain balance sheet strength • Improve cash flow

12. Pearson4 performance and priorities

13. Leading in good markets Sharing assets, process and culture Driving performance

14. The leading source of international business news, analysis and data 19%

15. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Continue to develop Interactive Data • Build the FT’s reach and brand • Manage the cost base • Make online investments pay • Broaden into education and books

16. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Continue to develop Interactive Data • Build the FT’s reach and brand • Manage the cost base • Make online investments pay • Broaden into education and books

17. Benefit from acquisitions Re-engineer processes Move into real time f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • develop interactive data P R O F I T (£M)

18. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Continue to develop Interactive Data • Build the FT’s reach and brand • Manage the cost base • Make online investments pay • Broaden into education and books

19. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • build the ft’s reach and brand F T Y E A R E N D C I R C U L A T I O N (000’s) SOURCE: ABC

20. 2.7 m 0.2m JAN 99 JAN 00 JAN 01 JAN 02 f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • build the ft’s reach and brand F T . C O M Unique monthly users SOURCE: ABC/ FT.COM

21. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Continue to develop Interactive Data • Build the FT’s reach and brand • Manage the cost base • Make online investments pay • Broaden into education and books

22. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • manage the cost base • Newspaper costs 15% lower • FT.com costs 35% lower • Not banking on recovery

23. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Continue to develop Interactive Data • Build the FT’s reach and brand • Manage the cost base • Make online investments pay • Broaden into education and books

24. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • make online investment pay L O S S (£M)

25. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • make online investment pay 2000 2001 syndication 26% advertising 60% services 14% services 15% advertising 85% 2002E subscriptions 10% services 15% syndication 25% advertising 50%

26. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Continue to develop Interactive Data • Build the FT’s reach and brand • Manage the cost base • Make online investments pay • Broaden into education and books

27. f i n a n c i a l t i m e s4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • broaden into education and books

28. 19% Most potent brand in the business, best-in-class performance

29. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Make Dorling Kindersley profitable • Sustain bestseller performance • Work capital harder • Deliver back-office savings

30. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Make Dorling Kindersley profitable • Sustain bestseller performance • Work capital harder • Deliver back-office savings

31. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • make dk profitable P E N G U I N M A R G I N S EXCLUDES DORLING KINDERSLEY

32. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • make dk profitable • Sales force doubled • Costs per page down 10% • Time to market down 15% • Stronger frontlist, fewer titles • Creative magic sparking Pearson Education

33. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Make Dorling Kindersley profitable • Sustain bestseller performance • Work capital harder • Deliver back-office savings

34. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • sustain bestseller performance N U M B E R O F B E S T S E L L I N G T I T L E S SOURCE: NEW YORK TIMES, BOOKTRACK (UK)

35. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • sustain bestseller performance SOURCE: BOOK PUBLISHING REPORT / SIMBA

36. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Make Dorling Kindersley profitable • Sustain bestseller performance • Work capital harder • Deliver back-office savings

37. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • Make Dorling Kindersley profitable • Sustain bestseller performance • Work capital harder • Deliver back-office savings

38. p e n g u i n4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a • deliver back-office savings • Merge with Pearson Ed in Australia and Canada • Globalise sourcing, regionalise other functions • Continue driving savings with SAP

39. us school23% us college14% us prof’l11% Int’national14% First in publishing, testing, technologyand services in the US and around the world

40. p e a r s o n e d4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a International • Restore profitability in Latin America • Capitalise on demand to learn English • Grow in college and school publishing • Enlarge global testing business

41. p e a r s o n e d4 m a r k e t o v e r v i e w 4 m a n a g e m e n t a g e n d a US professional • Protect margins in technology publishing • Make corporate training profitable • Expand certification contracts • Exploit surge in federal testing and training

42. p e a r s o n e d4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a US college • Keep growing market share • Use technology to increase adoptions and sell-through • Increase lead in custom publishing

43. p e a r s o n e d4 m a r k e t o v e r v i e w4 m a n a g e m e n t a g e n d a US school • Gain share profitably in publishing • Build on leadership in testing • Target early learning revenues • Make leadership in online learning pay

44. NCS • Underlying revenues up 6% • 17% growth in testing; software sales down 2% • Underlying operating profits up 47% – helped by integration savings • 15%+ revenue growth in 2002

45. 2002 and beyond • Strong earnings recovery in 2002 • Leading our markets in profitability and new business • Benefiting from more integrated company

46. Pearson42001 results presentation