Penguin problems pierce Pearson

A 20-cent fall in the value of the dollar and a string of problems at its Penguin books division left publisher Pearson nursing a fall in headline profits last year.

The results will be the last presented by Lord Stevenson, who vacates the chair later this year. Chief executive Dame Marjorie Scardino promised a better performance in the coming 12 months.

She said: 'We expect strong growth at Pearson Education and the Financial Times Group, and we are confident that our performance will be within market expectations, even while we tackle some challenges at Penguin.'

Penguin, which accounts for about 20% of Pearson's entire business, saw operating profits tumble from £91m to £54m.

There was a £14m hit from the dollar's fall, £9m extra cost from problems setting up a new UK warehouse, £6m from a one-off bankruptcy at a supplier and new marketing methods and, finally, a sudden drop in demand for mass-market books in the second half which knocked another £7m off profits.

Putting Penguin right will cost Pearson another £5m this year but finance director Rona Fairhead refused to say what actions were being taken 'until our staff has been told'. Penguin's UK head Anthony Forbes Watson was ousted at the start of this month and other changes are likely.

Scardino said the FT group had its best result for four years and prospects for the coming year were good. All three of the education businesses improved profits with a gain of 5% on average.

Pre-tax profits before goodwill and exceptional charges fell from £490m to £455m with the dollar's decline costing £52m. Headline earnings dropped from 33p to 30p a share while the dividend rises 5% to 25.4p.

The shares today fell 14½p to 637½p.

Commentary

YES, but was he any good? The City has never quite got Lord Stevenson, left, who is quitting the Pearson chair.

An excellent networker and communicator, and the ultimate pluralist (and defier of the Higgs code, holding two FTSE 100 chairmanships at once - he still has HBOS), he is a bit of a conundrum. Certainly, investors have had little to show for his reign.

It's true he gave the group focus, steering it from a rag-bag conglomerate, selling Madame Tussauds and a 50% share of Lazards, but it's also wrong to suppose that in its place he created a brilliantly efficient, profitmaking machine. Pearson is like a car whose engine looks good but there is always something wrong: if it's not the Financial Times, it's Penguin.

He was hugely supportive of chief executive Marjorie Scardino. Will his going make her vulnerable?

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in