Pearson Has Capacity to Make $1.6 Billion in Acquisitions as Digital Grows

Pearson Plc (PSON), the publisher of the Financial Times newspaper, has headroom for 1 billion pounds of acquisitions ($1.6 billion) as e-books and digital publishing drive revenue growth.

Pearson predicts growth in revenue and operating profit, which excludes gains from the sales of subsidiaries, in 2012 as increased digital transactions offset “weak” advertising and the effect of lower college enrollment in North America, the London-based company said in a statement today.

Pearson made offers to buy at least a dozen companies last year while building up its education business, according to data compiled by Bloomberg. Acquisitions contributed 262 million pounds to 2011 sales, the company said.

For acquisitions “we have talked about our priorities and they haven’t changed a lot,” Chief Executive Officer Marjorie Scardino said on a conference call. “Mostly education in emerging markets, and they are about building our interest in vocational and career workplace education and of course anytime we see a hole in our technology.”

The digital publishing business grew 18 percent to 2 billion pounds to make up a third of Pearson’s sales last year after revenue from Penguin e-books doubled and digital subscriptions to the Financial Times and online learning programs for students increased by more than 20 percent. Operating cash flow fell to 983 million pounds last year from 1.06 billion pounds.

Net income declined to 957 million pounds, or 119.3 pence per share, from 1.3 billion pounds, or 161.5 pence, a year earlier. Pearson had a gain in 2010 from selling its 61 percent stake in Interactive Data Corp.

Pearson fell 1.8 percent to 1,229 pence at 8:33 a.m. in London, paring the gain this year to 1.6 percent.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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