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Pearson Rises to Highest Since 2001 on Higher Sales

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Pearson Climbs to Highest Since 2001 as Sales Beat Estimates
The plan to sell MergerMarket is a signal that Pearson wants to unload the FT Group, which includes the Financial Times newspaper, "bit by bit," Alex DeGroote, a media analyst at Panmure Gordon & Co. in London, said in a phone interview. Photographer: Chris Ratcliffe/Bloomberg

July 26 (Bloomberg) -- Pearson Plc, the publisher of the Financial Times newspaper, rose to the highest level in 12 years after reporting first-half sales that beat analyst estimates.

Revenue rose 5 percent to 2.8 billion pounds ($4.3 billion), Pearson said in a statement today. That beat the average analyst estimate of 2.69 billion pounds, according to data compiled by Bloomberg. The stock climbed as much as 9.4 percent to its highest price since May 2001. The shares were up 8.6 percent at 1,359 pence as of 1:37 p.m. in London.

“Good growth in our digital, services and developing-market businesses continues to offset tough conditions for traditional publishing,” Chief Executive Officer John Fallon said on a conference call. “With our restructuring program on track and the reorganization of the company under way, we are making significant progress towards that goal.”

Pearson has said it will spend 150 million pounds on reorganizing this year to accelerate its education business’s move to fast-growing regions and digital services. In February, the company forecast that 2013 operating profit will be “broadly level” with 2012 before restructuring costs and including the Penguin book unit for the full year, which it reiterated today. The company said it will pay an interim dividend of 16 pence a share.

MergerMarket Sale

Pearson sales are “ahead of expectations,” Credit Suisse analysts including Nick Bertolotti said in a note today. “We believe good management and digital exposure will result in ongoing market share gains.”

Pearson said it’s exploring the possible sale of MergerMarket, an information provider of market data on activities such as mergers and acquisitions. The company has said restructuring will generate about 100 million pounds of annual cost savings in 2014.

The plan to sell MergerMarket is a signal that Pearson wants to unload the FT Group, which includes the Financial Times newspaper, “bit by bit,” Alex DeGroote, a media analyst at Panmure Gordon & Co. in London, said in a phone interview. He predicted a sale of the newspaper and Pearson’s stake in the Economist magazine, as well as other parts of FT Group, within 12 months. Pearson would be “worse off” after such an exit because it would be “undiversified” and too dependent on education, he said.

Education Growth

In March, Fallon told Financial Times employees that there would be fewer jobs in the U.S. and U.K. as Pearson focused on emerging markets, according to a person who attended the meeting. He also said Pearson was attempting to do in one year a restructuring that would normally be spread over six.

Pearson unveiled a new leadership team with the reorganization in May to drive efforts in digital learning, education and emerging markets. From January, the company will be divided into three worldwide business groups called School, Higher Education and Professional, and geographically grouped at North America, Growth and Core.

“Education is now emerging as one of the major growth industries for the next decade and beyond; it is serving a huge rise in the global middle class, and we now need to be thinking of how to serve global products focused on efficacy,” said Fallon, who took over from Marjorie Scardino this year.

Developing markets accounted for 45 percent of International Education revenues last year.

To contact the reporters on this story: Sam Chambers in London at schambers7@bloomberg.net; Kristen Schweizer in London at kschweizer1@bloomberg.net; Alex Pashley in London at apashley@bloomberg.net

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

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