Led by strong gains in sales and earnings from Penguin Group USA, adjusted operating profit at Penguin rose 12% in 2007, to £74 million ($148 million), while sales slipped to £846 million ( $1.69 billion) from £848 million. Excluding currency fluctuations, profits were up 20% and revenue 3%. The jump in profits resulted in an 8.7% operating margin in 2007, and Penguin chairman John Makinson said the company expects to hit parent company Pearson’s stated goal of 10% margins in 2008.

Makinson said sales were “well up” at Penguin USA, flat in the U.K, slightly off in Australia, and down a bit at DK; while DK’s core publishing had a good year, sales in Brady Games were off, Makinson said. The group also received strong contributions from Penguin India, where sales rose 70%, and in South Africa where sales increased 23%. Penguin’s China operation chipped in with a “few million dollars” in sales, Makinson said. Helping to drive the bottomline was improved supply chain efficiencies in the U.K. and improved gross margins in the U.S.

Penguin USA CEO David Shanks noted profit improvement was helped by a reduction in returns, particularly in hardcover, as well as some cost savings on the production side. Earnings also benefited from solid top line growth driven by big gains in the adult hardcover group and trade paperback division. Backlist sales were also up, though sales in the children’s group, coming off a strong 2006, were flat.

Penguin was having a good year through the first nine months of 2007 before things “went crazy” in December, Shanks said. In December alone, Penguin shipped 1.5 million copies of the blockbuster Eat, Pray, Love, and the company has shipped 4.5 million copies in total. Other million copy-sellers in the U.S. include A Thousand Splendid Suns, The Memory Keeper’s Daughter, Three Cups of Tea and the Kite Runner, while Alan Greenspan’s The Age of Turbulence, has shipped 1 million copies worldwide.

The company’s audio group had a 31% increase in sales. Shanks said that following more tests to ensure the security of non-DRM titles, Penguin will begin testing sales of DRM free digital downloads with eMusic.

Penguin USA is off to a strong start in 2008, led by the Oprah pick A New Earth by Eckhart Tolle. Penguin has shipped 3.45 million copies of the title which the publisher expects to remain a strong seller for the next several months as Winfrey teams with Tolle to lead live “webinars” about the book beginning tonight.