Pearson Book Revenues Rose 17% to $4 Billion

Total book revenues at Pearson increased nearly 17% in 2000, to £2.65 billion ($4.0 billion) and operating profit rose 21.5%, to £401 million ($606 million). Sales at Pearson Education, excluding revenues of £146 million from National Computer Systems, rose 11.2%, to £1.90 billion ($2.87 billion), while revenues at the Penguin Group increased 33.6%, to £755 million ($1.14 billion). Operating profit at Pearson Education, excluding £15 million from NCS, was £322 million ($486 million), while Penguin's operating profit rose 22%, to £79 million ($120 million). Penguin's operating income excludes integration charges related to Dorling Kindersley.

Within the Penguin Group, Penguin Putnam, headed by CEO Phyllis Grann, had an exceptionally strong year and accounted for approximately 60% ($685 million) of Penguin's total revenues and about 74% ($89 million) of operating profits. Results were up in all Penguin Putnam publishing fields—adult hardcover, trade paperback, mass market paperback and children's. The gains were led by an extremely strong performance by Penguin Putnam's frontlist, which included 42 adult hardcover bestsellers and 54 adult paperback bestsellers, a 56% increase over 1999.

Grann said the strong showing of Penguin Putnam's frontlist was especially important last year because the slowdown in the retail sector hurt backlist sales. Grann said the pattern appears to be repeating itself in early 2001—Penguin Putnam's frontlist continues to do very well, while backlist sales are struggling a bit. Total sales were running ahead of expectations through the first two months of 2001, Grann said, and she was hopeful the company's frontlist will carry the company through the year.

Another important contributor to the Penguin Group's sales gain in 2000 was the addition of DK, which added $180 million to sales since its acquisition by Pearson at the end of April. Excluding integration costs, DK was at breakeven for the eight months of 2000. During 2000, Penguin Group began integrating DK into Penguin's U.K. operations, a process that eliminated more than 100 jobs; David Wan, president of the Penguin Group, said integration on the "systems side" of DK is slated for 2001. Wan said he expects DK to be profitable this year. DK and Penguin Putnam will continue to run on parallel tracks in the U.S. in 2001, although Wan said "harmonizing" the back office of the two units could happen in 2002.

In Pearson Education, U.S. school sales rose a total of 23%, to $1.09 billion. Sales in the school group's core operations were up 10%, to approximately $974 million, led by gains in secondary science and social studies, as well as improvement in elementary reading sales. NCS added $116 million to school group sales. U.S. higher education and professional group sales, including $82 million generated by NCS, increased 17%, to $1.18 billion; core sales were ahead 9%, to $1.09 billion. Strong growth in higher-ed math, computer science, history and developmental English offset slower growth rates in the consumer IT publishing market.

International sales jumped 21% to $815 million, including a $20 million contribution from NCS. All of Pearson's major international operations had double-digit gains last year. Pearson will add a higher education component to its Learning Network portal this year, and it expects the network to break even in 2003.

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