Acquisitions helped to boost sales at both the Penguin Group and Pearson Education in the first six months of 2001, Pearson plc reported last week.
Total sales at the Penguin Group rose 13%, to $575 million, while operating profit increased 5.1%, to $53.3 million. Excluding sales from Dorling Kindersley, which Penguin acquired last May, worldwide sales and earnings for the group were up 7%. "DK had a modest loss for the period," Penguin Group president David Wan noted.
Sales at Penguin Putnam, excluding DK, were up about 10% in the period, with earnings ahead 4%, Penguin Putnam president Phyllis Grann said. The gains were driven by Penguin Putnam's frontlist titles as the company placed 59 adult books on the New York Times bestseller lists compared to 47 in the first half of 2000. Paperbacks had a particularly strong first half, with the number of bestsellers up by 31%. Sales of trade and mass market paperbacks were both up in the period. "I find it amazing that mass market sales were up, considering everybody's talking about the [format's] imminent death," Grann told PW, speculating that the size and price of mass market paperbacks continue to make them attractive to consumers. Other highlights in the period included a very strong performance by the children's group and a 22% gain at Viking. The company also finished the first half of the year with returns up by only 1% over the midpoint of 2000.
Backlist sales grew slower than frontlist in all Penguin subsidiaries. Grann attributed the slower growth rate in the U.S. to cautious ordering by retailers in the year's first quarter, and she doubted that the industry would be able to make up for the lost sales in the remainder of the year.
Penguin U.K. had good gains in the first half of 2001, led by very strong frontlist sales in both its adult and children's divisions. Sales were soft in Australia and Canada, however. Wan said an increase in book prices has hurt sales in Australia, while "structural changes" in Canada—the merger of Chapters and Indigo—have dampened sales there. Grann estimated that retail issues in Canada would not be resolved until the end of 2002.
The Penguin Group incurred about £16 million in integration costs in the first half of the year related to merging DK into the company's existing operations. DK contributed $75 million in sales in the first half of the year, but the bottom line was hurt by high returns due to the closing of DK Family Learning and slower backlist sales. Wan told PW that Penguin is refocusing DK's publishing program on fewer but more profitable titles that have worldwide appeal. He said DK's strength has been producing books that have a global interest and that the company "diluted its efforts" when it began developing more titles for local markets.
Because Penguin had a very strong second half of 2000, Wan said he does not expect the group to post a 7% underlying gain in the last six months of 2001. Grann said breaking the year into two parts is an artificial way to measure a company. "You have to look at the full year," Grann said, noting that Penguin times the release dates of its books to give each title its best chance for success rather than worrying about publishing the book in a particular quarter.
Strong Gains In Education
Artificial or not, Pearson executives said the second half of 2001 would be different from the first half in its education group. Pearson finance director John Makinson said the 23% increase in sales—excluding revenues from NCS Pearson—recorded by the U.S. school group would not be repeated in the last six months, although he predicted that the division will finish the year with revenue growth of better than 10%.
In the first half of the year, sales in the school group, including NCS, were £451 million ($645 million). The 3% growth rate recorded by the college division is expected to increase, with Makinson looking for growth higher than the 5% to 6% increase predicted for the entire market for the full year. Sales in the professional group were down 20% in the first six months due largely to weak sales of computer books. Total U.S. higher education and professional sales were £319 million ($456 million) in the first six months, including NCS.
International sales rose 22% in the period, to £241 million ($345 million), with good results in English Language Teaching and in Asia, but sales were soft in Latin America. The entire education group had total sales of £1.01 billion ($1.44 billion) in the first half, up 8% excluding acquisitions.
