Pearson chief executive Marjorie Scardino warned investors last week that profits at the U.K.-based media company will be "significantly below our original plans for the year." Although Scardino put most of the blame on the plunge in advertising, Pearson's book units also showed signs of slowing growth in the third quarter.
Revenues at the Penguin Group rose 11%, to £624 million ($911 million), for the first nine months of the year, due largely to the inclusion of sales from DK Publishing. Excluding DK, sales were up only 2% for the nine-month period. For the first half of the year, underlying sales were ahead 7%. The slowing growth in the year was not unexpected, as Penguin Putnam CEO Phyllis Grann had predicted that second-half sales would be slower than revenues in the first six months. Pearson attributed the slower growth to soft backlist sales, with sales of illustrated reference titles and travel books particularly hard hit.
At Pearson Education, total revenues for the first nine months rose 36%, to nearly £2 billion ($2.9 billion), a figure that includes results from NCS Pearson. Excluding sales from NCS, sales were up only 2% in the period. For the first six months of the year, underlying sales in the group were up 8%, while total revenues rose 59%. Sales in the U.S. school and college group were up for the nine months, but sales in technology publishing sales were off 20%, due mainly to poor sales of computer books. Pearson warned that profits from technology publishing could be as much as £25 million lower than its expectations at mid-year. International sales were flat for the nine months, as weakness in technology publishing and in Latin America offset gains in ELT (English-Language Teaching) and Asian markets. The terrorist attack against the World Trade Center will also have a negative impact on Pearson, as the company estimated that losses in its FT Knowledge group could be down by £5 million more than expected because of losses at the New York Institute of Finance, which was located in the WTC.
