2005 interim results. 25 July 2005

Transcription

1 2005 interim results 25 July 2005

2 Financial highlights m H H change underlying Sales 1,613 1, % Operating profit continuing 33 7 Profit/(loss) before tax (9) (16) Adjusted eps (1.9)p (2.8)p Free cash flow (265) (262) Dividend per share 10.0p 9.7p 3%

3 Faster growth Our markets are improving Our strategy is working

4 Financial performance

5 2005 financial priorities Faster earnings growth Accelerating organic sales Continuing cost action Continued cash and working capital management Improved return on invested capital Stronger balance sheet

6 Sales m H H change underlying School % Higher Education % Professional % Pearson Education % FT Publishing % IDC % FT Group % Penguin % Total sales 1,613 1, %

7 Operating profit m H H change underlying School Higher Education (45) (42) (12)% Professional % Pearson Education (22) (33) +30% FT Publishing IDC % FT Group % Penguin % Total continuing Discontinued Recoletos (3) 17 Total 30 24

8 IFRS: Adjustments to statutory earnings per share Exclude: IAS39 (accounting for financial instruments) Significant non-recurring items

9 Adjusted earnings per share m Adjusted operating profit (total) Finance costs Pensions Finance costs Traditional Adjusted profit/(loss) before tax Taxation Adjusted profit/(loss) after tax Minorities Adjusted loss Adjusted loss per share H (4) (35) (9) 3 (6) (9) (15) (1.9)p H (3) (37) (16) 5 (11) (11) (22) (2.8)p

10 P&L - statutory m Operating profit Finance costs traditional Finance costs pension Finance costs IAS39 Profit before tax Taxation Profit / (loss) (continuing operations) Discontinued operations Profit / (loss) for the period EPS (total) H (35) (4) (2) p H (39) (3) - (33) 11 (22) 13 (9) (2.5p)

11 Free cash flow m H H VAR Operating profit Working capital (230) (221) (9) Net tangible fixed assets (40) (51) 11 Depreciation and amortisation Other movements (10) 1 (11) Operating cash flow (196) (195) (1) Operating tax paid (23) (25) 2 Operating finance charges (34) (36) 2 Operating free cashflow (253) (256) 3 Non operating / integration (12) (6) (6) Total free cashflow (265) (262) (3)

12 Average annual working capital Pearson Education and Penguin, m 986 (58) (14) 563 Pre-publication/ authors advances (5) Inventory (39) Receivables/payables % 28.7% % of sales

13 Balance sheet m Goodwill & Intangible assets Tangible fixed assets Operating working capital Other net assets / (liabilities) Net assets Shareholders funds Provisions Minorities Deferred tax Net debt Capital employed H , ,015 (55) 4,825 3, (227) 1,298 4,825 H , , ,952 2, (223) 1,747 4,952

14 2005 financial progress Faster earnings growth Continued cash and working capital management Improved return on invested capital Stronger balance sheet

15 Business performance

16 Faster growth Our markets are improving Our strategy is working

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18 Good news: readership Regular readers in Europe Print Online Financial Times 6.7% 8.2% The Economist 5.5% 3.1% IHT Wall Street Journal Europe USA Today 1.7% 1.4% 1.3% 1.2% 2.1% 1.5% Source: Europe 2005 Universe: m Sample: 11,002

19 Good news: advertising FT year-on-year ad revenues 3% 1% 5% -11% -18% -12% -31% H1 02 H2 02 H1 03 H2 03 H1 04 H2 04 H1 05

20 Good financial data IDC revenues & margins $314m $340m $375m $443m $485m $273m H % 29.8% 31.2% 30.5% 30.6% 30.0% as reported under US GAAP

21 Outlook Financial data Industry returned to growth in 04 IDC growing faster than industry Business news and analysis Good growth in readership FT ad growth well ahead of peers

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23 Novel ideas Growth in UK commercial fiction Successful new imprints Mass market innovation

24 Outlook Healthy UK market Growing US market; weak mass market category Better growth in target segments

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26 School strength in breadth New programmes gaining share 30%+ share of participating new adoptions Good start in open territories and supplementary Scoring in testing NCLB-related contracts for 23 states Investment in UK modernisation Benefits of scale in international Success of global ELT programmes Technology advantage in School publishing

27 Leadership in Higher Education Rapid growth in career colleges Clear lead in technology Unique custom model growing 20%+ Applying capabilities outside the US

28 Solid professional execution 10-year US Department of Education contract 1.2m UK driving theory tests delivered 40,000 securities professionals certified GMAT examination for 250,000 students in 96 countries

29 Outlook Professional Rapid growth in services Technology publishing stabilising Higher Education Strong demand, steady growth School Healthy policy and funding environment Double digit growth in 05

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31 Appendices

32 Appendix Half year reconciliation of UK GAAP to IFRS m UK GAAP Share based payments Employee benefits Leases * Capitalised software Other intangible assets MML deconsolidation Other Total IFRS adjustments IFRS Adjusted operating profit 42 (4) 6 (5) (1) (3) (4) (1) (12) 30 June 2005 Adjusted earnings (10) (2) 2 (3) (1) (1) - - (5) (15) Adjusted operating profit 39 (4) 6 (8) (1) (2) (5) (1) (15) 24 June 2004 Adjusted earnings (14) (3) 3 (6) (1) (1) - - (8) (22) * The IFRS adjustment related to leases has reduced by 3m, but this is offset by an increase in related lease costs in both adjusted operating profit and adjusted earnings under UK GAAP.

33 Appendix $ sensitivity $: HY average rate HY end rate FY average rate Year end rate EPS ROIC 5 change in average rate = +/- 1p 8 weakening in average rate = (0.2)% 8 weakening in year end rate = 0.2 %

34 Appendix Strong in new adoptions Subject Total opportunity Market share (where we compete) Position Health $200m Music/ art/other $200m 40%+ #1 Social Studies $200m 24% #3 Science $100m 40% #1 Maths $100m 28% #1 Reading/ literature $100m 25% #2 Total competed for $650m 30%+ #1 Total all adoptions $900m 22% Pearson estimates