-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T0x1R7F81sYi4BB4vHatV4QcIdL5ZmSN5XjrbdScABn7yFIqFkdUM2LfQRAltYWh E1YNcIWQ+08jstLytq97Gw== 0001191638-03-001051.txt : 20030728 0001191638-03-001051.hdr.sgml : 20030728 20030728084419 ACCESSION NUMBER: 0001191638-03-001051 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030728 FILED AS OF DATE: 20030728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEARSON PLC CENTRAL INDEX KEY: 0000938323 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 000000000 STATE OF INCORPORATION: X0 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16055 FILM NUMBER: 03804888 BUSINESS ADDRESS: STREET 1: 3 BURLINGTON GARDENS STREET 2: BANK OF NEW YORK CITY: LONDON ENGLAND STATE: X0 ZIP: W1X 1LE BUSINESS PHONE: 4420744120 MAIL ADDRESS: STREET 1: 3 BURLINGTON GARDENS CITY: LONDON ENGLAND STATE: X0 ZIP: W1X 1LE 6-K 1 pson200307286k.txt INTERIM RESULTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 For the month of July 2003 PEARSON plc (Exact name of registrant as specified in its charter) N/A (Translation of registrant's name into English) 80 Strand London, England WC2R 0RL 44-20-7010-2000 (Address of principal executive office) Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F X Form 40-F Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 Yes No X - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Report includes the following documents: 1. A press release from Pearson plc announcing Interim Results 28 July 2003 PEARSON PLC INTERIM RESULTS (unaudited) Six months ended 30 June 2003
Half year Half year Change - Change - Full year 2003 2002 as reported underlying 2002 Sales GBP1,665m GBP1,813m (8)% (3)% GBP4,320m Business performance Operating profit* GBP38m GBP76m (50)% (71)% GBP493m Profit/ (loss) before tax* GBP(1)m GBP26m -- GBP399m Adjusted earnings/ (loss) per share (2.3)p 0.5p -- 30.3p Operating free cash flow GBP(375)m GBP(304)m (23)% GBP305m Statutory results Operating profit/ (loss) GBP(110)m GBP(111)m 1% GBP143m Loss before tax GBP(138)m GBP(188)m 27% GBP(25)m Loss per share (20.1)p (26.0)p 23% (13.9)p Dividend per share 9.4p 9.1p 3% 23.4p Net borrowings GBP1,897m GBP1,957m 3% GBP1,408m
*Continuing operations before goodwill, non-operating items and integration costs. On track for the full year - - Pearson makes most of its sales and all of its profits in the second half. - - Revenues and operating profits were down in the first half, as expected, due to tough trading conditions in advertising and technology businesses and phasing of book publishing revenues into the second half. - - Strong momentum built for second half, based on significant market share gains and further cost reductions. Strong competitive performances - - Pearson Education takes the number one position in new US School adoptions; US Higher Education continues to grow well ahead of the industry. - - FT Group profits up as IDC remains resilient and cost controls reduce impact of advertising declines at business newspapers. - - Penguin profits down in first half as expected; best-ever publishing schedule in the second half. Continuing efficiency gains - - Ongoing cost reductions offset tough trading conditions in business newspapers and technology publishing. - - Further integration of school software and book publishing businesses. - - Working capital management continues to improve. Marjorie Scardino, Pearson's chief executive, said: "We are confident about the full year because we are making the most of our strong market positions and operating on much lower costs. Our book publishing operations are proving resilient and performing well ahead of their competitors. Our business newspapers, with lower costs and improved content, will bounce back strongly when business advertising recovers." Financial review Sales in the six months to June 30, 2003 were GBP1,665m, 3% lower than in the first half of 2002. Sales were affected by tough trading conditions for our business newspapers and technology-related operations, a shift of business into the second half of the year at our education and consumer publishing businesses and the absence of the one-off, 2002 Transportation and Security Administration (TSA) contract. Operating profit was GBP38m versus GBP76m last year, due to business phasing. Adjusted earnings per share fell from 0.5p to a loss of 2.3p. Operating free cash flow was GBP71m lower at (GBP375)m. The two main factors were business phasing and a receivable due from the TSA. Improved inventory management resulted in the average working capital to sales ratio in our book publishing businesses improving to 31.9% (from 32.8% in 2002). Total free cash flow improved by GBP8m to (GBP381)m, helped by lower finance and integration charges. On a statutory basis, our loss before tax for the half-year improved 27% to GBP138m, helped by a lower (non cash) goodwill charge of GBP148m (GBP182m in 2002). The loss reflects the fact that Pearson makes all its profits in the second half but amortises goodwill evenly through the year. Pearson's net borrowings, which are at their peak at the half-year stage, were 3% lower than last year at GBP1,897m. The board has declared a 3% increase in the interim dividend to 9.4p. Outlook At this stage the outlook for our major businesses is: - - At Pearson Education, we expect the US School industry to grow at the low end of the 0-3% range and the US College industry to grow in the 5-7% range this year. In both markets, we expect to grow ahead of the industry as we build on the market share we gained in the first half. Revenues and profits in our Professional business will be significantly lower than last year due to the continued recession in technology publishing and the absence of the one-off, $400m TSA contract. - - Though corporate and financial advertising remains depressed, the FT Group should deliver profits ahead of last year. The FT Group is benefiting from continued strength at IDC and further cost reductions across its business newspapers. Those cost measures, together with investments in our business newspapers, will increase the benefits of an eventual advertising recovery. - - At Penguin, we are confident of revenue growth greater than the overall consumer publishing industry, which we expect to be broadly flat this year, and further profits progress. Penguin has its strongest-ever publishing schedule and has made an excellent start to the rest of the year. In the second half, we expect our interest charge to be similar to the first-half level of GBP39m based on current exchange rates. We expect free cash flow to benefit from reduced finance charges, working capital efficiencies and lower integration spend. For more information: Luke Swanson/ Jeff Taylor + 44 (0) 20 7010 2310 Pearson's interim results presentation for investors and analysts will be webcast live today from 0930 (BST) and available for replay from 12 noon (BST) via www.pearson.com. We are holding a conference call for US investors at 1500 (BST)/ 1000 (EDT). To participate in the conference call or to listen to the audiocast, please register at www.pearson.com. Video interviews with Marjorie Scardino and Rona Fairhead are also available at www.pearson.com. High resolution photographs are available for the media at www.newscast.co.uk. Notes. Throughout this statement (unless otherwise stated): 1. Growth rates are stated on an underlying basis, excluding the impact of currency movements and portfolio changes. Pearson generates approximately 70% of its revenues in the US. The average exchange rate for the first half of 2003 was GBP1:$1.61 (GBP1:$1.45 in the first half of 2002). The full year exchange rate in 2002 was GBP1:$1.51; 2. Adjusted figures are presented as additional measures of business performance. They are stated before goodwill, integration costs and non-operating items. Goodwill is amortised over no more than 20 years. 3. The 'business performance' measures, which Pearson uses alongside other measures to track performance, are included to provide additional detail on business performance. They are non-GAAP measures for both US and UK reporting. Reconciliations of operating profit, profit/ (loss) before tax, adjusted earnings per share and operating free cash flow to the equivalent statutory heading under UK GAAP are included in notes 2, 5, 6 and 10 respectively. Pearson Education
Half year Half year Change - Change - Full year GBP millions 2003 2002 as reported underlying 2002 Sales School 487 519 (6)% 0% 1,151 Higher Education 196 222 (12)% 3% 775 Professional 244 285 (14)% (6)% 784 FT Knowledge - 23 -- -- 46 Total 927 1,049 (12)% (1)% 2,756 Operating profit School 12 12 0% (26)% 115 Higher Education (43) (32) (34)% (54)% 142 Professional 5 29 (83)% (81)% 81 FT Knowledge -- (9) -- -- (12) Total (26) 0 -- -- 326
Notes: 1. In May 2003, Pearson and Edexcel agreed to create a new UK examining body, London Qualifications, with Pearson taking a 75% stake. In the first half of the year, Edexcel contributed GBP16m of revenues to our School division. 2. At the start of 2003, we moved our Alpha consumer publishing imprint from Pearson Education's Professional division to Penguin. 3. In January 2003 we restructured FT Knowledge, selling its corporate training arm and integrating its remaining businesses within the FT and Pearson Education's Professional business. Sales at Pearson Education were down level with last year. Pearson Education faces tough comparisons throughout 2003 due to the absence of the one-off, $400m TSA contract (which contributed $55m/ GBP38m of revenues in the first half of 2002). Sales at our School business were flat.The US School industry has been affected by state budget pressures, with some states reducing their planned spend on textbooks, testing programs and software, or deferring purchases into the second half of the year. However, adoption states are spending and our business is performing very strongly and growing ahead of the industry. In school publishing we expect to lead the industry in new adoption sales* this year, taking approximately 30% of the total new adoption market (even though we competed for only 85% of the adoption opportunities). We have successfully re-entered the Social Studies market, securing approximately 33% of all Social Studies adoptions and taking the leading position in the key Texas adoption. We expect to win more than 40% of Secondary Literature adoptions, taking the number one position in both Florida and California. We also have good early results from the open territories, which buy textbooks later in the year. Revenues at our US School testing business were slightly up, as it began work on several contracts won last year. It continued to extend its market leadership, even as some states delayed or reduced their testing programmes in the face of budget pressures. In the first half we have won several major new testing contracts in the US, including a five-year contract with the US College Board, beginning in 2005, to process and score the constructed response part of the SAT, the world's most widely used college admissions test. In May we became a major player in UK education testing through our partnership with Edexcel, one of the UK's leading examining and awarding bodies. Although, with budget pressures, school software sales are down on last year, we have significantly reduced costs and improved products by integrating our software and content businesses, and we expect them to breakeven for the full year. Outside the US, our English Language Teaching business grew 7%. We are benefiting from strong demand for textbooks and online programs as countries in Asia, Latin America and Europe integrate English language instruction into their school curriculum. * In the US, 21 'adoption' states buy textbooks and related programmes to a planned contract schedule, which means the level of spending varies from year to year according to this schedule. The 'open territory' states are those in which local districts buy textbooks on an as-needed basis rather than on a published state adoption schedule. Our Higher Education business makes approximately three-quarters of its revenues in the second half of the year, with major selling seasons in July/ August and December, ahead of the two US college semesters. The business reports losses in the first half as it invests in publishing, sales and marketing to deliver full-year growth. Worldwide, sales were up 3% and increased investment moved first-half losses up to GBP43m. In the US, sales were up 4%. According to Management Practice Data, gross sales for the industry were flat. Our share gains are based on a strong publishing schedule with several successful first editions, sales growth of more than 20% in custom publishing and the extension of our technology, particularly online course management systems, into new subject areas such as economics, health and physiology. Revenues were down 6% in our Professional business and profits down sharply. The key factors were the 2002 TSA contract and the continued recession in technology markets around the world. Stripping out the impact of the TSA contract, the Professional business is growing. We are benefiting from several major new contracts won from Federal departments including Defense and Health and Human Services, and the first full year of our contract to certify nurses in our 200 professional testing centres. These contracts were in start-up phase in the first half, with profits coming through strongly later in the year. Sales at our technology publishing business continued to decline with the IT industry. Our costs are already some $80m lower than three years ago and we have taken a series of further steps to reduce costs, both in the US and internationally. In the second half we will benefit from the absence of restructuring costs to implement these changes (which were absorbed in our operating profit) and the normal phasing of the business, which is weighted to the end of the year. Financial Times Group
Half year Half year Change - Change - Full year GBP millions 2003 2002 as reported underlying 2002 Sales Financial Times 102 115 (11)% (14)% 224 Other FT publishing 54 55 (2)% (12)% 105 Recoletos 82 74 11% 0% 148 IDC 132 126 5% 3% 249 Total 370 370 0% (5)% 726 Operating profit Financial Times (15) (11) (36)% (38)% (23) Other FT publishing 3 6 (50)% (54)% 10 Recoletos 14 14 0% (9)% 29 IDC 41 35 17% 21% 70 Associate and joint ventures 0 (6) -- -- (6) Total 43 38 13% 17% 80
Note: In February 2003, IDC acquired S&P Comstock, a real-time pricing business. In the first half of the year, Comstock contributed GBP13m of revenues to IDC. Sales at the FT Group were 5% lower as the deep recession in corporate and financial advertising continued to hit our business newspapers. Profits were up 17%, helped by lower internet losses, additional cost savings and further progress at IDC. Advertising revenues at the Financial Times continued to decline, falling 18% in the first half of the year. Average daily sales of the Financial Times for the six months to June were 461,000, a decline of 5% on the previous year. Although FT.com also felt the effects of the advertising downturn, its revenues were level with last year as paid subscribers grew to 57,000 (against 16,000 a year ago). FT.com's audience continued to grow with 3.5m unique monthly users in June, up from 2.8m a year ago. The UK edition of the Financial Times has been successfully revamped with more UK business news, improved design and a new weekend magazine. The FT's UK circulation was 6% higher in May and June than in the four months before the revamp (though still lower than in the previous year), and the magazine is attracting new consumer advertising campaigns. We will launch a new Asian edition of the FT in the Autumn, completing our global coverage. We have continued to reduce costs at the FT, more than funding our investments in the newspaper through GBP13m of further cost savings this year. We are taking additional cost measures, including integrating our UK and European commercial operations, which we expect to generate approximately GBP15m of cost savings in 2004. The advertising recession also reduced profits at Les Echos and FT Business. Average daily circulation at Les Echos was 117,000, a 3% decline that was significantly better than the overall newspaper industry in France. In September we will launch Les Echos in a new format, broadening its appeal to readers and advertisers. At FT Business, advertising volumes were approximately 20% lower but a series of cost reduction measures enabled us to maintain double digit margins. At Recoletos (Bolsa Madrid: REC), our 79%-owned Spanish media company, sales were level with last year. Advertising revenues were down 3% overall and 14% in Recoletos' business and finance division. Circulation at sports newspaper Marca increased a further 4% to 378,000, but declined 6% to 46,000 at Expansion, Spain's leading business newspaper. All of Recoletos' major titles are gaining readership share. Interactive Data Corporation (NYSE: IDC), our 60%-owned asset pricing business, increased revenues by 3% and operating profit by 21%. It is benefiting from the complete integration of the Merrill Lynch pricing business; its latest acquisition, real-time pricing service Comstock; and good growth from its high value pricing services. Although revenue growth has been dampened by tough conditions in the financial services industry, renewal rates in IDC's institutional business have remained high at 95%. The FT Group's Associates and Joint Ventures broke even in the first half (against a loss of GBP6m in the first half of 2002). FT Deutschland, our joint venture with Gruner + Jahr, grew circulation 11% to 91,000 and increased advertising revenues, and we are considering further expansion. The Economist Group, in which Pearson owns a 50% stake, increased profits despite the difficult advertising market, with weekly circulation at The Economist up to more than 900,000 (from 838,000 in the first half of 2002). The Penguin Group
Half year Half year Change - Change - Full year GBP millions 2003 2002 as reported underlying 2002 Sales 368 394 (7)% (3)% 838 Operating profit 21 38 (45)% (45)% 87
Note: At the start of 2003, we moved our Alpha publishing imprint from Pearson Education's Professional division to Penguin. The Penguin Group's revenues and profits declined, as expected, in the first half of the year. Our schedule of major frontlist titles is strongly weighted to the second half and the war in Iraq dampened US consumer spending in general and backlist sales in particular in April and May. Penguin's US sales were down 4% in the first half, in line with the overall US consumer publishing industry. Sales were up 4% in the UK, with strong performance from non-fiction titles including Michael Moore's million copy selling Stupid White Men, Antony Beevor's Berlin and Ellen MacArthur's Taking on the World. Though the industry remains soft, we have seen a pick-up in June and July, with Penguin making an excellent start to the second half of the year. John Steinbeck's East of Eden has sold 1.2 million copies in the four weeks since it was selected for Oprah Winfrey's Book Club. Kate Remembered, Scott Berg's account of 20 years of conversations with Katharine Hepburn, was published in mid-July and we have already shipped more than 680,000 copies in hardback. Penguin's second-half publishing list is its strongest ever. Many of our most popular and consistent best-selling authors have major books scheduled for publication in the Autumn. In the US, they include Patricia Cornwell, Nora Roberts, John Sandford, Nathaniel Philbrick, Amy Tan, Jan Karon, Garrison Keillor and Terry McMillan; and in the UK, Michael Moore, Simon Jenkins, Griff Rhys Jones, Pat Barker, Lisa Jewell and Lesley Pearse. Penguin is publishing new books by Tom Clancy and Clive Cussler in both markets. In September The English Roses, the first of five illustrated children's books by Madonna, will be published in 42 language editions in 100 countries. Penguin is the distributor in the US and publisher in other English language markets worldwide. Dorling Kindersley is also on track for a strong second half, led by Tom Peters' new-style business book Re-Imagine, Earth, the definitive family reference book on the planet, and America 24/7, which captures more than 1200 images documenting the lives of people in every US state in a single week. Penguin and Pearson Education continue to collaborate on joint publishing initiatives and programmes to capitalize on the scale they enjoy as the world's largest book publisher. Having successfully integrated Pearson Education and Penguin in Australia and Canada, we are now moving to shared back offices, technology, warehousing and distribution in the UK. This integration programme, which will cost GBP20m in 2003, will generate GBP20m of annual cost savings worldwide from 2005, shared between Penguin and Pearson Education. ENDS Except for the historical information contained herein, the matters discussed in this press release include forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. These risks and uncertainties include international, national and local conditions, as well as competition. They also include other risks detailed from time to time in the company's publicly-filed documents, including the company's Annual Report on form 20-F. The company undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise. Consolidated Profit and Loss Account for the six months to 30 June 2003
Note 2003 2002 2002 half year half year full year all figures in GBP millions Sales (including share of joint 1,673 1,819 4,331 ventures) Less: share of joint ventures (8) (6) (11) Sales 2a 1,665 1,813 4,320 Group operating (loss) / (105) (79) 194 profit Share of operating loss of joint ventures and associates 2c / d (5) (32) (51) Total operating (loss) / 2b (110) (111) 143 profit Total operating (loss) / profit analysed between : Operating profit before 38 76 493 goodwill amortisation, goodwill impairment and integration costs Goodwill amortisation and (148) (182) (340) impairment Integration costs - (5) (10) Total operating (loss) / 2b (110) (111) 143 profit Loss on sale of fixed assets (1) - (13) and investments Profit / (loss) on sale of 3 12 7 (27) subsidiaries and associates Profit on sale of subsidiaries - 3 3 and associates by an associate Non operating items 11 10 (37) (Loss) / profit before interest (99) (101) 106 and taxation Net finance costs 4 (39) (87) (131) Loss before taxation 5 (138) (188) (25) Taxation 7 (9) (6) (64) Loss after taxation (147) (194) (89) Equity minority interests (13) (13) (22) Loss for the financial period (160) (207) (111) Dividends on equity shares 8 (74) (73) (187) Retained loss (234) (280) (298) Adjusted (loss) / earnings per 6 (2.3)p 0.5p 30.3p share Loss per share 6 (20.1)p (26.0)p (13.9)p Diluted loss per share 6 (20.1)p (26.0)p (13.9)p Dividend per share 8 9.4p 9.1p 23.4p
There is no difference between the loss before taxation and the retained loss for the period stated above and their historical cost equivalents. The results for the 2002 full year are an abridged version of the full accounts, which have received an unqualified audit report from the auditors and have been filed with the Registrar of Companies.First half year figures are neither audited nor reviewed. Consolidated Balance Sheet as at 30 June 2003
2003 2002 2002 all figures in GBP millions half year half year full year Fixed assets Intangible assets 3,560 3,939 3,610 Tangible assets 498 528 503 Investments: joint ventures Share of gross assets 1 4 7 Share of gross liabilities - - - 1 4 7 Investments: associates 62 107 106 Investments: other 85 83 84 4,206 4,661 4,310 Current assets Stocks 792 848 734 Debtors 1,240 1,073 1,057 Deferred taxation 180 280 174 Investments 2 3 2 Cash at bank and in hand 229 542 575 2,443 2,746 2,542 Creditors - amounts falling due within one year Short-term borrowing (206) (57) (249) Other creditors (1,046) (995) (1,114) (1,252) (1,052) (1,363) Net current assets 1,191 1,694 1,179 Total assets less current liabilities 5,397 6,355 5,489 Creditors - amounts falling due after more than one year Medium and long-term borrowing (1,920) (2,442) (1,734) Other creditors (41) (41) (60) (1,961) (2,483) (1,794) Provisions for liabilities and charges (148) (174) (165) Net assets 3,288 3,698 3,530 Capital and reserves Called up share capital 200 200 200 Share premium account 2,466 2,460 2,465 Profit and loss account 411 849 673 Equity shareholders' funds 3,077 3,509 3,338 Equity minority interests 211 189 192 3,288 3,698 3,530
Consolidated Statement of Cash Flows for the six months to 30 June 2003
2003 2002 2002 all figures in GBP millions Note half year half year full year Net cash (outflow) / inflow from 10 (293) (193) 529 operating activities Dividends from joint ventures and 1 1 6 associates Interest received 8 6 11 Interest paid (44) (99) (151) Debt issue costs (1) - - Dividends paid to minority (2) (1) (1) interests Returns on investments and (39) (94) (141) servicing of finance Taxation (1) (35) (55) Purchase of tangible fixed (56) (71) (126) assets Sale of tangible fixed assets 3 - 7 Purchase of investments (3) (3) (21) Sale of investments - - 3 Capital expenditure and financial (56) (74) (137) investment Purchase of subsidiaries (87) (38) (87) Net cash acquired with 1 - 1 subsidiaries Purchase of joint ventures and (2) (9) (40) associates Sale of subsidiaries - 8 3 Net cash disposed with - - (1) subsidiaries Sale of associates 56 921 920 Acquisitions and disposals (32) 882 796 Equity dividends paid (113) (108) (181) Net cash (outflow) / inflow before management of liquid resources and financing (533) 379 817 Liquid resources acquired (112) (82) (65) Collateral deposit (placed) / - (29) 22 reclaimed Management of liquid resources (112) (111) (43) Issue of equity share capital 1 1 6 Capital element of finance lease (2) (2) (5) rentals Loan facility advanced / (repaid) 326 (59) (507) Bonds advanced / (repaid) 164 (156) (167) Collateral deposit reimbursed 45 - 17 Net movement in other (5) 7 (7) borrowings Financing 529 (209) (663) (Decrease) / increase in cash in (116) 59 111 the period
Statement of Total Recognised Gains and Losses for the six months ended 30 June 2003
2003 2002 2002 all figures in GBP millions half year half year full year Loss for the financial period (160) (207) (111) Other net gains and losses recognised in reserves: Currency translation differences (29) (153) (317) Taxation on currency translation - - 5 differences Total recognised gains and losses (189) (360) (423) relating to the period Prior year adjustment - FRS 19 - 209 209 Total recognised gains and losses (189) (151) (214)
Reconciliation of Movements in Equity Shareholders' Funds for the six months ended 30 June 2003
2003 2002 2002 all figures in GBP millions half year half year full year Loss for the financial period (160) (207) (111) Dividends on equity shares (74) (73) (187) (234) (280) (298) Currency translation differences (net of (29) (153) (312) taxation) Goodwill written back on sale of - 144 144 subsidiaries and associates Shares issued 1 1 6 Replacement options granted on 1 - 1 acquisition of subsidiary Net movement for the period (261) (288) (459) Equity shareholders' funds at beginning 3,338 3,797 3,797 of the period Equity shareholders' funds at end of the 3,077 3,509 3,338 period
Notes to the 2003 Results for the six months ended 30 June 2003 1.Basis of preparation The results for the six months ended 30 June 2003 have been prepared in accordance with the accounting policies set out in the 2002 Annual Report. 2a.Sector analysis - sales
2003 2002 2002 all figures in GBP millions half year half year full year Pearson Education 927 1,049 2,756 FT Group 370 370 726 The Penguin Group 368 394 838 1,665 1,813 4,320
2b.Sector analysis - operating (loss) / profit
....................2003 half year............................. Results from Integration Goodwill Goodwill Operating all figures operations costs amortisation impairment loss in GBP millions Pearson (26) - (120) - (146) Education FT Group 43 - (18) - 25 The Penguin 21 - (10) - 11 Group Continuing 38 - (148) - (110) operations Discontinued - - - - - operations 38 - (148) - (110)
.........................2002 half year............................... Results from Integration Goodwill Goodwill Operating operations costs amortisation impairment loss all figures in GBP millions Pearson - (3) (126) - (129) Education FT Group 38 - (33) (10) (5) The Penguin 38 (2) (10) - 26 Group Continuing 76 (5) (169) (10) (108) operations Discontinued - - (3) - (3) operations 76 (5) (172) (10) (111)
..............2002 full year................................. Results from Integration Goodwill Goodwill Operating operations costs amortisation impairment profit all figures in GBP millions Pearson 326 (7) (244) - 75 Education FT Group 80 - (65) (10) 5 The Penguin 87 (3) (18) - 66 Group Continuing 493 (10) (327) (10) 146 operations Discontinued - - (3) - (3) operations 493 (10) (330) (10) 143
2c.Sector analysis - joint ventures Included in the analysis of operating (loss) / profit in note 2b are the following amounts in respect of joint ventures:
2003 2002 2002 all figures in GBP millions half year half year full year Pearson Education - - (1) FT Group (4) (7) (13) The Penguin Group - - 1 (4) (7) (13)
2d.Sector analysis - associates Included in the analysis of operating (loss) / profit in note 2b are the following amounts in respect of associates:
.......2003 half year................... Results from Goodwill Operating operations amortisation loss all figures in GBP millions Pearson Education 1 - 1 FT Group 6 (8) (2) The Penguin Group - - - Continuing operations 7 (8) (1) Discontinued operations - - - 7 (8) (1)
........2002 half year.................... Results from Goodwill Operating operations amortisation loss all figures in GBP millions Pearson Education 1 - 1 FT Group 1 (24) (23) The Penguin Group - - - Continuing operations 2 (24) (22) Discontinued operations - (3) (3) 2 (27) (25)
...........2002 full year................. Results from Goodwill Operating operations amortisation loss all figures in GBP millions Pearson Education 3 (1) 2 FT Group 7 (44) (37) The Penguin Group - - - Continuing operations 10 (45) (35) Discontinued operations - (3) (3) 10 (48) (38)
3.Profit / (loss) on sale of subsidiaries and associates
2003 2002 2002 all figures in GBP millions half year half year full year Continuing operations: Loss on sale of Forum - - (40) Loss on sale of PH Direct - (10) (8) Net profit on sale of other subsidiaries 12 - 3 and associates Continuing operations 12 (10) (45) Profit on sale of RTL Group - - 17 18 discontinued operations Profit / (loss) on sale of subsidiaries 12 7 (27) and associates Taxation (11) (11) (6)
4.Net finance costs
2003 2002 2002 all figures in GBP millions half year half year full year Net interest payable (39) (50) (94) Early repayment of debt and termination - (37) (37) of swap contracts Net finance costs (39) (87) (131)
5.(Loss) / profit before taxation
2003 2002 2002 all figures in GBP millions half year half year full year Loss before taxation (138) (188) (25) Goodwill amortisation 148 172 330 Goodwill impairment - 10 10 Integration costs - 5 10 Non operating items (11) (10) 37 Early repayment of debt and termination - 37 37 of swap contracts (Loss) / profit before taxation (before goodwill amortisation and other items) (1) 26 399
6.(Loss) / earnings per share In order to show results from operating activities on a comparable basis, an adjusted earnings per share is presented which excludes items as set out below.The company's definition of adjusted earnings per share may not be comparable to other similarly titled measures reported by other companies.
2003 2002 2002 all figures are in GBP millions half year half year full year Loss for the financial period (160) (207) (111) Adjustments: - - Non operating items (11) (10) 37 - - Integration costs - 5 10 - - Goodwill amortisation 148 172 330 - - Goodwill impairment - 10 10 - - Early repayment of debt and termination - 37 37 of swap contracts Taxation on above items 9 (3) (67) Minority interest share of above items (4) - (5) Adjusted (loss) / earnings (18) 4 241 Weighted average number of shares (millions) - - for earnings and adjusted earnings 797.1 795.9 796.3 Effect of dilutive share options - - - Weighted average number of shares (millions) - - for diluted loss 797.1 795.9 796.3 Adjusted (loss) / earnings per share (2.3)p 0.5p 30.3p Loss per share (20.1)p (26.0)p (13.9)p
Where the Group has made a loss for the financial period, after taking into account goodwill amortisation, the effect of share options is anti-dilutive and there is no difference between the loss per share and the diluted loss per share. 7.Taxation The tax rate provided in the profit and loss account is analysed as follows:
2003 2002 2002 all figures in percentages half year half year full year UK tax rate 30.0 30.0 30.0 Effect of overseas tax rates 4.0 4.8 2.8 Other items - (0.8) - Tax rate reflected in adjusted (loss) / 34.0 34.0 32.8 earnings The taxation charge is analysed as: 2003 2002 2002 all figures in GBP millions half year half year full year Parent and subsidiaries (7) (4) (60) Joint ventures and associates (2) (2) (4) (9) (6) (64)
8.Dividends The directors have declared an interim dividend of 9.4p per equity share, payable on 26 September 2003 to shareholders on the register at the close of business on 8 August 2003. 9.Exchange rates Pearson earns a significant proportion of its sales and profits in overseas currencies, the most important being the US dollar.The relevant rates are as follows:
2003 2002 2002 half year half year full year Average for operating profits 1.61 1.45 1.51 Period end rate 1.65 1.52 1.61
10.Note to consolidated statement of cash flows
2003 2002 2002 all figures in GBP millions half year half year full year Reconciliation of operating (loss) / profit to net cash (outflow) / inflow from operating activities Total operating (loss) / profit (110) (111) 143 Share of operating loss of joint ventures 5 32 51 and associates Depreciation charges 56 63 122 Subsidiary goodwill amortisation and 140 155 292 impairment (Increase) / decrease in stocks (68) (27) 43 Increase in debtors (137) (94) (111) (Decrease) / increase in creditors (165) (156) 64 Decrease in operating provisions (14) (51) (50) Other and non-cash items - (4) (25) Net cash (outflow) / inflow from (293) (193) 529 operating activities Dividends from joint ventures and 1 1 6 associates Purchase of tangible fixed assets (56) (71) (126) Capital element of finance lease (2) (2) (5) rentals Proceeds from sale of tangible fixed 3 - 7 assets Add back: Non operating expenditure on 3 4 - fixed assets Add back: Cash spent against integration 6 32 44 and fair value provisions Pearson operating cashflow (338) (229) 455 Operating tax paid (1) (19) (46) Operating finance charges (36) (56) (104) Operating free cashflow (375) (304) 305 Non operating tax paid - (16) (9) Non operating finance charges - (37) (37) Integration and fair value spend (6) (32) (44) Total free cashflow (381) (389) 215 Dividends paid (including minorities) (115) (109) (182) Net movement of funds from operations (496) (498) 33 Acquisitions of businesses and (59) (50) (124) investments Disposals of businesses, investments and 51 930 930 property New equity 1 1 6 Other non operating items - (5) (5) Net movement of funds (503) 378 840 Exchange movements on net debt 14 44 131 Total movement in net debt (489) 422 971
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PEARSON plc Date: July 28, 2003 By: /s/ STEPHEN JONES ----------------------- Stephen Jones Deputy Secretary -----END PRIVACY-ENHANCED MESSAGE-----