'FT' offices lose 25% of book value: Re-evaluation dents Pearson profits

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PEARSON, the media group, has slashed the book value of Number One Southwark Bridge Road, the London home of its Financial Times newspaper, by more than a quarter from pounds 74m to pounds 54m.

The group said the directors considered that the property, bought at the height of the property boom, had suffered a permanent fall in its value. The move reduced operating profits for 1993, reported yesterday, by pounds 20m.

James Joll, Pearson's finance director, was phlegmatic about the reduction. 'We sold at the top of the market and so it was awfully hard not to buy at the top of the market.'

Pearson bought its South Bank office block in 1987 when it sold the FT's former City home, Bracken House, to a Japanese company for pounds 143m. It moved advertising and editorial staff to Southwark Bridge, while printing of the newspaper moved to London Docklands.

Despite the write-down, Pearson's operating profits jumped to pounds 216m in the year to the end of December. Excluding the write-down and exchange rate gains, operating profits were up 32 per cent while pre-tax profits rose 38 per cent to pounds 208.6m.

Higher profits owed much to tough cost-cutting; underlying sales were up 12 per cent to pounds 1.3bn. Acquisitions and disposals meant total sales rose 14 per cent to pounds 1.9bn - during the year Pearson bought Thames TV, the programme maker, and the Extel news service but demerged Royal Doulton and sold 55 per cent of its stake in Camco.

The results also underlined the dramatic turnaround in the loss- making BSkyB satellite station in which Pearson holds 17.5 per cent. For the first time Pearson's profits included income from BSkyB - pounds 7m in loan interest.

BSkyB's turnaround also meant Pearson was able to release a pounds 71.4m provision originally made in respect of its pounds 117m net investment in the company. In addition, Pearson has guaranteed BSkyB loans amounting to pounds 168m.

The satellite station - now valued by some analysts at up to pounds 4bn - is negotiating a refinancing with its bankers, which would result in the repayment of debt to its shareholders.

The figures were in line with expectations, but a slightly higher-than-expected final dividend of 7.625p (6.625p) surprised investors, and the shares rose 32p to 667p.

View from City Road, page 26

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