Latecomer has much to prove

BLUE CHIP: Pearson's recent strategy of concentrating heavily on television has yet to convince investors

AS ITS chairman, Lord Blakenham, loses no opportunity to point out and our chart confirms, Pearson has been one of the fastest-growing FT-SE 100 companies in the 11 years since that index was first compiled.

But, as our chart also shows, much of the growth in the share price happened in the massive spurt two years ago - and since the start of 1994 there has been a steady decline.

That decline partly reflects uncertainty over the group's June 1993 decision to concentrate on media and entertainment. The plan was to build on its longstanding newspaper and book interests with a strong push into television, where it already had a stake in Yorkshire-Tyne Tees TV and the satellite operator, BSkyB. More exotic activities, stretching from US oil exploration to Royal Doulton china and Chateau Latour vineyards, were sold.

But it is characteristic of what Lord Blakenham calls Pearson's pragmatism that it has reclassified its Madame Tussauds waxworks, Chessington Zoo and Alton Towers theme park as part of the entertainment division, along with BSkyB and Thames Television. And it cannot quite bear to part with its half-share in Lazard Brothers, the merchant bank.

Historically, the group was set up as the family vehicle to reinvest the fortune of Weetman Pearson, who struck oil on the Mexico-Texas border early this century. He was ennobled as Viscount Cowdray, and it was his second successor, the third viscount, who brought the business to the stock market in 1969.

In those days, several members of the family were on the board. Although their involvement in the business is now much reduced, Lord Blakenham is the first viscount's great grandson and the extended Pearson family's combined shareholding still accounts for nearly a fifth of the group's £3.1bn market value.

But that has fallen from nearly £4bn, as the investment community has tried to digest the implications of the moves into media and decide whether Pearson can deliver its promises.

Lord Blakenham told shareholders last year: "The thinking behind these moves is that as a media company we have great opportunities for deploying our brands and copyrights in expanding and overlapping media markets."

There has been a succession of deals since the new strategy was heralded, starting with the acquisition of Thames for £99m in June 1993. That was followed by the purchase of the Extel news agency six months later.

Last May, the so-called Global Alliance with the BBC was forged, and Pearson simultaneously paid £312m for what is now called Mindscape, a US publisher of computer and video software. In October, the group bought Future Publishing, a UK multimedia magazine firm, and last week snapped up a 10 per cent stake in the Hong Kong-based TVB television station. In the meantime, there has been a spate of other negotiations, including abortive talks to buy ITC, an American TV company with a 10,000-hour library of programmes and films.

This sequence has left many analysts confused. "It's not easy to see what they are trying to do, and where they are going," one said. "One is a bit perplexed, and I question the fact that they are not directly managing a lot of their TV assets. There is very little synergy compared with, say, Carlton buying Central TV."

"Speed has never been a feature of Pearson," remarked Derek Terrington, media watcher at Kleinwort Benson, "and they are limited in what they can do in television. A lot of people have been in there before them. I wonder what sort of force they want to be in television. Are these stakes what they want, or is that all they can get? It all has an air of being too late."

Lord Blakenham concedes that regulations are tying Pearson's hands, particularly as the UK rules prevent a television producer from owning more than 15 per cent of an overseas broadcaster.

"We would like to be substantial producers of TV programming around the world," said Lord Blakenham, "with important stakes in broadcasting stations where it helps us to build up contacts in a key market. And in the present environment, how else can we do that but by buying minority stakes?"

Pearson is slowly joining the race to converge media, producing electronic versions of the Financial Times and even a game version of Alton Park's Nemesis thrill ride. It is extending its global reach, using its shareholdings as springboards to do programme deals.

But the share price is signalling that the immediate outlook is unclear, as the world TV market becomes more competitive. The next test will be the race to mop up the TV market in the UK, after Stephen Dorrell, the Secretary of State for National Heritage, finally defines the Government's policy on cross-media ownership. That is only one of the hurdles Pearson must negotiate before investors judge its place in the global media pecking order. Until then, the shares are likely to tread water.


Newspapers (Financial Times, Westminster Press, Les Echos, Expansion, Actualidad Economica). Books (Penguin, Ladybird, Longman, Addison-Wesley). Electronic news (FT Profile, Extel). Amusements (Madame Tussauds, Chessington Zoo, Alton Towers). Television (Thames TV, stakes in BSkyB, UK Gold, UK Living, Yorkshire-Tyne Tees Television, TVB, joint venture with BBC). Merchant banking (50% of Lazard Brothers).

Share price 571p

Prospective yield 3%

Prospective price-earnings ratio 19

Dividend cover 2.1

1992 1993 1994*

Turnover 1.64bn £1.87bn £1.55bn

Pretax profit £150.8m £208.6m £262m

Net profit £105.3m £148m £181m

Earnings per share 19.3p 27p 32p

Dividend per share 12p 13p 14p

*Smith New Court forecast

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Rhys Williams
commonwealth games
Life and Style
People may feel that they're procrastinating by watching TV in the evening
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Life and Style
The veteran poverty campaigner Sir Bob Geldof issues a stark challenge to emerging economies at the Melbourne HIV/Aids conference
Arts and Entertainment
Benedict Cumberbatch and John Malkovich talk Penguins of Madagascar at Comic-Con
comic-con 2014Cumberbatch fans banned from asking about Sherlock at Comic-Con
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
filmGuardians Of The Galaxy should have taken itself a bit more seriously, writes Geoffrey Macnab
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Graduate Recruitment Resourcers - Banking Technologies

£18000 - £25000 per annum + OTE £40,000: SThree: Huxley Associates are looking...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform