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.

Activities

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

News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
News
i100
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
PROMOTED VIDEO
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Arts and Entertainment
A scene from Aladdin is performed at the Tony Awards in New York in June
theatreBrit producer Lythgoe makes kids' musical comedy a Los Angeles hit
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Financial Analyst - Forecasting - Yorkshire

£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...

Business Architect - Bristol - £500 per day

£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...

Regulatory Reporting-MI-Bank-Cardiff-£300/day

£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

Hunters protect Russia's rare Amur tiger

In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
Transfers: How has your club fared in summer sales?

How has your club fared in summer sales?

Who have bagged the bargain buys and who have landed the giant turkeys
Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

'I'm a realist; I know how hard this business is'

Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

The best swim shorts for men

Bag yourself the perfect pair and make a splash this summer
Has Ukip’s Glastonbury branch really been possessed by the devil?

Has Ukip’s Glastonbury branch really been possessed by the devil?

Meet the couple blamed for bringing Lucifer into local politics
Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup