Pearson, the publisher of Paul Burrell's controversial account of his time as butler to Diana, Princess of Wales, yesterday reassured investors that full-year profits were on track even though it revealed a slump in advertising at the Financial Times.
The company also revealed more details of a contract with the US Government worth $150m that has yet to be paid. The delayed payment, which is due from the Transport Security Administration (TSA), set up in the wake of 11 September, would affect the group's cash flow targets for the full year, Pearson said.
The money has been withheld by the TSA after complaints that Pearson had mismanaged the contract to hire 60,000 airline security screeners. A Federal audit of the contract is being carried out.
However, Dame Marjorie Scardino, the chief executive of Pearson, said yesterday the group remained on track to increase earnings as the effect of a weak dollar and lower profits in its professional division, including the TSA contract, were offset by a lower tax rate.
"Though market conditions remain tough for corporate advertising and technology-related businesses, we continue to perform strongly in our markets and are benefiting from further efficiency gains," the company said in its pre-close trading update.
But the market's reaction reflected growing concerns over the performance of the FT. The group's shares were down 2 per cent on news that advertising at the newspaper would be 12 per cent lower in the second half of the year and about 15 per cent lower for the full year.
The company had already announced an 18 per cent decline in advertising at the newspaper during the first half of the year.
Pearson said that while it could not predict an end to the advertising slump at the Financial Times, there was a glimmer of hope from the fact that the rate of advertising declines in the second half of the year would not be worse that the first-half decline. This came after five successive periods of half-on-half declines, the company said.
Bright spots in the update came from Pearson Education, a predominately US business, where its schools and higher education operations are expected to show good underlying progress on revenues and profits.
The company also announced that it had won a number of new contracts, including pupil testing in American schools and a contract to test US stockbrokers on behalf of the American National Association of Securities Dealers.Reuse content