Pearson chief repeats growth pledge

Pearson, the publisher, yesterday vowed to return to double-digit earnings growth this year even as it failed miserably to meet a previous pledge to double its share price over the past five years.

Back in 1997 Marjorie Scardino, then the new chief executive, committed the company to annual double-digit earnings growth and to double the share price by mid-2002. Pearson already missed the earnings target last year and the share-price pledge also failed as yesterday's interim results were presented.

On the eve of the 1997 prediction, Pearson shares stood at 666p. Adjusted for a subsequent rights issue, the shares would have to hit 1,175p. The stock closed at 612.5p yesterday, after rising 42.5p.

Ms Scardino said she did not regret making the pledge five years ago. "The reason we said that is because we knew the company would have to change a great deal. We needed some way of producing a performance culture at Pearson. It has been a wonderful tool to focus people's minds," she said.

"We didn't hit the [earnings] target for one reason – advertising, which fell like a rock. I don't think anybody could have predicted the trading conditions at the end of 2001 [at the newspapers]."

Pearson reported operating profits up 27 per cent at £76m, for the six months to 30 June. However, the bottom-line loss was £207m, which the company blamed on a fall in earnings at its newspapers and the fact that profits are second-half weighted.

At the Financial Times, advertising revenues fell by 31 per cent in the first half, compared with 2001. Pearson said it saw "no sign of advertising recovery" and that if demand for ads continues at these levels, the FT Group's operating profits will be 10 to 15 per cent down for the full year.

Elsewhere at Pearson there was better news, with its education businesses set to increase revenues by 3 to 5 per cent this year and the Penguin books unit seen as delivering double-digit growth in profits.

Analysts said the results were solid, despite the weakness at the Financial Times. Numis, the broker, is forecasting earnings per share growth for this year of 42 per cent.