Pearson cuts 150 jobs at 'FT' after ad revenue slumps 40%

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The Independent Online

Pearson, publisher of the Financial Times, yesterday warned of a savage downturn in advertising revenue and a further drop in demand for its computer textbooks.

The company said in July, while announcing interim results, that advertising sales at its FT Group division were running 25 per cent lower this year but revealed yesterday that the figure plummeted to 40 per cent down in September, in the wake of the US terrorist attacks.

Marjorie Scardino, Pearson's chief executive, said: "We think this is already a lot worse than the early Nineties advertising downturn. It took a real nose dive from the week beginning September 10th."

She said ad revenues fell this far in the early Nineties, but the fall took four years. This time, it had happened over six months.

Full-year profits at FT Group, which includes the Financial Times, as well as Les Echoes and its stake in The Economist, are likely to be 40 per cent down on last year, Pearson stated. Some 150 staff, or 14 per cent of the workforce at the Financial Times, will go this year.

Ms Scardino said: "I don't think it's possible to say when the bottom will come. We're assuming ad booking at the current very low level through 2002."

Andrew Gordon-Baker, an analyst at JP Morgan, said: "There's no gloss to this. They've come clean on how bad the advertising is."

He knocked 20 per cent off his full-year pre-tax profit forecast for Pearson to take it to £318m, having already cut his numbers three times in the past three months.

Pearson said the advertising slowdown would have a greater than anticipated impact on RTL Group, the European broadcaster in which it has a 22 per cent stake.

Sales at Pearson's technology publishing business, which produces textbooks and manuals, are down 20 per cent. The company said profits from this division could be up to £25m lower than expected at the half-year stage.

Ms Scardino said: "These markets are cyclical in character and will bounce back. When they do, we will see the benefit. In the meantime we will manage costs aggressively."

The company said its other businesses, which include its education interests and Penguin Books, were proving resilient, although there was weakness apparent in Penguin's backlist sales, with travel books seeing a sharp decline.

Pearson said it would buy the 50 per cent of, the financial news website, that it did not already own. The operation will be folded into its main site. Some job losses are expected as a result.

Pearson shares closed up 41.5p at 770p. Analysts said the earnings alert was expected and the company was benefiting, along with the rest of the media sector, from renewed buying interest in cyclical stocks.

Separately, AOL Time Warner, the US media giant, reported a third-quarter loss of $996m (£690m), with advertising and commerce revenues declining by 5 per cent.