Pearson rules out 'Financial Times' sale as paper crashes to £32m loss

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The Independent Online

The Financial Times crashed to a loss of £32m last year and the pink newspaper is expected to stay in the red this year, its owner Pearson said yesterday.

However, Pearson ruled out a sale of the FT as it reported group-wide profits of £410m for 2003, up £11m.

Separately, Marjorie Scardino, the group chief executive, underlined her faith in the company by announcing that she would convert a third of her pension pot into Pearson shares. It means that $1.2m of her pension pot will be invested in Pearson shares at last night's closing share price of 617.5p.

Ms Scardino said: "It shows I have great confidence in the future. It's just the best deal around at the moment. It's a third of my pension so it was a big decision for me. I am a long-term holder of the stock."

She has been chief executive for more than seven years and shows no sign of wanting to give up the role. "I'm going to be here for as long as I have fresh ideas," Ms Scardino said.

The FT provides just £200m of Pearson's £4bn annual revenues. The remainder of the company comprisesa large educational publishing business and a consumer publishing arm. Pearson revealed it will invest about $3m in "new channels" to sell books to new customers, including Penguin TV, which will commission non-fiction and children's programmes based on books published by Penguin and Dorling Kindersley, another of the group's brands.

Part of the initiative will include selling books direct to consumers' homes, in the way that Tupperware or cosmetics are marketed through"parties" in the home.

This will involve bespokeeditions of DK books aimed at younger children or families, which will be marketed by a network of agents. Pearson has recruited a manager from Avon, the direct-to-home cosmetics business, to run the initiative, which will be launched in the US. "We have quite a timid business model here," said Ms Scardino, referring to the growth expectations for the home-selling business.

The FT loss of £32m, up from a £23m loss the previous year, came after a 18 per cent fall in advertising revenues in the first half of 2003. Ad sales were 12 per cent lower in the second half. January and February this year saw a 4 per cent drop.

In the middle of last year, Pearson had indicated that the FT would break-even in 2004 if revenues were flat for the rest of 2003. That did not happen. Yesterday, the company said that the cost-cutting drive at the newspaper would reduce losses by £20m, even with no advertising recovery.

Ms Scardino said she was not assuming that there would be any advertising rebound. "We can't tell what's going to happen," she said.

City analysts expected ad sales at the FT to move into positive territory later this year, though that would still probably mean a loss for the year. CSFB, the broker, said it expected a £6m loss at the FT in 2004.

Asked if she stood by her comment that she would sell the FT "over my dead body", Ms Scardino said "absolutely". "We'd be nuts [to sell]. It's a fantastic brand."

Pearson told the City to expect growth in its most important business - educational publishing - next year and in 2006. The company indicated that some areas of the education business, which is US-based, would see "double-digit" growth from next year, as the "adoption cycle" picks up - the system whereby individual US states pick new school text books.