Pearson surprised the market yesterday by upping its profit expectations for the year as it shrugged off the worst of the economic headwinds that have buffeted the media industry.
The owner of The Financial Times and Penguin Books put out a nine-month revenue statement, showing underlying growth in revenues of 1 per cent, rising to 20 per cent with currency movements, "in spite of the tough economic environment".
Pearson benefited from gains in its education business in North America, with underlying growth of 3 per cent, despite the wider US school publishing market falling by a fifth over the period.
The division's performance was ahead of expectations, as Pearson's investment in digital services helped to lift its market share and expansion into new locations. The group sounded a note of caution, however, saying the fourth quarter was a vital selling season in education and consumer publishing, and there was "tough trading in some of our markets". Yet it added that it was "trading ahead of expectations" and lifted earnings for the year to at least 60p per share, up from 57.7p if the exchange rate remains the same.
Paul Richards, a Numis analyst, said the 4 per cent upgrade would lift its annual pre-tax profits from £690m to £720m.
Pearson's chief executive, Dame Marjorie Scardino, said: "We began 2009 in a cautious mood, wary of the impact of the global economic crisis on our company. We have now seen enough of it to say that, though no part of Pearson has been untouched, the company as a whole has proved its strength."
She added that the group would next year focus further on digital services, targeting new markets and efficiency gains. "As we look towards 2010, we intend to be even more aggressive in these areas – especially new services and fast-growing markets," she added. The FT Group, which publishes the financial newspaper and a range of business magazines, saw underlying revenues tumble 14 per cent as advertising returns came under pressure. Yet, Pearson said the FT's subscription model had helped it to weather the downturn.
Penguin revenues fell 2 per cent. It reacted to the declining retail market by slashing costs, boosting the drive to sell e-books, as well as growth in emerging markets including South Africa. It said book sales were lifted by releases including Jamie's America, and Juliet Naked by Nick Hornby.