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Pearson's pink paper falls into the red

Saeed Shah
Tuesday 04 March 2003 01:00 GMT
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Pearson revealed that trading at the Financial Times continued to deteriorate, as the pink paper fell into the red last year.

The FT was the weak point of the 2002 group figures, reported yesterday. Pearson said it could not forecast when performance at the business daily would improve. The newspaper made a £6m loss in the second half of last year but a small profit in the first half, producing an overall £1m profit. This year, the newspaper's revenues were 5 to 10 per cent down in January and February.

Marjorie Scardino, Pearson's chief executive, said: "For this [FT advertising] to turn up, business confidence has to come back.... People don't feel like putting their corporate messages out there. The war [threat] is holding people back."

At the top of the business cycle, three years ago, the FT was making about £80m a year profit. Last year, advertising revenues fell 23 per cent, on top of a 20 per cent decline in 2001.

The company will revamp the newspaper in April, putting in more UK news for the edition available in this country and there will be a new weekly magazine.

UK circulation has slipped by some 20,000 to 160,000 over the past couple of years. The cost base of the FT and the ft.com website has come down by £80m since 2000.

"We feel that we've got the [FT] cost base to such as place where we can weather most eventualities," Ms Scardino said.

It is hoped that the increased UK editorial coverage will attract readers from smaller businesses and northern parts of the country. An edition for Asia will be launched towards the end of this year.

Johnathan Barrett, an analyst at Teather & Greenwood, said: "You won't ever see it make £80m or £100m again, unless there's some pretty serious inflation. It's going to be a slow recovery. Even in 2005, I have the FT making just £10m."

Pearson shares closed up 7.5 per cent at 516p. Analysts said the FT was a relatively small part of the publishing group and there was relief in the City that the news elsewhere was good. Higher education textbooks and Penguin books performed strongly. Pearson said its US schools business would grow up to 5 per cent this year, after a poor year for this market in 2002.

Pre-tax profit, before exceptionals, was up 36 per cent at £399m. After accounting for a £340m goodwill charge and other charges, the loss before tax was £25m.

Ms Scardino declined to set new long-term goals for the group yesterday. "Our target in this kind of world is annual progress," she said. Ms Scardino dismissed speculation that she was about to step down, saying the group had just got to the point where it could cope with cycles and grow its assets.

"I'm certainly not going to leave before we can be sure we have accomplished these things," she said.

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