Pearson trading cheers shares

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The Independent Online
Pearson, the media and information conglomerate, yesterday cheered the stock market with a better-than-expected trading statement, sending the shares sharply higher in London. The shares put on 22p to close at 711.5p.

The company said the effects of the strengthening pound, which some had feared would depress US and European revenues, would have no material effect on 1996 earnings, which are likely to reach about pounds 250m.

Pearson said it would take a pounds 5m charge for reorganisation of its back office in both 1996 and 1997, in line with expectations.

But the company, which owns the Financial Times, Thames Television and Penguin Books, conceded that its share of the Channel 5 retuning budget would be sharply higher than originally anticipated, hitting about pounds 37m, or 24 per cent of the revised pounds 150m total forecast - in line with Pearson's equity stake in Britain's soon-to-be-launched fifth terrestrial channel. Even that figure was seen last night as conservative.

David Elstein, chief executive of Channel 5 Broadcasting, said the budget for retuning the Channel 37 frequency, one of two awarded to Channel 5 for the new service, would be about pounds 120m. Another pounds 50-pounds 60m would be required to retune households in the Channel 35 areas of the country, bringing the total to about pounds 180m, as reported in The Independent yesterday.

Pearson's share would be about pounds 45m, as revealed in The Independent yesterday.

Mr Elstein said that the shareholders of Pearson - which include Pearson, United News & Media and Luxembourg-based CLT - were "relaxed" about the higher budget, because each increase in the number of households retuned would expand the eventual market for Channel 5.

"As long as we keep our per-household costs to about pounds 12, we can expect that the extra retuning costs will be covered within two years of the channel's launch," he said yesterday.

He added that differences in the forecasts of the eventual retuning costs were due to uncertainty about the number of households likely to fall within the Channel 35 catchment areas.

"We just don't know how many homes we will have to retune," he said, adding that all forecasts were "guesstimates".

Pearson said its television subsidiary saw its operating profits rise strongly in 1996, helped by overseas sales.