Pearson shares up 14% on hopes of recovery

Pearson shares jumped yesterday despite the company reporting a massive drop in performance for last year, after the publisher of the Financial Times suggested its run of bad news was over.

After a year of downbeat announcements, culminating in two profit warnings, the group said its US schools testing business, NCS Pearson, would show 15 per cent revenue growth this year. It added that advertising at the FT had got no worse in the first two months of 2002, compared with the 42 per cent fall in ad volumes at the end of last year.

Pearson's 2001 figures were dragged down by lower advertising at the FT and at RTL, the pan-European television business in which it sold a 22 per cent stake in January, with group profits dropping 12 per cent to £294m. The bottom-line pre-tax loss came in at £438m, after goodwill charges, a £153m write-down relating to acquisitions and investments, and a further £123m loss from discontinued businesses.

Separately, RTL, which also reported 2001 numbers yesterday, said it had no interest in entering the battle for control of ITV. RTL already has a 65 per cent stake in Channel 5 and it will concentrate on this instead. RTL reported a ¤2.5bn (£1.5bn) loss for the year, after taking a ¤2.6bn in exceptional charges.

"Our strategy is to build, rather than buy assets. We fully support development of Channel 5 where we have decided to invest more in programming and we have seen an increase in audience," said Didier Bellens, RTL's chairman.

That statement was bad news Carlton, one of the two main ITV players, which had tried to convince RTL to buy it last year. More recently Carlton has held merger talks with Granada, which broke up last week. It was thought that RTL might now bid for Carlton or Granada, a move that would force it to sell its Channel 5 holding, for regulatory reasons. "With acquisitions, you have to pay for goodwill," said Mr Bellens. "We are not a candidate for ITV."

Pearson announced $250m (£176m) of new contracts at its NCS arm, helping to drive its shares up 14 per cent to 876p. Dame Marjorie Scardino, its chief executive, admitted that because of the poor 2001 results, she would miss the twin goals she set out five years ago ­ of delivering double-digit earnings growth and doubling the share price. However, she said the company would be back on track this year.

"To fulfil this [pledge] the share price would have to get to 1185p by August and I'm sweating," she said. "[But] we're going to be able to deliver strong earnings growth this year, no matter what happens to the economy."