UPDATE 3-Pearson's H1 brings extra confidence for 2008
(Recasts looking at wider sector, adds shares, CEO comment)
By Georgina Prodhan, European Media Correspondent
LONDON, July 28 (Reuters) - Publishing group Pearson Plc (PSON.L), owner of the Financial Times, posted stronger than expected results and an upbeat outlook on Monday in a display of resilience in an otherwise depressed media sector.
The world's biggest educational publisher, which also owns Penguin books, increased operating profit by 38 percent in the first half and said it was more confident in its outlook for 2008.
Its shares rose more than 3 percent.
"In spite of the macroeconomic conditions, we are on track to make further progress on our financial goals and our strong trading performance has increased our confidence in the full-year outlook," the company said in a statement.
Pearson has been cutting its exposure to advertising and adjusting its portfolio to exploit digital opportunities, for example in interactive learnings -- a strategy it says is paying off in the current uncertain economic environment.
First-half operating profit was 124 million pounds ($246 million), adjusted for effects of acquisitions and disposals, while underlying sales, adjusted for portfolio changes and currency movements, grew 6 percent to 1.97 billion pounds.
Both sales and profits beat market consensus, although Pearson's results are heavily weighted towards the second half, which contains the back-to-school and Christmas seasons important for its education and Penguin divisions.
Pearson also raised its interim dividend by 6.3 percent to 11.8 pence.
The company's shares, which trade at a premium to the media sector, rose as 3.2 percent to 614 pence by 0903 GMT, the top gainer in a flat European media index .SXMP.
Sales had been seen at 1.84 billion pounds and earnings before interest and tax were at 95.8 million, according to the average of six analyst forecasts collated by Reuters Estimates.
"The outlook appears to be fairly confident, fairly robust. At a time when people are very nervous overall about anything, it does read quite well," said Analyst Alex DeGroote of Panmure.
Numis analysts wrote in a note: "Pearson is at the resilient end of the media sector and accordingly remains one of our key picks. We believe the group is attractively valued at 12x earnings." The bank kept its "Add" recommendation on the stock.
Pearson's strong results failed to lift the shares of other professional publishers such as Reed Elsevier (REL.L)(ELSN.AS) or Thomson Reuters TRIL.L(TRI.N) on Monday, as Pearson's leadership in education materials puts it in a unique position.
Pearson makes two-thirds of its revenues and operating profit at its education division, whereas Reed Elsevier is more tilted to the professional market and Thomson Reuters has greater exposure to the financial services sector.
"FT A MUST-READ"
In the first half, underlying sales at Pearson's education unit grew 4 percent and the business made a small profit, unusually for the first half, as it said North American institutions remained committed to raising student standards.
Penguin, which published bestsellers including Sebastian Faulks's James Bond novel "Devil May Care" and Greg Mortenson's "Three Cups of Tea" in the first half, increased underlying sales by 9 percent and operating profit by 28 percent.
The FT group, Pearson's smallest division -- which contains almost all its advertising revenue -- increased underlying sales by 8 percent and operating profit by 15 percent.
Unlike many regional and national newspapers, the Financial Times has enjoyed steady circulation despite a price hike last year, and FT.com has seen a leap in registered users.
"The FT is a must-read in this kind of a market. It's not an easy environment to understand," Pearson Chief Executive Marjorie Scardino told journalists on a conference call.
FT Publishing's advertising revenues rose 2 percent as luxury-goods advertising held up while other areas such as recruitment declined.
"Who would be predicting rises in this kind of a market," Scardino said when asked about the advertising outlook for the second half. "We feel just about as confident as anybody could."
Pearson also raised its forecast for Interactive Data IDC.N, saying it now expected headline sales growth of 8 to 10 percent versus 7 to 9 percent, and 11 to 13 percent growth in operating profit instead of 9 to 11 percent. (Editing by David Cowell)
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