February 27, 2012 / 7:35 AM / 7 years ago

UPDATE 2-Pearson says digital will drive growth in 2012

* FY adj EPS 86.5 pence (company guidance 85.25 pence

* Revenue 5.86 bln stg (I/B/E/S poll 5.93 bln

* Expects continued sales and operating profit growth in 2012

* Shares down 2.4 percent

By Paul Sandle

LONDON, Feb 27 (Reuters) - Britain’s Pearson Plc reported a 12 percent jump in earnings, helped by demand for its education products in emerging markets, and forecast more growth in 2012 when digital revenue would overtake traditional publishing sales for the first time.

The owner of the world’s biggest education technology business, as well as the Financial Times and Penguin books, reported adjusted earnings per share of 86.5 pence for 2011, beating guidance it had raised in January.

Sales rose 6 percent at constant exchange rates to 5.86 billion pounds ($9.3 billion), light of market forecasts as textbook sales to U.S. schools came under pressure from tighter state budgets.

“Pearson expects to achieve continued sales and operating profit growth in 2012, in spite of tough trading conditions and rapid industry change,” the company said.

Chief Executive Majorie Scardino said Pearson would continue to invest in digital products and subscriptions, and in emerging markets, to counter challenging conditions in some Western economies.

“This year for the first time, we expect to generate more sales from digital and from services than we do from books and paper,” she told reporters on Monday.

Digital revenue, from services ranging from the FT on iPads to downloads of Kathryn Stockett’s “The Help” on Kindle ereaders, as well as from some 43 million student enrolled on learning programmes, reached 2 billion pounds in 2011, the company said.

Sales in developing markets, meanwhile, grew 24 percent to exceed 1 billion dollars for the first time. “Pearson now has substantial education businesses in Brazil, in China, in India and in Africa,” Scardino said.

The group had 1 billion pounds to spend on further deals, she said, with emerging markets top of the list, followed by vocational and professional services, including helping young people in Britain find a job.

NOT FOR SALE

International education and professional services are the fastest growing parts of Pearson, and there is longstanding speculation it will sell the Financial Times.

The newspaper accounts for about one-tenth of revenue and is exposed to advertising markets it said would remain weak in 2012, although a 29 percent rise in digital subscriptions to 267,000, about 44 percent of its circulation, was a highlight.

The speculation gained currency earlier this month when the Guardian reported that Thomson Reuters was interested in buying the newspaper, and Bloomberg had already flirted with a deal.

Pearson knocked back the rumour on Twitter on Feb. 9, and Scardino emphasised the point on Monday, although she stopped short of denying talks had taken place.

“The FT is not for sale, the FT is a very valuable part of Pearson, we are investing in it and we are very happy with it,” she said. “We do not share publicly who we talk to, all I’m saying is we are not selling the FT.”

Shares in Pearson, which have risen 20 percent in the last 12 months, outperforming the FTSE 100 index, fell 2.4 percent to 1,222 pence by 0936 GMT in a weaker market.

“Revenue trends continue to be tough for some areas of the business, but Pearson has nevertheless managed to eke out another beat vs expectations,” analysts at Citi said in a note.

Brokerage Liberum, meanwhile, said the North American education business, which produced 52 percent of profits and where sales fell 1 percent, faced significant pressures.

“With the stock trading at (a) 14.5 times 2012 price-earnings multiple, rising structural issues and doubts over Pearson’s view that digital can offset likely pricing pressure on higher education textbooks in particular, we remain cautious,” analyst Ian Whittaker said.

Pearson raised its dividend by 9 percent to 42 pence a share.

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