Lehman BrothersLehman Brothers

David ShanksDavid ShanksCEO, Penguin Group (US)CEO, Penguin Group (US)

15 June 200515 June 2005

Our shape

PearsonSales: $7,096mProfits: $758m

Penguin GroupSales: $1,509mProfits: $100m

School29%

Higher Education20%

FT Group16%

Professional14%

Penguin21%

UK & RoW40%

US60%

2004 results under IFRS translated at year end rate of £1: $1.92

The US consumer publishing market

By publisher By category

Harper Collins8%

Random House17%

PenguinPenguinPenguinPenguin11%11%11%11%

Simon & Schuster8%Time

Warner6%

Holzbrinck4%

Other 46%

Source: Nielsen Bookscan, AAP

Hardcover 31%

Tradepaperback 22%

Massmarket

20%

Youngreaders

18%

Other 9%

A US publishing powerhouse

Strength of brand and backlist

#1 imprint in US

• Breadth of publishing

• A leader in every major English languagebook market

• Part of the world’s largest book company

The world’s leading book companyBook revenues, $m

Source: 2004 resultsNote: 2004 FY average £1:$1.83; €1:$1.25.

1,276

1,283

1,588

2,097

2,230

2,396

4,114

Reed(Harcourt)

NewsCorp(HarperCollins)

Scholastic

Bertelsmann

McGraw-Hill

PearsonPearsonPearsonPearson

Houghton Mifflin

US gross sales by format, 2004

Source: AAP/ Penguin

Young readers

Mass market

Adult hardcover

Trade paperback

Other

18%16%

20% 33%

22% 21%

30%

9%

31%

Industry PenguinUS

Adult hardcover 30%

Trade paperback 21%

Emergence of multi-million bestsellers

2.2m 3.7m 7.2m

Emergence of multi-million bestsellers

2.2m 3.7m 7.2m

Mass market33%

Consumer attitudes to mass market

• 60% of readers over 50 have not bought a book because of legibility

• 82% of readers prefer new premium format to traditional mass market

• 70% of readers over 50 would spend $2 more on new format

Source: BzzAgent Marketing survey of 6800 readers, 2005

The premium paperback

The premium paperback

The premium paperback

Young readers

16%

Young readers

16%

Our priorities

• Balancing our investment

• Innovation in formats / channels

• Further cost savings

• Efficiency gains with Pearson Education

• Publishing success

Hot Shots

Our outlook

Patricia Cornwell

Photograph by Peter Ross

Our outlook

Our outlook