Pearson Interim Results 31 July 2000. Interim results to 30 June 2000 Acquisition Announcement.

transcript

Pearson Interim Results31 July 2000

Interim results

to 30 June 2000

AcquisitionAnnouncement

Record performances

Investing for growth

Delivering on the internet

Record performances

Investing faster

Delivering faster

Record performancesRecord performances£m£m

Sales 1,545 +18%

Operating profit* 156 +17%

Pre-tax profit 123 n/a

Earnings per share (p)- pre internet enterprises 10.0 +41%- post internet enterprises (0.6) n/a

Dividend per share (p) 9.2 + 7%

2000Half year

*before goodwill, internet enterprises and other items

Internet at the heart of Internet at the heart of PearsonPearson£m£m H1 H1 Full year

2000 1999 1999

Online delivery 60 35 90

Online channels 30 15 50

Composite 140 110 375education products

Investing faster…Investing faster…

Net H1 investment £84m

FT internet enterprises– stable costs, rising revenues

– profit two years ahead of plan

Learning Network– speed, reach, depth

– launch in September

… … delivering fasterdelivering faster

The integrated learning company

ResultResultss

Profit & LossProfit & Loss£m£m

Sales 1,545 1,306

Operating profit 156 133before Internet enterprises (84) (7)

Goodwill (72) (63)

Other items (11) (17)

Total operating profit/(loss) (11) 46

2000Half year

1999Half year

Sales growthSales growthContinuing operations before internet Continuing operations before internet enterprisesenterprises£m£m

TotalTotalgrowthgrowth

PortfolioPortfoliochangeschanges

ForeignForeignexchangeexchange

UnderlyingUnderlyinggrowthgrowth

17%17%

12%12%

225225

161161

FT Group 408 330 +24%

Pearson Education 647 554 +10%

Penguin 326 263 + 9%

Pearson TV 164 159 + 3%

Continuing operations 1,545 1,306 +12%

2000Half year

1999Half year

UnderlyingChange

Outstanding sales growthOutstanding sales growth£m£m

Operating profit growthOperating profit growthContinuing operationsContinuing operations£m£m

TotalTotalgrowthgrowth

PortfolioPortfoliochangeschanges

ForeignForeignexchangeexchange

OtherOther UnderlyingUnderlyinggrowthgrowth

32%32%33%33%

FT Group 109 86 29%

Pearson Education (26) (38) 27%

Penguin 33 31 16%

Pearson TV 32 33 - 3%

Continuing operations 148 112 33%

Discontinued operations 8 21

Total operating profit* 156 133 33%

*before goodwill, internet enterprises and other items

2000Half year

1999Half year

UnderlyingChange

Underlying profits rise by a Underlying profits rise by a third third £m£m

Accelerated internet Accelerated internet investmentinvestmentSix months to June 2000 Six months to June 2000 £m£m

FT Group 16 64

Learning Network - 19

Pearson Television - 1

SalesNet

Investment

Profit enhanced by Lazard Profit enhanced by Lazard sale sale £m£mOperating profit/(loss) (11) 46 Non-operating items 218 5

Profit before interest 207 51 Net finance costs (84)(71)

Profit/(loss) before tax 123(20) Taxation (32)(18)

Profit/(loss) after tax 91(38) Minorities (3)(3)

Profit/(loss) for the half year 88(41)

2000Half year

1999Half year

NCS tax opportunityNCS tax opportunity

Tax rate held at 25%

Likely benefit from NCS transaction

Adjusted earnings

Pre internet enterprises 10.0 7.1

After internet enterprises (0.6) 6.3

Interim dividend 9.2 8.6

2000Half year

1999Half year

Before goodwill, exceptional and non operating items

Pre internet eps up 41%Pre internet eps up 41%pence per sharepence per share

Working capital phasing Working capital phasing £m£m

Operating profit 156 133 (pre goodwill and other items)

Partnerships and associates 29 (2)

Working capital increase (286) (129)

Net tangible fixed assets (58) (37)

Depreciation 42 41

Other movements 13 (14)

Operating cash flow* (104) (8)

*before effect of integration costs

2000Half year

1999Half year

PerformanPerformancece

109109

20002000

19991999

19981998

Operating profithalf year

20002000 392392

19981998 33533519991999 328328

Saleshalf year £m

Pre internet enterprises

Operating profitsOperating profits£m£m

FT Newspaper 50 34 +47%FT Interactive Data 26 15 +73%FT Business 3 (1)Les Echos 16 13 +23%FT joint ventures (9) (1)Associates 4 8 -50%

90 68 +32%Recoletos 19 18 +6%

109 86 +27%

2000Half year

1999Half year Change

Growing circulationGrowing circulationJune sales (thousands)June sales (thousands)

327362

1997 1998 1999 2000

Increasing ad revenuesIncreasing ad revenues£m£m

1997 1998 1999 2000Jan - June

FT.com growthFT.com growth

H1 revenue growth 300%

75% visit at least twice per week

Averages 8 pages per user per day

CPM ad rates of £40 – £100

6/99 6/000

100 Million page views per month

FT business portalsFT business portals

6/99 6/000

100 Million page views per month

FT business portalsFT business portals

FT Group internet revenuesFT Group internet revenues

Advertising

Subscriptions

Syndication/licensinge-commerce

Generating returnsGenerating returnsFT.comFT.com

1999 2000 2001 2002 20030

Revenues

Strong performance in local currency– sales up 18%

– operating profit up 12%

#2 Spanish internet portal

Flotation planned

232232263263

20002000

19981998

19991999

20002000

19991999 313119981998 1616

£m294294ii

Saleshalf year

Pre Dorling Kindersley

3737ii

New York Times 58 34Sunday Times 31 22

More BestsellersMore Bestsellers2000

Half year1999

Half year

326326

232232263263

20002000

19981998

19991999

20002000 333319991999 313119981998 1616

Saleshalf year

Post Dorling Kindersley

DK integrationDK integration

March00

April00

June00

July00

Jan 01

Offeraccepted

Warehousing reorganised

Brand group established toexploit content across Pearson

New DKOperating

Board DKFLclosure

CombinedUK Sales &Marketing

Financesystemsmerged

Officeintegration

DEALCLOSED

Consolidatedsupply chain

London listed company London listed company worth £16 bnworth £16 bn

London listing

0 -Feb Mar Apr

2000May Jun Jul

Deal announced

The value of televisionThe value of television

£0.3bn

£3.5bn

Net valuecreated£3.8 bn

Net realisationsince 1990

Value ofRTL stake

Net valuecreated£3.8 bn

Net realisationsince 1990

Value ofRTL stake

20002000 647647

19981998 18018019991999 554554

20002000(26(26))

19991999(38)(38)19981998(19)(19)

Losseshalf year

Saleshalf year

Pearson EducationPearson Education£m£m

US School 222 187 +19%

Higher Ed & Professional 215 178 +21%

International 197 169 +17%

Discontinued 2 12

Pearson Education 636 546 +16%

FT Knowledge 11 8

647 554

2000Half year

1999Half year Change

On track for full yearOn track for full year

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

% of Total Year

RevenueRevenue

Operating ProfitOperating Profit

Cash FlowCash Flow

LaunchLaunch

AcquisitionAcquisition

The visionThe vision

The integrated learning company

Creates the “intelligent” classroomCreates the “intelligent” classroomConnects schools and homesConnects schools and homes

The companyThe company

Education +25% growth Education +25% growth

AssessmeAssessmentnt

K-12K-12applicationsapplications

Projects forProjects foreducation education customerscustomers

Accreditati0nAccreditati0n

Data Data managememanageme

##11 in assessment in assessment

Scores, processes and reports 40% of all K-12 standardised tests

Leads in internet-based tests, delivery systems

Leader in assessment technology

##11 in school applications in school applications

Software and systems to manage schools, students, curricula and teaching

40,000 schools out of 100,000

10,000 hours of on-line content

Bank of 40,000 questions

##11 in key data management in key data management nichesniches

Leveraging education skills and equipment

Leader in moving paper processes to web

Leading supplier to US Dept of Education

20% compound revenue 20% compound revenue growthgrowth$m$m

301331

1995 1996 1997 1998 1999 00e**market estimates

25% compound earnings 25% compound earnings growthgrowthEPS($)EPS($)

0.530.67

1995 1996 1997 1998 1999 00e*

*market estimates

The combinationThe combination

Customised school learning products

Larger sales force

Greater international reach

The combinationThe combination

Professional accreditation products

Larger sales force

Greater international reach

The combinationThe combinationThe school home connectionThe school home connection

TransactionTransaction

Deal highlightsDeal highlights

Cash tender offer at $73 per share– 26% premium over Friday’s closing

Values NCS at $2.5 bn

$98m break-up fee

Completion expected early September

ValuationValuation

2000* 1999

Multiples of:

Revenue 3.3 3.9

EBITDA 20.3 23.6

EPS 49 61

*consensus of analysts estimates

Added valueAdded value

Revenue opportunities

Cost reductions of $50m by 2002

Integration costs of $50m

Impact on PearsonImpact on Pearson

Enhances adjusted earnings in first year

Strengthens earnings quality and visibility

Superior cash conversion

Financial ratios protected by funding

The rights issueThe rights issue

3 for 11 at £10 to meet acquisition cost

Discount structure will – reduce issue costs

– create bonus element

Backstop underwriting to ensure completion

Synchronised with US listing process

Pro forma balance sheetPro forma balance sheet£m£m

Goodwill 3,018 4,529Fixed assets 453 500Working capital 1,160 1,101Other net assets 86 701

Net trading assets 4,717 6,831

Shareholders’ funds 1,831 3,963Provisions and minorities 343 300Net debt 2,543 2,568

Capital employed 4,717 6,831

2000Half year

PostAcquisition*

*post NCS and RTL transactions

The next “new new thing”The next “new new thing”

Transforming Pearson EducationTransforming Pearson Education

Pearson Interim Results 31 July 2000. Interim results to 30 June 2000 Acquisition Announcement.

Documents