Publishing Revenues Near $5 Billion at Pearson

Total publishing revenues at Pearson rose 19.9%, to £3.36 billion ($4.90 billion) in 2001, the company reported last week. Sales in the education segment jumped 24.1%, to £2.54 billion ($3.71 billion), while sales at the Penguin Group increased 8.6%, to £820 million ($1.18 billion). Operating profits in the education group rose 11%, to £374 million, while profits at Penguin increased 1.2%, to £80 million. Results include figures from Pearson's testing business plus Dorling Kindersley, both of which were acquired in 2000. Excluding DK, which lost £7 million on sales of £146 million last year, Penguin Group sales were up 3%, and operating profit increased 6%.

Within Penguin, Penguin Putnam had the strongest growth, with sales up 5% and operating profit ahead 7%. Gains were led by a record number of bestsellers at the company, which offset softness in travel books and in children's backlist, said David Shanks, Penguin Putnam CEO. Shanks said that the results indicated that "bestsellers are becoming a more and more important part of the product mix." Sales growth was spread evenly across the adult, children's and mass market categories. "I don't think I have to sit on any one area," Shanks told PW. Returns have been "fractionally lower" in 2001 than last year, and, barring heavy returns from the closing of two Ingram warehouses and the bankruptcy of Kmart, Shanks believes returns will remain at their usual levels.

Shanks is looking for solid growth in 2002, especially in the second half of the year when the majority of the publisher's big titles are set to be released. The second half of the year is also expected to see the launch of Bill Shinker's still unnamed imprint, while Adrian Zackheim's Portfolio imprint will publish its first titles in late 2002 or early 2003. Also in 2002, under Shanks's direction, Penguin Putnam will be the first Pearson company to install SAP to run all of its back-office operations. The company has been working on the installation for almost a year and is set to go live sometime this summer. Shanks is hopeful that the more "publisher friendly" version 4.6 will result in minimal disruptions in the company's operations. The installation of SAP is an important part in further integrating DK into Penguin's businesses as well as allowing some integration of Penguin's functions with Pearson Education.

In other areas of Penguin, group president David Wan said Penguin U.K. had a "solid year," with profits up on modest revenue gains. Penguin Canada enjoyed a turnaround year in terms of both finances and operations, Wan said. After an extensive overhaul, DK is expected to be profitable this year. The first major release under the revamped operation, Animal, has sold more than 500,000 copies in more than 23 languages since its release in October. Wan said the key to returning DK to profitability is returning it to "a true global publisher. It got in trouble by relying too heavily on local publishing," which DK's expensive, highly illustrated publishing projects could not support.

Educational group revenues included sales of £592 million and profits of £63 million from the NCS Pearson testing unit. Excluding results from NCS, revenues at Pearson Education were up 1% and operating profits fell 5%, as gains in the U.S. school and college groups were offset by declines in the professional and international operations.

In the school division, sales of basal and supplementary products rose 9%, while assessment and testing revenues increased 18%. Software sales fell 2%. The college division benefited from its online investments, with approximately 60% of the unit's revenues generated by textbooks bundled with Internet programs. Pearson chief executive Marjorie Scardino added that the division's custom publishing operation "is flying as a business." The overall increase in the year was limited by weak sales of engineering and computer textbooks.

Lower sales of technology and computer books also hurt results in the professional division, where sales, excluding NCS Pearson, fell 21%. A decline in sales of technology books was also a major factor in the relatively flat performance of Pearson's international group. In addition to weak technology sales, international operations were negatively affected by the economic downturn in Argentina and Colombia. A bright spot was school and college operations in Asia, Europe and South Africa, plus higher sales from the English-language training business.