Pearson's publishing divisions are poised to deliver solid gains in 2002 and should perform well again in 2003, company chief executive Marjorie Scardino said in a December 13 conference call with industry analysts. Growth will be led by the Penguin Group and Pearson Education's college, professional testing and government solutions businesses.
Revenue at Penguin, after falling 2% in the first half of 2002, is expected to increase by at least 3% for the full year, with operating profit increasing by more than 10%. Scardino said Penguin is having a strong second half of the year in both North America and Europe. Sales at Penguin Putnam are expected to increase by slightly more than the entire Penguin Group average. The combination of higher sales from Penguin and the return to profitability of its Dorling Kindersley division were cited as the two main drivers in improving profits in the consumer group this year.
Results at Pearson Education are more complicated. Revenue is projected to rise 5% this year, led by the college division, where sales are expected to increase by more than 10%. Scardino attributed the strong gains to investments made in its frontlist program; the growth of online applications; expansion in its custom-publishing operations; and strong improvement at its Addison Wesley Longman division, which will have sales of about $300 million this year. The strong performance in college will help to offset a 5%—6% decline in sales in the school division—a result of tight state budgets and a soft adoption schedule (News, Dec. 16).
As for other units within Pearson Education, Scardino said, sales in the international division's school and college segments were up, but sales were slow in technology markets both abroad and in the U.S. Sales in Pearson Education's school testing division will be slightly up, while revenue at Pearson NCS, its professional testing and integrated learning subsidiary, is expected to rise by 40%.
Looking ahead to 2003, Scardino is expecting another good year from Penguin, which, she said, will benefit from profit improvement at DK. Part of the gains at DK next year will be due to its collaboration with Pearson Education in developing a new program for the Texas social studies adoption. More adoption opportunities will bring modest growth to Pearson's school group next year, while the college group is projected to have another strong year, with revenue topping projected industry growth of 7%.
All of Pearson's publishing businesses will benefit from the integration of the back-office operations of its consumer and education groups. Pearson is investing £50 million to upgrade its technical infrastructure, including moving its information systems to SAP 4.6, a process that is occurring now in the U.S.