Book publishing revenue at Pearson fell 7% in 2003, to £3.29 billion ($5.86 billion), although operating profits rose about 1%, to £404 million ($719 million).

Total sales at Penguin were £840 million ($1.49 billion), a slight gain over sales of £838 million in 2002, although the company noted that excluding currency fluctuations, sales would have been up 2%. Operating profit increased 5%, to £91 million ($162 million). Penguin chairman John Makinson told PW sales were up at all Penguin operating groups, which helped to offset a decline in sales at Dorling Kindersley. Sales at DK, which remained profitable last year, were hurt by the soft market for backlist titles, a factor that hurt sales at Penguin Group USA as well. But strong frontlist sales resulted in a record year at Penguin USA, which accounts for about two-third of total Penguin sales.

The company had a record number of bestsellers in the year, placing 110 titles on the New York Times bestseller lists.

Susan Petersen Kennedy, Penguin publisher, said both the adult and children's groups had sales gains in the year. Among the top performing titles last year were East of Eden (1.8 million copies in print), The Secret Life of Bees (2.5 million copies) and Lies and the Lying Liars Who Tell Them (1.1 million copies). Boosted by Bees, Penguin's trade paperback program had a solid year, Kennedy noted, and the new Portfolio and Gotham Books imprints made contributions in the year. In the children's group, strong sales were turned in by The Trellis and the Seed, On Noah's Ark and Loamhedge. Licensed publishing hits included the Strawberry Shortcake and Dick & Jane series, which sold 4.5 million and 2.5 million copies, respectively. Madonna's two children's books sold a total of 1.2 million copies worldwide. Three more Madonna books are set for release this year.

Pearson chief executive Marjorie Scardino said she expects Penguin to have a slight gain in sales in the year, although margins could "take a bit of a hit" because of continued investment in new publishing programs and marketing initiatives, including the debut of Penguin TV. The company will also launch a party-plan sales effort this fall aimed at the pre-k market, Makinson said, adding that the party plan and TV initiatives are part of Penguin's effort to find more incremental sales by opening new distribution channels. "We're looking to create additional customers without taking any away from bricks-and-mortar stores," Makinson said.

Looking specifically at Penguin USA's 2004 prospects, Kennedy said her concerns about topping 2003 were "a tiny bit allayed" by a "very good" January, although she said the book market continues to be a "tough environment."

Education Sales Down 11%

Results at Pearson Education were hurt by changes in exchange rates; total sales in the education group fell 11%, to £2.45 billion, while operating profit was flat at £313 million. Excluding currency changes, sales were down 6%.

Operating profits were up in Pearson's school and higher education groups, but plunged about 50% in its professional segment.

Pearson's higher education group was especially affected by currency changes. Revenue was roughly flat in the year at £772 million, but in constant currency, sales were up 6%. Pearson said sales in the U.S. rose 6%, led by good results from frontlist titles, particularly at community colleges. Pearson's custom publishing program's revenue rose 35% last year, exceeding $100 million for the first time.

Currency changes actually helped boost sales in the school segment 2%, to £1.18 billion; excluding changes, sales rose 1%. In the U.S., basal sales through Scott Foresman and Prentice Hall rose 4%, helping to offset a drop in sales in the company's supplementary businesses. School testing sales were slightly ahead of 2002.

The declines in the professional segment were due to the loss of a government training contract and the 12% decline in computer book sales. Although the latter fell for the third straight year, Pearson said the rate of decline appears to be slowing, particularly in the U.S.

Scardino was optimistic about prospects for the higher education market in 2004, projecting a 4% to 6% sales increase. She said Pearson expects the school group to be "broadly flat" with 2003 as declines in basal sales are somewhat offset by gains in other segments in the group.

Asked when Pearson education chief Peter Jovanovich may return, Scardino said no timetable has been set. Jovanovich has been on a medical leave of absence since December.