pearson interim results 31 july 2000
DESCRIPTION
Pearson Interim Results 31 July 2000. Interim results to 30 June 2000. Acquisition Announcement. Record performances Investing for growth Delivering on the internet. Record performances Investing faster Delivering faster. Sales 1,545+18% Operating profit * 156+17% - PowerPoint PPT PresentationTRANSCRIPT
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
5454
1010
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%
3636
66 33
44
3737
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
16 84
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
8686
6969
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
Pre internet enterprises
Growing circulationGrowing circulationJune sales (thousands)June sales (thousands)
327362
396
462
1997 1998 1999 2000
Increasing ad revenuesIncreasing ad revenues£m£m
6171
84
118
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
25
50
75
100 Million page views per month
FT business portalsFT business portals
6/99 6/000
25
50
75
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
Costs
£
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
Operating profithalf year
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
£m
Operating profithalf year
Saleshalf year
Post Dorling Kindersley
DK integrationDK integration
DK integrationDK integration
March00
April00
May00
June00
July00
Oct00
Nov00
Jan 01
May01
Offeraccepted
Warehousing reorganised
Brand group established toexploit content across Pearson
New DKOperating
Board DKFLclosure
CombinedUK Sales &Marketing
Financesystemsmerged
Officeintegration
DEALCLOSED
May02
Consolidatedsupply chain
London listed company London listed company worth £16 bnworth £16 bn
Jan
London listing
200 -
150 -
100 -
50 -
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)
£m
Losseshalf year
Saleshalf year
Pre internet enterprises
Pearson EducationPearson Education£m£m
Sales
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
0%
25%
75%
50%
100%
-25%
-50%
-75%
RevenueRevenue
Operating ProfitOperating Profit
Cash FlowCash Flow
LaunchLaunch
AcquisitionAcquisition
The visionThe vision
The integrated learning company
The visionThe vision
Creates the “intelligent” classroomCreates the “intelligent” classroomConnects schools and homesConnects schools and homes
The visionThe vision
The companyThe company
Education +25% growth Education +25% growth
AssessmeAssessmentnt
K-12K-12applicationsapplications
Projects forProjects foreducation education customerscustomers
Accreditati0nAccreditati0n
Data Data managememanageme
ntnt
##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
406
505
630
750
1995 1996 1997 1998 1999 00e**market estimates
25% compound earnings 25% compound earnings growthgrowthEPS($)EPS($)
0.530.67
0.80
1.00
1.24
1.50
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
price
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
