Heavy Internet Spend Drives Down Pearson Profits

05 March 2001

London-headquartered media and education group Pearson, owner of the Financial Times, will today post a 17% profit decline for 2000, attributing this to strategic reorganisation and heavy internet spending.

Despite the dive, the results bettered market expectations with pre-tax profits reaching £333 million ($489m), ahead of analysts’ estimates of between £310m-£330m. However, profit was substantially below the 1999 level of £402m.

During the year, Pearson had invested £196m in internet development compared with £39m the preceding year. The group claims that the huge increase in webspend will advance the move into profitability for its online financial news site FT.com and consumer education portal, Learning Network.

The sites are now expected to emerge from the red at the end of 2002 and 2003 respectively, with substantially less investment required during the current fiscal.

Other media-related events contributed to the upheaval in 2000, among them the acquisition of lossmaking publisher Dorling Kindersley, the merging of Pearson Television with CLT-Ufa, and the purchase of a 22% stake in Bertelsmann-owned pan-European broadcaster RTL.

Says Pearson's high profile chief executive Majorie Scardino: "For the fourth straight year, we increased our organic revenue growth, improved our margins and turned in a good cash performance. We are making the moves that enable Pearson to grow more quickly and more profitably."

Separately, Pearson will today launch FT Mobile, a joint venture with mobile phone retailer Carphone Warehouse, offering business and financial content.

News source: Financial Times