PEARSON 2011 PRELIMINARY RESULTS
Financial performance
· Sales up 6% at CER in spite of tough trading conditions in many markets.
· Adjusted operating profit up 12% to £942m with growth in all businesses.
· Adjusted EPS up 12% to 86.5p (headline growth).
· Cash conversion remains strong at 104%; operating cash flow of £983m (£1,057m in 2010, which benefited from an unusually high working capital contribution).
· Return on invested capital of 9.1%, above Pearson's cost of capital; ROIC lower than in 2010 largely due to significant acquisition spend and higher cash tax.
Growth markets
· Digital revenues up 18% in headline terms to £2bn, now 33% of Pearson's sales. Substantial digital growth in all parts of Pearson including:
o Students using our digital learning programmes up 23% to 43m.
o Penguin eBook revenues up 106%; now 12% of total Penguin revenues.
o FT digital subscriptions up 29% to 267,000; approximately 44% of total paid circulation.
· Developing markets revenues up 24% in headline terms to $1bn ($834m in 2010), now 11% of Pearson's sales.
Efficiency
· Operating margins reach 16.1% (up 1.0% points)
· Average working capital: sales ratio improved to 16.9% (20.1% in 2010).
Investment
· Sustained organic investment of approximately £500m in new products and technologies.
· £896m invested in acquisitions including Schoolnet and Connections Education in North America and Global Education in China.
· Strong balance sheet (net debt of £499m) and approximately £1bn of headroom available for bolt-on acquisitions.
Dividend
· Dividend raised 9% to 42.0p, representing Pearson's 20th consecutive dividend increase.
Outlook
· Pearson expects to achieve continued sales and operating profit growth in 2012, in spite of tough trading conditions and rapid industry change.
· Revenues from digital and services businesses expected to exceed revenues from traditional publishing businesses in 2012.
Dividend. The board is proposing a dividend increase of 9% to 42.0p, subject to shareholder approval. 2011 will be Pearson's 20th straight year of increasing our dividend above the rate of inflation. Over the past ten years we have increased our dividend at a compound annual rate of 7%, returning more than £2.5bn to shareholders. We have a progressive dividend policy: we intend to sustain our dividend cover at around 2.0x over the long term, increasing our dividend more in line with earnings growth.
