A good publishing performance by Penguin Books helped owner Pearson offset an otherwise “weak key selling season” during the last quarter of its financial year.
However, Pearson announced an operating profit downgrade for 2012, and shares fell 3%.
The publisher praised its book division for trading in line with expectations in spite of “rapid industry change and tough conditions in the physical book retail market”.
The education and media group, which also owns the Financial Times, warned “tough market conditions and structural industry change” would continue to dog its businesses as a whole in the year ahead.
Although the group said it expects to report good revenue growth, in line with 2011 at constant exchange rates, it pointed the finger at weaker advertising sales and a poor performance from higher education and consumer publishing as the root cause for curbing its profit expectations ahead of full financial results on February 25.
It expects market conditions to remain “weak” and therefore anticipates operating profits in the region of £935 million.
Last year, Pearson unveiled plans to merge its Penguin books arm with German-owned Random House in a move aimed at fighting back against Amazon and Apple in the e-book revolution. The two companies are seeking clearance for the proposed merger from appropriate regulatory bodies around the world.
Digital and subscription-based revenues at the group continued to grow last year.
However, Pearson said profits will be “significantly” lower year-on-year because of “further actions to accelerate the shift from print to digital”.
It also said profits will be dented by a loss of income from the FTSE International, after it sold its 50% interest to the London Stock Exchange for £450m during December 2011. The firm said FTSE profit contribution accounted for £20m of profit and 2.2p of EPS in 2011.
In Pearson’s education division, which accounts for 75% of the company’s business, its North American division also weathered a tough year.
The company said US school and higher education publishing industries declined by 11% in the first 11 months of last year.
“Our services and digital-learning revenues continued to grow rapidly and we benefited from a strong performance from recent acquisitions and tight cost control,” it said.
“In general, Pearson’s businesses continue to face tough market conditions and structural industry change which we see continuing into 2013,” it added.
business@thecourier.co.uk