By Gavin Haycock
LONDON (Reuters) - UK-based Financial Times owner Pearson announced above-forecast profit and said it was confident 2008 would be another good year although it trimmed its revenue growth outlook in some areas, knocking its shares.
ABN AMRO analyst Paul Gooden said Pearson's outlook statement was slightly disappointing with the low single digit percentage forecast for underlying 2008 revenue growth in the schools business coming after 6 percent in 2007.
The education publisher expects margins in its schools business to be similar to 2007 and rise to around 15 percent in 2009, with percentage sales growth there "well into double digits" this year on a constant currency basis, boosted by its recent Harcourt acquisition.
Professional publishing is set to deliver low single digit underlying revenue growth, compared with 9 percent last year. At the start of 2007, Pearson predicted flat growth in this division and then went on to upgrade its estimate twice.
In higher education, 2008 underlying sales growth is seen at a mid single digit percentage, a little ahead of the industry, Pearson said. This compares with 5 percent growth in 2007.
Margins at book-publishing arm Penguin are expected to improve further, while the Financial Times division was likely to lift profit without any growth in advertising revenue.
ABN's Gooden said he rates the shares a "hold" given the outlook statement was no worse than could have been expected, Pearson's sales being second-half weighted and with a valuation that is "reasonable rather than bargain basement." Pearson makes around 90 percent of its pretax profit in the second half.
At 3:43 a.m. EST, Pearson's shares were down 3.8 percent at 641 pence while the European DJ Stoxx media index was 1.9 percent lower.
Pearson has been reducing its exposure to print advertising, with advertising accounting for 30 percent of FT Group revenues last year, compared with 52 percent in 2000.
Chief Executive Marjorie Scardino said advertising trends remain difficult to predict.
TOPS FORECASTS
The company's adjusted 2007 pretax profit increased to 549 million pounds ($1.09 billion) from 502 million a year earlier, while revenue in the year to end-December rose to 4.22 billion pounds from 4.05 billion.
Pearson was forecast to have 2007 revenue of 4.205 billion pounds, with estimates in a 4.04 billion-4.58 billion range, according to a Reuters poll of 22 analysts.
Adjusted pretax profit, which strips out amortization and exceptional charges, was seen at 533.2 million pounds, according to the average forecast of 12 analysts, whose estimates ranged from 521 million to 545 million pounds.
The company said group operating profit rose 14 percent to 634 million pounds, with the corresponding gains in education, Penguin and the FT Group at 9, 20 and 30 percent, respectively.
Adjusted earnings per share rose to 46.7 pence from 43.1 pence. Earnings per share before amortization and exceptional charges was seen at 45.60 pence, within a 43-45.90p range, based on the average forecast from 15 analysts.
The world's biggest publisher of education materials said in January it expected its full-year adjusted earnings would be at or above the top end of the range of market expectations at the time, despite the weaker dollar. It also said then that its 2007 figures would benefit from a lower tax charge.
It raised its dividend 7.8 percent to 31.6p a share.
Pearson expects its interest charges in 2008 to be similar to last year, with the higher level of net debt following the completion of the Harcourt acquisition offset by strong cash generation and recent proceeds from selling the Les Echos newspaper business and its scanners data management business.
The company's net debt fell to 973 million pounds from 1.06 billion in the previous year.
(editing by Will Waterman and Elizabeth Fullerton)
