UK publisher Pearson, made a spirited defence of its strategy to shareholders on Friday and shot down persistent rumours that it may sell its flagship newspaper, the Financial Times. "We've very good reasons to believe we're emerging with some very good prospects in front of us," outgoing Chairman Dennis Stevenson said at the company's annual general meeting. "The not such good news is that business progress has not been matched by our share price." "The horrible, grisly truth is that we've underperformed the FTSE," he said. "The share price has moved sideways for the last three or four years."
Chief Executive Marjorie Scardino arrived in 1997 and reshaped Pearson into the world's biggest education publisher. One hundred pounds invested in the FTSE 100 index in 1997 would now be worth 135 pounds, while the same amount invested in Pearson would be worth 126 pounds.
Shareholders had plenty of tough questions for Stevenson - whose announced retirement earlier this year has spurred further speculation about Pearson's future - noting that if the FT were sold it would likely bring in a substantial premium as one of the world's best-known newspapers.
"We are not considering selling the FT," Stevenson said, although he admitted that the company has "no religion about particular assets."
The newspaper's advertising revenues are up 3 percent in the year to date and it is on track to be "about breakeven" for the year, Pearson said. It has suffered three consecutive years of losses after the technology and business-to-business advertising market plunged.
Scardino said that cost cuts at the paper will result in dramatic profits when advertising returns, which may be the only way to silence critics.
"When FT profits are rising, nobody asks us when we're going to sell it," she told Reuters on the sidelines of the meeting. Pearson shares were up 0.5 percent to 633-1/2 pence by 1415 GMT.
The company said that the US textbook market, which accounts for most of its revenues, is set for strong growth, with new adoption opportunities expected to grow to about $900 million this year, from about $500 million in 2004. Pearson expects its US textbook and testing business to increase sales in double digit percentage for 2005.
At Pearson's Penguin book publishing division, which struggled last year due to slow US paperback sales and a software glitch at one of its warehouses, the company said trading is in line with expectations.
Stevenson has yet to set an exit date, and Pearson said the search for his replacement is still in the early stages. Whoever is chosen will play a major role in the company's future strategy.
"We believe the announcement of a new chairman could be pivotal for Pearson, particularly in light of recent investor disquiet over the group structure," the Numis media team said in a research note.
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