Pearson has warned investors that, if there is no improvement in market conditions, profits at FT Group could fall by as much as 40% for the full year as ad revenues are hit across the group. In a statement this morning the group said that advertising cancellations coupled with a decline in new business generated meant that profits across the group would suffer.
Advertising at the FT has been particularly badly hit (see
Forecasts), revenue for September were down 40% on last year and other titles within the group have also suffered significant losses. The circulation of the FT continues to increase putting further pressure on the group as it struggles with the current dilemma of many broadsheets; the high cost of newsprint means that without increases in advertising revenue more papers printed equals greater costs to the publisher.
Losses at Pearson Education are mainly as a result of the downturn in the technologies markets, particularly in the US where technology publishing sales are down by 20%. These losses have been partially offset by gains in English language teaching and Asian markets. Losses at FT Knowledge have occurred as a direct result of the attacks on the US as the New York Institute of Finance was located within the World Trade Centre, however some of these losses may be recovered through insurance claims.
Losses at RTL (see RTL Postpones Float As Results Are Hit By Ad Slowdown), in which Pearson has a 22% stake, will also impact on the group’s full year results.
Following heavy investment in internet enterprises last year, Pearson says that losses from this sector in the second half will be down 45% on the same period last year, totalling around £60 million.
Pearson’s chief executive, Marjorie Scardino, said: “We are now expecting profits to be significantly below our original plans for the year, almost entirely because of the weakness in advertising markets and, to a lesser extent, the technology recession. These markets are cyclical in character and will bounce back. When they do, we will see the benefit. In the meantime we will continue to manage our costs and our cash to minimise the impact on our financial performance.”
