Final Results continued

Pearson PLC 4 March 2002 PART 2 Consolidated Profit and Loss Account for the year ended 31 December 2001 -------------------2001------------------ -------------------2000------------- Results Results from from oper- Other oper- Other all figures in Â£ millions Note ations items Total ations items Total Sales (including share of joint 4,240 - 4,240 3,891 - 3,891 ventures) Less: share of joint ventures (15) - (15) (17) - (17) Sales of which 2a 4,225 - 4,225 3,874 - 3,874 Continuing operations 4,225 - 4,225 3,689 - 3,689 Discontinued operations - - - 185 - 185 Group operating profit of which 444 (431) 13 450 (228) 222 Continuing operations 444 (431) 13 421 (227) 194 Discontinued operations - - - 29 (1) 28 Share of operating (loss) of joint ventures and associates of which 2c 19 (86) (67) 40 (51) (11) Continuing operations (18) (51) (69) (7) (37) (44) Discontinued operations 37 (35) 2 47 (14) 33 Total operating (loss)/profit 2b 463 (517) (54) 490 (279) 211 Continuing operations Group loss on sale of fixed assets 3 - (12) (12) - (4) (4) and investments Group (loss)/profit on sale of subsidiary undertakings and associates 4 - (58) (58) - 30 30 Loss on sale of subsidiary undertakings and associates by an associate - (36) (36) - (3) (3) Discontinued operations Group profit on sale of subsidiary undertakings and associates 4 - - - - 231 231 Loss on sale of subsidiary undertakings and associates by an associate - (17) (17) - - - (Loss)/profit before interest and 463 (640) (177) 490 (25) 465 taxation Amounts written off investments 5 - (92) (92) - - - Net finance costs (169) - (169) (157) (24) (181) (Loss)/profit before taxation 294 (732) (438) 333 (49) 284 Taxation 7 (92) 159 67 (87) (19) (106) (Loss)/profit after taxation 202 (573) (371) 246 (68) 178 Equity minority interests (23) 3 (20) (14) 15 1 (Loss)/profit for the financial year 179 (570) (391) 232 (53) 179 Dividends on equity shares 8 (177) (164) (Loss)/profit retained (568) 15 Adjusted earnings per equity share before internet enterprises 6 39.2p 54.6p Adjusted earnings per equity share after internet enterprises 6 22.5p 31.9p (Loss)/earnings per equity share 6 (49.2)p 24.6p Diluted earnings per equity share 6 n/a 24.0p Dividends per equity share 8 22.3p 21.4p There is no difference between the loss on ordinary activities before taxation and the retained loss for the year stated above and their historical cost equivalents. Consolidated Balance Sheet as at 31 December 2001 all figures in Â£ millions Note 2001 2000 Fixed assets Intangible assets 4,261 4,522 Tangible assets 542 524 Investments: joint ventures Share of gross assets 8 13 Share of gross liabilities (1) (1) 7 12 Investments: associates 893 1,024 Investments: other 84 155 5,787 6,237 Current assets Stocks 849 828 Debtors 1,005 1,217 Investments 3 12 Cash at bank and in hand 393 516 2,250 2,573 Creditors - amounts falling due within one year Short term borrowing (165) (112) Other creditors (1,203) (1,484) (1,368) (1,596) Net current assets 882 977 Total assets less current liabilities 6,669 7,214 Creditors - amounts falling due after more than one year Medium and long term borrowing (2,607) (2,705) Other creditors (54) (34) (2,661) (2,739) Provisions for liabilities and charges Deferred taxation (5) (9) Other provisions for liabilities and charges (239) (257) Net assets 3,764 4,209 Capital and reserves Called up share capital 10 200 199 Share premium account 10 2,459 2,440 Profit and loss account 10 929 1,405 Equity shareholders' funds 3,588 4,044 Equity minority interests 176 165 3,764 4,209 Consolidated Statement of Cash Flows for the year ended 31 December 2001 all figures in Â£ millions Note 2001 2000 Net cash inflow from operating activities 11 490 361 Dividends from joint ventures and associates 25 49 Interest received 31 16 Interest paid (187) (179) Debt issue costs (1) (4) Dividends paid to minority interests (9) - Returns on investments and servicing of finance (166) (167) Taxation (71) (90) Purchase of tangible fixed assets (165) (139) Sale of tangible fixed assets 36 22 Purchase of investments (35) (132) Sale of investments 22 1 Capital expenditure and financial investment (142) (248) Purchase of subsidiary undertakings (128) (2,276) Net cash/(debt) acquired with subsidiary undertakings 83 (31) Purchase of joint ventures and associates (26) (108) Sale of subsidiary undertakings 41 158 Sale of associates 1 392 Acquisitions and disposals (29) (1,865) Equity dividends paid (174) (143) Net cash outflow before management of liquid resources and financing (67) (2,103) Liquid resources acquired (48) (16) Collateral deposit reimbursed/(placed) 47 (118) Management of liquid resources (1) (134) Issue of equity share capital 20 1,959 Capital element of finance lease rentals (7) (10) Loan facility advanced - 473 Loan facility repaid (521) (735) Bonds advanced 507 411 Loan notes advanced - 134 Net movement in other borrowings 3 63 Financing 2 2,295 (Decrease)/increase in cash in the year (66) 58 2001 results The preliminary results for the year ended 31 December 2001 have been extracted from audited accounts which have not yet been delivered to the Registrar of Companies. The 2000 accounts carry an unqualified audit report and have been so delivered. The 2001 Annual Report will be posted to shareholders on Tuesday 26 March 2002. Dividend The directors recommend a final dividend of 13.6p per share, payable on Friday 7 June 2002 to shareholders on the register at the close of business on Friday 15 March 2002. Annual General Meeting The AGM will be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SWIP 3EE, at 12 noon on Friday 26 April 2002. Statement of Total Recognised Gains and Losses for the year ended 31 December 2001 all figures in Â£ millions 2001 2000 (Loss)/profit for the financial year (391) 179 Other net gains and losses recognised in reserves: Currency translation differences 25 95 Taxation on currency translation differences - UK (6) (8) Total recognised (losses)/gains relating to the year (372) 266 Reconciliation of Movements in Equity Shareholders' Funds for the year ended 31 December 2001 all figures in Â£ millions 2001 2000 (Loss)/profit for the financial year (391) 179 Dividends on equity shares (177) (164) (568) 15 Currency translation differences (net of taxation) 19 87 Goodwill arising on prior year acquisitions - 1 Goodwill written back on business combinations - 585 Goodwill written back on sale of subsidiary undertakings and associates 37 68 Goodwill written back on sale of subsidiary undertakings and associates by an associate 36 - Shares issued 18 1,961 Replacement options granted on acquisition of subsidiary 2 6 Net movement for the year (456) 2,723 Equity shareholders' funds at beginning of the year 4,044 1,321 Equity shareholders' funds at end of the year 3,588 4,044 Notes to the 2001 Results for the year ended 31 December 2001 1. Basis of preparation The results for the year ended 31 December 2001 have been prepared in accordance with the accounting policies set out in the 2000 Annual Report. FRS 18 ' Accounting Policies' has been adopted but this has had no impact on the 2001 results. The transitional arrangements of FRS 17 'Retirement Benefits' have been adopted which require additional disclosures in respect of all retirement benefits. 2a. Sector analysis - sales -------------------------- 2001 -------------------------- 2000 ----------------- Sales Internet Sales Sales Internet Sales before before internet enterprises internet enterprises enterprise enterprise all figures in Â£ millions Business sectors Pearson Education 2,596 8 2,604 2,087 3 2,090 FT Group 750 51 801 802 42 844 The Penguin Group 820 - 820 755 - 755 Continuing operations 4,166 59 4,225 3,644 45 3,689 Discontinued operations - - - 185 - 185 4,166 59 4,225 3,829 45 3,874 Geographical markets supplied United Kingdom 423 10 433 436 13 449 Continental Europe 438 8 446 449 7 456 North America 2,936 39 2,975 2,424 24 2,448 Asia Pacific 239 2 241 229 1 230 Rest of world 130 - 130 106 - 106 Continuing operations 4,166 59 4,225 3,644 45 3,689 Discontinued operations - - - 185 - 185 4,166 59 4,225 3,829 45 3,874 2b. Sector analysis - operating (loss)/profit --------------------------------------------------------------- 2001 -------------------------------------------- Results from Internet Results Integration Goodwill Goodwill Operating operations enterprises from costs amortisation impairment loss before internet operations all figures in Â£ enterprises millions Business sectors 351 (77) 274 (29) (260) (8) (23) Pearson Education FT Group 132 (60) 72 - (67) (3) 2 The Penguin Group 80 - 80 (45) (20) (50) (35) Continuing 563 (137) 426 (74) (347) (61) (56) operations Discontinued 37 - 37 - (35) - 2 operations 600 (137) 463 (74) (382) (61) (54) 2b. Sector analysis - operating (loss)/profit (continued) --------------------------------------------------------------- 2001 -------------------------------------------- Results from Internet Results Integration Goodwill Goodwill Operating operations enterprises from costs amortisation impairment loss before internet operations all figures in Â£ enterprises millions Geographical markets supplied United Kingdom 16 (53) (37) (33) (27) (55) (152) Continental Europe 55 (10) 45 - (6) - 39 North America 470 (73) 397 (41) (309) (3) 44 Asia Pacific 24 - 24 - (4) - 20 Rest of world (2) (1) (3) - (1) (3) (7) Continuing 563 (137) 426 (74) (347) (61) (56) operations Discontinued operations 37 - 37 - (35) - 2 600 (137) 463 (74) (382) (61) (54) --------------------------------------------------------- 2000 ---------------------------------------------------- Results from Internet Results Integration Goodwill Goodwill Operating operations enterprises from costs amortisation impairment Profit before internet operations all figures in Â£ enterprises millions Business sectors Pearson Education 320 (83) 237 (13) (157) - 67 FT Group 211 (113) 98 - (53) - 45 The Penguin Group 79 - 79 (27) (14) - 38 Continuing operations 610 (196) 414 (40) (224) - 150 Discontinued operations 76 - 76 - (15) - 61 686 (196) 490 (40) (239) - 211 Geographical markets supplied United Kingdom 82 (90) (8) (16) (20) - (44) Continental Europe 83 (8) 75 - (1) - 74 North America 398 (97) 301 (21) (203) - 77 Asia Pacific 26 - 26 (3) - - 23 Rest of world 21 (1) 20 - - - 20 Continuing 610 (196) 414 (40) (224) - 150 Discontinued operations 76 - 76 - (15) - 61 686 (196) 490 (40) (239) - 211 Note: Internet enterprises consist of the Group's discrete internet operations, principally FT.com and Learning Network. Integration costs in 2001 and 2000 include costs in respect of the Dorling Kindersley and National Computer Systems acquisitions and, in 2000, the Simon & Schuster acquisition. In 2001, of the goodwill impairment charge Â£58m relates to the impairment of goodwill arising on acquisition of subsidiaries, principally in respect of DK, Â£50m, and Â£3m relates to the impairment of goodwill arising on acquisition of associates. Discontinued operations relate to the withdrawal of the Group from the television business following its disposal of its 22% interest in the RTL Group in January 2002 and from the banking business following its disposal of Lazard in March 2000. Analyses of the profits of joint ventures and associates are shown in note 2c. 2c. Sector analysis - joint ventures and associates Included in the analysis of operating (loss)/profit, results from operations, in note 2b are the following amounts in respect of joint ventures and associates: --------------------------- 2001 --------------------------- 2000 -------------------- Results from Other items Total Results from Other items Total operations operations all figures in Â£ millions Joint ventures Continuing operations (19) - (19) (21) - (21) --------------------------- 2001 --------------------------- 2000 ---------------------- Results from Other items Total Results from Other items Total operations operations all figures in Â£ millions Associates Continuing operations 1 (51) (50) 14 (37) (23) Discontinued operations 37 (35) 2 47 (14) 33 38 (86) (48) 61 (51) 10 3. Loss on sale of fixed assets and investments all figures in Â£ millions 2001 2000 Continuing operations: Loss on investment in Industry Standard (3) - Net loss on sale of property (2) - Net loss on other investments (7) (4) (12) (4) Taxation 1 3 4. (Loss)/profit on sale of subsidiary undertakings and associates all figures in Â£ millions 2001 2000 Profit on sale of Lazard - 231 Profit on sale of 20% of Recoletos - 86 Loss on sale of iForum (27) - Loss on closure of Dorling Kindersley Family Learning (2) (16) business Net loss on sale of other businesses and associates (29) (40) (58) 261 Continuing operations (58) 30 Discontinued operations - 231 (58) 261 Taxation 4 (51) 5. Amounts written off investments The value of own shares held has been assessed against the current market value and a provision of Â£37m for impairment has been made. The value of other fixed asset investments has been assessed according to the higher of net realisable value and value in use and a provision for impairment of Â£55m has also been made. 6. Earnings per share In order to show results from operating activities on a comparable basis two adjusted earnings per equity share are presented. First, an adjusted earnings per share is presented which excludes items of an unusual nature and goodwill amortisation as shown below. Due to a significant level of expenditure on internet enterprises, a second adjusted earnings per equity share is presented in which the results of these are also excluded from earnings. The company's definition of adjusted earnings per share may not be comparable to other similarly titled measures reported by other companies. ----------- 2001 -------- -------- 2000 ----------- Earnings Earnings per per share share Â£m (p) Â£m (p) (Loss)/profit for the financial year (391) (49.2) 179 24.6 Adjustments: Loss on sale of fixed assets and investments: continuing operations 12 1.5 4 0.5 Loss/(profit) on sale of subsidiary undertakings and associates: continuing operations 58 7.3 (30) (4.0) Profit on sale of subsidiary undertakings and associates: discontinued operations - - (231) (31.7) Loss on sale of subsidiary undertakings and associates by an associate: continuing operations 36 4.5 3 0.4 Loss on sale of subsidiary undertakings and associates by an associate: discontinued operations 17 2.1 - - Internet enterprises 137 17.1 196 26.9 Interest on internet enterprises 14 1.8 9 1.2 Goodwill amortisation 382 48.2 239 32.9 Integration costs 74 9.3 40 5.5 Goodwill impairment 61 7.7 - - Amounts written off investments 92 11.6 - - Other net finance costs - - 24 3.3 Taxation on above items (174) (21.9) (18) (2.5) Minority interest share of above items (6) (0.8) (18) (2.5) Adjusted earnings before internet enterprises 312 39.2 397 54.6 Internet enterprises (137) (17.1) (196) (26.9) Interest on internet enterprises (14) (1.8) (9) (1.2) Taxation on internet enterprises 16 2.0 37 5.0 Minority interest share of internet enterprises 2 0.2 3 0.4 Adjusted earnings after internet enterprises 179 22.5 232 31.9 (Loss)/profit for the financial year (391) n/a 179 24.3 Taxation on the conversion of ordinary shares (1) n/a (2) (0.3) Diluted (loss)/earnings (392) n/a 177 24.0 Weighted average number of equity shares (millions) - for earnings and adjusted earnings 795.4 727.7 Effect of dilutive share options n/a 8.4 Weighted average number of equity shares (millions) - for diluted earnings n/a 736.1 Adjusted earnings per equity share before internet enterprises 39.2p 54.6p Adjusted earnings per equity share after internet enterprises 22.5p 31.9p (Loss)/earnings per equity share (49.2)p 24.6p Diluted earnings per equity share n/a 24.0p 7. Taxation The tax rate provided in the profit and loss account is analysed as follows: all figures in percentages 2001 2000 United Kingdom tax rate 30.0 30.0 Effect of overseas tax rates 6.8 2.2 Effect of utilisation of tax losses in the US (10.8) (7.8) Other items (1.9) (1.4) Tax rate reflected in adjusted earnings (before internet enterprises) 24.1 23.0 Effect of internet enterprises 7.0 3.1 Tax rate reflected in adjusted earnings (after internet enterprises) 31.1 26.1 Effect of (losses)/profits excluded from adjusted earnings (15.8) 11.2 Tax rate reflected in earnings 15.3 37.3 The taxation (benefit)/charge is analysed as: all figures in Â£ millions 2001 2000 Parent and subsidiaries (82) 92 Joint ventures and associates 15 14 (67) 106 Note: The Group has significant tax losses available in the US, which are not recognised in the accounts and hence the tax rate reflected in adjusted earnings is lowered. Included in the parent and subsidiaries taxation of Â£82m, is a benefit of Â£143m relating to prior period disposals. 8. Dividends 2001 2001 2000 2000 Pence per Pence per share Â£m share Â£m Interim paid 8.7 68 8.2 58 Final proposed 13.6 109 13.2 106 Dividends for the year 22.3 177 21.4 164 9. Exchange rates Pearson earns a significant proportion of its sales and profits in overseas currencies, the most important being the US dollar. The relevant rates are as follows: ----- Â£ versus US$ ----- 2001 2000 Average for operating profits 1.44 1.51 Year end rate 1.46 1.49 10. Equity shareholders' funds Profit Share Share and loss capital premium account Total all figures in Â£ millions At 31 December 2000 199 2,440 1,405 4,044 Exchange differences - - 19 19 Shares issued 1 - - 1 Premium on issue of shares - 19 (2) 17 Goodwill written back on disposal of subsidiary undertakings and - - 37 37 Goodwill written back on disposal of subsidiary undertakings and associates by an associate - - 36 36 Replacement options granted on acquisition of subsidiary - - 2 2 (Loss) retained for the year - - (568) (568) At 31 December 2001 200 2,459 929 3,588 11. Note to consolidated statement of cash flows all figures in Â£ millions 2001 2000 Reconciliation of operating (loss)/profit to net cash inflow from operating activities Operating (loss)/profit - total (54) 211 Share of loss of joint ventures and associates 64 11 Depreciation charges 125 100 Goodwill amortisation and impairment 360 188 (Increase) in stocks (6) (97) Decrease in debtors 102 53 (Decrease) in creditors (103) (119) Increase/(decrease) in operating provisions 3 (4) Other and non-cash items (1) 18 Net cash inflow from operating activities 490 361 Purchase of fixed assets and finance lease payments (172) (149) Sale of operating tangible fixed assets 36 22 Dividends from associates 25 49 Other (11) (8) Operating cash flow 368 275 Analysed between: Operating cash flow before internet enterprises and other items 553 580 Dorling Kindersley exceptional payments - (46) Integration costs : Simon & Schuster / NCS (26) (36) Dorling Kindersley (43) (25) Cash effect of internet enterprises (116) (198) Operating cash flow 368 275 Note: The Dorling Kindersley exceptional payments in 2000 are in respect of creditors on the acquisition balance sheet beyond normal trading terms. This information is provided by RNS The company news service from the London Stock Exchange

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