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 £ 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 £ 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 £ 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 £ 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 £ 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 £ 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 £ 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 £ 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 £ 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 £58m relates to the impairment of goodwill arising on
acquisition of subsidiaries, principally in respect of DK, £50m, and £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 £ 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 £ 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 £ 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 £ 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 £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 £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
£m (p) £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 £ 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 £82m, is a
benefit of £143m relating to prior period disposals.
8. Dividends
2001 2001 2000 2000
Pence per Pence per
share £m share £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:
----- £ 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 £ 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 £ 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.
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