Interim Results - Part 2

Pearson PLC
28 July 2003

Consolidated Profit and Loss Account

for the six months to 30 June 2003

                                   Note         2003         2002         2002
                                           half year    half year    full year
all figures in £ millions

Sales (including share of joint                1,673        1,819        4,331
ventures)
Less: share of joint ventures                     (8)          (6)         (11)
Sales                                2a        1,665        1,813        4,320
Group operating (loss) /                        (105)         (79)         194
profit
Share of operating loss of
joint ventures
and associates                   2c / d           (5)         (32)         (51)
Total operating (loss) /             2b         (110)        (111)         143
profit
Total operating (loss) / profit
analysed between :
Operating profit before                           38           76          493
goodwill amortisation, goodwill
impairment and integration
costs
Goodwill amortisation and                       (148)        (182)        (340)
impairment
Integration costs                                  -           (5)         (10)
Total operating (loss) /             2b         (110)        (111)         143
profit
Loss on sale of fixed assets                      (1)           -          (13)
and investments
Profit / (loss) on sale of            3           12            7          (27)
subsidiaries and associates
Profit on sale of subsidiaries                     -            3            3
and associates by an
associate
Non operating items                               11           10          (37)
(Loss) / profit before interest                  (99)        (101)         106
and taxation
Net finance costs                     4          (39)         (87)        (131)
Loss before taxation                  5         (138)        (188)         (25)
Taxation                              7           (9)          (6)         (64)
Loss after taxation                             (147)        (194)         (89)
Equity minority interests                        (13)         (13)         (22)
Loss for the financial period                   (160)        (207)        (111)
Dividends on equity shares            8          (74)         (73)        (187)
Retained loss                                   (234)        (280)        (298)
Adjusted (loss) / earnings per        6         (2.3)p        0.5p        30.3p
share
Loss per share                        6        (20.1)p      (26.0)p      (13.9)p
Diluted loss per share                6        (20.1)p      (26.0)p      (13.9)p
Dividend per share                    8          9.4p         9.1p        23.4p


There is no difference between the loss before taxation and the retained loss
for the period stated above and their historical cost equivalents.


The results for the 2002 full year are an abridged version of the full accounts,
which have received an unqualified audit report from the auditors and have been
filed with the Registrar of Companies.First half year figures are neither
audited nor reviewed.





Consolidated Balance Sheet

as at 30 June 2003


                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year

Fixed assets
Intangible assets                              3,560        3,939        3,610
Tangible assets                                  498          528          503
Investments: joint ventures
Share of gross assets                              1            4            7
Share of gross liabilities                         -            -            -
                                                   1            4            7
Investments: associates                           62          107          106
Investments: other                                85           83           84
                                               4,206        4,661        4,310

Current assets
Stocks                                           792          848          734
Debtors                                        1,240        1,073        1,057
Deferred taxation                                180          280          174
Investments                                        2            3            2
Cash at bank and in hand                         229          542          575
                                               2,443        2,746        2,542

Creditors - amounts falling due within
one year
Short-term borrowing                            (206)         (57)        (249)
Other creditors                               (1,046)        (995)      (1,114)
                                              (1,252)      (1,052)      (1,363)
Net current assets                             1,191        1,694        1,179
Total assets less current liabilities          5,397        6,355        5,489

Creditors - amounts falling due after
more than one year
Medium and long-term borrowing                (1,920)      (2,442)      (1,734)
Other creditors                                  (41)         (41)         (60)
                                              (1,961)      (2,483)      (1,794)
Provisions for liabilities and charges          (148)        (174)        (165)
Net assets                                     3,288        3,698        3,530

Capital and reserves
Called up share capital                          200          200          200
Share premium account                          2,466        2,460        2,465
Profit and loss account                          411          849          673
Equity shareholders' funds                     3,077        3,509        3,338
Equity minority interests                        211          189          192
                                               3,288        3,698        3,530











Consolidated Statement of Cash Flows

for the six months to 30 June 2003

                                                2003         2002         2002
all figures in £ millions          Note    half year    half year    full year
Net cash (outflow) / inflow from     10         (293)        (193)         529
operating activities
Dividends from joint ventures and                  1            1            6
associates
Interest received                                  8            6           11
Interest paid                                    (44)         (99)        (151)
Debt issue costs                                  (1)           -            -
Dividends paid to minority                        (2)          (1)          (1)
interests
Returns on investments and                       (39)         (94)        (141)
servicing of finance
Taxation                                          (1)         (35)         (55)
Purchase of tangible fixed                       (56)         (71)        (126)
assets
Sale of tangible fixed assets                      3            -            7
Purchase of investments                           (3)          (3)         (21)
Sale of investments                                -            -            3
Capital expenditure and financial                (56)         (74)        (137)
investment
Purchase of subsidiaries                         (87)         (38)         (87)
Net cash acquired with                             1            -            1
subsidiaries
Purchase of joint ventures and                    (2)          (9)         (40)
associates
Sale of subsidiaries                               -            8            3
Net cash disposed with                             -            -           (1)
subsidiaries
Sale of associates                                56          921          920
Acquisitions and disposals                       (32)         882          796
Equity dividends paid                           (113)        (108)        (181)
Net cash (outflow) / inflow
before management of liquid
resources and financing                         (533)         379          817
Liquid resources acquired                       (112)         (82)         (65)
Collateral deposit (placed) /                      -          (29)          22
reclaimed
Management of liquid resources                  (112)        (111)         (43)
Issue of equity share capital                      1            1            6
Capital element of finance lease                  (2)          (2)          (5)
rentals
Loan facility advanced / (repaid)                326          (59)        (507)

Bonds advanced / (repaid)                        164         (156)        (167)
Collateral deposit reimbursed                     45            -           17
Net movement in other                             (5)           7           (7)
borrowings
Financing                                        529         (209)        (663)
(Decrease) / increase in cash in                (116)          59          111
the period




Statement of Total Recognised Gains and Losses

for the six months ended 30 June 2003


                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year
Loss for the financial period                   (160)        (207)        (111)
Other net gains and losses recognised in
reserves:
Currency translation differences                 (29)        (153)        (317)
Taxation on currency translation                   -            -            5
differences
Total recognised gains and losses               (189)        (360)        (423)
relating to the period
Prior year adjustment - FRS 19                     -          209          209
Total recognised gains and losses               (189)        (151)        (214)






Reconciliation of Movements in Equity Shareholders' Funds

for the six months ended 30 June 2003


                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year
Loss for the financial period                   (160)        (207)        (111)
Dividends on equity shares                       (74)         (73)        (187)
                                                (234)        (280)        (298)
Currency translation differences (net of         (29)        (153)        (312)
taxation)
Goodwill written back on sale of                   -          144          144
subsidiaries and associates
Shares issued                                      1            1            6
Replacement options granted on                     1            -            1
acquisition of subsidiary
Net movement for the period                     (261)        (288)        (459)
Equity shareholders' funds at beginning        3,338        3,797        3,797
of the period
Equity shareholders' funds at end of the       3,077        3,509        3,338
period



Notes to the 2003 Results

for the six months ended 30 June 2003

1.Basis of preparation

The results for the six months ended 30 June 2003 have been prepared in
accordance with the accounting policies set out in the 2002 Annual Report.


2a.Sector analysis - sales

                                       2003             2002             2002
all figures in £ millions         half year        half year        full year

Pearson Education                       927            1,049            2,756
FT Group                                370              370              726
The Penguin Group                       368              394              838
                                      1,665            1,813            4,320


2b.Sector analysis - operating (loss) / profit

                ....................2003 half year.............................

              Results from    Integration        Goodwill      Goodwill    Operating
all figures     operations          costs    amortisation    impairment         loss                   
in £ millions

Pearson                (26)             -            (120)            -         (146)
Education
FT Group                43              -             (18)            -           25
The Penguin             21              -             (10)            -           11
Group
Continuing              38              -            (148)            -         (110)
operations
Discontinued             -              -               -             -            -
operations
                        38              -            (148)            -         (110)

             .........................2002 half year...............................

              Results from  Integration        Goodwill      Goodwill    Operating
                operations        costs    amortisation    impairment         loss                                      
     
all figures                       
in £ millions

Pearson                -             (3)           (126)            -         (129)
Education
FT Group              38              -             (33)          (10)          (5)
The Penguin           38             (2)            (10)            -           26
Group
Continuing            76             (5)           (169)          (10)        (108)
operations
Discontinued           -              -              (3)            -           (3)
operations
                      76             (5)           (172)          (10)        (111)

                                                                     
                   ..............2002 full year.................................
                                                                               
             Results from  Integration        Goodwill        Goodwill    Operating
               operations        costs    amortisation      impairment       profit                                     
    
all figures                       
in £ millions

Pearson              326             (7)           (244)            -           75
Education
FT Group              80              -             (65)          (10)           5
The Penguin           87             (3)            (18)            -           66
Group
Continuing           493            (10)           (327)          (10)         146
operations
Discontinued           -              -              (3)            -           (3)
operations
                     493            (10)           (330)          (10)         143

2c.Sector analysis - joint ventures


Included in the analysis of operating (loss) / profit in note 2b are the
following amounts in respect of joint ventures:



                                       2003             2002             2002
all figures in £ millions         half year        half year        full year

Pearson Education                         -                -               (1)
FT Group                                 (4)              (7)             (13)
The Penguin Group                         -                -                1
                                         (4)              (7)             (13)



2d.Sector analysis - associates


Included in the analysis of operating (loss) / profit in note 2b are the
following amounts in respect of associates:



                                                                 
                                       .......2003 half year...................
                                       Results from      Goodwill    Operating
                                       operations    amortisation         loss
all figures in £ millions                            

Pearson Education                               1               -            1
FT Group                                        6              (8)          (2)
The Penguin Group                               -               -            -
Continuing operations                           7              (8)          (1)
Discontinued operations                         -               -            -
                                                7              (8)          (1)

                                    ........2002 half year....................

                                      Results from       Goodwill    Operating
                                      operations     amortisation         loss
all figures in £ millions                            

Pearson Education                              1                -            1
FT Group                                       1              (24)         (23)
The Penguin Group                              -                -            -
Continuing operations                          2              (24)         (22)
Discontinued operations                        -               (3)          (3)
                                               2              (27)         (25)

                                    ...........2002 full year.................

                                      Results from       Goodwill    Operating
                                      operations     amortisation         loss
all figures in £ millions                            

Pearson Education                              3               (1)           2
FT Group                                       7              (44)         (37)
The Penguin Group                              -                -            -
Continuing operations                         10              (45)         (35)
Discontinued operations                        -               (3)          (3)
                                              10              (48)         (38)



3.Profit / (loss) on sale of subsidiaries and associates

                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year
Continuing operations:
Loss on sale of Forum                              -            -          (40)
Loss on sale of PH Direct                          -          (10)          (8)
Net profit on sale of other subsidiaries          12            -            3
and associates
Continuing operations                             12          (10)         (45)
Profit on sale of RTL Group -                      -           17           18
discontinued operations
Profit / (loss) on sale of subsidiaries           12            7          (27)
and associates
Taxation                                         (11)         (11)          (6)


4.Net finance costs
                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year

Net interest payable                             (39)         (50)         (94)
Early repayment of debt and termination            -          (37)         (37)
of swap contracts
Net finance costs                                (39)         (87)        (131)





5.(Loss) / profit before taxation
                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year
Loss before taxation                            (138)        (188)         (25)
Goodwill amortisation                            148          172          330
Goodwill impairment                                -           10           10
Integration costs                                  -            5           10
Non operating items                              (11)         (10)          37
Early repayment of debt and termination            -           37           37
of swap contracts
(Loss) / profit before taxation (before
goodwill amortisation and other items)            (1)          26          399
                                                  



6.(Loss) / earnings per share

In order to show results from operating activities on a comparable basis, an
adjusted earnings per share is presented which excludes items as set out
below.The company's definition of adjusted earnings per share may not be
comparable to other similarly titled measures reported by other companies.


                                                2003         2002         2002
all figures are in £ millions              half year    half year    full year
Loss for the financial period                   (160)        (207)        (111)
Adjustments:
- Non operating items                            (11)         (10)          37
- Integration costs                                -            5           10
- Goodwill amortisation                          148          172          330
- Goodwill impairment                              -           10           10
- Early repayment of debt and termination          -           37           37
of swap contracts
Taxation on above items                            9           (3)         (67)
Minority interest share of above items            (4)           -           (5)
Adjusted (loss) / earnings                       (18)           4          241
Weighted average number of shares
(millions)
- for earnings and adjusted earnings           797.1        795.9        796.3
Effect of dilutive share options                   -            -            -
Weighted average number of shares
(millions)
- for diluted loss                             797.1        795.9        796.3
Adjusted (loss) / earnings per share            (2.3)p        0.5p        30.3p
Loss per share                                 (20.1)p      (26.0)p      (13.9)p


Where the Group has made a loss for the financial period, after taking into
account goodwill amortisation, the effect of share options is anti-dilutive and
there is no difference between the loss per share and the diluted loss per
share.

7.Taxation

The tax rate provided in the profit and loss account is analysed as follows:

                                                2003         2002         2002
all figures in percentages                 half year    half year    full year
UK tax rate                                     30.0         30.0         30.0
Effect of overseas tax rates                     4.0          4.8          2.8
Other items                                        -         (0.8)           -
Tax rate reflected in adjusted (loss) /         34.0         34.0         32.8
earnings


The taxation charge is analysed as:

                                        2003             2002             2002
all figures in £ millions          half year        half year        full year
Parent and subsidiaries                   (7)              (4)             (60)
Joint ventures and associates             (2)              (2)              (4)
                                          (9)              (6)             (64)


8.Dividends

The directors have declared an interim dividend of 9.4p per equity share,
payable on 26 September 2003 to shareholders on the register at the close of
business on 8 August 2003.


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:



                                        2003             2002             2002
                                   half year        half year        full year
Average for operating profits           1.61             1.45             1.51
Period end rate                         1.65             1.52             1.61




10.Note to consolidated statement of cash flows

                                                2003         2002         2002
all figures in £ millions                  half year    half year    full year
Reconciliation of operating (loss) /
profit to net cash (outflow) /
inflow from operating activities
Total operating (loss) / profit                 (110)        (111)         143
Share of operating loss of joint ventures          5           32           51
and associates
Depreciation charges                              56           63          122
Subsidiary goodwill amortisation and             140          155          292
impairment
(Increase) / decrease in stocks                  (68)         (27)          43
Increase in debtors                             (137)         (94)        (111)
(Decrease) / increase in creditors              (165)        (156)          64
Decrease in operating provisions                 (14)         (51)         (50)
Other and non-cash items                           -           (4)         (25)
Net cash (outflow) / inflow from                (293)        (193)         529
operating activities
Dividends from joint ventures and                  1            1            6
associates
Purchase of tangible fixed assets                (56)         (71)        (126)
Capital element of finance lease                  (2)          (2)          (5)
rentals
Proceeds from sale of tangible fixed               3            -            7
assets
Add back: Non operating expenditure on             3            4            -
fixed assets
Add back: Cash spent against integration           6           32           44
and fair value provisions
Pearson operating cashflow                      (338)        (229)         455
Operating tax paid                                (1)         (19)         (46)
Operating finance charges                        (36)         (56)        (104)
Operating free cashflow                         (375)        (304)         305
Non operating tax paid                             -          (16)          (9)
Non operating finance charges                      -          (37)         (37)
Integration and fair value spend                  (6)         (32)         (44)
Total free cashflow                             (381)        (389)         215
Dividends paid (including minorities)           (115)        (109)        (182)
Net movement of funds from operations           (496)        (498)          33
Acquisitions of businesses and                   (59)         (50)        (124)
investments
Disposals of businesses, investments and          51          930          930
property
New equity                                         1            1            6
Other non operating items                          -           (5)          (5)
Net movement of funds                           (503)         378          840
Exchange movements on net debt                    14           44          131
Total movement in net debt                      (489)         422          971


                      This information is provided by RNS
            The company news service from the London Stock Exchange