Suddenly, Pearson is seriously sexy
Raymond Snoddy on the success of publishing company Pearson and its chief executive, Dame Marjorie Scardino.
Pearson has had a great few days recently as the UK heads towards its destiny with a hung Parliament.
No not Lord Pearson, the leader of the UK Independence Party. He’s stuck in the same old mire.
The dark horse rushing up on the rails is Marjorie Scardino’s Pearson, the education publisher and owner of the Financial Times.
In the past Pearson has felt like a perpetual no-score draw. Well run. Decent company. Decent people. No nasty surprises or rushes of blood to the head, a characteristic that became progressively more valuable when some of the FT‘s readers decided to turn the world economy on its head.
But the Pearson share price for years just kept bobbing about on a piece of strong elastic tethered to a 600p stake.
No more. Suddenly Pearson, and its share price, is seriously sexy.
Improving conditions at the publishing group were highlighted at Friday’s annual meeting when Dame Marjorie talked of generating revenues of just over £1 billion in revenues in the first quarter, up 12% at constant currencies. Pearson generates around 60% of its revenues in the US.
There’s even excitement at Penguin over the growth of ebooks.
More important from the point of view of the traditional media, the Financial Times has returned to advertising growth with strong demand for both print and online subscriptions.
The FT even won the Media Owner of the Year award at last month’s Festival of Media Awards in Valancia.
Hardly surprisingly Dame Majorie is sticking to her long-held principles that the FT is a core part of the Pearson business and that it is not for sale. It never has been despite the repeated forecasts and claims.
Coincidentally Rupert Murdoch, who once owned a 20% stake in Pearson and hoped to turn it into ownership of the FT, announced good news overnight from his traditional media businesses.
The movie Avatar may have been the big money spinner for Murdoch but the News Corp chairman was able to report that advertising was returning to his US television stations and even papers like the Sun in the UK were recording record revenue weeks. Even Murdoch was surprised by that one.
Something is definitely happening out there, although the economic outlook remains uncertain to say the least.
As for Pearson, the company’s shares started their sustained rise about nine months ago and recently reached an eight-year high of 1069p.
It is a tribute to the doggedness of Dame Marjorie who stuck by her educational publishing strategy year after year when it seemed the corner was always about to be turned sometime in the near future.
The board also stuck with her, she never wavered – neither did the 63-year-old lose the taste for the struggle.
If Dame Marjorie had been a football manager she would long have been sacked long ago for failing to win either the Premiership or the Champions League.
Then following hard on the heels of the record share price came yesterday’s major disposal of Pearson’s 61% stake in Interactive Data, a provider of financial market data and analysis.
You could quibble and question why precisely a company that provides financial information is seen as no longer relevant to a group company that publishes the FT and the Economist.
After all is was seen as very relevant indeed when the stake was first acquired.
But the deal brings around $2 billion into Pearson’s coffers and gives the company great flexibility in the acquisition market.
Some analysts have been a little sniffy and argued that although the sale is taking Pearson in the right direction, it is being done “at a less attractive level than previously expected”.
Pearson’s shares fell 30p on news of the deal, partly it seems because none of the money is being given back to shareholders.
Pearson under Scardino has been involved in a long distillation process that has gradually ended the company’s status as a rather strange conglomerate and turned it into a more focused publishing company.
The very list of disposals – Alton Towers, Madame Tassauds, Lazards merchant bank and Thames Television – underlines what an odd company this was.
In retrospect, the sale of Westminister Press, Pearson’s regional newspaper group also wasn’t such a silly move.
The signs are that Pearson will use the money for a series of bolt-ons to its international education publishing business.
There is already speculation about companies such as the e-Learning company Skillsoft or education publisher Santillana.
But all this is mere detail.
The main point is that Pearson is interesting again and it has been achieved by the only woman who runs a FTSE-100 company, Dame Marjorie Scardino.