Pearson's 2004 annual results met market expectations - a 3% rise in underlying sales to £3.9 billion, and operating profit up 5% to £455 million (adjusted for the weak dollar). But that doesn't necessarily mean all is well on the ranch. The news of veteran chairman Lord Stevenson's departure prompted talk of a strategy change for the publishing group, comprising books (Penguin), financial newspapers (FT Group) and education (Pearson Education). Penguin had a shaky year after its UK CEO Anthony Forbes Watson quit following differences with boss John Makinson and a poorly implemented new distribution system in Rugby cost the business £9 million. US sales also fell 33% in December, and profits for the year were 24% lower. Some say the three divisions are not well matched and that a new chairman might want to focus on the most important one, education, and take bids for the other two.
CEO Dame Marjorie Scardino told the FT that Stevenson's departure 'is one of those stories where the truth is much more unexciting than people would like to assume'. A change in strategy for the group 'is a matter for the entire board and we review everything quite frequently. I do not think a new chairman would want to shake up everything and dump it out.' She has also said: 'We have worked hard to create a company where all the parts make sense to each other.' And of the future: 'We have set the stage for a new phase in Pearson's growth with our network of business newspapers returned to profit and excellent prospects for our education businesses for the next few years.'
THE STRAIGHT TALK
Some analysts are cynical about Stevenson's reasons for leaving. 'Change starts at the top. It looks like he is deserting (Scardino),' said one. Would his successor be tempted to break up the group? Says a Pearson investor: 'The FT is a trophy asset running below its peak potential. There are a lot of people out there who feel they might like to try (running it)', though Scardino is adamant it is not for sale. But Numis Securities analyst Paul Richards told the Guardian: 'Are financial newspapers, consumer publishing and education natural bedfellows? I am not sure that they are.'
Pearson Education is expected to deliver strong growth next year and the FT has turned a corner. But Penguin remains a challenge. A new chairman and a change of strategy may well boost Pearson's share price. But will Scardino be run off the ranch?