Penguin owner looks forward with confidence

Pearson, which also owns the Financial Times, added that the book business was likely to be “in line” with the industry in 2012 following years of outperformance.

Penguin, whose UK arm published 78 top-ten best-sellers last year, expects to benefit from a strong publishing schedule, including comedian David Walliams’ autobiography Camp David and sports presenter Clare Balding’s childhood memoirs.

Pearson, which also has a large education division, reported an 11 per cent rise in sales to £1.16bn in the first three months of 2012, and an underlying sales increase of 3 per cent, but it warned first half operating profits would be lower than last year.

The company said in its interim management statement, released yesterday: “Though the external environment remains challenging and we are yet to see signs of improvement, we continue to expect Pearson to achieve growth in sales and operating profits for the year as a whole.”

Penguin said it intended to “mount a robust defence” in civil proceedings recently brought against the publisher by the United States Department of Justice. The DoJ is suing Penguin and other publishers including Apple for allegedly conspiring to fix the prices of electronic books – which Penguin strongly denies.

Pearson, which makes 60 per cent of its revenues in the US, said its full year expectations were unchanged as its profits are heavily weighted to the second half.

The group warned the US education market remained generally weak though it continued to benefit from growth in its digital businesses.

Pearson also said its UK training business had been hit by changes in Government funding policy related to apprenticeships and it would take “appropriate” steps to change the business.

The Financial Times delivered “good sales growth”, Pearson said, despite a tough environment for corporate advertising and deal-making. The FT’s paid print and digital circulation was 605,000 in the first quarter of 2012, including 285,000 digital subscribers.

Analysts at investment banking and broking group Numis Securities said Pearson’s first quarter interim management statement was in line with expectations. UBS analysts described the statement as “robust”.

At the end of 2011, Pearson’s net debt was £499m. Its net debt increased during the first quarter by £206m to £705m, level with the first quarter of 2011. It said this was as a result of “the normal seasonal build-up of working capital ahead of our key selling periods in education and acquisition spend”.

Pearson added: “That strong balance sheet gives us headroom of approximately £1bn available to invest in bolt-on acquisitions.”

Shares in Pearson are down five per cent this year so far and are regarded as a bargain by many analysts at an enterprise value of about seven times 2013 core earnings, close to an all-time low. Last night Pearson’s share price was up 17p at 1167p.