Content area
As one UK equities analyst pointed out, the only way for Pearson to grow its television assets is to look outside the UK. The restrictions on ownership of production and broadcasting assets in that country have forced Pearson to look across borders for expansion possibilities as well as rearrange its UK assets.
Further on the production front, just after announcing its plans to take a stake in TVB, Pearson bought Grundy Worldwide, the international production company led by Australian entrepreneur Reg Grundy. Grundy has its own string of locally-based production companies across Europe, allowing Pearson to expand its presence on the continent in one fell swoop. Pearson's other production companies in Europe include the well-respected Thames Television and Financial Times Television in the UK.
The importance of the North American educational market was reflected in the restructuring of Pearson's businesses in that area. Since 1988, when it acquired Addison-Wesley, Pearson has run the North American educational publishing arm of its business searately from its UK assets. This year it combined Addison-Wesley with the Longman Group to create Addison-Wesley Longman, one of the three largest educational publishers in the world. Addison-Wesley Longman is hoping to take advantage of the potential growth in the education market, particularly in the U.S.
Pearson plc has spent the last year creating a new look-- committing itself to competing as a global media conglomerate. It has regrouped assets to streamline the international management of its businesses, and it has made a concerted push into international television with several key investments. Television
Pearson has always been known as a publishing powerhouse, but in the last year the company's focus has been on its international television assets. It hopped on the Far East bandwagon with the purchase of a stake in Television Broadcasts Ltd. (TVB). It has increased its presence in satellite television via an alliance with the BBC. It has augmented its worldwide production assets with the purchase of the successful game show and daytime drama poducer, Grundy Worldwide. And it has shifted its UK assets from regional television holdings in the recent sale of its stake in Yorkshire-Tyne Tees Television Holdings plc (YTTV).
As one UK equities analyst pointed out, the only way for Pearson to grow its television assets is to look outside the UK. The restrictions on ownership of production and broadcasting assets in that country have forced Pearson to look across borders for expansion possibilities as well as rearrange its UK assets.
Thanks to UK regulators, Pearson has made its fashionable appearance in the Far East with the purchase of Hong Kong broadcaster, TVB. With the largest Chinese-language program library in the world, TVB will be crucial to infiltrating the Chinese market, over which media conglomerates around the globe are salivating. As one media equities analyst observed, "Everyone wants to be in the region, but nobody knows quite what to do about it."
Pearson appears to be an exception to this indecisiveness. The company clearly is poised for an Asian expansion, having concluded an agreement with TVB and the Hindustan Times to set up a television production company in India.
Further on the production front, just after announcing its plans to take a stake in TVB, Pearson bought Grundy Worldwide, the international production company led by Australian entrepreneur Reg Grundy. Grundy has its own string of locally-based production companies across Europe, allowing Pearson to expand its presence on the continent in one fell swoop. Pearson's other production companies in Europe include the well-respected Thames Television and Financial Times Television in the UK.
Even at home, Pearson has been preparing to upgrade its assets from the regional to the national. Forced to hone its strategy by UK ownership regulations, the company's recent announcement of the sale of its 14 percent stake in YTTV reflects its growing television ambitions.
It sold its 7.04 million shares and 1.97 million warrants to MAI plc at a price of 500 pence (US$0.80) per share for a total consideration of Pounds 41 million ($65.5 million). The sale was a clear indicator that Pearson is taking a broader view of its television interests.
"We have decided that a 14 percent stake in a regional broadcaster is no longer of any strategic interest to us," said Greg Dyke, chairman and chief executive of Pearson Television Limited. "By divesting ourselves of our stake in YTTV we are able, under existing legislation, to take up to a 20 percent shareholding in Channel 5 were our consortium to win."
Pearson's broadcasting strategy is not limited to terrestrial television. Perhaps its most important television asset is a 14 percent stake in BSkyB. In addition Pearson owns 15 percent of both UK Living and UK Gold, the UK cable channels.
It furthered both its satellite broadcasting presence and its European presence via a joint venture agreement with the BBC earlier this year. The new venture launched two satellite television channels on the continent in January of this year. The 24-hour English-language news service provided on BBC World is hoping to be a European-slanted answer to CNN. Publishing
With the exception of certain niche sectors, traditional publishing offers little for expansion on a global scale. Pearson has identified professional and educational publishing as its bailiwick. The company sees considerable growth potential in these areas, particularly in the U.S.
The importance of the North American educational market was reflected in the restructuring of Pearson's businesses in that area. Since 1988, when it acquired Addison-Wesley, Pearson has run the North American educational publishing arm of its business searately from its UK assets. This year it combined Addison-Wesley with the Longman Group to create Addison-Wesley Longman, one of the three largest educational publishers in the world. Addison-Wesley Longman is hoping to take advantage of the potential growth in the education market, particularly in the U.S.
Professional publishing also offers tremendous growth potential on an international scale. New York has the highest volume of sales for Pearson's Financial Times--next to London. The paper's franchise around the world similarly has grown.
In recognition of its international readership, the Financial Times will expand its printing arrangements, doubling the non-UK printing sites from five to ten by 1996. The first new contract went live in Sweden this past January.
Nor is Pearson relying solely on the English-language market for expansion in professional publishing. In 1994 it increased its stake in the Spanish financial and sports publisher Recoletos to 57 percent. It built into the deal the chance for incremental purchase as it comes to know the market better. Recoletos has been sniffing out opportunities in Latin America over the past year, offering a gateway for Pearson to that region. New media
Like many publishers, Pearson is attuned to the possibilities new media products--such as electronic publishing and CD-ROM--present. Its 1993 acquisition of Mindscape, called Software Toolworks at the time, established it in the CD-ROM market. Mindscape's video-game cartridge business tanked last year, clarifying the company's focus.
At the same time, Pearson established Pearson New Entertainment Europe (PNEE) which bought Future Publishing, and landed Pearson with a stable of magazines linked to new media. This will be a repository of electronic publishing assets. ****************************************************************
TB PEARSON PLC SUMMARY OF RESULTS 1994 1993 Change ---------------------------------------------------------------- Operating Profit (Pds MM) Pds 272.4 Pds 216.1 +26% Profit Before Tax (Pds MM) Pds 297.8 Pds 208.6 +43% Earnings Per Share 40.4p 27.0p +50% Adjusted Earnings Per Share 34.1p 27.9p +22% Dividends Per Share 15.0p 13.0p +15% Source: Pearson plc
TE **************************************************************** *******************************************************************
TB PEARSON PLC ANALYSIS OF SALES, OPERATING PROFIT AND CAPITAL EMPLOYED (Pounds in Millions) Sales Operating Capital
Turnover Profit Employed
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993 ------------------------------------------------------------------- Business Sectors ---------------- Information 581.8 487.1 84.7 60.2 236.1 230.5 Education 352.6 349.8 51.2 55.8 244.1 220.2 Entertainment 615.7 482.7 129.5 62.2 905.8 489.2 Investment Banking - - 30.2 36.4 102.5 98.3 Corporate expenses less
other income - - (23.2) (4.3) (56.4) (34.2) Permanent diminution
in value - - - (20.0) - -
------- ------- ------- ------- ------- ------- Continuing
operations 1,550.1 1,319.6 272.4 190.3 1,432.1 1,004.0 Discontinued
operations - 550.5 - 25.8 - 65.0
------- ------- ------- ------- ------- -------
1,550.1 1,870.1 272.4 216.1 1,432.1 1,069.0 Geographical Markets Supplied and
Location of Capital Employed --------------------------------- UK 625.2 495.8 134.0 56.7 1,007.7 648.8 Continental Europe 184.9 159.9 28.0 30.6 80.5 40.9 North America 557.6 507.5 80.2 76.9 306.6 285.0 Asia Pacific 144.8 122.0 22.8 19.1 31.6 21.5 Rest of World 37.6 34.4 7.4 7.0 5.7 7.8
------- ------- ------- ------- ------- ------- Continuing
operations 1,550.1 1,319.6 272.4 190.3 1,432.1 1,004.0 Discontinued
operations - 550.5 - 25.8 - 65.0
------- ------- ------- ------- ------- -------
1,550.1 1,870.1 272.4 216.1 1,432.1 1,069.0 Source: Pearson plc
TE *******************************************************************
Copyright Phillips Business Information Corporation Jun 5, 1995