Preliminary Results 1999

Preliminary Results1999

Record performances

Investing for growth

Delivering on the internet

Financial Highlights

Sales 3,332 +39%

Operating profit 549 +41%

Pre-tax profit 402 +15%

Earnings per share- pre internet enterprises 53.3p +27%- post internet enterprises48.5p +15%

Dividend per share 22.5p +7%

1999

After internet, before S&S integration costs

£m

Financial Analysis

Strong Underlying Sales Growth

1999 7.3%

1998 6.7%

1997 6.5%

1996 5.6%

1995 2.3%

Improving Trading Marginpre internet enterprises

1999

1998 13.1%

1997 11.5%

1996 9.2%

1995 8.5%

15.2%

Improving Trading Marginpost internet enterprises

1999

1998

1997

1996

1995

13.1%

11.5%

9.2%

8.5%

14.0%

High Cash Conversion

92%1999

1998 101%

1997 74%

1996 78%

1995 55%

1999 1998

Identifying Internet Enterprises

Sales 3,332 2,395 + 39%

Operating profit 588 389 + 51%

before:

Internet enterprises (39) -

Goodwill (131) (12)

Exceptional items (100) (127)

Total operating profit 318 250 + 27%

£m

19991999 19981998

Total operating profitTotal operating profit 318 318 250250

Non-operating itemsNon-operating items 309 309 418418

Profit before interestProfit before interest 627 627 668668 InterestInterest (147)(147) (39)(39)

Profit before taxProfit before tax 480 480 629 629 TaxationTaxation (180) (180) (188)(188)

Profit after taxProfit after tax 300 300 441441 MinoritiesMinorities (6) (6) (4)(4)

Profit for the financial yearProfit for the financial year 294 294 437437

Increased interest costs

£m£m

UK tax rateUK tax rate 30.230.2 31.031.0

Benefit of US tax losses Benefit of US tax losses (7.7)(7.7) (2.7)(2.7)

Other itemsOther items 2.52.5 (0.3)(0.3)

Tax rate reflected in adjusted Tax rate reflected in adjusted earningsearnings 25.025.0 28.028.0

Lower Tax Rate19991999

%%19981998

%%

AdjustedAdjusted earnings earnings

- pre internet- pre internet 53.353.3 42.042.0 +27%+27%

- post internet- post internet 48.548.5 42.042.0 +15%+15%

Higher Earnings and Dividends

Per share (p)Per share (p) 19991999 19981998

DividendDividend 22.5 22.5 21.021.0 + 7%+ 7%

Operating Cash Flow Tops £500m

Operating profit Operating profit 588 588 389 389

Working capital Working capital (7) (7) 40 40

Net tangible fixed assetsNet tangible fixed assets (81)(81) (113)(113)

DepreciationDepreciation 81 81 6666

Other movementsOther movements (41) (41) 10 10

Operating cash flowOperating cash flow** 540540 392392

Internet enterprisesInternet enterprises (34)(34) --

Total operating cash flowTotal operating cash flow** 506506 392392

* Before S&S integration costs

19991999 19981998£m£m

Intangible assets 2,457 2,330Tangible assets 405 435Working capital 766 824Other net (liabilities)/assets (79) 47

Net trading assets 3,549 3,636

Shareholders’ funds 1,321 1,048Provisions and minorities 233 309Net debt 1,995 2,279

Capital employed 3,549 3,636

Focus on Capital Employed

31 Dec 31 Dec 19991999 31 Dec 31 Dec 19981998£m£m

Opening net debt (2,279)Inflows

Operations 540Disposals 677Equity 18

OutflowsS&S integration costs (110)Internet enterprises (34)Acquisitions (327)Interest, tax, dividends, exchange(480)

Closing net debt (1,995)

Reduced Borrowings

£m£m

Improved Gross Debt Profile£m

1998 1999 1999Proforma

Average maturity :Average maturity : 4.44.4yearsyears

5.15.1yearsyears

1,6371,637

2,6242,6242,3232,323

BondsBonds

BanksBanks

7.07.0yearsyears

90%90%

18%18%46%46%

10%10%82%82%

54%54%

Key Messages

Acceleration in top line growth

All-round progress on profits and margins

Another year of high cash conversion

Significantly strengthened balance sheet

150118

108

1999

1998

1997

Operating profit

1999 687

1997 676

1998 683

Sales1999

£m

1999 1998

Operating Profits

FT Newspaper 56 42 +33%

FT Interactive Data 31 22 +41%

FT Business 1 1 -

FT businesses sold (2) (2) -

Les Echos 18 10 +80%

Recoletos 34 30 +13%

Associates 12 15 - 20%

Total 150 118 +27%

£m

Newspapers’ growth makes headlines

FT Interactive Data twice the size

Business portals double traffic

Europe’s Leading Business Newspapers – Circulation Growth

FT

Expansion

Les Echos

100

110

120

130

1997 1998 1999

+19%

+44%

+41%

Increase in advertising revenues ’99 vs. ’98

FT Interactive Data

• Doubled the size of the business

• Burst into new markets

• Grew on the web

Europe’s Leading Business PortalsCombined monthly traffic (page-views)

Jan1999

Dec0

20m

40m

60m

FT.com Trebles Traffic in 1999Unique monthly visitors

70% visit2x per week

Jan 1999 Dec

0

0.5m

1m

CBS MarketWatch Sitesvs. major competitors

0

200

400

600

Oct 98

Jan 99Apr 9

9Jul 9

9Oct

99

yahoo finance

marketwatch.com

cnnfn.com

fool.com

thestreet.com

wsj.com

Source: DoubleClicks

Index

Ads, subscriptions

Licence fees, subscriptionsLicence fees, subscriptions

Subscriptions, fees

Licence fees,subscriptions, ads

Ads, fees

Ads, e-commerce

Ads, e-commerceAds, e-commerce

1999 355

1997 247

1998 343

Sales

1999 681998 61

1997 26

Operating profit

£m

1999 1998

Operating Profits

Pearson TV 74 71 46

BSkyB 1 4 4

Channel 5 (7) (14) (24)

Total 68 61 26

£m 1997

Dramas pull in big crowds

New shows, evergreen formats

C5 gets bigger

Game shows go online

565

525

523

1999

1997

1998

Sales

1999 651998 48

1997 58

Operating profit

£m

More best-sellers

Supply chain efficiency

More niche markets

Internet sales treble

1999 1,725

1997 563

1998 702

Sales

1999 2571998 99

1997 60

Operating profit

£m

19991998

Proforma

Sales

US School 586 537 +9%

US Higher Ed/Professional 666 593 +12%

International 446 423 +5%

Discontinued 8 22

Pearson Education sales 1,706 1,575 +8%

FT Knowledge 19 -

1,725 1,575

£m

No.1 in school math and social studies

Higher Education moves ahead

International recovers strongly

Internet Enterprises

Headlines

Funding from £250m share placing

Transparent reporting

Venture capital approach

Defining Internet Enterprises

Test of scale and separability

Revenue and cost identification

Reporting EPS pre and post internet

Approach to Revenue Investment

Set key performance targets

Monitor targets monthly

Release funds against targets

Revenue Investment in Internet Enterprises : 2000

Committed funds : £50m

Contingent funds : £50m £100m

Discretionary funds : £50m

Timing and currency variable

Approach to Equity Investment

Invest only within strategy

Invest in business relationships

Invest in kind as well as in cash

Equity Investment in Internet Enterprises

Investing in Internet Enterprises1999

Investing in Internet Enterprises2000

Double Digits and Dividends

Commitment to double digit earnings growth before internet enterprises

Peg dividend growth to this earnings line

Target dividend cover of 2.5 times

Online delivery 9090

Online channels 5050

Composite education products 375375

1999 Online Revenues

19991999£m£m

Record performances

Investing for growth

Delivering on the internet