Penguin Group And Pearson See Spike In First Half Sales And Profit

If anyone has questions about the viability of the publishing industry, I would encourage them to stop and review the Penguin Group and Pearson Publishing's 2010 Interim financial results. Sales at Penguin for the first half of the year rose 9 percent, breaking 493 million pounds. Sales at Pearson, Penguin's parent, also rose 9 percent in the first half of 2010, with adjusted operating profit increasing by 79% to 178m. Overall, the operating profit at the book publisher more than doubled, hitting 44 million pounds (up from 21 million pounds a year ago). To understand the driving factors behind this increase, and develop a reasonable projection for future performance, a quick review of Pearson's financial statements and interim report is necessary.

Penguin is one of the most famous brands in book publishing, known around the world for the quality of its publishing and its consistent record of innovation. Over the past five years, Penguin's sales have increased at an annual average rate of 2% and profits at 5%. In the early part of 2010 Penguin grew well ahead of industry in its major markets and produced a substantial profit improvement. According to Pearson, "a strong and consistent publishing performance across imprints and territories produced market share gains in the US, UK and Australia, our three largest markets. Penguin profits benefited from a series of organizational changes made in 2009 at Penguin UK and Dorling Kindersley to strengthen publishing, accelerate the transition to digital, reduce costs and shift design and production to lower-cost markets. Additionally, Penguin's first-half results also benefited from a stronger market and publishing schedule in comparison with the first half of 2009. Continued investment in global publishing, with the launch of the Portfolio and Razorbill imprints in the UK, and in developing markets with the imminent launch of Portuguese Penguin Classics in Brazil in addition to Mandarin and Korean editions, further helped drive sales." Digitally, eBook sales continued to support Penguin's growth. Penguin's eBook sales grew threefold on the previous year. Currently, 15,700 eBook titles are now available across multiple platforms. Additionally, Penguin continues to extend their reach to new audiences, most recently with the launch of Apple's iBookstore and iPad where, in the US, Penguin's Winnie-the-Pooh was the only book pre-loaded onto the device.

On the publishing front, the first half of 2010 was a strong year for Penguin. Penguin performed strongly in adult publishing across the globe with bestselling titles including: Kathryn Stockett's The Help, Charlaine Harris' new Sookie Stackhouse novel Dead in the Family and Michael Pollan's Food Rules in the US; Andrew Rawnsley's The End of the Party, Peter Andre's My World and Paul Hoffman's The Left Hand of God (boosted by its accompanying iPhone app) in the UK; and Bryce Courtenay's The Story of Danny Dunn and Michelle Bridges' Crunch Time Cookbook in Australia. Penguin also continued to see a very strong performance from their children's publishing around the world with bestselling titles including: John Grisham's first ever children's title Theodore Boone: Kid Lawyer, and Richelle Mead with Spirit Bound, in the US; Rick Riordan (Percy Jackson series) and Jeff Kinney (Diary of a Wimpy Kid) in the UK. Brands such as Peppa Pig, Spot and Club Penguin continue to perform strongly in the UK. A strong second half of the year is expected from this unit, with publishing being led by major new books in the US, including titles by Tom Clancy, Patricia Cornwell, Ken Follett, Nora Roberts, Ron Chernow and Barbra Streisand. Penguin UK's list includes new titles by Stephen Fry, Michael McIntyre, John Le Carre, Eoin Colfer and Niall Ferguson. Is there opportunity afloat digitally for Penguin? Most certainly. Ebooks currently comprising 8.5 percent of sales results from Penguin, a figure that is expected to rise. Additionally, growth in one of Penguin's key focus areas - children's books - is expected to positively impact market sales.

While Penguin results contributed to Pearson's sales and profitability, the other publishing wings of the company continue to drive performance. North American Education remains Pearson's largest business, with 2009 sales of 2.5bn and operating profit of 403m. In developing their roots as a leading publisher, Pearson has made significant investments in order to transform themselves into a world-leading provider of learning technologies for students and enterprise technologies for educational institutions. These technology services - including eCollege, PowerSchool, the MyLabs and Edustructures - form the backbone of Pearson's strategy to help educators raise student performance, while at the same time helping institutions become more effective. Of note, the US Higher Education publishing market grew 12.2% in the first five months of the year, according to the Association of American Publishers with the industry benefiting from healthy enrollment growth and good demand for instructional materials. Pearson was able to take advantage of this growth, primarily because of its leading position in technology and customization.

Internationally, Pearson continues to make ripples. Pearson is currently the world's leading education company and outside North America, their international Education sales almost doubled. Profits have increased nearly three-fold over the past five years, and profit growth is expected. According to Pearson, "their strategy is to combine educational content, assessment, technologies and related services to help educational institutions become more effective and their students more successful." They expect to benefit from a series of powerful long-term global trends, including: "increasing public and private spending on education (despite current pressures on public spending in developed markets); growing participation rates in elementary, secondary and higher education; the demand for assessment to provide measures of achievement; the growing technology infrastructure in educational institutions; and the rise of English and other international languages." Of note, on 22 July 2010, Pearson announced a strategic partnership with Sistema Educacional Brasileiro (SEB) to provide services to its educational institutions and to acquire its school learning systems ("sistema") business for R$888m ($497m; 326m). A sistema is an integrated learning system incorporating curriculum design, teacher support and training, print and digital content, technology platforms, assessment and other services. SEB's four sistemas - COC, Dom Bosco, Pueri Domus and NAME - serve more than 450,000 students across both private and public schools.

For more information, see the following LINK

Photo Credit: Penguin Group