Investment: Prospects rosy for Pearson

Investment: Prospects rosy for Pearson

MARKETS HAVE short memories. A little under two years ago Pearson shares fell on news that Marjorie Scardino was to take over as chief executive of the media group. Now investors will happily take her at her word. Shares in the Financial Times to Baywatch group, which have already risen by almost two-thirds during Ms Scardino's 19-month tenure - added 76p to close at 1196p yesterday as Pearson outlined a rosy future.

Strong first-half results, which showed operating profits from continuing operations up 30 per cent at pounds 91.8m on sales ahead by 5 per cent at pounds 945m, were partly behind the rise. Operating profits at the FT rose 17 per cent as its pounds 100m push into overseas markets lifted circulation. And Pearson Television, helped by acquisitions, boosted profits 49 per cent.

Yet investors are also willing to take a fair amount on trust. Penguin had a weak first half but summer releases from the best-selling thriller writers Patricia Cornwell and Tom Clancy should make up the shortfall. Although the educational publishing arm made its usual first-half loss, analysts are upbeat about the acquisition of Simon & Schuster's education publishing business - which US regulators are still poring over.

The sale of Madame Tussauds will largely complete Pearson's disposal programme and bring its debt back down to normal levels. Although the group is tracking PolyGram's film division - and would probably be prepared to issue shares to fund the deal - Pearson is more likely to stick to developing its existing businesses.

Barring a severe economic downturn, which would hit advertising sales, prospects look good. But with the shares trading on a multiple of 28 times stockbroker Henderson Crosthwaite's full-year profit forecast, most of the good news is in the price. A firm hold.

business mix. At 27 times 1999 forecast earnings of around pounds 28m, the shares are a strong hold.