Pearson posted pre-tax profits up 2.8% to £410m on a turnover that was down by 6% to £4.05bn. Pearson said it expected to make progress in 2004 but was predicting a much stronger 2005.
Ad revenues at the Financial Times fell 18% in the first half and 12% in the second half and was down £23m overall, £9m more than 2002, as industry conditions remained tough for the FT's key advertising categories of corporate finance, technology and business to business.
Rona Fairhead, finance director at Pearson, told reporters that the group had no intention of selling the FT.
"There are a lot of good reasons [to keep the FT]. We have a whole group of business newspapers worldwide. We benefit from having that breadth. We have terrific brands and we know how to manage brands," she said.
Speculation has surrounded the fate of the FT as it continues to suffer poor advertising revenues. Last year USA Today publisher Gannett said it was interested in buying the FT if Pearson put it up for sale.
Pearson said the advertising declines were significantly worse immediately before and during the war in Iraq, but the rate of decline began to narrow towards the end of the year helped by growth in US, online and recruitment advertising.
Despite an uncertain outlook Pearson said that advertising trends for its newspaper business were continuing to improve in the first two months of the year and that forward bookings were running a little ahead of last year.
Even if there is no significant advertising recovery Pearson said that £20m in cost savings achieved will reduce losses at the Financial Times.
Pearson chief executive Marjorie Scardino said: "We are now leaner, stronger and more ready for the better conditions we're beginning to see ahead. In 2004 we expect to make further underlying progress toward our financial goals and in 2005 we see a very strong performance from our whole company."
The Financial Times Group saw profits rise by 8% despite a 3% revenue decline. Pearson said 2003 was the third year of a savage corporate advertising recession for its business newspapers, which has seen advertising volumes at the Financial Times fall almost two-thirds since the peak in 2000. Over the same period, Pearson said it has now cut costs at the FT by more than £100m.
The FT's circulation in the six months to January 2004 was 433,000, 4% lower than in the same period last year, although FT.com's subscribers are some 50% higher at 74,000.
Profits at Les Echos were behind last year, reflecting continuing declines in advertising revenues and investment in the newspaper's relaunch. Average circulation for the year was down 4%.
The FT said there was good progress at FT Deutschland, its joint venture with Gruner+Jahr, and at the Economist Group, in which Pearson owns a 50% interest.
FT Deutschland's average circulation for 2003 was 92,000, an increase of 9% on the previous year and advertising revenues increased in a declining market. The Economist increased its operating profit despite further revenue declines. The Economist's circulation growth continued with average weekly circulation 3% higher at 908,000.
Revenues at Recoletos, its 79%-owned Spanish media group, were up 4% as its consumer titles, including sports newspaper Marca, performed strongly, offsetting further advertising revenue decline at business newspaper Expansion.
Pearson said its school business saw sales up 1% and profit up 13% and its digital learning business returned to profit despite lower sales. Higher education sales were up 6% and profit up 11%. Its US higher education business was up 6%.
Pearson's Penguin publishing business saw revenues and profits up by 2% for another record year.
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