The £105m rise in pre-tax profits came on the back of sales of £4.3bn, up 5%, while operating profits rose 18% to £493m giving an adjusted earnings per share of 30.3p, an increase of 42% on 2001.
Pearson's Financial Times Group saw revenues fall £75m or 8% as the global economic downturn continued to hit advertising revenues and, to a much lesser extent, newsstand sales.
The Financial Times and its FT.com website were hard hit and advertising revenues fell by 23% after a 20% decline in 2001.
Pearson said that conditions remained tough for FT's major advertising categories, including financial services, technology and business to business. The newspaper ended the year with average daily circulation of 473,587, a decline of 6% on the previous year, primarily due to lower sales in the UK.
FT.com broke even in the fourth quarter of 2002 with revenues up 9% to £25m. FT.com has added to the growing success of subscription websites because, despite the introduction of paid-for services, the site's popularity continued to grow rising 30% to a record 3.5m unique monthly users in January 2003.
Les Echos made a profit of £7m down 34% on 2001 as advertising revenues fell sharply. Average daily circulation was 121,000, a 6% decline, but well ahead of its market. FT Business delivered double-digit margins as its major titles -- Investors Chronicle, The Banker and Financial Adviser -- all strengthened their market positions.
Losses from the FT's associates and joint ventures were less than half the level of the previous year, due to continued progress at FT Deutschland, Pearson's joint venture with Gruner+Jahr. Despite the tough German advertising market, FT Deutschland grew its advertising revenues slightly and increased its circulation by 14% to 89,000 at the end of the year.
The Economist Group, in which Pearson owns a 50% interest, offset falling advertising revenues with tight cost controls. The Economist's worldwide weekly circulation grew by 6% to 881,259.
Pearson's Professional and Higher Education businesses helped Pearson Education deliver 11% revenue growth and 22% profit growth in a slower year for school textbook adoptions. Penguin increased revenues by 5% and profits by 11%, with market share gains in UK and US and a £15m profit improvement from Dorling Kindersley.
Pearson chief executive Marjorie Scardino said: "Last year, we increased earnings, generated more cash and improved our return on capital, even though we faced an advertising recession far deeper than expected. Our broadly based education business and Penguin recorded good growth.
"We performed competitively in each of our markets, while managing our costs tightly and investing in new products to increase sales and new systems to boost profits. While the economic environment is uncertain, we are confident we will make further progress on earnings, cash and returns this year," she said.
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