LONDON — British media group Pearson has decided against selling off its television division, raising doubts about whether Pearson TV’s chief exec Greg Dyke will choose to stay with the company.
It’s an open secret that Dyke has been mulling a buyout of Pearson TV, or at least hoping to persuade Pearson to sell a minority stake in the TV division to its management.
But Pearson’s new chief executive, Marjorie Scardino, who joined the company in January, has reportedly decided that the TV business is too important to let go.
However, she provided few clues Monday about how she plans to shake up the troubled media group as she un-veiled a lackluster set of financial results for 1996, the year preceding her arrival.
”The major immediate changes under new management at Pearson will be the ones of style and focus on perform-ance,” she said. ”As time goes on, we may change the business we’re in, too, as we work toward being first in a few important markets.”
”But we won’t be selling things just to be tidy,” she insisted. ”We’ll be selling things where the move will make the company more valuable for our shareholders — of today and tomorrow.”
Two American disasters severely undermined Pearson’s 1996 profits. The company was forced to take a one-off £100 million ($159 million) hit because of accounting problems in Penguin’s U.S. publishing operations, dating back several years but only uncovered during Scardino’s first month in charge.
And the California-based CD-ROM firm Mindscape continues to hemorrhage red ink, losing £45.5 million ($72.3 million) in 1996 compared with losses of £6.9 million ($11 million) the year before.
As a result, Pearson’s overall operating profit dropped by 30% to £181 million ($288 million), although without the Penguin hit it would have risen by 8%. Sales rose 19% to £2.19 billion ($3.48 billion).
The problems at Mindscape meant that profits at Pearson’s entertainment division fell by 53% to £52.5 million ($83.5 million), although sales grew 13% to £803 million ($1.28 billion).
But within that, Pearson TV’s profits rose 19% to £40 million ($63.6 million). The belief that Pearson TV’s success is being masked by the wider problems of the group is one reason Dyke, a multimillionaire in his own right, wants to spin it off.
Pearson TV is mainly an international production and distribution business, built around companies such as Grundy Worldwide, Thames TV, ACI and SelecTV. These account for 70% of Pearson TV’s revenues, but the di-vision also has minority stakes in several cable and satellite TV channels around the world, and has a 24% stake of the U.K.’s new terrestrial web, Channel 5, which launches March 28.
Pearson operates in three divisions — entertainment, information and education. Information, which consists largely of business magazines and newspapers headed by the flagship Financial Times, increased its profit by 28% to £134.4 million ($214 million), with sales up 9% to £828.7 million ($1.32 billion).
Scardino announced that Pearson plans to spend $159 million over the next five years to expand the Financial Times internationally, with particular emphasis on the U.S.
The education division, built around the educational publishers Addison Wesley Longman and HarperCollins Edu-cational, increased its profit by 114% to £68.1 million ($108 million), with sales up 54% to £554.3 million ($881 million).