Pearson: FT profits diving 40%

By ROBERT LEA
Updated:

 

MEDIA giant Pearson has warned of a 40% collapse in profits at the Financial Times this year after advertising in the group of newspapers almost halved in the weeks after the 11 September terrorist attacks on the US.

About 150 jobs - 15% of the workforce - are going at the FT newspaper as chief executive Marjorie Scardino makes staff cuts, including compulsory redundancies, across the group.

Shortfalls elsewhere, notably in computer publishing, will cut group profits by £110m more than expected. Finance director John Makinson said: 'We are not expecting a material recovery between now and the end of the year.'

Last year the company made pre-exceptional operating profits of £490m and the newspapers division, which relies heavily on advertising revenues, accounted for about a third of group profits.

Pearson issued its profits warning after a poor third-quarter performance was exacerbated by the attacks. Speaking of an 'exceptional downturn' in advertising, it stated: 'In the last month we have seen a large number of advertising cancellations and very little new advertising activity.'

Makinson said advertising revenues in the third quarter of the year were plunging by up to 25%. In the last three weeks of September that fall accelerated to 45%. 'The business-to-business advertising market is suffering more and earlier than the consumer advertising market,' he said. 'It certainly isn't good.'

He said the FT was suffering from the collapse of its two biggest markets: corporate advertisers in the technology market were already in recession, while financial services companies had reined in spending since 11 September. Its sister magazine The Economist has been hit by the collapse in travel, airline and luxury hotel advertising, also big markets for the FT. Falls are similar at its Les Echos and Expansion newspapers on the Continent and at the German edition of the FT.

Pearson warned of slowing sales in its Penguin books division, especially among the Dorling Kindersley and Rough Guide travel titles, though it said the sales of the likes of Jamie Oliver and Victoria Beckham books are helping to offset this. It said the ad slowdown 'is also likely to have a greater impact' at Channel 5 and Thames TV owner RTL, in which Pearson has a 22% stake.

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