Ad slump hits takings at Pearson

FT Group profits are expected to be 40% lower than last year

Pearson, the media group which publishes the Financial Times newspaper, has warned profits are likely to be hit by an "exceptional downturn in advertising" following the terrorist attacks in the US.

The company said it had, within the last month, seen a large number of advertising cancellations and very little new business.

If the trend continues, full-year profits at its FT Group, which publishes a number of business newspapers, could be 40% lower than those last year, it said in a statement.

"We are now expecting profits to be significantly below our original plans for the year," Pearson's chief executive Marjorie Scardino said.

She said the company was being managed as if there were "no rays of sunshine" ahead.

Pearson expects to see about 150 jobs to go at the Financial Times by the end of the year through natural wastage.

Tech gloom strikes again

The group said advertising from technology firms, among those worst hit by the ongoing global economic downturn, had shown a particular decline.

"Profits from technology publishing could be as much as £25m lower than our expectations at the half-year," Wednesday's briefing said.

The company also said that the slump in advertising spending is expected to have a worse than expected impact on the European media giant RTL, of which Pearson owns a 22% stake.

FT Group

Pearson said all its business newspapers within the FT Group had suffered since the September 11 attacks.

Scardino: profits will be 'significantly' lower

Advertising revenues at the flagship Financial Times newspaper were 40% lower last month than in September 2000.

Other titles - including The Economist, Les Echoes and FT Deutschland - also saw advertising income "fall significantly".

Underlying sales at FT Group fell 4% for the nine months to the end of September, while across the whole Pearson group sales grew by only 1% to £3.2bn.

Warning 'expected'

Pearson also said its losses from its internet operations should be about £60m in the second half of the year.

After major cost-cutting and a reorganisation of its internet interests it says it is now "on track" to meet its break-even targets.

The company also announced it was to take full control of the online information business FTMarketWatch.Com and integrate it into its FT.Com website.

In the City, Pearson shares, which slumped 5% immediately after Wednesday's warning, recovered to close up 41.5p, or 5.7%, at 770p.

"Pearson was probably the last of the big international media companies to make a profits warning so one can hardly say it hadn't been expected," said Jeremy Batstone, head of research at NatWest Stockbrokers.