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: chief executives review :

In a world mesmerised by technology, it would be easy to find ourselves focusing more on the works of the engine than on its purpose. But we try not to. Instead, we try to think of the technology as fuel and concentrate on how it can get us to where we want to go.

So in 1999 we kept our eyes on the road and logged another great year for Pearson shareholders. Financially, we met everyone’s expectations, including most of our own (though we also think we could achieve more). Strategically, our own plans and the world’s fashions helped us do more with the networked world and plan more about the role it will play in our future.

Our measures of operating success have for the last three years been sales, margins and cash. We performed strongly on all counts and at the same time invested in the future. Details on how we performed start in The Pearson goals.

In Pearson Education, we completed a complex integration of two large companies without breaking our stride. We didn’t compromise business performance or educational standards, and we didn’t spill any of the planned savings from the mixture. In the Financial Times Group, we rode the wave of a grand advertising boom with all our financial newspapers as well as a boom in the equity and bond markets which buoyed even further our leading position in the market for online securities data. But it wasn’t just the market that made us successful. In both businesses, we managed also to attract more readers and customers, grow faster than our competitors and so increase our market share. At the same time, we were building more functional news and information services for the business executives and investors who are some of our most loyal customers.

Work on Penguin’s consumer book business began to pay off, too, as growth in internet sales and other technology-related developments gave us advantages in the back and front of the house, in our supply chain and in gathering communities online. At the same time, investment in already great and soon-to-be great authors yielded rewards for us and our readers.

The same desire for favourites drove our television business, centred on its own kind of bestsellers. Our enduring formats and stories once again performed all over the world in a multitude of languages to a multitude of television audiences. These same shows also began to perform online with interactive games that brought a new dimension to the business. And across the company, the Pearson Technology Centre, our in-house technology hub, and Headland, our digital publishing arm, helped us apply technology both to transform the supply side of our publishing operations and break out into new markets.

As we flew along last year, we continued to redesign our aeroplane in mid-flight. Our essential effort is still to become a simpler, more integrated media company focused on services that appeal to people’s minds and emotions, whether they’re learning, making decisions or having a good laugh. In our redesign, we looked for the opportunities that will secure our future: in new business information audiences and services, in new education tools to help students and teachers, in new ways of telling stories. (A few of many examples from across Pearson are set out opposite and over the page.) In all that we did, we tried to balance creating a great business for the long term with making consistent shorter-term returns for those who have their money invested in Pearson now.

As we were working, the world was definitely moving in our direction. The trends which have for several years attracted our attention – the appetite for education in the developed and developing world; the growth of English; the power of technology when applied to the mind’s creative output – continue to gather momentum.

In the US, for example, a mini ‘baby boom’ will swell the school rolls by two million children over the next five years, while their parents themselves swarm back to college for further education. Around the world, public and private spending on education is rising as individuals, companies and nations strive to be part of an increasingly brain-powered world.

In that world, the onward march of English as the language of global business, along with cross-border investment traffic and the private investor revolution, have created new markets for business information.

Meanwhile books, most published first in English, are often the beginning of stories that are told across all media and in all parts of the world. With a growing number of channels to carry them, our ownership or stewardship of these stories and data and analysis, combined with our ability to work in many formats, gives Pearson a great advantage.

At the heart of all these trends is the revolutionary impact of the internet. We’ve tried out a lot of analogies to help us think about what this networked world will mean – the industrial revolution, the railroads, the internal combustion engine, television, even the computer itself. We’ve finally settled on our favourite – electricity. Like electricity, the internet is the invisible circuit that makes things possible that never were before. We will, before very long, take it entirely for granted. But it will change our world for ever.

In this world, the real prizes will go to the media companies with the brands, content, ideas and versatility to use this electricity to make their customers’ lives easier and run their businesses better. It’s not about the electricity. It’s about what it can do – and we have a lot of ideas about how we will use it to help people learn; to help them succeed financially; to provoke their imaginations or prompt a smile. To help us realise our ideas, we’ve also chosen a few truisms to rest our case on, at least for now:

content is the thing : The Pearson factory manufactures and manages rich content. It may help you pass a test, get a job (or do the job you already have better). It may help you understand the world or, for a little while, switch it off. But across its range – from children to adults, forensic pathologists to cooks – it draws an audience that keeps coming back for more. That’s a much-valued quality in any medium, and it has given us confidence to invest more than ever to hire and retain the best journalists, authors, editors and producers and encourage their creativity.

brands count : The internet is generating content even faster than computing power is multiplying, but for many people clicking through the web for what they want is like rummaging through a Saturday garage sale. They need help to find what they are looking for – and brands provide just that. The list of new advertisers in the Financial Times and its sister titles show the importance new businesses attach to building brand awareness. In Pearson, we already have a fantastic range of brands – built through ‘old’ media – that people trust and look for. Across all channels, but particularly the web, we are building and using them like never before, because the other rule about brands on the net is: ‘use it or lose it’.

the world is global, but it’s local too : The internet moves its data passengers with fluidity across borders. But as it crosses them, languages and cultures don’t disappear. So we are also investing more in building our presence in national and regional markets and languages around the world, to help us move forward being as fluent in French, Spanish, Portuguese, German, Chinese and many other languages as we are in English in all its accents.

Our ideas about the world may not continue to be sound, and we’ll watch closely for signs of atmospheric changes. But for now they are our advantages. With the internet, they give us the means to execute our game plan on a scale never possible before, to sew all our businesses together and change the kind of company we have.
But as we try to do that, there is one other thing we know, and it’s something we don’t think will change. That is the utter reliance Pearson has on its people. No matter what brands or content we own; no matter what market shares we build; no matter what ideas we have, nothing counts if there aren’t people who enjoy their work and are challenged to do more than they thought they could. If we can make Pearson the best place to work in the world, we will be sure to make all our shareholders happy.
So my thanks to everyone who did just that in 1999. I hope you feel like doing it again, and again.
signature - Majorie Scardino


* Introduction
* Chairman's letter
* Chief executive's review
* The Pearson Goals
* Internet Goals
* The Results
* Financial Review
* Financial Policy
* Directors' Report
* Personnel Committee Report
* Pearson Education
* Penguin Group
* Financial Times Group
* Pearson Televison
* Recolétos
* Lazard
* Consolidated profit and loss account
* Consolidated balance sheet
* Consolidated statement of cash flows
* Statement of total recognised gains and losses
* Note of historical cost profits and losses
* Reconciliation of movements in equity shareholders' funds
* Report to the Auditors to the Members of Pearson plc
* Principal subsidiaries and associates
* Five year summary
* Shareholder information
* Notes to the accounts

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