MAIN NEWS HEADLINES

August 1-15, 2005 Edition

Pearson Reports

Mid-Year Results,

Penguin Sales Rise

LONDON/07/26/05—Pearson Plc, the world’s largest educational publisher, reported a net income of 346 million pounds ($601 million), or 42.3 pence a share, in the six months ended June 30. The gain represented an overall revenue increase of 10%, and reversed last year’s net loss of 9 million pounds. The company also posted a one-time gain from the sale of Spanish publisher Recoletos Group de Comunicacion SA.

Marjorie Scardino, Pearson’s chief executive, said: “We are very pleased with the start we’ve made on 2005. We still have the majority of the year’s trading ahead of us, but the first-half momentum supports our confidence that we will meet our financial goals.”

Penguin Group, Pearson’s trade publishing division, reported a 5% increase to 353 pounds ($632 million), bolstered by increases in sales from Penguin UK and Dorling Kindersley (DK). Travel books helped Penguin increase sales, while the Star Wars movie helped DK’s performance. Operating profits rose 44%, to 13 million pounds ($23 million).

While Penguin USA sales are not broken out of the Pearson Group, the U.S. division CEO David Shanks said he was happy with his unit’s first half. Seventy-nine Penguin USA titles earned bestseller status during the first half of the year. Penguin made strong showings in adult hardcover, adult paperback and young readers. The company’s Riverhead imprint led the way with five bestsellers, including Nick Hornby’s A Long Way Down, with a print run of more than 200,000 copies. Success also focused on new imprints and new authors, including Steve Coll’s 2005 Pulitzer Prize-winning Ghost Wars from Penguin Press, and nearly 150 first-time authors published in the US.

Penguin’s second-half publishing schedule includes new books from Patricia Cornwell, Nora Roberts, Jan Karon, Amy Tan, Peggy Noonan, John Berendt, Terry McMillan, Maureen Dowd, Billy Graham, JM Coetzee, Paul McCartney, Jamie Oliver, Zadie Smith, Ryan Giggs, Ellen MacArthur and Gloria Hunniford.

Pearson shares have climbed 6.3 percent, based on investor confidence that the US school textbook market and business advertising will both increase in 2005.

Pearson’s education group saw a 12% increase in revenues in the first six months, to 953 million pounds ($1.70 billion). The school division led the way with a 19% sales increase to 518 million pounds. Sales in the higher education division rose 5%, to 192 million pounds. The company expects double-digit sales in the school division by the end of the year, while higher education sales are expected to increase by about 4%

The London-based Pearson earns most of its sales in the second half of the year with the first half serving as an indicator as to whether the company is meeting projected goals.

This was the first year that Pearson reported results under the new International Financial Reporting Standards, designed to help make US and European rules more compatible. The company restated its 2004 earnings under the new rules last month.