Chairman's Statement

The Pearson board is very pleased with the headway we have made this year and the platform that has been established for long term growth. Although Pearson had good assets and good prospects when we began the year, with a new chairman and a new chief executive, there was work to do. We have made a good start.

In 1997, sales rose to a record of nearly £2.3 bn. Operating profits were up 15%, with earnings up 14%. If currency exchange rates hadn’t moved against us, our sales would have been £101m higher and our profits £17m higher. The board recommends a dividend of 19.5p for the year, up 8% over last year. While this rise is lower than the rise in our earnings, it is on a par with the market average and represents adequate dividend cover and our belief that we can offer shareholders a better return long term by investing in the Company’s future.

We’ve made progress by concentrating on attracting good people and setting tougher objectives and tighter financial disciplines. We are looking analytically and strategically at all our businesses, but at the same time we’ve applied a pragmatic determination to making the Company more valuable for our shareholders. Pearson operates in an industry changing quickly and constantly. It is our ability to manage the complex creative and commercial mix of that environment that gives us our competitive edge. To deploy it to our shareholders’ advantage, we have to make Pearson greater than the sum of its business parts.

We have dynamic new management at the head of Pearson. Marjorie Scardino and the members of the team at the centre and in the businesses know how to provide leadership. They know how to work together and are beginning to exploit the money-making opportunities available to the Group as a unit. The board has confidence in them and in all of the people at Pearson who have done a superb job in this first year of a new chapter in our Company’s history.

David Veit, who retires from the board at the AGM, and Pehr Gyllenhammar, who retired last December, helped us make this transition. Pehr, a non-executive sans pareil for fourteen years, was a source of wise judgement and always fun. David, an executive director since 1981, served longest and most recently as president of our Company in the United States. He brought a combination of intelligence, energy, loyalty and integrity. We thank both men sincerely.

We still have a way to go before we achieve all our plans. By the time we do they probably will have changed, because the world will have changed. But I’m confident we now have the ability to take advantage of that changing world while producing good results and value for our shareholders.

Dennis Stevenson, Chairman