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  Pearson Annual Report 2001    

Chairman’s Statement


Dear fellow shareholders,

2001 was a year of events in world politics and economics none of us will soon forget. Pearson suffered, along with virtually all of our peers. Adjusted earnings per share, the main measure by which we judge our progress, fell sharply and so did the share price.

In spite of the decline in earnings last year, your board is recommending a 4% increase in the dividend. This increase reflects a confidence that, although these are uncertain times, we should see a strong earnings recovery in 2002 (even without any help from the economy) and that Pearson is in good shape to create a steady increase in value for shareholders in the years ahead.

There are plenty of reasons for our confidence:

Although profits were hit hard by the advertising downturn, our businesses turned in good competitive performances last year.

As Marjorie reports in her review, the fall in earnings in 2001 was due primarily to the worldwide downturn in business advertising. Each of our businesses out-performed its competitors and has good prospects for 2002. Although none of us would be foolhardy enough to predict the timing of an advertising recovery, it will come at some point and we will benefit when it does.

Pearson is now a company made up of three businesses that make sense together.

With the sale of our stake in the television business, RTL Group, Pearson is now built around three complementary businesses, each with a powerful, sustainable position in its market. Our balance sheet is now stronger than it has been for some years. The major investments we’ve made most recently (Dorling Kindersley and NCS) and the internet investments that have moved our publishing businesses along ( and Learning Network) will start to come into their own this year, and we’ll enjoy their benefits for years to come.

Pearson has the people to pull it all off.

There is a huge reservoir of extraordinary human talent within Pearson, people who bring great commitment and passion to their work. We saw this last year in the quality of our journalism after September 11, in the determination of our school publishing team to win a race against time to ensure the implications of that terrible day were reflected in our new American history textbooks, in the bravery of our people who were in the World Trade Center. We saw it in many ways from colleagues right across Pearson who, however tough the market, got on with the job in hand.

And we saw it in the Pearson management team. You learn most about your colleagues in hard times. With impressive resilience, dogged concentration and good spirits, Marjorie and the team have protected the company from the worst effects of a corporate-led downturn. Furthermore, despite the pressures, they continued to develop the new products and services that will enable us to grow in the future. On behalf of the board, I thank them.

I also thank the non-executive directors for the contribution they made over the last year. They, too, showed what manner of colleagues they were in hard times; their constructive contributions combined with their solid support have been indispensable. This year we welcome a new face to the board. We are proposing that Patrick Cescau, of Unilever, should be appointed to the board at the annual general meeting. A French national, Patrick will bring to the board a wealth of commercial and financial experience from both Europe and the United States.

Finally, on behalf of the board, I thank the 29,000 people who work for Pearson around the world for their commitment, talent and hard work. As a big majority of them own shares in Pearson, they share the board’s desire to see a strong recovery in earnings in 2002 and the years ahead and its commitment to the continuation of the brave, imaginative and decent culture that helps make Pearson what it is.

Dennis Stevenson