Picture: Renjith Krishnan

Pearson raised its 2011 profit outlook on Friday after higher sales of digital products and in developing markets pushed the Financial Times owner past first-half earnings expectations.

“Our numbers for the first half are very solid,” Chief Executive Marjorie Scardino said.

“Though market conditions are anything but easy, we are sufficiently encouraged by our start to the year to raise both our guidance and our dividend.”

The educational and Penguin books publisher said it expected to achieve adjusted earnings per share of about 80 pence for the year, up from 77.5 pence in 2010. It had previously forecast earnings growth but gave no specific number.

Shares in Pearson rose as much as 5.2 percent, as the upgrade was welcomed by analysts who had forecast full-year EPS of 78.4 pence, according to a Thomson Reuters I/B/E/S poll. They were 0.7 perecnt higher at 1,147 pence by 14:54 SA time.

UBS said it was a strong state of numbers from a leading player in a global structural growth opportunity.

“More importantly, given H1 represents only about 20 percent of full-year profits, management have upgraded full-year guidance,” the bank's analysts said in a note.

“Although a relatively small move, it shows their confidence that they are even willing to do this.”

The group's biggest division, education publishing, which makes most of it profit in the second half, saw sales rise 9 percent and profits increase 31 percent in the period.

North American sales were down 3 percent, against a tough comparative, but Scardino said growth was expected for the full year, helped by it winning a 37 percent share of the state adoptions - school textbooks chosen at state level - in which it competed.

US textbooks rival McGraw-Hill on Thursday said revenue at its education business fell 5 percent in its second quarter, due in part to delays in product orders.

Pearson has about 500 million pounds left from selling its IDC division last year to use for more acquisitions in developing markets, CFO Robin Freestone said.

News Corp , whose HarperCollins unit already competes with Pearson's Penguin, hired Joel Klein in November to drive a push into similar territory, although the former New York City department of education chancellor is now busier providing “oversight and guidance” on the phone hacking crisis.

Scardino said building an international business took time.

“You can't do all this in a day,” she said, adding that the task took more than hiring “two or three education movie stars - we see (Klein) as a education movie star”.

Pearson's international education business, which spans English-language teaching in China to driving theory tests in Dubai, saw headline sales growth of 27 percent, the company said.

Profits at the Financial Times grew by 10 percent, driven by digital subscriptions, it said, while the growing popularity of ebooks helped sustain profit at Penguin despite sales falling 4 percent.

Digital sales of Penguin's titles, including “The Brightest Star in the Sky” by Marion Keyes, grew 128 percent and now represented 14 percent of Penguin's revenues. “We have moved over to being fairly agnostic in books,” Scardino said.

Group sales increased 3 percent to 2.42 billion pounds at the headline level, it said, and adjusted earnings per share were 16.8 pence, against 16.6 pence a year ago, both ahead of analyst expectations of 2.38 billion pounds and 13.70 pence, according to a Thomson Reuters I/B/E/S poll of 9 brokers. - Reuters