Last Updated 28 Aug 2020

McGraw-Hill Financial Performance

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It is reported that there was an 8.6% increase in the earnings per share to $2.40 for the year 2006 that due to the increase in the revenue by 4.2% amounting to $6.3 billion.  Another successful year for the McGraw-Hill, but before that, let’s take a look at the past few years where the evaluation of this research must focus. The net income of the McGraw-Hill for the year 2003 is $687.7 million.  During 2004, the net income had reached an amount of $755.8 million, a 9.9% increase from the previous year.  In addition to this, the company’s revenue increased by 7.4% amounting to $5.3 billion. In accordance with the Emerging Issues Task Force Issue 00-10, “Accounting for Shipping and Handling Fees Costs”, the corporation had made reclassification of the revenues resulting in an increase in the revenue of $62.5 million and $62.5 million during the year 2004 and 2003 respectively. There is an increase of 14.3% in the McGraw-Hill revenue during 2005 which had reached about $6 billion.  Together with it is the increase in the net income of 11.7% reaching an amount of $844.3 million and also an increase in the earnings per share of 12.8%.  The company had also returned an amount greater than $924 million to the shareholders prior to the increase of 14.4% compared to as before of 4.9%.

Pearson PLC Financial Performance

In the year 2003, changes in the company’s portfolios had made revenue to increase by £89 million and £24 million on the profit.  However, due to the movements of currency, there is a £181 million reduction in the revenues and £27 million on the profits. During the year 2004, the revenues of the Pearson PLC had decreased by £302 million and £51 million on the profits due to the currency movements that happened at that time.  However, the changes in the portfolio had made an increase of £41 million on the revenues but still, the profit dropped down by £8 million. However, the movements of the currency in 2005 had made a positive effect on Pearson PLC.  Regarding the continuing business basis, there is an increase in the sails by £46 million and the profit had also increased by £12 million.  In addition to this, the portfolio changes also made the sales to increase by £29 million and profits by £9 million. Also during the year 2005, the fastest growth of sales happened in comparison to the past five years of the corporation.  The sales increased by 9%.  There is also a 22% increase in the profit amounting to £509 million and with the margins going up to 12.4%.  There is also an increase of more than 33% in the operating cash flow of Pearson and more than 50% on the free cash flow, reaching an amount of £431 million. These results to the most cash generated in Pearson that ever happened before.  The biggest contributor to this success is the –education- having a sale of up to 12% generating an amount of £2.66 billion and making the profit to go up by 22% to the amount of £348 million.

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McGraw-Hill Stock Performance

A 10% increase was approved by the Board of Directors of the McGraw-Hill Companies on the Corporation’s common stock regular quarterly cash dividend.  It was the 32nd of the consecutive increase in the annual dividend of the Corporation’s common stock. In 2004, an amount of $630 million was returned by the McGraw-Hill Companies to their shareholder.  There was a 50% increase in the dividend payments compared to the previous year (2003).  There is a new annualized rate amounting to $1.32 per share brought by the Corporation’s increase by 3 cents to 33 cents per share in the regular quarterly dividend on the common stock.  There was a history of the continued increase in the McGraw-Hill dividends for 32 consecutive years.  Also, during this year, the acquisition of the 5 million shares of its repurchase range happened on the Corporation. There was an increase of a 10.3% average on the McGraw-Hill Companies annualized total return over the past 5 years. In 2005, the expanded stock repurchase program continued for 45 million shares which are far greater than the outlook of the Corporation in 2004 of between three to five million shares.  In addition to this, it has been 33 consecutive years of an increase in the dividend.  Since 1974, 10.3% had been the average compound annual growth rate.

Pearson Stock Performance

The shareholders had approved the amount of 17 pence per ordinary share as a final dividend in 2005 and the total dividend had reached the amount of 27 pence (adding the already paid interim dividend).  There is an increase from the previous year's dividend from 25.4 pence (2004). In 2004, an adjustment of up to 5% amounting to 30 pence (57.6 cents) per share occurred, and also there was an increase in the dividends by 5%. In 2003, a dividend per share amounts to 24.2 pence or 43.3 cents.  The price of the share this year is £5.72 and £6.25 in the following year (2004) and in 2005, the share price is £6.52.

Stock Performance Analysis

In 2004, the stock performance of the McGraw-Hill dramatically increased from 17.8% of return putting it on its peak having a record giving 32.9% in return to the shareholders.  However, it has not been good during the year 2005 due to the currency movement thus dropping down to 14.4%.  However, it was a disaster for Pearson PLC’s stock to be performing to the down low having its percent of return down to its lowest return of 1.5%.  The stock performance trend from 2003 until 2005 has been continuously going down.  Currency movement and the changed company portfolio didn’t make a resistance for the company at these times.

Long-Term Commitment

Until 2005, McGraw-Hill Companies had succeeded and made the constant average return on investments through dividends of 10.3% for 33 consecutive years since 1974.  By simply looking at these numbers, the possibility of McGraw-Hill to a long-term commitment would bring up more success to the Corporation. Pearson had been facing trouble in their past years before 2003.  Those years have been tough for the Corporation.  But their claim is they had made three of their companies, namely education, business information, and consumer publishing to becoming world leaders. These happenings made them think of two things; making their operations efficient and selling better products and services compared to their competitors.  This strategy made them sold more than £250 million worth of products and services by combining two or more parts of Pearson, both working together.  The results of this had reduced costs, increased revenues, assets, and working capital that will continue planning on a long-term commitment.

Reference

  1. McGraw-Hill. (2007).
  2. The McGraw-Hill Companies, Inc.: Financial Statement.  Retrieved March 10, 2007, from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspxSymbol=MHP&lstStatement=Balance&stmtView=Ann
  3. PLC, P. (2007). Financial Statement.  Retrieved March 10, 2007, from http://finance.google.com/finance?fstype=ci&cid=664805

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