The group, which publishes the Financial Times newspaper, met its financial target for 2002 after slipping up in 2001.

But the FT division posted an 8% slide in revenues for the year to December 2002 as advertising in its flagship newspaper slumped 23%.

Pearson has been hit by companies slashing their marketing budget during the economic downturn in an effort to cut costs.

Slow campaigns

Advertising giant WPP, which owns the J Walter Thompson, Ogilvy & Mather and Young & Rubicam agencies, warned last week that conditions would remain tough as it posted a fall in profits for 2002.

And Pearson confirmed the conditions.

"We are managing our business newspapers on the basis that there will be no advertising recovery in 2003," the group said in a statement.

The publisher reported profits of �399m for 2002 against �294m in 2001, in line with analysts' forecasts.

Its core education division remained robust, with revenues up 11%, while Penguin books saw a 5% gain.

"While the economic environment is uncertain, we are confident we will make further progress on earnings, cash and returns this year," said chief executive Dame Marjorie Scardino.

FT rumours

Scardino has bet everything on education, transforming the group from a jumble of media assets into the world's biggest textbook publisher.

But the company was keen to stress the FT remained central to its business, despite recent troubles.

City rumours that Scardino was ready to sell the newspaper - if the price was right - were dismissed by finance director Rona Fairhead.

"Marjorie says (the FT) would be sold over her dead body and she's still very much alive," she told reporters.

Shares up

Pearson also beat its goal of 40% growth in earnings per share at 30.3p

The finance director said she was "pretty confident" the group would meet double-digit profit growth this year too.

Shares in Pearson initially closed up 36p at 516p, as investors digested the results.

Michael Picken, an analyst at Credit Suiss First Boston, said: "It's a steady as she goes story with no major upsets in these results.

"It's a mixed bag that didn't surprise anyone."