* Beats revenue, earnings forecast
* Raises dividend by 7 pct
* Does not expect economic conditions to improve
* Shares down 2.05 pct at 0912 GMT
(Adds shares, reaction, quotes)
By Kate Holton
LONDON, March 2 (Reuters) - British publishing group Pearson (PSON.L) posted a better-than-expected 2008 adjusted earnings per share of 57.7 pence due to a strong performance at its educational unit, and said it hoped to either match or better that in 2009.
The owner of the world's largest educational publishing business, the Financial Times group and Penguin books, reiterated on Monday its caution about the economic environment however the company said it would still increase the dividend by 7 percent.
"We don't expect economic conditions to improve any time soon, but we do expect our company to remain hardy and aggressive," Chief Executive Marjorie Scardino said.
On Monday Pearson reported a 24 percent rise in headline earnings growth to give it adjusted earnings per share (EPS) of 57.7 pence. In January the company expected to report growth of about 20 percent for 2008 and an adjusted EPS of 56.0 pence.
Analysts welcomed the results and noted that Pearson had not included in its guidance any benefit from the U.S. administration stimulus plan.
"We believe this represents a source of significant potential upside," UBS analysts said in a note to clients on the U.S. stimulus. Shares in Pearson initially rose at the open however they were down 2.05 percent at 646 pence at 0912 GMT.
Pearson reported that 2008 underlying sales rose 8 percent at constant exchange rates to 4.8 billion pounds ($6.81 billion), beating the average analyst forecast of 4.69 billion pounds in a Reuters Estimates poll of 17 analysts.
Profits at the educational unit were up 11 percent to 474 million pounds due to "substantial growth" in U.S. Higher Education and International offsetting weak market conditions for U.S. school publishing.
Profits at the FT Group, the only part of the company that still has exposure to advertising, rose 13 percent to 195 million pounds due to digital and subscription growth and Penguin profits rose 4 percent to 93 million pounds.
The group said trading momentum had remained strong in the fourth quarter for the education business.
Scardino told reporters that advertising had been up at the FT Publishing for the majority of the year however fell 13 percent in the fourth quarter and has continued to be down in 2009.
Penguin performed well in the key holiday selling season, it said.
"We are planning on the basis that the tough market conditions that we saw for some of our businesses towards the end of 2008 are likely to persist throughout 2009," it said.
It said it was planning for weak conditions in the U.S. school publishing market but expected continued growth in testing, higher education and international education businesses.
For the FT Group it expects a tough year for advertising and strong renewal rates in the subscription business, and at Penguin it expects another competitive performance in challenging trading conditions.
"Pearson have today reported strong FY results, ahead of even recently upgraded expectations," UBS said.
"We continue to believe Pearson will be more resilient than the market expects with good growth in areas like US College / International Education, cost savings and market share gains offsetting softness in areas like US Schools."
Pearson's dependence on educational publications for two-thirds of its revenues is seen as its advantage over rivals Reed Elsevier (REL.L)ELSN.AS, Wolters Kluwer (WLSNc.AS) and Thomson Reuters TRIL.L(TRI.TO).
Reed and Wolters are both dependent on professional markets, including law firms suffering from declines in the financial and property sectors, while Thomson Reuters is heavily exposed to financial services. ($1=.7044 Pound) (Reporting by Kate Holton; Editing by Sharon Lindores)