Pearson Boosts Profit; Warns on Outlook-- Update
February 26 2016 - 6:40AM
Dow Jones News
(Rewrites, adds detail.)
By Simon Zekaria
LONDON--Pearson PLC (PSON.LN) on Friday recorded a jump in
full-year profit after earnings were boosted by the landmark sale
of its trophy publishing assets, even as the education products
specialist warned it faces a challenging outlook this year.
London-based Pearson said its 2015 net profit soared to 823
million pounds ($1.15 billion) from GBP471 million the prior year.
Last year, it sold the Financial Times newspaper and its
noncontrolling stake in the publisher of The Economist to fund its
growth across global education, which includes textbooks in Western
markets, digital learning programs and English-language
schools.
Operating profit adjusted for exceptional items rose to GBP723
million from GBP722 million, in line with company guidance.
Adjusted earnings per share increased to 70.3 pence from 66.7
pence.
At 1039 GMT, shares were up 5.5% to 846 pence, valuing the
company at GBP6.59 billion.
Still, Pearson's profit was also hit by impairment charges of
GBP849 million in North America and elsewhere because of difficult
market conditions.
Sales fell 2% year-over-year to GBP4.47 billion, hit by trading
impacts in U.S. higher education--where higher-education
enrollments are falling--U.K. education and South Africa.
Chief Executive John Fallon said the group is suffering from
cyclical conditions across U.S. educational markets and worsening
macro-economic pressures across key emerging market economies such
as Brazil and China.
"It has been a challenging time for Pearson," Mr. Fallon told
reporters.
Last month, Pearson launched fresh cost-savings worth half a
billion dollars and axed 10% of its workforce world-wide. It is
simplifying its structure by merging businesses and focusing on
fewer, bigger opportunities.
For 2016, before costs of its reorganization, it expects to
report adjusted operating profit between GBP580 million and GBP620
million and adjusted earnings per share between 50 pence and 55
pence.
Pearson expects to report adjusted operating profit of GBP800
million in 2018, based on a recovery of its business in the U.K.
and U.S.
Pearson, which makes two-thirds of its sales in North America,
has booked hundreds of millions of dollars in cost savings in
recent years to counter a slowdown in mature educational
markets.
It is boosting its push into emerging markets, such as Brazil
and China, where there is greater demand for learning services. In
those countries, a rising middle class population is investing
heavily in education, including private language schools.
"There are some big structural growth opportunities in
education," said Mr. Fallon, highlighting Pearson's confidence over
its prospects.
Pearson proposed a full-year dividend of 52 pence a share, up 2%
from a year earlier.
"If the restructuring goes to plan, and if Pearson's markets
show the improvement they expect, then investors can look forward
to a very high level of income in the medium term, with hopefully
longer term capital gains driven by an improved business
performance," said Hargreaves Lansdown analyst Steve Clayton.
"But there are a lot of bridges to cross on this journey."
News Corp, which owns Dow Jones & Co., publisher of The Wall
Street Journal, competes with Pearson's book publishing and
education divisions.
Write to Simon Zekaria at simon.zekaria@wsj.com
(END) Dow Jones Newswires
February 26, 2016 06:25 ET (11:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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