Pearson Shares Tumble after Sales Slump -- Update
October 17 2016 - 5:46AM
Dow Jones News
(Rewrites, adds detail.)
By Simon Zekaria and Razak Musah Baba
LONDON--Shares in Pearson PLC (PSON.LN) tumbled on Monday after
its sales dropped on weaker-than-expected trading across
higher-education in North America.
The U.S.-focused educational-products specialist, which has
faced a prolonged bout of restructuring amid multibillion-dollar
asset disposals, said sales adjusted for currency changes, as well
as merger and acquisition activity, in the first nine months fell
7% year-over-year reflecting "expected" declines in revenue from
student-testing contracts in the U.S. and U.K., two of its key
Western markets.
It also recorded declines in North American higher-
education-courseware, reflecting a further draw down of inventories
by retailers in July and August.
The strength of the U.S. dollar verses the sterling helped limit
the decline in total sales to 3%. The decline was steeper at 10% at
constant exchange rates.
At 1032 GMT, Pearson shares were down 9.5% at 754 pence.
Analysts said the sales slump was wider than expected. In recent
trading, its stock has been boosted by improved sentiment following
the pound's weakness.
Still, Pearson said trends are improving and it reaffirmed its
2016 targets and 2018 goals.
"Our competitive performance is good," it said in a statement."
Our markets have been challenging but we are managing discretionary
costs tightly."
The company expects to report adjusted operating profit, before
restructuring costs, of between 580 million pounds ($706 million)
and GBP620 million in 2016, and adjusted earnings per share of
share of between 50 pence and 55 pence.
It also said if current exchange rates persist until the end of
2016 the earnings per share guidance range will increase by
approximately 4.5 pence.
U.K.-headquartered Pearson, which used to own the Financial
Times newspaper--once its flagship publishing asset--and a stake in
the publisher of the Economist magazine, expects to report at least
GBP800 million in operating profit by 2018.
At the start of the year, the company launched cost-savings
worth half a billion dollars and released plans to ax 4,000 staff,
or 10% of its workforce world-wide.
At the time, it said it had underestimated the impact of trading
pressures across its key markets. Rapid growth in employment and
increasing education regulation in the U.S. has roiled
higher-education enrollments in the company, which has put pressure
on Pearson's business.
To counter a slowdown in mature educational markets, it has
pushed into emerging economies, such as Brazil and China, where
there is greater demand for learning services.
The company plans to simplify its structure by merging
businesses and focus on fewer, bigger opportunities. This year, the
costs of its reorganization are forecast to hit GBP320 million, as
it books savings of about GBP350 million across this year and
next.
News Corp, which owns Dow Jones & Co., publisher of The Wall
Street Journal, competes with Pearson's book publishing,
business-news and education divisions.
Write to Simon Zekaria at simon.zekaria@wsj.com and Razak Musah
Baba at razak.baba@wsj.com
(END) Dow Jones Newswires
October 17, 2016 05:31 ET (09:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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