Pearson Shares Plummet on Weak U.S. Education Sales
October 17 2016 - 7:40AM
Dow Jones News
LONDON—Shares in Pearson PLC tumbled on Monday after the
educational publisher said weaker-than-expected trading in the
higher-education sector in North America weighed down on nine-month
sales.
The U.S.-focused educational-products specialist, which has
undergone a prolonged bout of restructuring including
multibillion-dollar asset sales, said revenue fell 7% in the nine
months to end-September from the same period last year when
adjusted for changing exchange rates and mergers and
acquisitions.
The decline was just 3% when currency factors, notably the
dollar's strength against the British pound, were included, the
U.K.-based Pearson said.
Weaker sales reflected "expected" declines in revenue from
student-testing contracts in the U.S. and U.K., two of its most
important markets, Pearson said. The company also recorded declines
in North American higher-education courseware, reflecting a further
draw down of inventories by retailers in July and August.
Pearson said its Penguin Random House publishing business
performed better, partly from movie-tie-in sales for books such as
The Girl on the Train by Paula Hawkins in addition to best-selling
new work by authors Colson Whitehead and John Le Carré .
"Our markets have been challenging, but we are managing
discretionary costs tightly," Pearson said, with no plans to change
its earnings outlook for the full year or medium-term targets.
Investors were taken aback by the poor performance of Pearson's
North American business. The stock fell as much as 10% in morning
trading in London.
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 after acknowledging 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 even as
it has sought new sources of growth in countries like Brazil and
China.
Pearson expects to report adjusted operating profit, before
restructuring costs, of between £ 580 million pounds ($706 million)
and £ 620 million in 2016, and adjusted earnings a share of share
of between 50 pence and 55 pence. If current exchange rates persist
until the end of 2016, that would add 4.5 pence to earnings a
share, the company said.
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 £ 800 million in
adjusted operating profit by 2018.
News Corp, which owns Dow Jones & Co., publisher of The Wall
Street Journal, competes with Pearson's book publishing
operations.
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 07:25 ET (11:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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