Pearson Shares Dive on Profit Warning -- Update
January 18 2017 - 4:00AM
Dow Jones News
By Ian Walker
LONDON--Shares in Pearson PLC plunged more than 20% on Wednesday
after the world's largest education company issued a profit warning
for 2018, warned of lower future dividends and said it plans to
sell its stake in its Penguin Random House publishing joint
venture.
Pearson blamed further declines in the North American higher
education courseware business for the warning, but said it still
expects its 2016 operating profit to be in line with its previous
guidance.
It plans to sell its 47% stake in Penguin Random House to
bolster its finances and invest in other parts of its business. Its
joint-venture partner, German media company Bertelsmann SE, said it
was open to raising its stake in the publishing house "provided the
financial terms are fair."
The publishing house was formed in 2013 when the two companies
combined their book-publishing businesses.
Pearson's share price has almost halved in the past three years
and the company has laid off thousands of employees amid trading
pressures in key markets. It has sold several assets during the
period, including the Financial Times newspaper and its 50%
non-controlling stake in the publisher of the Economist magazine,
to fund its growth across global education, raising billions of
dollars.
Wednesday's stake sale will form part of broader plan by Pearson
to reshape its portfolio while it accelerates its digital
transition into higher education.
It reported an 8% fall in revenue in 2016 in underlying terms,
which strip out one-off items. It expects to report an adjusted
operating profit of GBP630 million ($777.1 million) in 2016.
The company added that it plans to recommend a final dividend of
34 pence for 2016, making a total payout for the year of 52 pence.
However, it said that from 2017 it intends to rebase its dividend
to reflect portfolio changes, increased investment, and earnings
guidance.
Ulrike Dauer in Frankfurt contributed to this article.
Write to Ian Walker at ian.walker@wsj.com
(END) Dow Jones Newswires
January 18, 2017 03:45 ET (08:45 GMT)
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