Pearson Full-Year Profit Forecast Raised After Move to Digital, Rental Products

Pearson (PSO), a UK-based education company whose most important market is North America, narrowed its profit forecast for 2017 to the upper half of its previous range as trading in the first nine months improved after a shift to digital and rental offerings.

The company now expects 2017 adjusted operating profit of between 576 million pounds ($763 million) and 606 million pounds, rather than in the previous range of 546 million pounds to 606 million pounds, it said on its website on Tuesday.

Adjusted earnings per share are projected to be between 51 pence and 54 pence, up from the previous estimate of 45.5 pence to 52.5 pence, the company said, citing the relative strength of trading at its US higher education courseware business, while noting that it expects pressures to persist in this business in the medium term.

While sales fell 2% on an underlying basis primarily due to expected declines in North America in school assessment, school and higher education courseware, the company said the result was in line with its expectations and was consistent with the higher end of its profit forecast. Sales in US higher education courseware dropped 1% on an underlying basis, towards the upper half of its projected range of between a 1% increase and 7% decline.

“We expect tough market conditions in our biggest business to continue over the next couple of years,” John Fallon, chief executive of Pearson, said. “We continue to invest in growing market opportunities, gaining share with our digital transformation, and becoming simpler and more efficient.” The company also said it will begin a 300 million pound share buyback soon.

The company has been cutting jobs and selling non-core assets, such as a 22% stake in Penguin Random House to Bertelsmann, earlier this month.

The shift to digital offering is beginning to help the business, with an 11% revenue jump in US higher education digital courseware registered over the nine month period and institution-wide direct digital access contracts nearly doubling to 477 in total.

The company also had success with reducing the rental price of 2,000 eBooks, which helped push up eBook revenue more than 20% in the first nine months of the year.

Leave a Comment