Pearson first half pre-tax losses widen; restructuring on track

Educational publisher Pearson has reported a widening in first half pre-tax losses to £306m from £132m, reflecting lower operating profits and £171m in restructuring charges.

Sales decreased by £131m in headline terms to £1.86bn primarily due to the expected weakness in assessment revenues in the US and UK, which are weighted towards the first half of the year and the phasing of both gross sales and returns in North American Higher Education courseware.

Total adjusted operating profit from continuing operations fell £39m to £15m reflecting revenue declines, incentive compensation accruals and dual IT running costs, partly offset by initial savings from Pearson's simplification programme and phasing of integration benefits at Penguin Random House.

Currency movements, primarily from the depreciation of sterling against the US dollar during the period, increased sales by £86m and operating profits by £5m.

Pearson said its 2016 outlook was unchanged and it continue to expect to report adjusted operating profit before restructuring costs of between £580m and £620m.

“This reflects the impact of: the in-year benefits from restructuring offset by the loss of operating profit from disposals made in 2015, ongoing challenging conditions in our largest markets, the reinstatement of the employee incentive pool and other operational factors (including dual running costs as we rationalise our technology infrastructure, cost inflation and increased pre-publication amortisation relating to new product launches),” Pearson said.

The company said it expected adjusted earnings per share to be between 50p - 55p, after a normalised interest charge of approximately £60m and a tax rate of approximately 19%.

“This guidance is based on our current portfolio of businesses and exchange rates on 31 December 2015. If current exchange rates persist until the end of 2016 the earnings per share guidance range will increase by approximately 4p,” the company said.