Tough markets see Pearson revenue, earnings down

Sales at publisher Pearson declined 2% in underlying terms during the 2015 calendar year to £4.47bn, according to its preliminary results on Friday.

The company cited good growth in Pearson VUE, Connections and Wall Street English in China, but that was more than offset by declines in the US Higher Education, UK Qualifications and South Africa sectors.

Pearson made an adjusted operating profit - also down 2% in underlying terms - though adjusted earnings per share grew 5% to 70.3p, reflecting lower interest and a lower tax rate of 15.5%.

Operating cash flow decreased significantly, by 33%, with Pearson's board blaming challenging trading, disposals and increased US higher education textbook returns, partially offset by an increased dividend payment from Penguin Random House.

"Our competitive performance during the last three years has been strong, but the challenges in our biggest markets have persisted for longer than anticipated," said Pearson chief executive John Fallon.

He said Pearson was now implementing the plans it announced in January to integrate its business, reduce its cost base and focus on fewer, bigger growth opportunities.

"Education is a sector with large growth opportunities for Pearson, and we are committed to helping millions of learners to progress in their careers and lives," Fallon added.

On a statutory basis, Pearson made profit of £823m, which it said was affected by two significant items - pre-tax gains on the disposal of the Financial Times, the Economist Group and PowerSchool of £1.21bn; and an impairment of goodwill and intangibles of £849m, primarily reflecting challenging market conditions in the Growth and North American divisions.

The company had announced in January that it would further simplify its business, and confirmed on Friday that it would complete the majority of those actions by mid-year, incurring implementation costs of £320m in 2016.

It expected to generate annualised savings of £350m, with around £250m of the savings in 2016 and a further £100m in 2017.

The board said it expected to report adjusted operating profit of between £580m and £620m, and earnings per share of between 50p and 55p for 2016, with the in-year benefits from restructuring offset by the loss of operating profit from disposals made in 2015, as well as ongoing market challenges, the reinstatement of the employee incentive pool and other operational factors.

Operational profit for 2016 after restructuring charges was expected to be in toe £260m-£300m range.

Pearson said that, with the full benefits of the restructure, the launch of new products, and stability returning to US college enrolments and the UK education market by the end of 2017, the company expected adjusted operating profit to be at or above £800m in 2018.

The firm's board proposed a final dividend level with last year, at 34p, taking total dividends for the year to 52p.