Pearson expects education demand to hedge against economic headwinds
Pearson said he expected demand for his courses and textbooks to outweigh headwinds in the global economy as a digital shift in the FTSE 100 group showed signs of wearing his fruit, pushing its shares up 7%.
The group said on Monday it expects its full-year margins to hit a mid-teens target next year, two years ahead of schedule, due to cuts in costs and strong demand for his courses as Covid restrictions ease.
Chief Executive Andy Bird, a former Disney executive who took over in 2020, shifted Pearson’s focus from a traditional textbook publisher to a consumer-focused digital brand offering learning opportunities beyond school and university, such as retraining programs for adults.
He said the shift to online adult education and employee training would shield the group from the worst of an economic downturn, as services are “non-discretionary expenses”.
“We are in the business of learning for life, which makes us a resilient and diverse group,” he said.
Pearson shares were up 7% at 806p at the start of trading in London, although this is still below the 870p per share – or £7bn – offer from private equity group Apollo that the board board rejected in March.
Bird’s comments came as Pearson reported revenue of £1.8bn for the six months to June 30, up from £1.6bn a year earlier. Pre-tax profit of £148 million was significantly higher than the £9 million recorded in the same half last year due to asset disposals and lower restructuring costs. On an underlying basis, pre-tax profit rose 22% year-on-year to £160m.
Sally Johnson, chief financial officer, said Pearson had benefited from the reopening of international borders, leading to increased demand for its English classes.
“Covid is something that is behind us and we are in a new normal,” Johnson said. “We are resilient in a recessionary environment.”
Pearson, which employs 21,000 people globally, said it had identified £100m of cost savings to take effect next year, which included “streamlined portfolio, products and content, new reductions in business properties and other operating productivities”.
First-half figures were supported by strong performance from Pearson’s assessment and qualification division, with underlying sales up 16%, with its English-language unit up 22%. However, underlying sales for Pearson’s higher education unit fell 4% year-on-year.
Under former chief executive John Fallon, Pearson sold stakes in The Economist, Financial Times and Penguin Random House and issued seven profit warnings in as many years as it struggled to adjust to the US online education market.