Full year sales look set to remain unchanged year-on-year, as progress in core and growth markets offset weakness in US courseware. Operating profits are expected to scrape in at the bottom end of guidance at around £590m. These trends are expected to continue in 2020.
Pearson will begin a £350m share buyback shortly, using the proceeds of the Penguin Random House sale.
The shares fell 9.4% in early trading.
HL view to follow.
Third quarter trading update (26 September 2019)
Core markets saw revenue rise 5%, while Growth rose 4%. Areas of particular strength included the North American school business Connections (+6%), global Online Program Management (+10%), Professional Certification test centres (+10%) and Pearson Test of English (+17%).
However sales of US Higher Education Courseware fell 12%, as print revenues continued to decline. Pearson group also struggled with delivery issues following the adoption of a new Enterprise Resource Planning system. The digital: print split now stands at 63%:37%, with digital revenues growing modestly.
Pearson's simplification programme has delivered cost savings of £130m, with total annualised savings of £335m by the end of 2019. The group has agreed the sale of its remaining 25% stake in Penguin Random House for £530m.
Next year (2020), adjusted operating profits are expected to be between £500m and £580m, including the 25% stake in Penguin Random House. The 76% of total revenue that does not include US Higher Education Courseware is expected to sustain low single digit growth overall, while US Higher Education sales continue to struggle.
Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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