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Pearson - US courseware a struggle, but some light elsewhere

Nicholas Hyett | 16 January 2020 | A A A
Pearson - US courseware a struggle, but some light elsewhere

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Pearson plc Ordinary 25p

Sell: 585.00 | Buy: 585.80 | Change 2.20 (0.38%)
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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.

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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.

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