10th Aug 2020 22:02
(Alliance News) - Moody's Investor Service on Monday downgraded the senior unsecured ratings of Pearson PLC to Baa3 from Baa2.
Moody's kept the publishing firm's outlook at Stable.
"Pearson has struggled to see any significant organic revenue growth since 2011 and its scale and scope of activities has also narrowed down over the years driven by several non-core asset disposals," Moody's said.
The company's operating performance is "likely to deteriorate more significantly" in 2020 than Moody's had forecasted at the time of changing the outlook on the company's ratings to negative in March.
At the beginning of the year, and before the spread of coronavirus globally, Moody's had expected Pearson's reported adjusted profit to reduce to between GBP410 to GBP490 million in 2020 compared with GBP581 million in 2019, due to continued structural challenges in the US higher education courseware business and the sale of its 25% stake in Penguin Random House.
Moody's now expects a steeper decline in Pearson's revenues in 2020 by around 13% to 15% and expects its reported adjusted operating profit to shrink to around GBP300 to GBP330 million, due to temporary business disruptions caused by the coronavirus outbreak.
"While recovery in operating performance is likely from 2021, a considerable degree of uncertainty still remains around the business outlook. In Moody's opinion, Pearson's business risk profile has weakened over the years and has become more commensurate with a Baa3 rating" says Gunjan Dixit, a Moody's Vice President Senior Credit Officer and lead analyst on Pearson.
Shares in Pearson closed 3.2% higher in London on Monday at 608.80 pence each.
By Paul McGowan; [email protected]
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