31st Jul 2023 14:50
(Alliance News) - Pearson PLC delivered an impressive performance and surpassed market expectations in its first six months, offering some support to its shares which have struggled so far in 2023.
Shares in the educational and professional publishing firm were up 0.9% at 877.60 pence in London on Monday afternoon, but are down 6.6% in the year-to-date.
Pearson said pretax profit in the half year ended June 30 was up 24% to GBP236 million from GBP185 million the year prior, while sales increased 5.0% to GBP1.88 billion from GBP1.79 billion. Pearson said this reflected a strong underlying performance, portfolio changes and currency movements.
"We have continued to execute well operationally and maintained a sharp focus on delivering efficiencies whilst positioning our portfolio for long-term growth," said Chief Executive Andy Bird.
UBS rates Pearson at 'buy' with a 970p target price.
UBS analysts Adam Berlin, Richard Eary and Yulia Kazakovtseva said the sales boost was 5% above market expectations of GBP1.79 billion, "mainly due to better organic growth and higher OPM reported revenues than expected." They said revenue surpassed consensus in several of Pearson's businesses: for instance, English grew 44% instead of the expected 35% while Higher Ed fell 2% rather than declining 4%.
"We were particularly impressed by Pearson Vue (up 12%), and the improvements in US Higher Ed which benefited from reorganisation of the sales force," UBS added.
Earnings before interest and tax meanwhile reached GBP250 million for the period, 12% above the GBP223 million consensus.
Pearson said it was confident it would achieve its 2023 targets, and that its full-year adjusted operating profit and profit margin outlooks were in line with expectations. It also said it remained on track to achieve GBP120 million of cost efficiencies in 2023, having delivered a little under half in the first half of this year.
Bird commented: "The progress we are making to accelerate our digital journey, increase interconnectivity and leverage our long-standing AI capabilities will enable us to serve an ever-greater number of individuals and enterprises with our trusted, proprietary learning content."
Hargreeves Lansdown analyst Steve Clayton said Pearson "continues to recover" and that its margins were already "boosted by ongoing cost efficiency programmes."
Clayton also remarked that Bird "is confident of hitting full year expectations and, as so many chief executives seem keen to say these days, stressed the group's existing strengths in deploying AI to drive the business forwards".
Meanwhile Victoria Scholar, head of investment at Interactive Investor, said: "Pearson has been repositioning itself towards digital education services...It has also been focusing on upskilling and reskilling demand which have all helped to boost profitability.
"Shares in Pearson are trading higher today, buoyed by the stronger top and bottom-line performance. However after a blockbuster share price performance last year, enthusiasm has been fading, with shares in the red year-to-date. It has suffered some price target cuts lately including from JP Morgan, Deutsche Bank and Barclays in July."
By Emma Curzon, Alliance News reporter
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