26th Sep 2019 09:01
(Alliance News) - Shares in Pearson PLC opened sharply lower on Thursday after the educational publisher warned that annual adjusted operating profit would be at the lower end of its guidance range due to weaker-than-expected trading in its US Higher Education Courseware business in key selling season.
Pearson shares were down 16% at 719.80 pence each in morning trade, the worst performer in the FTSE 100 index of London large-caps.
Pearson said it anticipates 2019 revenue to stabilise, but adjusted operating profit to be at the bottom of its guidance range of GBP590 million to GBP640 million. Adjusted earnings per share also is predicted to be at the bottom of the guidance range of 57.5p to 63.0p.
In 2018, adjusted operating profit totalled GBP546 million, while adjusted earnings per share was 70.3p.
Pearson said revenue from US Higher Education Courseware is down by around 10% in the first nine months of 2019, mainly due to significant acceleration of print attrition in the key trading season, with students returning to school turning away from print products more rapidly than anticipated. It also blamed lower college enrolments and use of open educational resources.
The company now predicts revenue from the business will decline by between 8% to 12% for 2019, weaker than original guidance for a 0% to 5% reduction. The US Higher Education Courseware business contributes about 25% of Pearson's total annual revenue.
Pearson, which formerly owned the Financial Times newspaper, said that the weaker trading in US Higher Education Courseware business will be offset by good underlying growth in the rest of the business - such as Online Program Management, Connections Academy and Professional Certification within its North America division - and by temporary additional cost savings, expected to total over GBP330 million.
"The third-quarter has been significantly weaker than we expected in US Higher Education Courseware. Whilst difficult in the short term this places more importance on our work to remake this part of Pearson and we are exploring new ways of deploying our new technology platform so that we can offer students highly affordable, convenient, adaptive, digital courseware. We still expect revenue across Pearson as a whole to stabilise this year, with encouraging growth in many parts of the company," said Pearson Chief Executive Officer John Fallon.
In July, Fallon said the company saw a good first half, with underlying growth across all divisions, and is seeing benefits from shift to digital publications. The company remains on track to at least stabilise revenue in 2019 and return the company to top line growth from 2020.
Pearson on Thursday also made several divisional management changes as part of its ongoing restructuring programme.
The company said Tim Bozik will lead its North America Higher Education Courseware business, in addition to his current Global Product responsibilities. Kevin Capitani, president of the North America business, will be leaving early in 2020, it added.
By Tapan Panchal; [email protected]
Copyright 2019 Alliance News Limited. All Rights Reserved.
Related Shares:
Pearson