23rd Mar 2020 09:13
(Alliance News) - Pearson PLC said Monday it has paused its share buyback as it identified three trends in its current trading performance as a result of the Covid-19 outbreak.
To date, GBP167 million of the education group's GBP350 million share buyback programme has been completed.
The first trend identified by Pearson is uncertainty in the group's businesses that rely on learners and staff accessing physical sites. These businesses include Pearson VUE, the Pearson Test of English, US Student Assessments and higher institutions in South Africa, which is expected to hurt group profit.
This is particularly true in the US, where test cancellations in several states is expected to lower operating profit for 2020 by GBP15 million. Pearson said there is risk of other states cancelling tests, which could further hit profit.
For 2019, Pearson's operating profit was GBP275 million.
Should the crisis worsen, Pearson said the damage could extend to its English franchise business in Brazil.
However, the second and third trends were more positive, with a significant uplift in the use of Pearson's digital products and services and growing interest in its Global Online Learning units.
In particular, Connections Academy, Pearson's virtual school business, reported a strong increase in application volumes for the 2019/20 school year. The company expects the growing interest to translate into increased billings later in 2020, although the growth will depend on how long the disruption to face-to-face teaching and learning continues.
Looking ahead, Pearson said it has identified actions to reduce operating costs and spending to partially limit the damage from Covid-19 and is exploring further steps to take.
The group said its balance sheet is strong, with low levels of net debt and GBP1 billion in total liquidity from cash and its revolving credit facility.
"While we are experiencing unprecedented times as a result of Covid-19, we have a diversified business with a presence in multiple geographies, a strong balance sheet with relatively low net debt, and we are taking immediate measures to contain our costs and protect our financial position. In the longer term the growing interest in digital products and online learning mean Pearson is well-placed given the investment we have made in this space," the group stated.
Shares in Pearson were down 8.8% at 455.90 pence on Monday morning in London.
By Dayo Laniyan; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Pearson