Pearson Forecasts Difficult 2020 as U.S. Pressures Persist


(Bloomberg) --

Pearson Plc confirmed a tough outlook for 2020, with declines in U.S. higher education courseware sales expected to continue to offset growth in testing and professional qualifications.

  • Pearson projected for full-year 2020 adjusted operating profit of 410 million pounds ($528.5 million) to 490 million pounds million pounds, excluding the 25% stake in Penguin Random House, which it says accounts for about 65 million pounds of additional profit.
  • Combining both, the 2020 projection roughly compares to an assessment in January for adjusted operating profit to be between 475 million pounds and 555 million pounds, at December 2019 exchange rates.

Key Insights

  • Pearson expects to close the sale of the Penguin stake this year.
  • U.S. higher education courseware fell 12% last year, continuing a trend that has been a scourge for Pearson, prompting multiple profit warnings under outgoing Chief Executive Officer John Fallon and sending its shares to the lowest since 2003.
  • Pearson forecast sales outside of courseware to grow in the low single digits. Its business lines beyond traditional books, which comprise about 75% of its sales, include issuing professional certificates and administering tests.
  • Pearson said it faces a tax challenge in Brazil concerning deductions of goodwill amortization from 2013 to 2016, with potential exposure of 124 million pounds through the end of last year and 45 million pounds in future. Pearson said it believes the challenge won’t succeed, and its position is strong.

Market Reaction

  • Pearson’s shares fell 0.7% at 8:05 a.m. in London.
  • The company’s stock has declined 34% over the last 12 months, compared to a 4% gain in the FTSE 100 Index.

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