Pearson Falls After Hot U.S. Job Market Hits College Enrollment
Pearson Sees ‘Promising Start’ as Students Go Back to School
(Bloomberg) -- Pearson Plc shares fell the most in more than 18 months as more people looked for U.S. job opportunities instead of signing up for community colleges that rely on the company’s education materials.
Higher-education sales fell 7% in the nine months through September, Pearson said in a statement Friday. That suggested a “big drop” in the third quarter, the start of the academic year, given the division had grown slightly in the first half, said Conor O’Shea, an analyst at Kepler Cheuvreux, in a research note.
Community college enrollments were hit by a strong labor market and a surge in Covid-19 infections in the key period for returning to class, the company said.
The shares dropped as much as 10.7%, the biggest drop since March 2020.
The selloff highlights the challenges Pearson faces in transforming itself from traditional publisher of textbooks and news to digital education provider. The turmoil led to a swoop by activist investor Cevian Capital AG, which took a stake in the company last year.
Shareholders have generally warmed to Chief Executive Officer Andy Bird’s plans to streamline operations, and the stock had risen 35% over the past 12 months to Thursday’s close.
Read more: Analysts flag Pearson courseware weakness
A central part of the former Walt Disney Co. executive’s strategy is the direct-to-consumer platform Pearson+. Bird, who took the top job at the London-based company a year ago, is betting the app can help recapture sales lost to the second-hand book market and unlock future demand from students using it to gain further qualifications after they graduate.
He said Friday the 2 million registrations for Pearson+ since it launched in July is “a promising start.” Continuing Covid uncertainty also meant the company’s virtual school product saw “slight growth” in enrollment for the 2021/22 academic year.
Pearson reiterated its March guidance for full-year adjusted operating profit of around 377 million pounds ($516 million).
It’s nevertheless pressing on with change. It said it was now selling the majority of its division that sells local-language textbooks abroad, after it announced a strategic review in March. The unit generates about 300 million pounds in revenue with “low teens” profit margins, Chief Financial Officer Sally Johnson said in an interview.
Read More: Pearson CFO discusses plans to sell textbook publishing unit
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