Pearson holds dividend as it plans to target consumers directly

Educational publisher Pearson maintained its dividend as it delivered lower annual profits offset by a rise in online learning, reflecting school closures during the Covid-19 pandemic, and said it would refocus the business towards a direct-to-consumer model.

The company on Monday said adjusted operating profit fell to £313m from £581m, in line with expectations. A final unchanged dividend of 13.5p a share was declared.

New chief executive Andy Bird said it Pearson would target demand-led opportunities to provide digital learning tools, a workforce skills gaps and demand for accreditation and certification with the group reorganising into five divisions.

Sales decreased 12% to £3.4bn, reflecting underlying performance, portfolio changes and currency movements, Pearson added.

It also announced plans to reduce its property portfolio, saying its offices would occupy a “significantly” smaller square footage, resulting in a one-off cost of £140m but leading to cost savings of around £20m a year.

Looking forward, adjusted operating profit was expected to be in line with current market expectations, with year-on-year revenue growth.

"Enrolments for the 21/22 academic year expected to be broadly flat, with the 'covid cohort' partially returning to bricks and mortar schools, offset by underlying growth, and waiting lists. Online Program Management is also expected to grow."

It also warned revenue phasing would be impacted by current conditions, with first quarter sales behind a challenging 2020 comparative. Growth was expected in the second and quarter, assuming further pandemic recovery, with the delivery of pent-up testing demand in the second half of 2020 "providing a tougher comparative".

AJ Bell investment director Russ Mould said the move to cut the property portfolio as more people worked from home "could well send a chill through the office property space".

“Pearson’s central problem has been the structural decline of the academic textbook market. Previously the sale of these expensive tomes was extremely lucrative for Pearson, but now much more learning is taking place online," he added, noting that its "indifferent performance" had seen the company become one of the more heavily shorted firms on the UK market.

“Pearson is working hard to become a beneficiary rather than a victim of the shift towards a more digital education sector – which like many trends has been accelerated by the pandemic. It has already invested heavily in this area which is a good start."