Pearson slumps on trading update, CFO departure
Pearson shares slumped on Thursday after the education publisher said full-year adjusted operating profit was set to come in at the bottom end of its guidance range and announced the departure of its chief financial officer.
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In a trading update for 2019 ahead of its results in February, the company said it expects flat underlying revenue and adjusted operating profit of around £590m as weaker sales in US Higher Education Courseware were offset by a strong performance elsewhere. Pearson had guided to profit of between £590m and £640m.
It also announced that CFO Coram Williams would be leaving to take on "a comparable role" at a company based in Continental Europe. Williams will be succeeded by deputy CFO Sally Johnson.
He will step down from his position and from the board later this year, allowing sufficient time to ensure a "smooth and orderly" transition, the company said.
Pearson said underlying revenue in North America was down 3% due to a weaker performance from US Higher Education Courseware, which saw revenue fall 12%. This was partially offset by strong growth in Connection, OPM and VUE. The US higher education courseware segment makes up about 24% of group revenue.
Chief executive John Fallon: "We have secured flat revenue this year and delivered operating profit within the guidance range, with much weaker sales in US Higher Education Courseware offset by a strong performance in the broader 76% of Pearson.
"Pearson is now a simpler, more efficient company, with strong financial foundations. This enables us to continue to invest in digital innovation and platform-based products."
In 2020, the company expects to deliver adjusted operating profit of between £500m and £580m including the 25% stake in Penguin Random House. It said the trends seen in 2019 in US Higher Education Courseware are set to continue, with heavy declines in print partially offset by modest growth in digital.
At 0930 GMT, the shares were down 10.5% at 553.40p.
Russ Mould, investment director at AJ Bell,said: "Fundamentally US students are not buying as many expensive academic textbooks, instead using eBooks and online journals. And Pearson’s own digital business isn’t growing fast enough to make up the shortfall.
"Things don’t look likely to get any better here this year based on the company’s outlook comments. Cost cutting helped to mitigate the impact on profit in 2019 and the company may find it difficult to repeat that trick this year.
"The separately announced news that chief financial officer Coram Williams is joining current CEO John Fallon in leaving the business in 2020 is something of a double-edged sword.
"While a fresh approach to running the business might be welcome, it could also result in a loss of momentum in the transformation of the group."