Education group Pearson lifts profit outlook

·3 min read
FILE PHOTO: FILE PHOTO: The company logo is displayed outside the Pearson offices in London

By Kate Holton

LONDON (Reuters) - Global education group Pearson raised its full-year profit forecast on Wednesday in a boost to management efforts to restructure the business and expand into areas including workforce training, qualifications and assessment.

The British company has endured a turbulent pandemic, lifted by online learning demand and stymied in October when a surge of the Omicron variant and a tight U.S. labour market deterred students from enrolling at community colleges.

Under the leadership of former Disney executive Andy Bird it has sought to broaden its approach beyond traditional education outlets, selling directly to consumers via its Pearson+ app and to businesses looking to train staff.

In such a tight labour market where workers are reassessing their priorities, Bird said companies were looking to offer training as a way to remain competitive. A rapid shift to digital operations has also forced many workers to learn new skills.

He added that he believed virtual learning was here to stay.

"2021 was a pivotal year for Pearson where we really positioned ourselves to ensure we capture the global growth of lifelong learning by investing behind our digital strategy and delivering products and services direct to consumer," he told reporters.

Pearson said full-year adjusted operating profit was now forecast to come in at 385 million pounds, with organic revenue growth of 8%, compared with expectations of 375 million pounds ($510 million) and 6.7% growth.

That lifted its shares by 6%, although they remain below levels in October when the company revealed the impact COVID-19 had had on enrolments at U.S. community colleges.

That pressure meant revenues at the U.S. Higher Education Courseware division, often the source of Pearson profit downgrades in the past, were down 9% at the nine-month mark, compared with a 2% fall in the first half of the year.

On Wednesday, it said the full-year figure would be down 6%. Bird said it had benefited from students buying textbooks as they returned to campus, and he also noted that community colleges have enrollment windows in January, meaning the October disappointment may be reversed this year.

Pearson said it had enjoyed a strong final quarter in general, with its Assessment & Qualification division sales up 18% for the year. That unit is worth more than half of group profits.

Its new Pearson+ app, at the heart of the new consumer-focused strategy, has 2.75 million registered users, and 133,000 paid subscriptions. It said many had come from its existing online services, meaning it had not paid lots to acquire users.

Analysts at Citi, with a "Buy" rating on the stock, said the improvement in trading had come across the business.

"The overall impact on consensus earnings is likely to be fairly small (c. 2%-3%) but the impact on the multiple may be more significant, especially given cautious positioning into results," they said. "We think the update will be well received."

($1 = 0.7352 pounds)

(Reporting by Kate Holton; editing by James Davey, Carmel Crimmins and Jane Merriman)

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