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4th
May
2018
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Pearson,
the world's learning company, is today providing an update on Q1
trading.
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Highlights
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Operating performance on track
Total underlying
revenues are up 1%, with growth in North America and Core partially
offset by a decline in our Growth segment due to the phasing of
sales in our South African school courseware business.
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US higher education courseware revenues grew
slightly as lower gross sales were offset by lower returns from the
channel. The underlying market pressures in this business continue
to impact gross sales as expected. Our guidance for 2018 therefore
remains unchanged: we expect net sales in US higher education
courseware to be flat to down mid-single digit
percent.
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The cost efficiency programme that we
presented in August 2017 is on track to deliver
£300m1 of annualised cost savings by 2020, with
cumulative savings by the end of 2018 of
£95m.
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Net debt at the end of the first
quarter was down significantly year on year at £0.6bn (2017:
£1.1bn). Net debt was higher than December
31st 2017 following the typical seasonal pattern of
cash outflow and the completion of our share buyback, partially
offset by proceeds received from the disposal of Wall Street
English. We continue to expect year end net debt to be in line with
2017.
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We maintain our guidance range for
2018 with operating profit of £520m to £560m, adjusted
earnings per share of 49p to 53p and cash conversion in excess of
90%. This is based on our portfolio at 31st December 2017, a net interest charge of
£45m, a tax rate of approximately 20%, and exchange rates on
31 December 2017.
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Q1 is our smallest quarter. Pearson's sales
and operating profit are always weighted towards the second half of
the calendar year.
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Our US K-12 courseware business remains
classified as held-for-sale with negotiations on the disposal
progressing.
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John Fallon, Chief Executive said:
"We
have made a good start to 2018, performing in line with our
expectations. We continue to make good progress against our
strategic priorities including our digital transformation and we
expect to grow underlying profit in 2018."
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Financial summary
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Underlying
growth
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Sales
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North
America
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3%
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Core
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6%
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Growth
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(12)%
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Total
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1%
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Notes
Throughout
this announcement: growth rates are stated on an underlying basis
unless otherwise stated. Underlying growth rates exclude both
currency movements, portfolio changes and the impact of adopting
IFRS 15 in 2018. The latter impact is not material.
1 Based on December 2016 exchange rates. A significant part
of costs and savings from the restructuring programme are US Dollar
denominated and in other non-Sterling currencies and are therefore
subject to exchange rate movements over the implementation
timeframe.
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Q1 Trading
In North
America, revenues grew 3% in
underlying terms with slight growth in US higher education
courseware, due to lower returns from the channel, and good growth
in Online Program Management (OPM), student assessment,
Professional Certification and Connections Virtual Schools,
partially offset by expected declines in Learning Studio, a
learning management system that is being
retired.
In our Core
segment (which
includes the UK, Australia and Italy), revenues grew 6% in
underlying terms, partly helped by phasing, but with good growth in
Pearson Test of English and in OPM, where we have recently
announced an additional partnership with the University of
Sussex to launch a programme of postgraduate online degrees from
September 2018.
In our Growth segment (which includes Brazil, China, India and
South Africa) revenues were down 12% as good growth in China and in
our Wizard English language schools in Brazil were offset by a
decline in South Africa school courseware, against the prior year
Q1, which benefited from an unusually large order. Excluding South
African school courseware, our Growth segment revenues rose 1% in
underlying terms in the first quarter.
At Penguin
Random House, trading is in
line with our expectations.
We will hold a conference call at 8.30am today Friday, 4th May to
discuss our first quarter results. A replay will be available soon
after on our website www.pearson.com. Our AGM will begin today at
12 noon at IET London, 2 Savoy Place, London WC2R 0BL.
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Investor Relations
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Jo
Russell, Tom Waldron, Anjali Kotak
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+44
(0) 207 010 2310
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Media
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Tom
Steiner
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+44
(0) 207 010 2310
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Webcast details
URL for international dial in numbers
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Analyst
and investor conference call details:United Kingdom Toll-Free:
08003589473
United
Kingdom Toll: +44 3333000804
PIN:
11854697#
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
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Forward looking statements: Except for the historical
information contained herein, the matters discussed in this
statement include forward-looking statements. In particular, all
statements that express forecasts, expectations and projections
with respect to future matters, including trends in results of
operations, margins, growth rates, overall market trends, the
impact of interest or exchange rates, the availability of
financing, anticipated cost savings and synergies and the execution
of Pearson's strategy, are forward-looking statements. By their
nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that will
occur in future. They are based on numerous assumptions regarding
Pearson's present and future business strategies and the
environment in which it will operate in the future. There are a
number of factors which could cause actual results and developments
to differ materially from those expressed or implied by these
forward-looking statements, including a number of factors outside
Pearson's control. These include international, national and local
conditions, as well as competition. They also include other risks
detailed from time to time in Pearson's publicly-filed documents
and you are advised to read, in particular, the risk factors set
out in Pearson's latest annual report and accounts, which can be
found on its website (www.pearson.com/corporate/investors.html).
Any forward-looking statements speak only as of the date they are
made, and Pearson gives no undertaking to update forward-looking
statements to reflect any changes in its expectations with regard
thereto or any changes to events, conditions or circumstances on
which any such statement is based. Readers are cautioned not to
place undue reliance on such forward-looking
statements.
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PEARSON
plc
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Date: 04
May 2018
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By: /s/
NATALIE WHITE
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------------------------------------
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Natalie
White
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Deputy
Company Secretary
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