Pearson expects profit recovery in 2018 as tough markets persist

Educational publisher suffering as fewer young people attend college in US

Penguin books are seen in a used bookshop in central London. Pearson owns Penguin Random House. Photograph: Reuters

Penguin books are seen in a used bookshop in central London. Pearson owns Penguin Random House. Photograph: Reuters

 

Pearson, the British education company struggling to adapt to tough conditions in markets from the US to China, said declining sales would stabilise this year before starting to grow again in 2017.

The company, which has suffered after more young people in the US took jobs rather than enrolling in college, posted a 2 per cent drop in operating profit to £723 million (€918m) for 2015.

Sales of £4.47 billion were also down 2 per cent, although they met analysts’ expectations which had been downgraded in October after the company warned on profit.

“The cyclical and policy challenges we face in our major markets are persisting for longer than we expected,” chief executive John Fallon said on Friday.

He said sales would start to stabilise by the end of this year and then “start to provide a modest tailwind”.

Shares

Shares in the group, down 43 per cent in the last 12 months, were trading up 5.5 per cent at 845.5 pence on Friday.

Pearson, which owns Penguin Random House, said last month it would cut 4,000 jobs - 10 per cent of its workforce-- and restructure once again to tackle pressures hitting markets from North America to South Africa after deciding to focus on educational publishing.

The company last year sold the Financial Times and its stake in The Economist to concentrate on education.

It said the poor performance in emerging markets would be addressed by the restructuring it announced last month.

Pearson said it expected adjusted operating profit to fall again this year, to between £580 and £620 million, but added the restructured group should deliver profit at or above £800 million in 2018.

Reuters