Pearson expects a flat year

Pearson (PSON) shares fell over 5 per cent on the morning the publishing giant announced these full-year results. That reflected a downbeat outlook statement and a 3 per cent dip in adjusted earnings per share last year - although management had flagged-up the bad news in a trading statement last month. Even before factoring in £150m of restructuring costs, new chief executive John Fallon expects profits to be flat this year.

Last year's statutory numbers are distorted by a number of one-offs, notably the group's decision to sell Penguin into a new joint venture with erstwhile rival Random House. The idea is that the combined operation would be better placed to fund the big push into digital publishing and emerging markets that management deems necessary.

Pearson as a whole is moving in the same direction. Mr Fallon is not minded to change the strategic shift towards the online and emerging worlds laid out by his predecessor Dame Marjorie Scardino – instead he wants to "accelerate" it. It’s not hard to see why. Including Penguin, sales for the group rose 4 per cent to £6.1bn but, without acquisitions, they would have fallen 1 per cent. Declining sales were offset by cost-cutting in the dominant North American Education division but, at a group level, like-for-like profits were still down 2 per cent.

Broker Numis Securities expects to downgrade its 2013 EPS forecast from 88p to bring it in line with the 2012 figure of 84p. The broker noted that "dividend yield provides some protection", but remains "very comfortable" with a hold recommendation.

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