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Pearson learns its lesson

Pearson has completed its two-year restructuring programme as curriculum changes have weighed on growth
March 2, 2015

Pearson's (PSON) transformation from print publisher to digital content and services specialist may finally be paying off. Strip out currency effects and the sale of deal intelligence business Mergermarket, and the education specialist's operating profits rose 8 per cent to £720m.

1425p

That reflected constant-currency sales growth of 2 per cent, driven by rising sales of digital services and the £505m cash-and-debt acquisition of Brazilian school conglomerate Grupo Multi. Pearson also completed a two-year restructuring programme. Net restructuring costs were two-thirds lower, at £44m, and the group expects to realise £45m in cost savings this year.

Evidence of Pearson's transformation can be seen at the Financial Times. Circulation rose a tenth to almost 720,000 readers across print and online as digital subscriptions climbed more than a fifth. That combined with cost savings fuelled a 17 per cent increase in underlying operating profits at the group's professional division, to £106m.

On the other hand, underlying sales slid 7 per cent in Pearson's schools business. That was due to changes to school curricula in the US and UK and weaker textbook sales in South Africa. There were positives, though: over 4,600 schools are now members of Bug Club, its UK primary-school reading programme, while multimedia teaching solution DigiClass has now been installed in over 26,000 classrooms across India - up 10 per cent year on year.

Broker Numis expects pre-tax profit to rise 16 per cent to £762m this year, sending EPS up 19 per cent to 79.5p.

PEARSON (PSON)
ORD PRICE:1,425pMARKET VALUE:£11.7bn
TOUCH:1,424-1,426p12-MONTH HIGH:1,426pLOW: 981p
DIVIDEND YIELD:3.6%PE RATIO:48
NET ASSET VALUE:729p*NET DEBT:27%

Year to 31 DecTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20105.660.67161.938.7
2011 (restated)4.821.05119.642.0
2012 (restated)4.960.3938.745.0
20135.070.3836.448.0
20144.870.3130.051.0
% change-4-20-18+6

Ex-div: 6 Apr

Payment: 1 May

*Includes intangible assets of £6.3bn, or 769p a share