It is hard to deny that progress has been made at Pearson (PSON) in 2017. Debts are down, cash flows are up and profits came in at the upper end of guidance. The problem is that guidance was slashed this time last year, meaning numbers aren’t truly impressive when compared with 2016. And so, while it is easy to draw positive headlines out of these results, on an underlying basis Pearson is struggling just as much as ever.
Revenues were down across all three of the group’s locations – most notably a 4 per cent drop in the key US business where demand for university textbooks and school exam materials continues to wane. The tough environment isn’t likely to get any easier in 2018, and so broker Numis has forecast a further 8 per cent decline in revenues to £4.2bn in the current financial year.
Underlying operating profits took a 9 per cent hit due to the poor trading performance, increased amortisation expense and staff costs. And though this was partly offset by £150m of restructuring savings, the 2018 profit outlook is no cheerier: pre-tax profits and EPS are forecast at £495m and 51p, respectively (from £497m and 54p in 2017).
| PEARSON (PSON) | ||||
| ORD PRICE: | 702p | MARKET VALUE: | £5.49bn | |
| TOUCH: | 701-702p | 12-MONTH HIGH: | 773p | 563p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 513p* | NET DEBT: | 11% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 5.07 | 0.38 | 36.4 | 48 |
| 2014 | 4.54 | 0.26 | 24.7 | 51 |
| 2015 | 4.47 | -0.43 | -43.3 | 52 |
| 2016 | 4.55 | -2.56 | -287 | 52 |
| 2017 | 4.51 | 0.42 | 49.9 | 17 |
| % change | -1 | - | - | -67 |
| Ex-div: | 05 Apr | |||
| Payment: | 11 May | |||
| *Includes intangible assets of £3bn, or 379p a share | ||||
