For those clinging to the hope that embattled education group Pearson (PSON) has the potential to make a recovery, today’s trading update provides a nice headline: 2017 earnings are ahead of expectations. However, realistic investors were not fooled that this financial performance is any reflection of an improvement in Pearson’s operations. Rather, the earnings beat has been caused by a better-than-expected tax rate. On an underlying basis, the company is struggling just as much as ever.
Like-for-like revenue fell 2 per cent in the year to December 2017, dragged down by sluggishness in the key US division. The outlook is no better. Having sold three of its better-quality businesses (Global Education, Wall Street English and a half of its stake in Penguin Random House), it’s no real surprise that 2018 operating profit is expected to be below those recorded last year, and even on a like-for-like basis growth forecasts are poor. Management claims that the digital overhaul is under way, but tangible evidence of this bearing fruit remains elusive.
