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Pearson hit by school closures

The publisher swung to an adjusted operating loss of £23m during the first half of the year
July 24, 2020

Pearson’s (PSON) underlying revenues plunged by almost a fifth during the first half of the year, as the group grappled with the shuttering of schools and test centres during lockdown. 

IC TIP: Hold at 526p

Global assessment, the group’s largest segment, suffered a slide in sales of almost a quarter as Pearson VUE test centres shut in March. North American courseware sales dropped 14 per cent, as the long-running decline in demand for print products was compounded by the closure of campus-based bookstores. The international division saw its adjusted operating profit drop by almost two-thirds.

Perhaps the only bright spot was the global online learning segment, which grew 5 per cent. In virtual schools, applications jumped 61 per cent compared to the same period in 2019, as more students considered the possibility of full-time digital learning. Pearson said that it expects a portion of those applications to translate into increased enrolments for the upcoming academic year. 

The group managed to reduce its net debt to £982m from £1bn at the end of last year, largely due to proceeds from the sale of Penguin Random House and deferred proceeds from the K12 disposal. 

The consensus forecast EPS for the full year is 30.32p, rising to 41.96p in 2021. 

PEARSON (PSON)   
ORD PRICE:526pMARKET VALUE:£ 4.0bn
TOUCH:525-527p12-MONTH HIGH:424pLOW: 927p
DIVIDEND YIELD:3.1%PE RATIO:15
NET ASSET VALUE:556p*NET DEBT:23%
Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20191.83136.16.00
20201.49356.36.00
% change-18+169+3-
Ex-div:13 Aug   
Payment:21 Sep   
*Includes intangible assets of £3.9bn or 522p a share