While Pearson’s (PSON) shares enjoyed an uptick on results day, it’s important to note that the first half makes only a small contribution to full-year trading. The second half has more bearing, because it includes the start of the academic year.
There were positive glimmers. Reported sales declined, but rose 2 per cent on an underlying basis – lifted by the North America and core businesses, and tempered by the growth division (constituting 66, 20 and 14 per cent of group revenues respectively). Operating profits soared to £233m from £16m – although this was driven by the sale of the Wall Street English language teaching business and Utel, the online university partnership in Mexico. Adjusted underlying operating profits rose 46 per cent; something Pearson attributes partly to savings from its 2017-2019 restructuring programme.
US higher education courseware “grew modestly”, thanks to lower returns. But bosses still anticipate a second-half decline in net sales, against ongoing underlying market pressures. And the US K12 courseware business hasn’t been sold; analysts at Liberum say this will “raise questions”. They believe it will be difficult to sell this business, and that its valuation should be around £100m-£150m, against the consensus £200m-£400m.
Broker Numis forecasts adjusted pre-tax profit of £495m and EPS of 50.7p for 2018, down from £497m and 54.1p in 2017.
| PEARSON (PSON) | ||||
| ORD PRICE: | 954p | MARKET VALUE: | £7.45bn | |
| TOUCH: | 954-954.6p | 12-MONTH HIGH: | 963p | LOW: 563p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 524p* | NET DEBT: | 19% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 2.05 | -10.0 | -2.1 | 5.0 |
| 2018 | 1.87 | 202 | 24.1 | 5.5 |
| % change | -9 | - | - | +10 |
| Ex-div: | 16 Aug | |||
| Payment: | 14 Sep | |||
| *Includes intangible assets of £3.1bn, or 393p a share | ||||
