Cost cuts help Pearson to reiterate targets amid tough trading

17 Oct, 2016 11:48 am

Pearson, the world’s biggest education company, reiterated its full-year outlook on Monday after cost cuts helped it to counter worse-than-expected trading in the third quarter.

In a key update for investors, Pearson said nine-month organic sales fell by 7 percent, maintaining the declines recorded in the first half of the year due to weak demand for courseware in its North American higher education business.

Analysts had expected a nine-month fall of 5 percent.

Pearson said the pressures on the courseware business had however shown signs of improvement in September and October.

Combined with cost cuts, this enabled the group to reiterate its forecast of adjusted operating profit of between 580 million pounds and 620 million pounds.

It said it would also get a 4.5 pence boost to earnings per share if current exchange rates persist until the end of 2016.

“While market conditions continue to be challenging, particularly in higher education, thanks to tight cost management we are on track to deliver our guidance this year, and to achieve our long term growth goal,” said Chief Executive John Fallon.

The 172-year-old company, which sold the Financial Times newspaper and its stake in The Economist magazine in 2015 to concentrate on education, has been hit by several profit warnings in recent years.

As the economy recovered in its biggest market, the United States, more people went into employment than education. It has also suffered from students borrowing or buying second-hand books, and a row in the United States over testing standards.

It said on Monday that retailers had further corrected their inventory demands in July and August which added to existing declines in its testing business in the US and Britain. -Reuters

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