Pearson slump drags FTSE lower
LONDON – Britain’s top share index dipped on Wednesday, hit by a drop in Pearson after it said that full-year profit would come in at the lower end of its range.
Pearson fell 13.5 percent, set for its sharpest fall since 1987, after the British education publisher said that to lower enrolments at some colleges in the United States and lower school text book purchases in some parts of South Africa would hit full year results.
Analysts said that following a few years of transition, the results showed that the company had still not confronted some of its structural issues.
“While the 2012/3 profit warnings could be explained away in the narrative of tough transition years, 2015 was supposed to be the year of stabilisation,” analysts at Liberum said in a note, reiterating the stock as a “Top Sell”.
“This is clearly not happening and there will be increased questions over 2016.”
The drop was set to trim over 5 points off the FTSE 100 index, enough to take British blue chip shares into negative territory. The index was down 4.78 points, or 0.1 percent, at 6,340.35 points by 0734 GMT.
Among risers, chip designer ARM, which licenses chips for use in Apple products, surged 8.6 percent after results.
The rise came after it met expectations with a 27 percent rise in third-quarter profit, and its confident outlook alleviated concerns about a slowdown in the semi-conductor sector.
Sky rose 2.3 percent after posting slightly better-than-expected first-quarter operating profit, helped by strong new broadband additions in Britain.
Reckitt Benckiser rose 2.2 percent, touching an all-time high after it raised its full-year sales outlook following a bigger-than-expected gain in third-quarter sales helped by consumer health products.
Britain’s Merlin Entertainments rose 2 after announcing it will take its Legoland amusement park to Shanghai as part of a deal agreed with investment firm China Media Capital during the state visit of President Xi Jinping.
Among mid-caps, Home Retail slumped 13.2 percent after Britain’s biggest household goods retailer issued a profit warning due to weak Argos trading.
“Despite being Sellers this has somewhat exceeded even our bearish anticipation,” analysts at Haitong Research said in a note, reiterating their “Sell” rating on the stock.
“The unwinding of the Argos story leaves us needing to be persuaded that it is not staring into an abyss.” -Reuters