Pearson Shares Dive on Profit Warning -- Update
21 October 2015 - 8:18PM
Dow Jones News
By SIMON ZEKARIA
LONDON--Shares in Pearson PLC dropped more than 16% on Wednesday
after the education company warned of tough market conditions and
cut its full-year earnings guidance.
Pearson, which makes most of its revenue from educational
services in the U.S., said it expects adjusted earnings a share for
2015 to come in at the lower end of a range of 70 pence to 75
pence, down from a previous range of between 75 pence and 80
pence.
"The key cyclical and policy-related factors which have been
hurting our markets for some years have yet to improve," said Chief
Executive John Fallon.
Shares in the company, which has recently sold trophy publishing
assets such as the Financial Times newspaper, fell sharply on the
news to 996 pence, down 16%. Bernstein analyst Claudio Aspesi said
the earnings forecast downgrade is "extremely disappointing" and
that "a lack of visibility on the business is becoming painful to
manage."
Pearson said third-quarter sales fell 2% compared with the same
period last year. For the nine months of 2015, sales rose 2%.
The company said its trading performance remained strong in the
first nine months of the year, with share gains across major
markets including the U.S. and U.K. However, it said some of its
operations, including U.S. higher education and emerging markets,
were hit.
"In particular, lower community college enrollments and higher
returns [affected] the U.S. higher education market, and lower
purchasing in certain provinces affecting the school textbook
market in South Africa," Pearson said.
Pearson also said the revised earnings forecast was made
following the disposal of PowerSchool, FT Group and The Economist
Group, as well as movements in foreign-exchange rates.
It added that the guidance was based on current exchange rates
continuing to the end of the year, no further acquisitions or
disposals, a tax rate of approximately 15% and an interest charge
of approximately GBP70 million ($108 million).
In August, Pearson sold its 50% noncontrolling stake in the
publisher of the Economist magazine for GBP469 million. The
disposal swiftly followed Pearson's landmark sale of the FT Group,
which includes the Financial Times newspaper, to Nikkei Inc. of
Japan for GBP844 million.
Pearson is plowing proceeds from the deals into its global
education business, which includes textbooks in Western markets,
digital learning programs and English language schools.
It has restructured its operations and booked hundreds of
millions of dollars in cost savings to counter a slowdown in mature
educational markets and boost its push into emerging economies such
as Brazil and China where there is greater demand for learning
services.
Write to SIMON ZEKARIA at simon.zekaria@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 21, 2015 05:03 ET (09:03 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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