Pearson, the world’s learning company, is today providing an update on Q1 trading.
Underlying revenue up 2%, operating performance on track
- Revenue grew 2% in North America, 4% in Core and was flat in Growth.
- We remain on track to deliver annualised cost savings in excess of £330m1 exiting 2019.
- We completed the sale of our US K12 Courseware business at the end of the quarter.
- Our guidance for 2019, after adjusting for IFRS 16 and the disposal of US K12 Courseware, remains unchanged. We expect to deliver adjusted operating profit of between £590m to £640m.
- This guidance includes a post-IFRS 16 net interest charge of £60m, a tax rate of 21% to give an adjusted earnings per share range of 53.5p to 59.0p. This is based on the exchange rates at 31 December 2018.
- Q1 net debt was down year-on-year at £0.5bn (2018: £0.6bn) on a pre-IFRS 16 basis. On a post-IFRS 16 basis, Q1 net debt was c.£1.2bn.
- We continue to accelerate our digital transformation with momentum in key structural growth opportunities and the launch of a suite of digital products and capabilities for the back to school period this year, including:
- The commercial launch of Revel, our fully integrated digital courseware product, on our new global learning platform
- The introduction of our first AI powered math tutor as a mobile app marketed to calculus students, and
- Ongoing development of our first AI powered essay marker, which will adapt to the professor’s personal style.
John Fallon, Chief Executive said:
“We are off to a strong start to the year, having laid good foundations in 2018. We continue to make progress against our strategic priorities, and we are bringing exciting new products and capabilities to market in 2019 which will continue to accelerate our move to digital. We expect our sales to stabilise this year and to increase our underlying profit further."
Throughout this announcement: growth rates are stated on an underlying basis unless otherwise stated. Underlying growth rates exclude both currency movements and portfolio changes.
1 Based on December 2018 exchange rates, a significant part of costs and savings from the restructuring programme are US Dollar denominated and in other non-Sterling currencies and are therefore subject to exchange rate movements over the implementation timeframe.
In North America, revenue grew 2% in underlying terms with good growth in Online Program Management (OPM) and Virtual Schools which benefited from new partnerships and strong enrolment growth as well as Professional Certification which saw good volume growth in key segments including IT, Healthcare and Teacher Certification. This was partially offset by a slight decline in revenue from US Higher Education Courseware.
Our guidance for US Higher Education Courseware in 2019 remains unchanged: we expect net sales to be flat to down 5% for the full year. Q1 revenue was in line with expectations, declining slightly against a strong comparative in Q1 2018, which was helped by the absence of the additional returns provision we took in Q1 2017.
In our Core segment (which includes the UK, Australia and Italy), revenue grew 4% in underlying terms, helped by good growth in Pearson Test of English Academic and OPM as well as phasing in Courseware in the UK and Europe.
In our Growth segment (which includes China, Brazil, South Africa and India) revenue was flat in Q1 2019, with growth offset by timing of orders in China and Brazil. We continue to expect growth in this segment in 2019 weighted towards the second half of the year.
At Penguin Random House, trading is in line with our expectations.
We will hold a conference call for analysts at 8.30am today Friday, 26th April to discuss our first quarter results. A replay will be available soon after on our website www.pearson.com/corporate. Our AGM will begin today at 12 noon at IET London, 2 Savoy Place, London WC2R 0BL.
Jo Russell, Tom Waldron, Anjali Kotak
+44 (0) 207 010 2310
+44 (0) 207 010 2310
Charles Pretzlik, Nick Cosgrove, Simone Selzer
+44 (0) 207 404 5959
Webcast details (replay)
Analyst and investor conference call replay
Forward looking statements
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