Pearson PLC Trading Statement (3322Y)
January 23 2014 - 1:00AM
UK Regulatory
TIDMPSON
RNS Number : 3322Y
Pearson PLC
23 January 2014
Press release
23 January 2014
JANUARY TRADING UPDATE
Pearson, the world's leading learning company, is today
providing its regular January trading update.
Pearson faced tough market conditions throughout 2013 as
cyclical, policy-related and structural pressures affected our
education publishing and assessment businesses in North America and
the UK, our two largest markets. We continued to achieve strong
growth in emerging markets, digital learning and new service-based
business models and we continue to invest behind those growth
opportunities.
On 28 February 2014 we will announce our preliminary results for
2013 and we expect to report:
-- Operating profit of approximately GBP865m before
restructuring charges primarily reflecting the associate accounting
impact of the Penguin Random House merger and lower underlying
margins in North American Higher Education, particularly in the
important fourth quarter.
-- Adjusted EPS of around 83p before restructuring charges, in
line with our previous guidance and 2012.
-- Net restructuring costs of approximately GBP130m (comprising
GBP170m expensed and GBP40m of savings achieved during the year)
resulting in adjusted EPS of around 70p after restructuring
charges.
John Fallon, chief executive, said: "Pearson made good progress
on our strategic goals in 2013 but our trading and financial
performance has been weaker than expected, particularly in North
America. With trading conditions still challenging in 2014, this
further underlines the importance of the work we started in 2013 to
reduce our established cost base and redirect our investment
towards our biggest future growth opportunities. We will accelerate
this transformation in 2014 and remain confident about our growth
prospects in 2015 and beyond. Pearson will emerge from this
transitional phase as a stronger, faster growing company, better
able to tackle some of the biggest problems in global
education."
Our North American education business faced a tough trading
environment throughout 2013, driven by state budget pressures and
the transition to the Common Core (affecting our School business)
and lower enrolments (affecting Higher Education). The career
college sector, in which we have a strong market position, was
particularly weak. In addition to these market pressures, our North
American margins were further affected by planned investments in
learning technologies and related infrastructure, Common Core
programmes, the launch costs related to major multi-year
service-based contracts in higher education, and increased returns
provisions.
Our International education business achieved another strong
underlying performance in emerging markets, particularly in South
Africa and China, offset by weak textbook sales in developed
markets and policy changes affecting qualifications and textbook
publishing in the UK. Margins before restructuring charges were
similar to 2012.
Our Professional education business generated good sales growth
at constant exchange rates with a strong performance in assessment
and training partly offset by softness in publishing.
The Financial Times Group produced good profit growth,
particularly at the Financial Times. Digital subscriptions to the
FT continued to grow strongly, more than offsetting weak
advertising sales and planned reductions in print circulation. In
December 2013 we announced the disposal of Mergermarket to BC
Partners for GBP382m. In 2013, Mergermarket will report revenues
and operating profit before central costs of approximately GBP108m
and GBP28m, respectively.
Penguin Random House benefited from a solid fourth-quarter
publishing performance and in its key selling season traded in line
with the expectations that we set out in our third quarter interim
management statement. As previously disclosed, the accounting
treatment for Penguin Random House reduces Pearson's operating
profit but at the EPS level we gain an equivalent benefit through
our tax charge. We estimate this effect will be approximately
GBP29m in 2013.
For the full year, we expect our total interest charge to
adjusted earnings to be slightly higher than the GBP65m reported in
2012 and our effective tax rate to be lower, reflecting the Penguin
Random House associate accounting and agreement on historic tax
matters.
We expensed net restructuring costs of approximately GBP130m
during 2013. We expensed GBP170m of charges with additional
restructuring activity including an added warehouse closure
announced in late 2013. This is due for completion around the end
of 2014. We achieved GBP40m of cost savings during the year
reflecting later implementation of sales-related restructuring to
avoid key selling periods. In 2014, we will realise further
benefits from our 2013 restructuring programme and expense
approximately GBP50m net restructuring charges to accelerate our
shift towards the biggest sources of future growth: digital,
services and emerging markets education.
Pearson generates approximately 60% of its sales in the US. The
average GBP:$ exchange rate during 2013 was 1.57. The year end
GBP:$ exchange rate was 1.66. A five cent move in the average GBP:$
exchange rate for the full year has an impact of approximately 1.3p
on adjusted earnings per share.
ENDS
For more information
Simon Mays-Smith / Brendan O'Grady/ Pippa Vaux + 44 (0)207 010 2310
Forward-looking statements
The matters discussed in this statement include forward-looking
statements and unaudited results. In particular, all statements
that express forecasts, expectations and projections with respect
to future matters, including 2013 reported results, trends in
results of operations, margins, growth rates, overall market
trends, the impact of interest or exchange rates, the availability
of financing, anticipated costs savings and synergies and the
execution of Pearson's strategy, are forward looking statements. By
their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will occur in future. There are a number of
factors which could cause actual results and developments to differ
materially from those expressed or implied by these forward looking
statements, including a number of factors outside Pearson's
control. These include international, national and local
conditions, as well as competition. They also include other risks
detailed from time to time in the company's publicly-filed
documents. Any forward looking statements speak only as of the date
they are made, and Pearson gives no undertaking to update
forward-looking statements to reflect any changes in its
expectations with regard thereto or any changes to events,
conditions or circumstances on which any such statement is
based.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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