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16th January
2019
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Pearson, the world's learning company, is today providing an update
on full year 2018 trading and giving preliminary guidance for 2019.
Full year results will be announced on 22 February
2019.
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Highlights
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Underlying profit growth driven by continued strategic progress in
2018
Expect to deliver adjusted operating profit of
£540m-£545m for 2018, in line with guidance of £520m
to £560m
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Adjusted earnings per
share of 70.0p-71.0p reflecting one-off tax benefits and a lower
finance charge as disclosed in Pearson's Q3 trading
update.
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Total underlying
revenues were down 1% year on year, with declines in US Higher
Education Courseware (US HECW) of 5% and US K12 courseware largely
offset by the rest of the business growing in aggregate at over 1%.
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Revenue in North America
declined 1%, Core was flat and Growth was up
1%.
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Strong balance sheet
with closing net debt at 31 December 2018 expected to be around
£200m (2017: £432m).
Digital transformation progressing to plan
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US HECW digital revenue
grew 2% to represent 55% of sales (50% in
2017).
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Direct to consumer sales
grew 8% to 23% in US HECW.
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Signed a further 192
Inclusive Access institutions in 2018 taking the total to nearly
700.
Continuing strong performance in structural growth
opportunities
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Online Program
Management (OPM) saw 14% growth in global course registrations and
revenue growth of 9%.
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Connections Academy,
Pearson's K12 virtual schools business, grew revenues
8%.
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In English, Pearson Test
of English Academic grew test volumes by 30%.
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In Professional
Certification revenues grew 4%.
Simplification on course to deliver cost savings slightly ahead of
expectations
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Cost efficiency
programme ahead of plan in 2018 with incremental cost savings of
around £130m and restructuring costs1 of
around £100m.
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Now expect to deliver
increased annualised cost savings1 in
excess of £330m by the end of 2019. One-off restructuring
costs will rise with this to around £330m. This is ahead of
our original plan of £300m in savings and
costs.
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US K12 Courseware
continues to be held for sale.
2019
outlook2 -
further financial and strategic progress
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Expect to deliver 2019
adjusted operating profit of between £590m to
£640m.
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Expect US HECW revenue to be zero to
down 5% as underlying pressures continue, and for the rest of the
business to show continued growth in aggregate with a good
performance in each of the structural growth opportunities: OPM,
Virtual Schools, Professional Certification and
English.
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This guidance is based
on existing portfolio and exchange rates as at 31 December 2018.
Expect a net interest charge of c.£30m, a tax rate of 21% and
adjusted earnings per share of 56.5p to 62.0p.
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John Fallon, Chief Executive said:
"We have made good progress in 2018, returning Pearson to
underlying profit growth. We are also building a platform to enable
Pearson to achieve its full digital potential, empowering more
people around the world to learn the knowledge and skills to
flourish in the changing world of work. There is much still to do,
but we are increasingly confident in Pearson's potential to grow
and prosper."
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Financial impact
We maintain a strong balance sheet with closing net debt at 31
December 2018 expected to be around £200m. This equates to a
net debt to EBITDA ratio of c.0.3x and c.1.5x on a simplified
credit agency view adjusting for leases and other
items.
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Impact of IFRS 16 - Leases
All 2019 guidance provided in this statement is on a pre-IFRS 16
basis.
IFRS 16 is the new lease standard which will replace IAS 17 and is
applicable for financial years commencing on or after 1 January
2019, and hence will first apply to the Group for its financial
year ending 31 December 2019.
The standard will result in the operating lease expense being
replaced by finance costs and depreciation which will reflect the
corresponding lease liabilities and right of use assets that will
now be recognised on the balance sheet.
Full details will be given at our FY18 results on 22
February.
Notes
Throughout
this announcement: growth rates are stated on an underlying basis
unless otherwise stated. Underlying growth rates exclude both
currency movements, portfolio changes and accounting changes. The
latter impact is not material.
1 Based on December 2018 exchange rates versus prior
guidance at December 2016 exchange rates. The impact of FX rates
would be to slightly reduce savings on a like for like basis. 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.
2 2019 guidance excludes the impact of our adoption of
IFRS 16 Leases for the year ended December 2019. Full details of
the impact of IFRS 16 will be presented with our preliminary
results on 22 February.
Analyst and investor conference call details
We will hold a conference call at 08.30am today 16 January to
discuss this trading update. A replay will be available soon after
on our website www.pearson.com.
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Investor Relations
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Jo
Russell, Tom Waldron, Anjali Kotak
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+44
(0) 207 010 2310
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Media
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Tom
Steiner
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+44
(0) 207 010 2310
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Brunswick
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Charles
Pretzlik, Nick Cosgrove, Simone Selzer
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+44
(0) 207 404 5959
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Webcast details
URL for international dial in numbers
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Analyst
and investor conference call details:United Kingdom Toll-Free:
08003589473
United
Kingdom Toll: +44 3333000804
PIN:
13546259#
Audience URL: https://event.on24.com/wcc/r/1913033-1/52A244363540280035B71F7EEA20102C?partnerref=rss-events
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
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Forward looking statements: Except for the historical
information contained herein, the matters discussed in this
statement include forward-looking statements. In particular, all
statements that express forecasts, expectations and projections
with respect to future matters, including trends in results of
operations, margins, growth rates, overall market trends, the
impact of interest or exchange rates, the availability of
financing, anticipated cost 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. They are based on numerous assumptions regarding
Pearson's present and future business strategies and the
environment in which it will operate in the 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 Pearson's publicly-filed documents
and you are advised to read, in particular, the risk factors set
out in Pearson's latest annual report and accounts, which can be
found on its website (www.pearson.com/corporate/investors.html).
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. Readers are cautioned not to
place undue reliance on such forward-looking
statements.
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PEARSON
plc
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Date: 16
January 2019
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By: /s/
NATALIE WHITE
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------------------------------------
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Natalie
White
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Deputy
Company Secretary
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