Pearson's share price tumbles after former FT publisher reports 11 per cent revenue fall

 
William Turvill
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Pearson is primarily an education business now, after selling its stakes in the Financial Times and Economist (Source: Getty)

The former publisher of the Financial Times and Economist, which has transformed itself into primarily an education business, today reported an 11 per cent fall in revenues for the first half of the year.

Pearson’s share price fell around six per cent to 913.5p after it reported the results on Friday morning and at the time of writing was the FTSE 100's highest faller.

The figures

The company’s sales total for the six month-period fell seven per cent on an underlying basis to £1.9bn.

Its adjusted operating profit of £15m was down from £39m in the same period of 2015, but “in-line with our expectations”.

Pearson held its dividend at 18p, “in-line with previous guidance, reflecting the board’s confidence in the medium term outlook”.

Pearson also said today that it was making good progress in its "simplification and change programmes", with 3,450 out of a targeted 4,000 jobs now cut.

Read more: Cost-cutting former FT owner reports first-quarter sales drop

The company’s share price has soared since the UK’s vote for Brexit. Its closing price on 23 June, before the result of the referendum emerged, was 888p. It closed on Thursday at 970p – up around nine per cent.

29 July 2016 @ 8:30amPearson (PSON)

Why it’s interesting

Results reports wouldn’t be results reports in 2016 without a mention of Brexit.

Pearson revealed it has set up an “executive committee to monitor the impact of Brexit on its principal risks”.

The company said it “remains of the view that it may well add increased complexity across certain of its activities, with the potential for some short-term disruption”.

The report said: “The group will continue to monitor developments carefully. There remains significant uncertainty, but with a significant majority of the group’s activities outside the UK and Europe, Pearson does not currently believe that there will be, overall, a material adverse impact on the Group's results or financial position.”

Read more: These companies could start offering low-cost degrees

Ian Whittaker, a media analyst at Liberum, said the results “showed a sharper than expected organic revenue decline, with a consensus of five per cent rather than the seven per cent reported”.

“Although Pearson kept their full-year guidance – unsurprising given the heavy weighting of profits to [the second half of 2016] – and highlighted the FX and restructuring benefits, the top-line declines will raise further concerns of a profit warning in 2016.”

What the company said

Chief executive John Fallon:

We are making good progress on the programme of work we began in January to simplify the company and return to growth, and we are performing well against the financial, operational and educational milestones we set out in February.

It is still relatively early in the year, and we have two big trading quarters in education ahead of us. Nonetheless we are trading in line with our 2016 expectations, and making progress toward our target of £800m or more of operating profit by 2018.

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