Wednesday 20 January 2021 1:13 pm

Teacher's pet: Pearson shares lead the FTSE gainers after return to sales growth

Education group Pearson today reported a return to sales growth in the fourth quarter, but warned the ongoing pandemic could lead to further school closures and exam cancellations.

The positive news sent Pearson shares to the top of the FTSE gainers, up 5.5 per cent to 716p this lunchtime.

The FTSE 100 firm posted a four per cent rise in sales for the last three months of the year, driven by strong growth in its online learning business.

For 2020 as a whole, group sales dropped 10 per cent — marginally better than market consensus. Pearson said operating profit would be in line with expectations at between £310m and £315m.

Chief executive Andy Bird, who took the reins in October, said it had been an “incredibly challenging year” for the company and warned of continued turbulence.

“Uncertainty remains in the near term as a result of the ongoing pandemic, with further lockdowns, exam cancellations and reduced global mobility,” he said.

“However, I am excited about our future given the shift to online learning and the huge opportunity to help more people develop the skills they need.”

Pearson has seen its share price tumble in recent years as it struggles to shift its reliance away from textbook sales and towards a more digitally-focused model.

These difficulties have been compounded by the Covid-19 pandemic, which has forced the closure of schools and assessment centres and sparked exam cancellations.

Pearson’s global assessment, US courseware and international divisions have been hardest hit by the crisis, though trading improved in the fourth quarter thanks to increased digital purchases.

The company said it was on track to make £50m of cost savings this year, while its balance sheet remained strong with net debt of just £0.5bn and liquidity of roughly £1.9bn.

Analysts at Morgan Stanley said the figures were “encouraging in what could have been a tricky quarter given lockdowns”. Shares were up more than six per cent in morning trading.

Chief executive Bird, a former Disney executive, has promised a shake-up at the education and publishing giant as it looks to develop a more digitally-focused business model.

In November the new boss announced the launch of a new division that will deliver services directly to consumers — a move that mirrors the highly successful models of streaming services such as Netflix.

Pearson has tapped former Warner Bros executive Lynne Frank to head up the new division, while former British diplomat Mike Howells has joined as chief strategy officer.

Pearson did not give guidance for 2021, but said it would give further details of its new consumer-focused strategy at its full-year results in March.