Pearson Boosts Profit; Warns on Outlook-- Update

(Rewrites, adds detail.)

By Simon Zekaria

LONDON--Pearson PLC (PSON.LN) on Friday recorded a jump in full-year profit after earnings were boosted by the landmark sale of its trophy publishing assets, even as the education products specialist warned it faces a challenging outlook this year.

London-based Pearson said its 2015 net profit soared to 823 million pounds ($1.15 billion) from GBP471 million the prior year. Last year, it sold the Financial Times newspaper and its noncontrolling stake in the publisher of The Economist to fund its growth across global education, which includes textbooks in Western markets, digital learning programs and English-language schools.

Operating profit adjusted for exceptional items rose to GBP723 million from GBP722 million, in line with company guidance. Adjusted earnings per share increased to 70.3 pence from 66.7 pence.

At 1039 GMT, shares were up 5.5% to 846 pence, valuing the company at GBP6.59 billion.

Still, Pearson's profit was also hit by impairment charges of GBP849 million in North America and elsewhere because of difficult market conditions.

Sales fell 2% year-over-year to GBP4.47 billion, hit by trading impacts in U.S. higher education--where higher-education enrollments are falling--U.K. education and South Africa.

Chief Executive John Fallon said the group is suffering from cyclical conditions across U.S. educational markets and worsening macro-economic pressures across key emerging market economies such as Brazil and China.

"It has been a challenging time for Pearson," Mr. Fallon told reporters.

Last month, Pearson launched fresh cost-savings worth half a billion dollars and axed 10% of its workforce world-wide. It is simplifying its structure by merging businesses and focusing on fewer, bigger opportunities.

For 2016, before costs of its reorganization, it expects to report adjusted operating profit between GBP580 million and GBP620 million and adjusted earnings per share between 50 pence and 55 pence.

Pearson expects to report adjusted operating profit of GBP800 million in 2018, based on a recovery of its business in the U.K. and U.S.

Pearson, which makes two-thirds of its sales in North America, has booked hundreds of millions of dollars in cost savings in recent years to counter a slowdown in mature educational markets.

It is boosting its push into emerging markets, such as Brazil and China, where there is greater demand for learning services. In those countries, a rising middle class population is investing heavily in education, including private language schools.

"There are some big structural growth opportunities in education," said Mr. Fallon, highlighting Pearson's confidence over its prospects.

Pearson proposed a full-year dividend of 52 pence a share, up 2% from a year earlier.

"If the restructuring goes to plan, and if Pearson's markets show the improvement they expect, then investors can look forward to a very high level of income in the medium term, with hopefully longer term capital gains driven by an improved business performance," said Hargreaves Lansdown analyst Steve Clayton.

"But there are a lot of bridges to cross on this journey."

News Corp, which owns Dow Jones & Co., publisher of The Wall Street Journal, competes with Pearson's book publishing and education divisions.

Write to Simon Zekaria at [e-mail]

(END) Dow Jones Newswires

February 26, 2016 06:25 ET (11:25 GMT)

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