Pearson PLC (PSON) - Interim Management Statement
RNS Number : 7209P
29 October 2012
29 October 2012
Pearson nine-month Interim Management Statement
· Sales are up 5% and operating profit down 5%*.
· In spite of tough market conditions, Pearson reiterates its full year
outlook of growth in sales and operating profits with margins reflecting
acquisition integration costs and the FTSE sale.
· Pearson and Bertelsmann agree to combine Penguin and Random House,
creating the world's leading trade publisher.
Pearson, the world's leading learning company, is today providing its regular
nine-month interim management statement.
Pearson increased sales by 5% in the first nine months of 2012, with good
growth at International Education and the FT Group and a resilient performance
in North American Education. Operating profit was 5% lower, reflecting the
sale of FTSE in 2011, acquisition integration costs and continued weakness in
UK professional training.
The fourth quarter is always a key selling season in education and consumer
publishing. We expect markets conditions to remain tough but we believe we can
sustain our solid Q3 trading momentum. So, we are reiterating our previous
full-year outlook of growth in sales and profits at constant exchange rates,
with margins reflecting acquisition integration costs, weakness in Pearson in
Practice and the sale of FTSE. We expect to report adjusted earnings per
share broadly in line with the consensus of current market expectations of
84.9p, according to Bloomberg and Reuters. This guidance remains struck at
£1:$1.59 average exchange rate for the year.
Pearson's chief executive Marjorie Scardino said: "We have confidently
reiterated our guidance because many of our businesses are going strong in
this complicated trading environment. But the dynamics of the markets we're in
could make that achievement more about resilience than flamboyance. As always,
all the people in Pearson have their shoulders to the wheels that turn in our
important fourth quarter."
Revenue growth analysis: first nine months of 2012
Headline CER Underlying
North American Education 6% 4% (3)%
International Education 10% 13% 6%
Professional Education 1% 0% (12)%
Pearson Education 7% 7% 0%
FT Group 7% 7% 7%
Penguin 0% (1)% (2)%
Total 6% 5% 0%
Highlights for the first nine months of 2012
In education, our long-term investment in technology and services is enabling
us to achieve sustained growth, even in difficult markets for education
materials. For our education company as a whole, sales are up 7% in the first
nine months of the year.
In North America, textbook publishing markets have been weak in 2012, affected
by slower college enrolments, state budget pressures, the transition to Common
Core standards and a smaller new adoption opportunity. For the first nine
months of the year, total sales for the US School and College textbook
publishing industries declined by 17.9% and 4.5% respectively, with the total
market down 10.7%, according to preliminary estimates from the Association of
Even so, Pearson's sales in North American Education were up 4% as our
leadership in digital learning continued to produce significant market share
gains in both School and Higher Education. Our Higher Education business
continues to achieve good growth in online learning platforms, digital
homework and assessment programmes (with MyLab registrations up 12% to more
than nine million), and custom publishing. In October, we announced the
acquisition of EmbanetCompass (subject to a Hart-Scott-Rodino review), which
partners with leading non-profit colleges and universities in North America to
provide fully online courses and learning tools for more than 100 university
Our Assessment and Information business remained resilient with good growth in
State testing, boosted by market share gains, outweighing weaker clinical and
diagnostic assessment revenues. Our School Curriculum business continued to
face state budget pressures, a smaller new adoption opportunity (of
approximately $400m) and uncertainty caused by the pending transition to
Common Core standards. But it still took market share with a good performance
in new adoptions and made more strides in online learning, particularly at
Sales in International Education were up 13% after nine months. Our digital
and services businesses continue to grow, with sustained momentum in English
language schools in China, school services in India, higher education in South
Africa and school learning systems in Brazil. Textbook publishing has remained
generally weak, particularly in markets where purchases are publicly-funded.
In Professional Education, sales were level. We continued to grow in
Professional Testing, which administered seven million tests in the first nine
months of the year, benefiting from sales of additional services to existing
customers, our partnership with American Council on Education for General
Educational Development (GED) tests and the acquisition of Certiport.
As previously stated, we reshaped Pearson in Practice in the first half of
2012 in response to changing government funding criteria for apprenticeships.
Market conditions remained challenging in the third quarter and take-up of new
training programmes has been slower than expected. As a result we continue to
expect full-year profits in Professional Education to be significantly lower
than in 2011, and we have initiated a comprehensive review of this business
given the radically different external environment.
Sales were up 7% at the FT Group. Across print and online, the FT reaches an
average daily audience of nearly 2.1 million, with a combined circulation of
over 600,000 and digital subscriptions growing strongly, up 17% to 313,000 for
the nine months. Advertising remains weak and short-term, but we continue to
take market share. Mergermarket continued to grow despite volatile markets,
with strong performances from Debtwire and mergermarket, which launched
several new products in growth markets such as China and the Middle East.
At Penguin, sales were down 1% compared to 2011 with the third quarter
benefiting from ebooks revenue up 35% on 2011, and, as expected, a stronger
publishing schedule. Key titles included Mark Owen's No Easy Day, Ken
Follett's Winter of the World, Junot Diaz's This Is How You Lose Her, Zadie
Smith's NW and Jamie Oliver's 15 Minute Meals. Penguin has a strong fourth
quarter publishing schedule including bestselling authors Patricia Cornwell,
Nora Roberts, Tom Clancy and Jared Diamond in the US and Jeff Kinney, David
Walliams, Pippa Middleton and Dawn French in the UK. In a separate statement,
Pearson and Bertelsmann have today announced an agreement to create the
world's leading consumer publishing organisation by combining Penguin and
Random House in a newly-created joint venture.
Balance sheet.At the start of 2012, Pearson had net debt of £499m. Our 2011
net debt/EBITDA ratio was 0.5x and interest cover was 18.1x. Our 2012 net debt
peaked in July at £1.3bn, following the normal seasonal build-up of working
capital in the first half of the year. Cash generation in the first nine
months was partially offset by acquisitions (totalling approximately £0.3bn,
including the acquisitions of Certiport, GlobalEnglish and ASI) resulted in
net debt at the end of September 2012 of £1.1bn (September 2011: £1.1bn).
Interest and tax.In 2012, our net interest charge will be broadly level with
2011, reflecting the impact of a $500m, 10-year bond issued in May 2012 with a
coupon of 3.75%, which further extends our debt maturity profile. We
anticipate our P&L tax charge against adjusted earnings to be in the 24-26%
range with a modestly lower cash tax rate.
Exchange rates. Pearson generates approximately 60% of its sales in the US. A
five cent move in the average £:$ exchange rate for the full year (which in
2011 was £1:$1.60) has an impact of approximately 1.3p on adjusted earnings
per share. The average rate during the first nine months of 2012 was £1:$1.58
(compared to £1:$1.61 in the first nine months of 2011), and the closing rate
at the end of September was £1:$1.62).
* Throughout this statement, growth rates are given at constant exchange rates
(unless otherwise stated). They are based on continuing operations and exclude
the impact of currency movements. Underlying growth rates exclude the impact
of both currency movements and portfolio changes.
For more information:
Luke Swanson/ Simon Mays-Smith/ Charles Goldsmith + 44 (0)20
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 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
IMSEAKENADKAFEF -0- Oct/29/2012 07:00 GMT
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