ii view: does Pearson pass the investment test?

Growing its digital sales and offering products aimed at helping workers upskill. Buy, sell, or hold?

Full-year results to 31 December

• Adjusted revenue up 5% to £3.8 billion
• Adjusted profit up 11% to £456 million
• Final dividend of 14.9p per share
• Total dividend for the year up 5% to 21.5p per share
• Net debt of £0.6 billion, up from £0.4 billion

Chief executive Andy Bird said:

"These results are testament to the strong momentum that we've been building operationally and strategically over the past 24 months. For a second consecutive year, our financial performance was ahead of expectations, and we saw progress in our strategic initiatives, which are taking Pearson on a new, exciting journey.

“Our portfolio continues to strengthen, with our new Workforce Skills talent investment platform created to leverage the structural growth in our markets and increased need for upskilling and reskilling. This will be a key growth driver for Pearson over the coming years.”

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ii round-up:

Pearson (LSE:PSON) describes itself as the world’s leading learning company.

The FTSE 100 company is focused on courseware materials, assessments, and distance-learning services.

For a round-up of these latest results announced on 3 March, please click here.

ii view:

Tracing its roots back to 1844, Pearson today employs over 20,000 people. It operates across five core divisions with Assessment & Qualifications (A&Q) its biggest profit generator at around 57%, followed by Higher Education at 20% and Virtual Learning at 15%. English Language Learning and Workforce Skills largely make up the balance. 

Its strategic focuses include growing its digital related sales, focusing down on costs and reshaping its business portfolio, with recent transactions taking in both a part sale for its Virtual Learning division and an acquisition at A&Q. 

For investors, headline sales for its Higher Education division retreated 4% over 2022,  with US college enrolments falling. Pearson’s broad move towards learning materials online arguably makes it easier for others to enter and compete, while the highly uncertain economic outlook including a consumer cost-of-living crisis cannot be completely ignored.  

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On the upside, its ongoing push towards digitalisation saw related sales growing 9% over 2022 and management is on track to cut a further £120 million of costs during 2023. Its Work Skills business has also been reshaped as it attempts to assist the one billion people estimated by the World Economic forum that will require reskilling by 2030, while a restructuring at its Higher Education business is underway. 

For now, and although the share price has been under pressure recently, robust demand and general momentum towards lifelong learning for employees look to offer potential grounds for longer-term optimism.  

Positives: 

• Pursuing cost savings
• Diversity of business divisions

Negatives:

• Uncertain economic outlook
• Currency movements can hinder performance

The average rating of stock market analysts:

Strong hold