Pearson shares jump as publisher signals return to growth

Pearson shares were on a roll after the firm said it is on track for a return to profit growth this year as a turnaround plan begins to bear fruit.

The education publisher saw underlying revenues come in flat for the first nine months of the year, in line with market forecasts.

Pearson added that its underlying profit guidance remains unchanged within a range of £520 million to £560 million, with growth on an underlying basis pencilled in.

Boss John Fallon said: “We are on track to return to underlying profit growth and, with a strong balance sheet, are set up well for the future.

“We are picking up the pace in our growth opportunities, performing well competitively and making good progress in our digital transformation.

“There’s a lot still to do but we are increasingly excited about the opportunity to help learners acquire the knowledge and skills to succeed in a fast changing world.”

The news sent Pearson’s shares to the top of the FTSE 100, the stock rising over 4% to 850p in early trade.

Pearson, which has been selling assets such as the Financial Times and Economist, has been moving towards a focus on the education sector.

Mr Fallon’s transformation plan is on track to deliver £300 million of cost savings by the end of 2019 as the firm looks to slash its debt.

To this end, net debt more than halved year on year to £620 million in the first nine months of the year.

Pearson said revenue at US higher education courseware division was down 3% in the period, but this was ahead of expectations and was offset by growth in the rest of the company.

The company’s online programme management division saw “good” revenue growth in the first nine months of the year, with global course registrations up 13%.

This drove a 2% rise in revenue in Pearson’s Core segment.

The “strong” growth seen in its Pearson Test of English Academic, rising 25%, also aided the segment’s growth.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “What might be considered Pearson’s core business, school and university textbooks, has been having a pretty tough time recently.

“Fortunately the education giant has been shifting away from more traditional classroom materials in favour of digital, and progress there looks more positive.

“There’s still a lot to do before Pearson can be said to have completed its digital transformation, and a strategic shift like that comes with risks, given the falls in share price since 2015 Pearson shareholders know that only too well.

“But after today’s numbers, a pass mark is looking increasingly achievable.”