Education publisher Pearson says US students going digital faster than expected

Education publisher Pearson has warned students are turning to online and digital resources faster than bosses expected – hitting its balance sheet.

Profits are now expected to be at the bottom end of expectations between £590 million and £640 million, with the news sending shares plunging 17%, down 148p to 712.8p.

The company has been struggling in the US for several months, and bosses said they now believe its US Higher Education Courseware, which accounts for 25% of all sales, was down 10%.

The split between digital and print sales is expected to shift from a 55% to 45% split, to one of 65% to 35% by the end of the year, they added.

Pearson said: “The key selling season has seen a significant industry wide acceleration of print attrition as channel partners and students turn away from print products more rapidly than anticipated.”

In the first nine months of the year, the company said underlying sales are expected to be flat, with core markets up 5% but North America down 3%.

The US Courseware division is expected to fall by between 8% and 12% for the entire year, compared with initial predictions from the company of no more than a 5% fall.

John Fallon, chief executive of Pearson, said: “Whilst difficult in the short term this places more importance on our work to remake this part of Pearson and we are exploring new ways of deploying our new technology platform so that we can offer students highly affordable, convenient, adaptive, digital courseware.”

The company has struggled in adapting to digitisation in education, focusing attentions on print publications, which can command higher prices and better margins.

Mr Fallon also said the business struggled during the all-important back-to-school period in August.

In its core business, which includes the UK, Australia and Italy, revenue is expected to increase by 5% due to strong growth in academic testing services, online education programmes and the delivery of a new digital contract in Egypt.

Read Full Story