Pearson sees sales dip but PRH underlying growth of 10%

Pearson has announced adjusted operating profit growth of 8% in the past year, despite revenue dropping by 9%, according to its 2018 preliminary financial results. Meanwhile, it announced underlying growth of 10% from Penguin Random House (PRH), which it still has a 25% stake in.

Pearson, which announced the sale of its K-12 courseware business last week, posted its annual financial results on Friday, with the company saying they were a "turning point” in its move towards becoming a digital-first publisher and returning to growth in 2020.

Pearson said PRH had performed “solidly” thanks to underlying revenue growth from increased audio sales and “stable” print sales. The trade publisher benefited from bestseller Becoming by Michelle Obama, alongside titles from Bill Clinton & James Patterson, Jordan Peterson, Jamie Oliver, Dr.Seuss, John Grisham, and Lee Child.

There was a decline in adjusted operating profits from PRH, down from £94m the previous year to £68m, a fall which follows the sale of its 22% stake in PRH in October 2017. The figures are slightly ahead of Pearson’s estimate for PRH this time last year.

In 2019, Pearson expected a normalised publishing performance from PRH, with after-tax contributions of £60m to £65m of its adjusted operating profit.

Chief executive John Fallon said: “We made good progress last year. We increased underlying profits, outperformed our cost savings plan and invested in the digital platforms that are making us a simpler, more efficient and innovative company.

“We are increasingly well placed to guide our customers through a lifetime of learning and help our partners shape the future of education. We have a lot still to do, but we expect company wide sales to stabilise this year, and grow again in 2020 and beyond.”

Pearson revealed revenue was down 9% to £4.1bn in 2018 due to changes in its portfolio, with profit before tax dipping 15% to £498m. Adjusted operating profit rose to £546m over the year, in line with guidance.

The UK education giant said it now expected adjusted operating profits of between £590m and £640m in 2019. The company expects to cut £130m in costs this year, with around 1,500 jobs to go as part of those savings.

Underlying revenue fell 1%, which the publisher blamed on its courseware business, saying it had been largely offset by growth elsewhere. Revenue in North America declined 1%, Core was flat and Growth up 1%.

Digital and digitally-enabled revenues made up 62% of sales, up from 57% in 2017. The publisher said it was continuing to invest in the sector with its digital schools programmes and innovations like AI-powered maths tutors and essay markers. US Higher education courseware ebooks revenue grew at over 20% in 2018.