Pearson warns Covid-19 will hit profits and pauses share buyback

Pearson has warned its profits will be hit, and paused its share buyback, after the Covid-19 pandemic closed testing centres and saw US state assessments postponed or waived.

The company had already forecast a fall in profits for 2020 last month, partly owing to a decline in US revenue, and said today (23rd March) the coronavirus would add to its woes. Pearson said trading to the end of February was in line with expectations but the outbreak had led to a change in conditions not least because of the uncertainty for the parts of its business that rely on learners and staff accessing physical sites.

The closure of the majority of Pearson VUE test centres until the middle of April means 2020 operating profit would be down £25m to £35m, the publisher said. US student assessments being postponed or waived had also seen operating profit impacted by around £15m so far.

“If the crisis broadens, it could also impact our English franchise business in Brazil,” Pearson warned. “We are making both variable and discretionary cost savings to partially mitigate these impacts and are considering further actions.”

Pearson said a £350m share buyback programme was now being paused, with around £167m of the shares on offer completed so far.

The company stressed its actions were “underpinned by our strong financial position, with significant headroom on liquidity and scope for further cost savings”.

It also noted there had been a “significant uplift” in the use of its digital products and services, and a surge in interest for its Global Online Learning businesses, focused initially on virtual school offerings, but expected also to include fully online university programmes.

The firm also said it was making an array of its digital tools, services and and resources available to students, educators and parents around the world affected by school, college and university closures.

In the UK, that includes free subscriptions to literacy and numeracy resources for primary schools, free access for parents to Carol Vorderman’s The Maths Factor and subscriptions to e-books and content to secondary schools supporting GCSE, A Level and BTEC qualifications.

John Fallon, Pearson's c.e.o, said: "Hundreds of millions of students around the world are facing the most significant disruption to education in modern history. It’s more important than ever that learning continues, even if it can’t happen in person. Learners, teachers and families are at the heart of everything Pearson does. If we band together, we can all do our part to keep learning going and ease the burden of this unprecedented time.”