'Weaker' Pearson US courseware tumbles 10% but revenues set to stabilise

In a third quarter trading update, Pearson has reported "weaker than expected" performance in its US higher education courseware business, with revenue down around 10%, but it still expects revenues to stabilise for the whole group this year. 

The company, which is moving away from print to embrace a digital strategy, said it expected adjusted operating profit to be at the bottom end of its £590m to £640m guidance range.

In its US courseware strand, the company said lower college enrolments and use of open eduction resources had been predicted. But it said the weaker results were partly down to a more rapid than anticipated move away from print by partners and students. Revenues are now expected to decline in 2019 by 8-12%, way down on original guidance of 0-5%.

While the courseware business took a hit, the company said businesses generating the other 75% of its revenue grew in aggregate by around 3%. That included strong performance in its Online Program Management, Connections Academy and K12 virtual schools.

At the nine month mark, the group said it expected underlying revenue to be "broadly flat", with Core markets - including the UK, Australia and Italy - up 5%, Growth markets rising by 3% but the US dropping 3%.

Penguin Random House, in which Pearson has a 25% stake, is "on track to perform in line with our expectations", the report noted.

Pearson c.e.o. John Fallon said: "The third quarter has been significantly weaker than we expected in US Higher Education Courseware. 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. We still expect revenue across Pearson as a whole to stabilise this year, with encouraging growth in many parts of the company."

The company also announced a number of staff moves, including Tom Bozik leading the US courseware business alongside Global Product, and Rod Bristow heading up Online Program Management and Virtual Schools businesses globally, in addition to looking after the UK business.

Kevin Capitani, president of the North America business, will be leaving Pearson early next year while Gio Giovanelli will now lead its businesses outside of the US and UK.

Sidney Taurel, chair of Pearson said: “Pearson has come a long way through its digital transformation and the company is in much better shape than it was three years ago. There are still challenges to overcome in our US Higher Education Courseware business, which we are all very focused on. We are now a leaner, more efficient and more digital company with a strong balance sheet, which gives us a platform from which we can address these challenges."