Academic publishing firm Pearson (PSON) saw its share p[rice plunge 10.6% to 553p after its latest update revealed ongoing problems in its US higher education business.
A £350m share buyback linked to the sale of its stake in publisher Penguin Random House has done little to appease the market.
While trading is roughly in line with the downgraded guidance given in September, with 2019 profit expected at £590m, the outlook looks pretty bleak. This year profit is expected to total between £500m to £580m.
The company has also announced that chief financial officer Coram Williams is following CEO John Fallon out of the door in 2020.
The weakness in the US courseware business is such that the company likes to point how the ‘broader 76%’ of the group has performed. Here revenue is up 4%.
WEAK 2020 STEER
Numis analyst Gareth Davies says: ‘Trading in 2019 looks to be broadly as expected. Guidance for 2020 looks to be weak, with the top end of guidance around 8% below our estimates heading into today.’
AJ Bell investment director Russ Mould says: ‘Fundamentally US students are not buying as many expensive academic textbooks, instead using eBooks and online journals. And Pearson’s own digital business isn’t growing fast enough to make up the shortfall.
‘Cost cutting helped to mitigate the impact on profit in 2019 and the company may find it difficult to repeat that trick this year.
‘The separately announced news that chief financial officer Coram Williams is joining current CEO John Fallon in leaving the business in 2020 is something of a double-edged sword.
‘While a fresh approach to running the business might be welcome, it could also result in a loss of momentum in the transformation of the group.’
