11:01 AM, Jan 17, 2018 — Education publishing company Pearson (PSO, PSON.L) expects to report a fall in full-year sales following the continuation of a declining trend in its flagship US higher education courseware business and an adjusted operating profit below an earlier guidance range based on the average effective exchange rate from 2017.
Total underlying sales fell 2% during the 12 months that ended December 31, Pearson said in a trading update ahead of the release of its full year results on February 23. Revenue from US higher education courseware slid 3% due to the continuation of trends seen in the first nine months coupled with cautious buying behavior of channel partners in the fourth quarter.
Based on an average effective exchange rate from 2017, the company said it expects an adjusted operating profit of about 570-575 million pounds ($785.6-$792.5 million) and earnings per share of 53.5-54.5 pence. That compares with an October 2017 guidance range of 576-606 million pounds and 49-52 pence, respectively. Pearson said the beat on earnings reflects, among other things, an improved tax rate. At guidance exchange rates from December 2016, the adjusted operating profit is likely to come near the top end of the forecast.
As part of a program to increase simplification and efficiency, the company has been making asset disposals, including the sale in late December of 44.75% equity stake in its Mexican online university partnership, Utel. Good cash generation and proceeds from disposals also helped Pearson to reduce its net debt, which is anticipated to come in at $500 million in 2017, down from $1.1 billion a year ago.
The company also said its efficiency program is on track to deliver 300 million pounds of annualized cost savings by 2020. Restructuring costs in 2017 stood at about 80 million pounds, above the 70 million pounds guidance and reflecting faster progress. Total restructuring costs are set to be in line with guidance of 300 million pounds over 2017-2019, with 90 million pounds earmarked in 2018.
Pearson said it sees an adjusted operating profit of between 520-560 million pounds less the full-year impacts of disposals made in 2017 of 45 million pounds, and less favorable exchange rates as at December 31 of 25 million pounds. It added that the group effective tax rate will remain unchanged for the US tax reform over the medium term.
“Our restructuring program is on track and our 2017 performance has set us up well to make further progress against our strategic priorities and grow profit in 2018,” Chief Executive Officer John Fallon said in the update. The company has “made good progress in 2017 on the simplification of our portfolio” and the “strengthening of our balance sheet,” he added.
Companies: Pearson, Plc
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