Educational materials supplier and testing giant Pearson kept its full-year forecasts unchanged after it announced a surge in first-half profits.
At 859p per share Pearson’s share price was down fractionally in subdued Monday trading.
Sales at the FTSE 100 firm rose 5% between January to June, to £1.88 billion, while turnover increased 6% on an underlying basis. Adjusted operating profit soared 56% year on year to £250 million, which was 44% higher in underlying terms.
Revenues at its core Assessments and Qualifications division rose 12%, or 7% on an underlying basis, to £796 million. Sales increased 12% at its computer-based Pearson VUE unit as test volumes leapt 22% year on year, to 12.2 million.
Sales at the company’s English Language Learning division jumped 51% (or 44% on an underlying basis), to £184 million. Test volumes rocketed 76% year on year during the six months to June.
Pearson raised its full-year sales growth forecast for English Language Learning on the back of its strong showing. Revenues are now expected to rise by around 20% from 2022 levels, up from a prior prediction of high-single-digit percentages. The firm said it expects turnover here to normalise during the second half.
Sales at the company’s Virtual Learning arm, however, dropped 4% to £373 million in the first half. On an underlying basis revenue tanked 15% as a long-running contract with Arizona State University came to an end.
Operating cash flow surged to £79 million from £9 million, thanks to strong trading as well as the benefits of ongoing cost reduction. But Pearson’s net debt rose to £911 million from £810 million a year earlier on the back of tax payments, dividends and 2022’s share buyback programme.
The company proposed an interim dividend of 7p per share for the first half, up from 6.6p a year earlier.
Forecasts Maintained
Chief executive Andy Bird commented that “we have continued to execute well operationally and maintained a sharp focus on delivering efficiencies whilst positioning our portfolio for long-term growth.”
He added “the progress we are making to accelerate our digital journey, increase interconnectivity and leverage our long-standing AI capabilities will enable us to serve an ever-greater number of individuals and enterprises with our trusted, proprietary learning content.”
Bird said that Pearson remains on course to grow group revenues by mid-single-digits through to 2025. Margins are still tipped to rise “to the upper end of mid-teens” over the period.
For this year, guidance for adjusted operating profit was maintained at £568 million. Revenues are still expected to rise by low-to-mid-single digit percentages.
“Ticking Along Nicely”
Adam Vettese, analyst at eToro, said that “Pearson is ticking along nicely, registering growth in every key financial metric despite the challenging economic environment.”
While net debt rose in the first half, he commented that the company’s balance sheet remains in “a strong position.”
Vettese added that “the education company’s digital transformation programme is clearly paying off, turning it into a more modern and relevant business offering materials fit for today’s classroom.”
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