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Pearson swings to full year profit as restructuring efforts pay off

Last updated: 21:32 23 Feb 2018 AEDT, First published: 19:32 23 Feb 2018 AEDT

Pearson
Pearson's shares rose 5% in morning trading

Pearson plc (LON:PSON) swung to a profit in 2017 on the back of a restructuring to simplify the business.

The education giant also announced that it was in talks with potential buyers to sell its K12 school business in the US.

It posted a pre-tax profit of £421mln following a £2.5mln loss the previous year when it took an impairment in its US business. 

Revenues came to £4.5bn, down 4% at constant exchange rates on the previous year or a 2% decline on an underlying basis, due to a weak performance in the higher education business in the US. 

Liberum reiterated a 'sell' rating on the stock, saying "the key question for Pearson in 2018 is how it responds to the threat of the new all you can eat offer from No.2 US Higher Education company Cengage, which threatens its single most important business".

Pearson streamlines through disposals 

The company cut its debt pile to a net £432mln from £1bn thanks to proceeds from disposals in 2017, including the sale of its Global Education unit and a 22% stake in Penguin Random House.

“Pearson has made good progress against its strategic priorities in 2017 with further simplification of the portfolio, strengthening of our balance sheet and delivering results at the top end of guidance,” said chief executive John Fallon.

“We are confident we will make further progress against our strategic priorities and grow underlying profit in 2018."

READ: Pearson stabilises but sees another flat year ahead

Cost savings and dividend

The company said it was on track to deliver £300mln of annualised cost savings by 2020 under its restructuring plan. 

Pearson proposed a final dividend of 12p, bringing the total payout for the year to 17p, down from 52p in 2016. This comes on top of a £300mln share buyback announced in October. 

In 2018 it expects to report adjusted operating profit of between £520mln and £560mln and adjusted earnings per share (EPS) of 49p to 53p.

It reported adjusted operating profit of £576mln in 2017 and EPS of 54.1p thanks to proceeds from its disposals. 

Shares jumped 5.3% to 742p in morning trade. 

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