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Pearson posts better-than-expected first-half results, on track to return to underlying full-year profit growth

Last updated: 18:30 27 Jul 2018 AEST, First published: 16:38 27 Jul 2018 AEST

Pearson building
Pearson saw its first-half sales fall to £1.865bn, down 9% from the £2.047bn reported a year earlier, although underlying growth was 2%

Pearson plc (LON:PSON) reported better-than-expected first-half results, with the educational publishing group buoyed by online courses and demand in the US, and reiterated that it is on track to return to underlying profit growth this year.

The FTSE 100-listed firm posted half-year adjusted operating profit of £107mln, flat on the first-half of 2017 but up 46% on an underlying basis and well ahead of the consensus forecast for £85mln.

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The group saw its first-half sales fall to £1.865bn, down 9% from the £2.047bn reported a year earlier, although underlying growth was 2%

Pearson said: “US Higher Education Courseware revenue grew modestly in the first half helped by lower returns, as expected. However, in line with our full year guidance for this segment, we continue to expect a decline in net sales in the second half as gross sales continue to be impacted by ongoing underlying market pressures.”

The group said it expects to deliver underlying profit growth in 2018.

John Fallon, Pearson’s chief executive said: "Although there is still much to do, we have had a good first half and continued to make progress against our strategic priorities.”

Pearson hiked its interim dividend by 10% to 5.5p, up from 5.0p a year earlier.

In early morning trading, Pearson shares were 2.2% higher at 944p.

Strategic repositioning now largely complete

George Salmon, equity analyst at Hargreaves Lansdown commented: “The scale of the transformation at Pearson is highlighted by the size of the adjustments it’s making to profit numbers. Operating profits are, in reality, less than half of the £233mln reported figure, which is massively boosted by asset sales.

“There’s still one or two bits and pieces left to go, but Pearson’s strategic repositioning is now largely complete. What’s left behind is a pure-play on education, historically not a bad place to be. The problem is the sector is in the midst of change. A trend towards online services is at the heart of the disruption.”

He added: “To justify the sale of assets like the Financial Times and Economist newspapers, Pearson needs to prove itself capable of thriving in this brave new world of interactive education. These results will give some assurance on that front, but the bumper sales season doesn’t come until later in the year. That makes full-year results the more important test.”

 -- Adds share price, analyst comment --

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