REG - Pearson PLC - Pearson 2022 Nine Month Trading Update

PearsonAnnouncement

24/10/2022 07:00

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RNS Number : 7916D  Pearson PLC  24 October 2022

 
 
Pearson 2022 Nine Month Trading Update  (Unaudited)
 24 October 2022  Strong nine month results with continued operational and strategic momentum -
                  Group on track for full year expectations

Highlights
 ·         Group underlying sales up 7%. Full year sales and adjusted operating profit
           expectations reaffirmed.
 ·         Strong trading performance with an outstanding result in English Language
           Learning and a good performance in Virtual Learning, Workforce Skills and
           Assessment & Qualifications, offset by an expected decline in Higher
           Education.
 ·         Delivering strategic progress; reshaping our portfolio and increasing
           interconnectivity between divisions to unlock synergies and lifelong learning
           potential.
 ·         On track to deliver at least £100m of efficiencies in 2023 which will
           accelerate improved margin expectations from 2025 to 2023.

 

Andy Bird, Pearson's Chief Executive, said:

"This has been another good quarter for Pearson and I am pleased with the
continuing momentum the business is demonstrating through our sharp focus on
delivery. We are executing well on our plan for accelerated margin
improvement.

 

"We believe Pearson is well positioned for the future, and we are confident of
being able to navigate the challenging macroeconomic environment. We are
making strong progress in creating a digital learning ecosystem which can
serve many more people across their lifetime of learning. This will lead to
better outcomes for our learners and also deliver value for our shareholders
and wider stakeholders."

 

Underlying sales growth of 7%

 ·         Assessment & Qualifications sales grew 12% with good performances in
           Clinical Assessment due to a continued focus on health and wellness, as well
           as US Student Assessment and UK & International Qualifications, as exam
           timetables continue to normalise after COVID-19 disruption.
 ·         Virtual Learning sales increased 5% underpinned by a good performance in
           Virtual Schools. Online Program Management (OPM) grew 3% with slower enrolment
           growth than anticipated when we entered the year.
 ·         Higher Education sales were down 4% with US Higher Education Courseware sales
           declining 4%, consistent with our expectations. Pearson+ is performing well
           with robust growth versus prior year Fall semester. 17 study channels are live
           and engagement to date has been encouraging.
 ·         English Language Learning sales increased 28%, with strong growth in Pearson
           Test of English volumes as global mobility continues to improve with border
           re-openings. English Courseware delivered sales growth across most
           international markets offset by the ongoing impact of the reforms in China.
 ·         Workforce Skills sales grew 9%. Sales in our Performance business, which
           includes BTEC and Apprenticeships, grew well. Sales in our Transformation
           business, which includes Credly and Faethm, as well as GED and TalentLens,
           grew strongly.
 ·         Strategic review sales grew 20% due to the phasing of orders within our South
           African business. Following the completion of the disposals of our
           international courseware local publishing businesses in Europe,
           French-speaking Canada and Hong Kong these businesses are no longer included
           in our underlying sales measure.

 

Share buyback

 ·         £350m share buyback continuing, with over £240m of shares repurchased as of
           30(th) September 2022.

2022 outlook reaffirmed*

 ·         Pearson remains on track to deliver group sales and adjusted operating profit
           consensus expectations for FY22.

Financial summary
 Underlying growth for the third quarter and nine months ended 30th September
 compared to the equivalent period in 2021.
 Sales                            Q3    Nine months
 Assessment & Qualifications      7%    12%
 Virtual Learning                 9%    5%
 Higher Education                 (4)%  (4)%
 English Language Learning        36%   28%
 Workforce Skills                 20%   9%
 Sub-total                        7%    7%
 Strategic review                       20%
 Total                                  7%

Throughout this announcement growth rates are stated on an underlying basis
unless otherwise stated. Underlying growth rates exclude currency movements
and portfolio changes.

*2022 consensus on the Pearson website as at full year 2021; median adjusted
operating profit of £416m at £:$ 1.37. For reference, each 5c move in USD FX
rate equates to approximately £15m of adjusted operating profit. The disposal
of our strategic review businesses impacts adjusted operating profit by
c.£15m in 2022.

Assessment & Qualifications

Assessment & Qualifications sales increased 12%.

 

In Professional Certification (VUE) sales were down 3% predominantly due to
the DVSA contract change.

 

Clinical Assessment performed well with sales up 9% due to an ongoing focus on
mental health and wellbeing combined with government funding driving demand
for core products and digital solutions.

 

US Student Assessment sales grew 32% due to the full resumption of exams
across US states.

 

In UK & International Qualifications, sales grew 35% due to the return of
exams following COVID-19 disruption.

 

We expect Assessment & Qualifications to deliver good revenue growth this
year but there will be a tougher comparison in Q4 given the phasing in 2021
due to COVID-19. We expect VUE to return to growth in Q4 as the impact of the
DVSA contract loss unwinds.

 

Virtual Learning

In Virtual Learning, sales increased 5%.

 

In Virtual Schools, sales increased by 6% reflecting firm retention rates
relating to the 2021/22 academic year and favourable revenue mix partially
offset by a small decline in enrolments for the 2022/23 academic year, as the
COVID-19 cohort fully unwinds, along with lower district partnership renewals.

 

In Online Program Management, sales increased by 3% with growth in the UK and
Australia partially offset by declines in North America due to lower
enrolments. We will update in due course on the ongoing strategic review of
our OPM business.

 

Higher Education

Higher Education sales were down 4% with US Higher Education Courseware sales
declining 4%, consistent with our expectations. Early market data for the back
to school period shows enrolments to be down in line with our assumption at
the beginning of the year. We also believe there may have been a loss of
market monetisation due to an increase in non-consumption. As previously
highlighted, growth in Pearson+ subscriptions means that there has also been a
shift in revenue recognition from Q3 to Q4. These impacts have been partially
offset by improved pricing.

 

Pearson+ is performing very well with robust growth versus prior year Fall
semester. 17 study channels are live and engagement to date has been
encouraging.

 

English Language Learning

In English Language Learning, sales increased 28% with continued strong growth
in Pearson Test of English volumes for tests taken in India and Australia, and
for tests taken by UK bound people as global mobility continues to improve
with border re-openings, as well as a limited-time extension of post-study
visa applications in Australia. We also gained market share in India. We
expect to have a strong year overall, although there will be a tougher
comparison in Q4 as borders started to reopen at the end of last year and the
impact of the post-study visa extension in Australia reduces.

 

English Courseware revenue was up 4% driven by international growth across all
regions offset by the ongoing impact of the government reforms in China.

 

Mondly performance was encouraging, benefitting from access to the high growth
direct to consumer language learning market. It is on track with our
expectations, contributing to the transformation of English Language Learning,
as well as increasing interconnectivity across the Group with its recent
integration on Pearson+.

 

Workforce Skills

Workforce Skills sales grew 9%. Sales in our Performance business, which
includes BTEC and Apprenticeships, grew well. Sales in our Transformation
business, which includes Credly and Faethm, as well as GED and TalentLens,
grew strongly. Our Transformation business is the foundation of our new
enterprise and professional consumer strategy on which we are building our
integrated suite of workforce skills solutions for enterprises.

 

Strategic Review

Sales in our international courseware local publishing businesses under
strategic review grew 20%. We have now concluded the sales of our
international courseware local publishing businesses in Europe,
French-speaking Canada and Hong Kong. This means these businesses, which were
showing a decline at the half year, are no longer included in underlying sales
growth. The completion of the sale of our South Africa business is expected in
Q4. The impact of these disposals on our adjusted operating profit will be
c.£15m in 2022 and just under £25m for 2023. Operating cashflow for these
businesses is weighted to Q4 and the timing of completions will impact
operating cash conversion in 2022. The retained English-speaking Canadian and
Australian K12 Courseware businesses are now shown within Assessment &
Qualifications.

 

Strong financial position

Pearson's financial position remains robust, with low net debt and strong
liquidity.

 

Contacts
 Investor Relations  Jo Russell                                                                  +44 (0) 7785 451 266

                     James Caddy                                                                 +44 (0) 7825 948 218

                     Gemma Terry                                                                 +44 (0) 7841 363 216
 Teneo               Charles Armitstead                                                          +44 (0) 7703 330 269
 Virtual event       Pearson's 2022 nine month trading update online presentation taking place
                     today at 0830 (BST). Register to receive log in details:
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                     (https://pearson.connectid.cloud/register)

 

Notes

Forward looking statements: Except for the historical information contained
herein, the matters discussed in this statement include forward-looking
statements. In particular, all statements that express forecasts, expectations
and projections with respect to future matters, including trends in results of
operations, margins, growth rates, overall market trends, the impact of
interest or exchange rates, the availability of financing, anticipated cost
savings and synergies and the execution of Pearson's strategy, are
forward-looking statements. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend on
circumstances that will occur in future. They are based on numerous
assumptions regarding Pearson's present and future business strategies and the
environment in which it will operate in the future. There are a number of
factors which could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements, including
a number of factors outside Pearson's control. These include international,
national and local conditions, as well as competition. They also include other
risks detailed from time to time in Pearson's publicly-filed documents and you
are advised to read, in particular, the risk factors set out in Pearson's
latest annual report and accounts, which can be found on its website
(www.pearsonplc.com). Any forward-looking statements speak only as of the date
they are made, and Pearson gives no undertaking to update forward-looking
statements to reflect any changes in its expectations with regard thereto or
any changes to events, conditions or circumstances on which any such statement
is based. Readers are cautioned not to place undue reliance on such
forward-looking statements.

 

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