REG - Pearson PLC - Pearson 2022 Trading Update

PearsonAnnouncement

18/01/2023 07:00

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RNS Number : 0451N  Pearson PLC  18 January 2023

 
 
Pearson 2022 Trading Update (Unaudited)
 18(th) January 2023  Continuing strategic and operational momentum throughout 2022, trading ahead
                      of expectations

Highlights
 ·         Group underlying sales for the full year up 5% and adjusted operating profit
           of c.£455m at £:$ 1.24, up c.11% on an underlying basis compared to 2021,
           ahead of expectations.
 ·         Strong trading performance reflects good result in English Language Learning,
           Virtual Learning, Workforce Skills and Assessment & Qualifications, offset
           by an expected, albeit reduced, decline in Higher Education.
 ·         A year of strategic and operational progress; reshaping our portfolio for
           growth, adding capabilities and increasing interconnectivity between divisions
           to unlock synergies and build further lifelong learning potential.
 ·         On track to deliver approximately £120m of cost efficiencies in 2023,
           weighted to Higher

           Education, some £20m of which will be used to offset inflationary pressures.

 

Andy Bird, Pearson's Chief Executive, said:

"Pearson has completed the year ahead of our original expectations. This
performance demonstrates focused execution and the ongoing momentum in the
business as we continue to implement our new strategy that underpins our
future growth. Pearson is well positioned to make further progress reflecting
the structural growth in our markets, the continued need for upskilling and
reskilling, and the strength of our offering."

 

Underlying sales growth of 5% for 2022

 ·             Assessment & Qualifications sales for the full year were up 8% with strong
               performances in US Student Assessment and UK & International
               Qualifications as exams resumed, and in Clinical Assessment due to good
               government funding and continued focus on health and wellbeing. VUE test
               volumes* grew 16% to 19.4m with particularly strong growth in the IT segment
               and healthcare. Q4 sales were down 4% with expected declines in US Student
               Assessment and UK & International Qualifications due to 2021 phasing,
               offset by strong growth in VUE, as the impact of changes to the DVSA contract
               unwound, and growth in Clinical Assessment.
 ·             Virtual Learning sales for the full year were up 4%. Virtual schools had a
               good performance with sales up 4%, driven by 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 and lower district
               partnership renewals. OPM sales were up by 4% in the full year. Q4 sales were
               flat with OPM growth offset by a slight decline in virtual school sales
               reflecting lower 22/23 school year enrolments as the Covid-19 cohort fully
               unwinds.
 ·             Higher Education sales were down 4% for the full year driven by a decline in
               enrolments and a loss of adoptions to non-mainstream publishers including open
               educational resources partially offset by improved pricing. As highlighted at
               the nine-month trading update, these factors alongside prepaid access card
               elimination mean that unit sales have declined more than revenues. There was
               continued momentum in Inclusive Access with 9% sales growth to not-for-profit
               institutions and the total number of institutions increasing to 1,040. Sales
               for the division were down 3% in Q4. Pearson+ performed well in the Fall
               semester with 2.83m registered users and 406k paid subscriptions, representing
               a threefold increase compared to prior year Fall semester.
 ·             English Language Learning sales were up 24% for the full year. Performance was
               underpinned by Pearson Test of English (PTE) volumes, which were up 90%, as
               global mobility continued to improve with border re-openings and we saw market
               share gain in India. Within Institutional, there was strong growth in Latin
               America and the Middle East offset by the ongoing impact of government reforms
               in China. Q4 sales were up 14% with continued strong growth in PTE despite a
               tougher comparator.
 ·             Workforce Skills sales were up 7% for the full year, with growth driven by
               BTEC and Apprenticeships, GED and TalentLens. The Performance business grew by
               5%. The enterprise focused Transformation business, which is the foundation of
               our integrated suite of workforce skills solutions, grew by 12%. Pearson has
               1,503 enterprise clients in its Workforce Skills portfolio, up 133% on last
               year, with the acquisition of Credly underpinning this growth. Q4 sales were
               down 2%, reflecting prior year Covid-19 related BTEC revenue phasing benefits.
               Our Transformation business continued to grow strongly.
 ·             Businesses under strategic review sales declined 16% for the full year.
               Following the announcement of the sale of our international courseware local
               publishing businesses in Europe, French speaking Canada, Hong Kong and South
               Africa, these financials are no longer included in our underlying performance
               measures.

 

 

Strategic Progress - Highlights

 ·         Integration of Credly and Faethm progressing well, underpinning our new
           enterprise and professional consumer strategy. Acquisition of Mondly enhances
           our credentials in the language learning direct to consumer space, contributes
           to the transformation of English Language Learning and increases
           interconnectivity across the Group. Subject to closing, the PDRI acquisition
           will expand Pearson's services to U.S. federal agencies and grows presence
           with large employers. Disposal of our international courseware local
           publishing businesses is now complete.
 ·         Implemented change in US Higher Education sales leadership, restructured sales
           team and developed new go to market approach for 2023. Sales and marketing
           focus on helping to win and retain more adoptions. Investment focused on
           modernising our platform products to increase stability and deliver upgraded,
           best-in-class features that will improve the instructor and student
           experience.
 ·         Pearson+ roll out progressing well with launch of 18 study channels, widening
           the total addressable market for the Pearson lifelong learning ecosystem.
           Creating increasing interconnectivity between divisions with successful
           integration of Mondly on Pearson+.
 ·         Further efficiencies announced at Interim results in August, accelerating our
           improved margin expectation to 2023 from 2025. On track to deliver
           approximately £120m of cost efficiencies in 2023, weighted to Higher
           Education, some £20m of which will be used to offset ongoing inflationary
           pressures. One-time costs to deliver these savings, which are excluded from
           adjusted operating profit to better highlight underlying performance, now
           expected to be c.£150m reflecting increased level of savings and movements in
           FX. Approximately £85m will be incurred in cash, mostly in 2023, with the
           remaining £65m relating to write offs of predominantly property lease assets.

 
Financial summary

Underlying growth for the fourth quarter and financial year ended 31st
December compared to the equivalent period in 2021.

                                          Q4     Full Year
 Sales
 Assessment & Qualifications              (4)%   8%
 Virtual Learning                         0%     4%
 Higher Education                         (3)%   (4)%
 English Language Learning                14%    24%
 Workforce Skills                         (2)%   7%
 Sub total                                (1)%   5%
 Strategic review                         (35)%  (16)%
 Total                                    (1)%   5%

 

Strong balance sheet and net debt of c.£0.6bn. Cash conversion c.85% with
strong underlying performance impacted, as expected, by timing of disposal of
international courseware local publishing businesses in 2022.

 

£350m share buyback programme has now been completed with a total of 42.3m
shares repurchased.

 

For an accompanying data table providing 2022 metrics relating to revenue
across select key businesses, please follow this link
(https://plc.pearson.com/en-GB/investors/performance/results-reports-presentations)
.

 

Full year results will be announced on 3rd March 2023.

 

 

 

 

 

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

* VUE test volumes include GED test but revenues for GED are reflected in the
Workforce Skills division.

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

 

 

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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