Pearson’s performance exceeds forecasts amidst recovery in studying English

Pearson’s full-year earnings beat expectations, thanks to a resurgence in demand for English language studies.

The FTSE 100 education publisher’s adjusted operating profit grew about 11 per cent on an underlying basis to £455 million in 2022, compared to average analyst forecasts of £446 million.

Underlying revenue was also up 5 percent as the easing of Covid-19 restrictions led to a return of exams after many were canceled last year.

It also sparked a resurgence in the number of students traveling abroad to study English, with purchases of products and services related to learning the language increasing by nearly a quarter.

Demand for Pearson’s English tests skyrocketed 90 percent, while institutional sales increased significantly in Latin America and the Middle East, offsetting the impact of new laws on extracurricular activities in China.

While an easing of lockdown regulations allowed a return to face-to-face education, virtual learning revenue growth remained steady on the back of solid retention rates over the past full academic year.

In addition, the number of corporate clients in the company’s people skills portfolio more than doubled to more than 1,500, primarily as a result of the acquisition of software company Credly.

Higher education sales fell, however, due to a drop in enrollment, a problem accelerated among men in the US, and a loss of business for several publishers.

Pearson is currently executing a cost reduction program to increase margins.

This year alone, around £120 million is on track to be saved, of which £20 million is intended to minimize inflationary burdens.

Group CEO Andy Bird said the “performance demonstrates focused execution and continued momentum in the business as we continue to implement our new strategy that will support our future growth.”

He added, “Pearson is well positioned to make further progress due to the structural growth in our markets, the ongoing need to upskill and reskill and the strength of our offering.”

In recent years, the company, which once owned The Economist magazine and The Financial Times, has sought to reduce its reliance on textbooks as consumers have begun to learn more online.

Under Bird’s leadership, it has sold its course material publishing operations in South Africa, Hong Kong, French-speaking Canada, Italy and Germany, with the latter two divisions being bought for £163 million by Sanoma Corporation, Finland’s largest media organisation.

The group has also acquired Mondly, a language learning app that allows users to learn a new language through virtual or augmented reality, and Florida-based digital tutoring platform Clutch Prep.

Pearson shares were up 1.4 percent late Wednesday morning to 929.2 pence, meaning their value is up about 49 percent over the past 12 months.

Victoria Scholar, head of investment at Interactive Investor, said: “Investors are excited about the opportunities Pearson is seizing, and this is reflected in the impressive performance of the share price one year from now.”