Pearson expects education demand to insulate against economic headwinds

Publisher Pearson has said it expects demand for its courses and textbooks to insulate it against global economic headwinds as a digital turnround at the FTSE 100 group showed signs of bearing fruit.

The education publishing group said on Monday that it expected its profit margin to grow from 9 per cent to a mid-teen target next year — two years ahead of schedule — after cost cuts and strong demand for its courses as Covid-related restrictions ease.

Chief executive Andy Bird, a former Disney executive who took over in 2020, has shifted Pearson’s focus from being a traditional textbook publisher to a digital brand catering for education beyond school and college, such as adult reskilling programmes.

Bird said the shift towards online adult education and employee training would help insulate the group from the worst of an economic downturn, with continued demand for “upskilling and reskilling”.

“We are in the business of delivering learning for life, which makes us a resilient and diverse group,” he added.

Pearson shares rose 12 per cent to 847p on Monday afternoon, although this was still below the 870p a share, or £7bn, bid from private equity group Apollo that the board rejected in March.

Bird’s comments came as Pearson reported revenues of £1.8bn for the six months to June 30, up from £1.6bn a year earlier.

Pre-tax profit of £148mn was significantly higher than the £9mn reported in the same half last year because of asset disposals and lower restructuring costs. On an underlying basis, adjusted operating profit rose 22 per cent year on year to £160mn.

Sally Johnson, chief financial officer, said Pearson had benefited from the reopening of international borders, resulting in solid demand for its English language courses. “Covid is something that is behind us and we are in a new normal,” said Johnson. “We are resilient in a recessionary environment.”

Pearson, which employs 21,000 people worldwide, said it had identified £100mn of cost savings that would come into effect next year.

First-half figures were buoyed by strong performances in the company’s assessment and qualifications division as underlying sales rose 16 per cent, with those in its English language unit up 22 per cent. However, underlying sales at Pearson’s higher education unit fell 4 per cent year on year.

The interim dividend edged up 5 per cent to 6.6p per share.

Under previous chief executive John Fallon, Pearson sold off stakes in The Economist, the Financial Times and Penguin Random House and issued multiple profit warnings, as it struggled to adapt to the US education market moving online.