Learning company Pearson anticipates good revenue growth in 2012 in spite of the 120m pound cost of closing the group’s UK adult training business, Pearson in Practice.
That comes even after weakness in the key fourth-quarter selling season for higher education, consumer publishing and corporate advertising, as well as the ongoing structural changes in the industry.
For the year as a whole, the group stated that it expects to report an operating profit in EBITA (earnings before interest, taxes and amortisation) terms of approximately £935m (Investec: £951m) and adjusted earnings of approximately 84p per share (Investec: 84.5), broadly in line with the year before at constant exchange rates.
Last year the company reported annual operating profits of £942m.
The total interest charge to adjusted earnings is forecast by the group to be approximately £50m including a £12m pensions finance credit and Pearson’s effective tax rate is expected to be around the low-end of its guidance of 24-26%.
Geographical business performanceThe group’s North American education business is expected to report ‘modest revenue growth’ at constant exchange rates.
The international education business should report ‘double digit sales growth’ and the professional business is forecast to report operating profits significantly lower than in 2011.
However, the group stated that it had faced a ‘dramatic fall in demand with changes to the apprenticeships programme’ – as a result of new government legislation – leading to the conclusion that its Pearson in Practise UK adult training business no longer had a sustainable model. The cost of closure and impairments are expected to be approximately £120m.
Financial Times GroupThe Financial Times Group is expected to report ‘good revenue’ growth for the full year, in spite of a slow fourth quarter caused by weaker advertising sales.
Digital and subscription-based revenues were described as having continued to grow well at both the FT and Mergermarket.
However, it stated that the FT Group’s full-year profits would be significantly lower than in 2011, reflecting the absence of a contribution from FTSE International following its disposal and further actions to accelerate the shift from print to digital.
PenguinThe group stated that Penguin benefited from a good fourth-quarter publishing performance and traded in line with expectations in its key selling season.
Following Pearson and Bertelsmann’s announcement of their plans to combine Penguin with Random House, the two companies are seeking clearance for the proposed merger from appropriate regulatory authorities around the world.
Completion of the process is expected to ‘prompt significant restructuring’ as the group demerges Penguin from Pearson and integrates it with Random House.
FTSE 100-listed Pearson generates approximately 60% of its sales in the US.
On this last point it may be worth noting that one of the main risks identified by Investec pertains to US state financing.
Pearson expects the tough market conditions and structural industry change to continue into 2013.
Lastly, Investec points out that the stock is trading at a premium valuation of 13.5 times estimated 2013 calendar year price-to-earnings.