Pearson reports £2.5bn loss but revenues beat forecasts

The education group Pearson has reported a £2.5bn pre tax loss for
2016 as revenues declined by eight per cent and the company took a
huge writedown on the value of its US higher education business.

The FTSE 100 group said the “underlying issues in the North American
higher education courseware market were more severe than anticipated”,
highlighting declining student enrolments and changes in buying
patterns and a correction of inventory levels by college bookstores
and distributors.

Pearson had already issued a profit warning in January which sent the
company’s shares tumbling by 30 per cent as revenues from its US
higher education business fell by 18 per cent in 2016.

However, beyond the headline losses, the company reported ahead of
consensus revenues for the year at £4.496bn and operating profits of
£635m.

Analysts at Citi were also cheered by better signals on its debt
position and the company’s plans to dispose of Global Education, its
English test business in China and to find a strategic partner for
Wall Street English, its English language learning business.

Pearson chief executive John Fallon said:

2016 was a challenging year for Pearson, but we remain the global leader in education, with a strong market position.

Our priorities for 2017 are clear. We will continue to accelerate
our digital transformation, simplify our portfolio, control our costs, and focus our investment on the biggest growth opportunities in education.