Pearson expects sales to return to growth next year
The publishing company posted an 18% rise in profits for 2018.
Pearson said it expects sales to stabilise this year and return to growth in 2020 as it reported an 18% increase profits on lower costs.
The publishing company made a pre-tax profit of £498 million last year compared with £421 million in 2017 as reduced costs were offset by challenges in its US higher education business.
Revenue fell to £4.13 billion from £4.51 billion due to weakness in the US business, which has seen sales fall as students are increasingly buying second-hand and digital textbooks.
Chief executive John Fallon acknowledged that there is still work to do but is optimistic that sales will grow next year.
“We made good progress last year. We increased underlying profits, outperformed our cost savings plan and invested in the digital platforms that are making us a simpler, more efficient and innovative company,” he said.
“We are increasingly well placed to guide our customers through a lifetime of learning and help our partners shape the future of education.
“We have a lot still to do, but we expect company-wide sales to stabilise this year, and grow again in 2020 and beyond.”
The firm expects to report adjusted operating profit of between £590 million and £640 million for 2019.
Pearson is in the midst of a transformation programme and has been forced to cut jobs and sell assets including the Financial Times newspaper and The Economist magazine to focus on the education sector.
On Monday, the company said it has sold its K12 course materials business in the US to private equity firm Nexus Capital for 250 million US dollars (£193.5 million).
The deal will see Pearson bank an initial cash payment of 25 million dollars, with the remainder to be paid over seven years.
Sophie Lund-Yates, equity analyst at investment firm Hargreaves Lansdown, said it was a nice surprise to hear that Pearson expects its performance to improve, but that the publisher has relied too heavily on cost savings to keep itself going.
If grades were being handed out, the US higher education courseware business would be lucky to get a pass this year Sophie Lund-Yates, Hargreaves Lansdown
“(Pearson) should be applauded for squeezing out such savings, but at some point the juice has to run out and sales growth needs to take over.
“If grades were being handed out, the US higher education courseware business would be lucky to get a pass this year.
“Problems here mean revenue has been disappointing for a while, and a lot of that’s because competitors have been introducing new, lower-cost business models that better meet demand for inexpensive, quality materials.”
However, she said not everything is a cause for concern as Pearson’s effort to bolster its digital offering is going well, adding that hopes are pinned on digital growing fast enough to stem disappointing performance elsewhere.