Pearson beats forecasts as relaxation of travel rules drives recovery in demand for English language studies
- Pearson said its adjusted operating profits grew by c.11% on an underlying basis
- Demand for the FTSE 100 company’s English tests skyrocketed by 90% last year
- Looser Covid rules led to a rebound in people travelling abroad to study English
Pearson’s full-year profits surpassed expectations, thanks to a revival in demand for English language studies.
The FTSE 100 education publisher’s adjusted operating profits grew by about 11 per cent on an underlying basis to £455million in 2022, compared to average analyst forecasts of £446million.
Underlying turnover also increased by 5 per cent as loosening Covid-19 restrictions prompted a return of exams after many were cancelled the previous year.
Rebound: Education publisher Pearson said its adjusted operating profits grew by about 11 per cent on an underlying basis to £455million in 2022
It also produced a resurgence in students travelling abroad to study English, with purchases of products and services related to learning the language climbing by almost a quarter.
Demand for Pearson’s English tests skyrocketed by 90 per cent, while institutional sales expanded significantly across Latin America and the Middle East, offsetting the impact caused by new laws on extracurricular activities in China.
While a relaxation of lockdown regulations enabled a return to in-person teaching, virtual learning revenue growth remained steady thanks to solid retention rates related to the last full academic year.
Alongside this, the number of enterprise clients in the firm’s workforce skills portfolio more than doubled to over 1,500, primarily due to the takeover of software company Credly.
However, higher education sales fell back amid a drop in enrollment numbers, a problem that was accelerated among men in the US and a loss of trade to different publishers.
Pearson is currently undertaking a cost-reduction programme in efforts to boost margins.
Approximately £120million is on track to be saved this year alone, with £20million intended for minimising inflationary burdens.
Andy Bird, the group’s chief executive, said the ‘performance demonstrates focused execution and the ongoing momentum in the business as we continue to implement our new strategy that underpins our future growth’.
He added: ‘Pearson is well positioned to make further progress reflecting the structural growth in our markets, the continued need for upskilling and reskilling, 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 shifted to learning online more often.
Under Bird’s leadership, it has sold off its courseware publishing operations in South Africa, Hong Kong, French-speaking Canada, Italy and Germany, with the latter two divisions being bought for £163million by Sanoma Corporation, Finland’s largest media organisation.
The group has also bought Mondly, a language learning app where users can study a new language via virtual or augmented reality, and Florida-based digital tutoring platform Clutch Prep.
Pearson shares were up 1.4 per cent to 929.2p on late Wednesday morning, meaning their value has expanded by around 49 per cent in the past 12 months.
Victoria Scholar, the head of investment at Interactive Investor, said: ‘Investors are excited about the opportunities that Pearson is grabbing, and this has been reflected in its impressive one-year share price performance.’