Pearson PLC (LSE:PSON) shares fell 2% in early trading despite the education group confirming profit ahead of expectations, a 5% dividend increase and issuing an upbeat outlook.
The FTSE 100-listed company said it was confident of further underlying sales growth in the low to mid-single digits with adjusted operating profit in line with the median average analyst forecast of £585mln.
Revenues for the calendar year were in line with what was said in its January year-end update, up 5% to £3.8bn, while adjusted operating profit, up 11% to £456mln, was slightly above guidance.
Net debt stood at £557mln, which was slightly better than guidance of £600mln after the completion of a £350mln buyback programme and cash conversion of 88%.
A final dividend of 14.9p made for a 21.5p full-year dividend, up from 20.5p in in 2021.
Chief executive Andy Bird said the new Workforce Skills talent investment platform created to tap into growth in education markets and “increased need for upskilling and reskilling” will be “a key growth driver” in coming years.
The shares, which were one of the best performers in the FTSE 350 last year with around a 50% gain, fell below 900p in early trading.
Analyst Roddy Davidson at Shore Capital said it was a year of “solid trading momentum and strategic implementation” for Pearson, with the company increasing its exposure and competitive position within digital products, “and its status as a beneficiary of a positive long-term outlook for global learning spend”.
Following a relatively flat share price performance over the last six months, Shore Cap’s current estimates put the stock on a PE ratio of 16.3, falling to 14.6 in 2024, with a forecast dividend yield of 2.4% rising to 2.6%.
“We regard these metrics as undemanding and view the group as a highly attractive strategic asset,” said Davidson, noting around 35% upside potential to his fair value assessment of 1,263p.