Pearson PLC (LON:PSON) said it will pay its final dividend for last year, as a rise in online learning in the first quarter during the coronavirus pandemic has been offset by the closure of its test centres.
Underlying sales fell 5% in the first quarter of 2020, the FTSE 100-listed educational publisher said in a trading statement, with online learning the only division to enjoy growth in the period, of 6%.
Global assessment sales fell 3%, while North American courseware, the group’s bugbear in recent years, shrank another 10%, as did international sales, most of which had been indicated in a recent update.
Closure of assessment centres will have a £20-30mln impact on operating profit per month, with a single £20mln hit so far from the cancellation of US school and college exams, though UK cancellations are not expected to do much damage, the company said.
However Pearson is taking the opportunity to accelerate the shift to digital in US higher education as well as investing in its online learning business amid recent growth in demand, offering free services and resources available to schools, colleges and universities closed during the coronavirus lockdown.
Another free online portal is also being launched, called UK Learns, containing free digital courses to “help re-skill and broaden employability prospects” for the furloughed and unemployed.
Net debt stood at around £1.4bn at the end of March, with roughly £0.8bn of liquidity since boosted by the injection of £530mln of cash after completing the sale of Penguin Random House earlier this month.
The group, which has been looking to trim costs as part of a simplification program over recent year, has chosen not to furlough any staff but instead redeploy them around the group, while chief executive John Fallon and other senior members of the board have taken 20-50% cuts to their salaries and fees.
Fallon said: “When the threat of the pandemic eventually eases, it will be even clearer that the future of learning is increasingly digital.”
Payment of the final dividend of 13.5p will be put to shareholders at Friday's annual meeting.
Shares in Pearson fell more than 3% on Friday morning to 435.9p, down around a third so far this year.
Analysts at AJ Bell said: “By offering a lot of its online resources for free during the crisis, Pearson is effectively getting customers used to consuming its products through the digital channel and hopefully creating a new habit that will be sticky once the world returns to normal.”
Analyst Emilie Stevens at Hargreaves Lansdown said: “It’s too early for cheers though, as growth online is still not enough to offset declines elsewhere in the business, and a lot of the new interest is being generated by freebies.
“But millions of new digital users are still millions of new digital users and it’s also promising to hear Pearson’s seeing contact from those previously unconvinced – larger institutions have come knocking for digital solutions at scale.”
She said things are likely to get worse before they get better: “Lockdown closures are a serious hit to profits and the longer the lockdown, the bigger the dent.”
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