Pearson’s earnings soar as exam schedules normalize and English language courses grow in popularity
- Britain’s largest education company reported first-half profits rose to £131 million
- Revenue growth was primarily driven by the assessment and qualification business
- Pearson has expanded its digital offering as textbook sales have fallen
Pearson’s profits soared in the first six months of 2022 amid a significant uptick in students taking exams and a huge demand for English language tests.
Britain’s largest education company reported first half profits rose to £131 million from just £18 million, thanks to healthy sales growth in four of its five new global divisions.
Revenue growth was primarily attributable to the Assessment and Qualifications division, as personal exam business returned to normal, contracts were won in the United States, and levels of mental health assessments exceeded forecasts.
Growth: Pearson reported first half profit rose to £131m, from just £18m last year
This offset a decline in trade at computer-based testing company VUE, following changes to a contract with the Drivers and Vehicle Standards Agency.
The division also reported adjusted operating income of £137 million, a year-on-year increase of about a third, enabling the FTSE 100 group to achieve total underlying profit of £160 million.
By comparison, the publisher’s English language course business still made a small loss of £4 million, although the easing of travel restrictions caused a surge in people taking the tests.
Pearson shares were the biggest riser in the FTSE 100 Index on Monday, rising 12.7 percent to 852.6 pence, more than double the rate of gain achieved by second-ranked HSBC Holdings.
For much of 2020 and early 2021, Pearson was financially affected by the massive closure of testing centers and cancellation of exams as governments tried to contain the Covid-19 virus.
In addition, the pandemic accelerated the long-term decline in demand for high-margin textbooks and online learning services, particularly in the US.
In response to this growing trend, the London-listed company has launched a range of strategies to improve its digital offering, identify cost savings and restructure its portfolio, with CEO Andy Bird leading much of the change.
This involved reorganizing the company into five core divisions, including virtual learning, higher education and human resources skills, reducing office space and selling numerous publishing houses.
Pearson agreed in June to sell its Italian and German K12 courseware divisions worth £163 million to Finnish media giant Sanoma Corporation and last October sold Brazil-based learning systems COC and Dom Bosco to Arco Platform.
And to increase its online portfolio, the group has acquired Credly, the world’s largest professional reference platform, and Mondly, a free language learning app that allows users to learn a new language through virtual or augmented reality.
Pearson himself has been the subject of three recent takeover bids by Apollo Global Management, all of which were rejected by its board of directors, which claimed the private equity house’s bids were too low.
Chief executive Andy Bird said: “Pearson delivered another encouraging financial performance in the first half of the year. We continue to make excellent strategic and operational progress, with momentum across the company.”
“We are already seeing clear benefits from our increasingly diverse learning ecosystem, with Pearson serving more people throughout their lifelong learning journey.”
Thanks to the strong results, Pearson has maintained its annual guidance for the fiscal year 2022 and increased its interim dividend by 5 percent to 6.6 pence per share.