Pearson 2023 (LON:PSON) has announced its latest trading update (unaudited).
Highlights
| · | Underlying Group sales growth1 of 5% for the full year, excluding OPM2 and the Strategic Review3 businesses. |
| · | Group adjusted operating profit of c.£570-575m at £:$ of 1.25 for the full year, up more than 30% on an underlying basis compared to 2022, resulting in a margin of c.15.5%. |
| · | Strong full year performance driven by Assessment & Qualifications and English Language Learning. |
| · | Cost efficiency programme successfully delivered £120m of savings. |
| · | We’re encouraged by how students are engaging with our generative AI study tools and will be expanding the current beta to many more MyLab and Mastering titles by Fall semester 2024. Higher Education platform units also delivered encouraging growth. |
| · | Pearson+ passed the milestone of 1 million cumulative paid subscriptions for the calendar year. |
Omar Abbosh, Pearson’s Chief Executive, said:
“I am excited to be leading this high quality, purpose-driven company and I would like to thank Andy for the strong progress made under his leadership.
Pearson saw strong strategic and operational progress in 2023 leading to financial performance ahead of our initial expectations. The Group is well positioned to seize growth opportunities and deliver long-term future value for all of our stakeholders. I look forward to leading the next phase in Pearson’s ongoing evolution.”
Underlying sales growth1 of 5% for 2023, excluding OPM2 and Strategic Review3 businesses; 1% in aggregate
| · | Assessment & Qualifications sales were up 7% for the full year largely driven by a strong performance in Pearson VUE with good progress in IT and healthcare alongside the commencement of new contracts. VUE test volumes4 grew 6% to 20.7m. There was also good growth across US Student Assessments, Clinical and UK & International Qualifications, due to new contract wins, good government funding and price increases. As anticipated, Q4 sales growth of 3% was slower than in prior quarters due to contract phasing. |
| · | Virtual Learning sales decreased 20% for the full year, primarily due to an 87% expected decrease in the OPM business given the previously announced ASU contract loss. Virtual Schools sales declined 2% for the full year, with enrolments for the 2023/24 academic year lower due to the previously announced loss of a larger partner school. Excluding this impact, enrolments were up 1%. Virtual Schools sales grew 5% in Q4, primarily driven by improvements in funding, as well as growth associated with the launch of Connections Academy Career Pathways. |
| · | Higher Education sales were down 3% for the full year, in line with expectations, driven by loss of adoptions to non-mainstream publishers in the first half of the year, as well as pricing mix. We saw strong growth in Inclusive Access sales to not-for-profit institutions, which were up 22% for the year, and delivered 2% growth in platform units. We’re encouraged by how students are engaging with our generative AI study tools and will be expanding the current beta to many more MyLab and Mastering titles by Fall semester 2024. Q4 sales were flat. Pearson+ performed well with 3.03m registered users and 516k paid subscriptions, representing 27% growth compared to the prior year Fall semester. Pearson+ passed the milestone of 1 million cumulative paid subscriptions for the calendar year. |
| · | English Language Learning sales increased 30% for the full year with all three segments contributing to this growth. Pearson Test of English (PTE) was the outstanding contributor, delivering volume growth of 49% against a backdrop of favourable migration policy in Australia and market share gains in India. Q4 sales grew 22% largely driven by PTE and Institutional. We launched PTE for Canadian Student Direct Stream visa applications in the second half of 2023 and expect to begin delivering PTE for Canadian economic immigration visa applications in the first quarter of 2024. We are continuing to invest in building our brand awareness and testing capacity in the competitive Canadian market. |
| · | Workforce Skills sales grew 11% for the full year, with a solid performance in both Vocational Qualifications and Workforce Solutions. Sales grew 28% in Q4, driven by strong growth in BTECs, both in the UK and internationally. |
Share buyback
| · | The previously announced buyback to repurchase £300m of shares continued, with £188m of shares repurchased as at 31st December 2023. |
| · | As at 15th January 2024 £206m of shares had been repurchased at an average price of 918p per share, representing 69% of the total programme. |
Strong financial position
| · | Pearson’s financial position remains robust, with a strong balance sheet, net debt of less than £0.8bn and a strong 2023 cash performance. |
Financial calendar
| · | Full year results will be announced on 1st March 2024. We will hold a virtual presentation and Q&A session, during which we will outline the 2024 outlook. |
| · | A business and strategic update will be provided at our Interim results in July. |
Financial summary
Underlying growth for the fourth quarter and financial year ended 31st December 2023 compared to the equivalent period in 2022.
| Sales | Q4 | Full Year |
| Assessment & Qualifications | 3% | 7% |
| Virtual Learning | (22)% | (20)% |
| Higher Education | 0% | (3)% |
| English Language Learning | 22% | 30% |
| Workforce Skills | 28% | 11% |
| Strategic Review3 | (125)% | (74)% |
| Total | 0% | 1% |
| Total, excluding OPM2 and Strategic Review3 | 6% | 5% |
1Throughout this announcement growth rates are stated on an underlying basis unless otherwise stated. Underlying growth rates exclude currency movements, and portfolio changes.
2We have completed the sale of the Pearson Online Learning Services (POLS) business and as such have removed from underlying measures throughout. Within this specific measure we exclude our entire OPM business (POLS and ASU) to aid comparison to guidance.
3Strategic Review is sales in international courseware local publishing businesses being wound down, which will continue to be reported separately until dissipated.
4VUE test volumes include GED tests but sales for GED are reflected in the Workforce Skills division. PDRI test volumes are not currently included in this metric.
