Investors encouraged to sell Pearson shares as profit continues to drop

The publisher looks to move online as the demand for printed textbooks falls

Article updated: 21 February 2020 1:00pm Author: Ian Forrest

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  • The group reported a sharp drop in full-year headline sales and profits today, but claimed that 76% of its business is now profitable
  • The company saw its sales fall 6% to £3.9bn with pre-tax profits down 53% to £232m
  • Underlying operating profit rose 6% to £581m but the company expects that to drop in 2020 to £410m-490m
  • Shares dropped 4% in early trading, following a dismal run over the past six months which has seen them fall 32% to near a five-year low
  • Recommendation: Management clearly has a long way to go with the company’s turnaround and with the last profit warning in January fresh in investors’ minds, we continue with our Sell recommendation

Publishing group Pearson reported a sharp drop in full-year headline sales and profits today, but claimed that 76% of its business is now profitable. The company saw its sales fall 6% to £3.9bn with pre-tax profits down 53% to £232m. Underlying operating profit rose 6% to £581m but the company expects that to drop in 2020 to £410m-490m. Pearson has seen a big drop in demand for its printed textbooks in the US and is in the middle of moving to more online provision of educational material.

The market clearly found little to cheer about in these results and the shares dropped 4% in early trading. That follows a dismal run over the past six months, which has seen them fall 32% to near a five-year low. Despite a small rise in the dividend, and optimistic talk by the outgoing CEO about the strength of the company’s new digital learning platform, the market is clearly waiting to see some tangible evidence of an improvement in the key North American market. With the last profit warning in January still fresh in investors’ minds and clearly a long way to go with the company’s turnaround, we continue with our sell recommendation.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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