Pearson hails new app but pandemic still dragging on numbers

A strong US jobs market has tempted potential students away from further study and into the workforce, hitting revenue at educational publisher Pearson.

The group said that its higher education unit had taken a 7 per cent hit, despite growth in the UK and Canada which was more than offset by a 9 per cent drop in the US in the first nine months of the year.

"While no market data for the full back to school period is available as yet, Pearson's internal analysis indicates a decline in enrolments, particularly in community colleges, following a surge in Covid-19 infections in the key back to school period, and a strengthening of the US labour market," it said.

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But bosses said their adjusted operating profit is still on track to meet expectations this year, and is set to hit around £377 million.

Keith Bowman, equity analyst at Interactive Investor: 'The pandemic has accelerated the company’s existing move online.'Keith Bowman, equity analyst at Interactive Investor: 'The pandemic has accelerated the company’s existing move online.'
Keith Bowman, equity analyst at Interactive Investor: 'The pandemic has accelerated the company’s existing move online.'

Its virtual learning unit - a strong performer during the pandemic - grew revenue by 14 per cent, some of it boosted by a strong performance for its online schools.

But the online schools performance is expected to slow in the second half of the year. Enrolment grew for the current academic year because of continued Covid uncertainty, the company said.

Underlying revenue for the whole company increased 10 per cent.

Chief executive Andy Bird said: "We are encouraged with our strategic, financial and operational progress, despite the continuing effects of Covid-19 in some markets and its impact on enrolments in the back to school period.

"At this important stage of the year, we are on track to meet market expectations for the full year."

Earlier this year the company launched Pearson+, a US-based online library for the publisher's textbooks.

For a monthly fee of $15 (£11), students can borrow from its library of 1,500 books.

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“Pearson's new learning app, Pearson+, launched in late July as part of our strategy to build strong, long-term relationships with millions of students,” Bird said.

“The app provides a better user experience for students with enhanced functionality and will accelerate our recapture of the secondary market.

“We have seen encouraging progress to date, with over two million registered users, reflecting a strong uptake from MyLab and Mastering users and more than 100,000 paid subscriptions.”

Keith Bowman, equity analyst at online investment service Interactive Investor, noted: “Education company Pearson offered broad reassurance in its new strategy as take-up of its new learning app proved strong and it maintained full-year profit guidance.

“For investors, the pandemic has accelerated the company’s existing move online. Previous initiatives to switch from textbooks to online materials have now been extended to target consumers directly, and beyond students attending schools and colleges.

“Business disposals have helped reduce group net debt and an estimated forward dividend yield of over 2.5 per cent is not to be sniffed at in an era of ultra-low interest rates.

“However, some impact from the pandemic is still being felt, while the company’s record for transformations is arguably patchy. For now, and given the company’s ongoing transition, analyst consensus opinion currently points to a hold.”

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