Pearson sees bright future in education after FT sale

[LONDON] Pearson will increase earnings this year for the first time since 2011, it said on Friday, allaying worries about the health of a US education business that is increasingly important after its deal to sell the Financial Times newspaper.

The British publisher posted on Friday a small fall in first-half earnings, a day after Japan's Nikkei agreed to buy the global business newspaper for US$1.3 billion.

However, the period accounts for just 10 per cent of annual operating profit due to the timing of the academic year and Chief Executive John Fallon said the firm was doing well, particularly in North America where underlying sales rose 3 per cent.

"A good competitive performance overall means we are able to reiterate our earnings guidance, and Pearson will return to growth this year," he said.

Investors have been fretting about Pearson's US education testing business, which accounts for about 7 per cent of sales, after it lost big contracts including in Texas. Fallon said that business was stabilising.

Citi analysts had expected underlying sales in North America to be flat to down 1 per cent.

Pearson has been adapting to meet demand for more online learning and digital products at a time when academic budgets in Britain and the United States have been squeezed by cash-strapped governments.

The deal to sell the Financial Times ended years of speculation over the newspaper, which was seen by analysts as an anomaly in a group focused on education textbooks, testing and digital learning.

Pearson did not quantify the impact of the sale in its results as it does not close until later in the year, although it noted on Thursday the newspaper contributed about 24 million pounds of operating income.

The deal would generate net proceeds of 650-700 million pounds, more than expected according to Citi analysts, and if used to pay debt, could cause a "mild accretion" to analysts'consensus earnings per share (EPS) forecast.

Finance Director Robin Freestone said the proceeds would be used to maintain a strong balance sheet, for investment, and finally acquisitions. A payout to shareholders via a special dividend or share buyback, was not top of the agenda, he added.

At 1015 GMT, Pearson shares were up 1.1 per cent at 1,248 pence.

First-half adjusted EPS fell to 4.4 pence from 4.7 pence the same time last year. Sales rose 1 per cent to 2.2 billion pounds.

Pearson said it still expected full-year adjusted EPS of 75-80 pence, though the sale of PowerSchool in June would reduce it by about 1 pence and currency moves could take another 2 pence off. Adjusted EPS was 66.7 pence last year The group increased its interim dividend by 6 per cent to 18 pence a share.

REUTERS