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Interim Results

Pearson reports growth in revenue, operating profit and earnings

04 August 2017 08:26

Pearson reported underlying growth in revenue, operating profit and earnings in the first half of the year.

Full year guidance remained unchanged. We continued to make good progress on our strategic priorities of simplification and digital transformation, and our plans to reduce Pearson's cost base by a further £300m exiting 2019, which we initially outlined on May 5th.

Sales up 1% to £2,047m in underlying terms primarily due to higher gross sales and lower returns in North American higher education courseware, modest growth in VUE, continued strong growth of Pearson Test of English in Australia, good growth in Wall Street English and English language courseware in China and in school courseware in South Africa, partially offset by expected declines in US school assessment, macroeconomic weakness in Brazil and the impact of business exits in the Middle East.

Pearson's sales are always significantly weighted towards the second half of the calendar year. As expected, the phasing in our North American higher education courseware business has benefited the first half of 2017, with growth in net revenues as gross revenues grew modestly, returns declined significantly and digital revenues continued to grow well.

Relative to our expectations, the picture of gross sales and returns in H1, and through to the end of July, is similar to that reported for the first three months: our gross sales are a little ahead of where we expected them to be and returns, whilst down significantly over last year, are running a little higher than expected.

Our guidance for the full year is unchanged with underlying market pressures still expected to impact gross sales in the second half.


-Deferred revenues grew 4% in underlying terms

- Adjusted operating profit improved significantly to £107m (H1 2016: £15m) reflecting savings from the 2016 restructuring programme, a benefit from phasing and the strength of the US Dollar against Sterling, offset by cost inflation and other operational factors

Adjusted earnings per share of 5.6p (H1 2016: adjusted loss per share 1.3p) reflected higher adjusted operating profit, partially offset by higher interest charges

- Statutory operating profit was £16m (H1 2016: a loss of £286m) reflecting higher adjusted profit and the absence of restructuring costs

- Net debt rose £207m to £1,633m with an increase of £89m due to strength of the US Dollar against Sterling and a pension contribution of £162m relating to the 2013 creation of Penguin Random House, with a final payment of around £63m expected in the second half, in line with prior guidance. Over the last 12 months operating cash flow more than covered dividends paid, restructuring costs, interest and tax charges

- In line with our recently announced dividend policy the Board has declared an interim dividend of 5p (2016: 18p) and plans a share buyback of £300m following the announced reduction and recapitalisation of our stake in PRH

- We are today announcing the launch of a market tender to repurchase our $500m 3.75% US Dollar Notes 2022 and $500m 3.25% US Dollar Notes 2023 and we plan to redeem the $300m 4.625% June 2018 bond following the completion of the PRH transaction.

At 8:26am: (LON:PSON) Pearson PLC share price was +5.5p at 674.5p

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