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Summary
- Shares of Pearson Plc jumped more than 9 per cent on Monday.
- The stocks of Pearson emerged as the biggest gainer amid the 101-constituent pack of benchmark FTSE 100.
- For FY21, Pearson is expecting revenue growth in line with current market expectation.
The shares of Pearson Plc, the London-based publishing and education firm, jumped more than 9 per cent on Monday, 8 March, after the company said it expects to return to growth in 2021. The shares extended gains in the wee hours of trading after the stock of Pearson opened marginally lower.
According to data available with the London Stock Exchange, the stock of Pearson rose as much as 9.66 per cent to an intraday high of GBX 833.40 from the previous close of GBX 760. With the sharp appreciation in the share prices, Pearson stock has hit a fresh 1-month high. It was on 27 January 2021, Pearson shares concluded at a year-to-date (YTD) closing high of GBX 867.80.
Following the 9 per cent rise in the share prices, the stock of Pearson emerged as the biggest gainer amidst the 101-constituent pack of benchmark FTSE 100. Barring today’s gain in the share prices, the stock of Pearson has already garnered a growth of more than 17 per cent in the present year so far.
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FY20 highlights
Pearson’s underlying revenue dropped 10 per cent in 2020, while the full-year sales declined 10 per cent to £3,397 million as compared to £3,869 million in FY19, largely due to the persisting nature of business operations affected by Covid-10, foreign exchange variations and portfolio changes.
The statutory operating profit of Pearson for FY20 came in at £411 million as against the FY19 £275 million. A considerable change in the operating metrics was realised due to the gain on the sale of a stake in Penguin Random House (PRH). Changes in the portfolio during the year, alongside lower restructuring costs, partially helped in offsetting the impact of Covid-19 aided the growth of operating profit.
The company has proposed a final dividend of 13.5 pence for FY20 on an operating cash flow of £315 million vs a cash flow of £418 million in FY19. In the reporting period, the company managed to reduce the net debt to £463 million as against total debt obligations to the tune of £1,016 million at the 2019- end. Pearson has generated a net cash equivalent to £450 million in FY20.
Guidance
For FY21, Pearson is expecting revenue growth in line with current market expectation. Furthermore, the company is anticipating good growth in the virtual learning space guided by the online classroom programmes in the 2020-21 academic year. However, the enrolments for 2021-22 academic year are expected to be broadly flat, Pearson said.
The Online Program Management (OPM) is also likely to grow in the present academic year. The company has been expecting that the impacted test centres to reopen in April, with the operations resuming progressively in the second half of the present calendar year.
The teacher assessments are likely to replace exams cancelled in the UK with modest profit impact, while US school assessments are expected to resume shortly as clinical tests will be taken as schools reopen after phased exit from the Covid-induced restrictions.
