Education publisher Pearson reports biggest loss in its history
Pre-tax losses soar to £2.6bn as group – planning to sell its Penguin Random House stake – is hit by slump in US textbook sales
Pearson has reported a pre-tax loss of £2.6bn for 2016, the biggest in its history, after a slump at its US education operation.
The world’s largest education publisher, which in January saw almost £2bn wiped from its stock market value after issuing its fifth profit warning in two years, reported the record loss after taking a £2.55bn non-cash charge for “impairment of goodwill reflecting trading pressures” in its North American businesses.
A spokesman said the charge related mainly to historic acquisitions of Simon & Schuster Education and National Computer Systems, purchased in 1998 and 2000 respectively, as a “necessary consequence” of the lower profit expectations announced last month.
In January, the company slashed its profit forecast for this year by £180m and scrapped its target of £800m for next year. It also announced that it planned to sell its stake in the world’s largest book publisher, Penguin Random House, to strengthen its balance sheet.
The profit warning was prompted by the collapse of its US higher education business, which is struggling with a decline in textbook sales and the transition to digital learning. The US business accounts for two-thirds of Pearson’s revenues and profits.
The news earlier this year led to Pearson’s biggest ever one-day share price fall and prompted speculation that John Fallon, the chief executive, may be forced out of the company.
“I am a shareholder and I share the frustration of all shareholders,” said Fallon, when asked whether he should continue to lead the company. “My conversations with the chairman and the board are all about ensuring we lead Pearson through this transition as quick as possible. My job is to get on and stay very focused.”
On Friday, Pearson said that after stripping out the multibillion-dollar impairment charge adjusted operating profits were down by 21% to £635m. Revenues fell by 8% to £4.5bn.
The company has advised that operating profits would be £570m-£630m in 2017 and that it was “rebasing” its dividend policy.
Fallon said: “2016 was a challenging year for Pearson, but we remain the global leader in education, with a strong market position. Education like every other sector and sphere of life is going through this digital transformation. There is going to be a big winner in the transformation in education. We are absolutely determined to make Pearson that winner.”
The company said it was looking to sell its English test preparation business in China, Global Education, which it acquired in 2011 for $155m (£123m), and to Education publisher Pearson reports biggest loss in its history | Business | The Guardian: