LONDON BRIEFING: Pearson Says Now Well Placed To Grow In Digital World

(Alliance News) - Pearson on Friday said its financial performance worsened in 2019 amid ...

Alliance News 21 February, 2020 | 8:06AM
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(Alliance News) - Pearson on Friday said its financial performance worsened in 2019 amid restructuring costs, but said it expects to grow profitability going forward.

Pearson said its sales decreased by 6% in headline terms in 2019 to GBP3.87 billion from GBP4.13 billion a year earlier, with portfolio changes reducing sales by GBP347 million. On the other hand, the company said it benefited from currency movements, which increased revenue by GBP97 million.

Stripping out the impact of portfolio and currency movements, revenue was flat in underlying terms, the company noted.

Pretax profit was lower, at GBP232 million compared to GBP498 million a year ago, hurt by the reduced gains on disposals and higher restructuring charges.

The FTSE 100-listed company believes that "the future of learning will be increasingly digital" and, therefore, it is restructuring to meet its clients needs.

Looking ahead, Pearson said it expects to deliver 2020 adjusted operating profit of between GBP410 million to GBP490 million, excluding the recently sold 25% stake in Penguin Random House. The disposal generated USD675 million net proceeds.

In 2019, adjusted operating profit totalled GBP581 million, up from GBP546 million in 2018, reflecting a GBP130 million year-on-year benefit from restructuring, and other benefits, including operational factors, FX and the adoption of IFRS 16 accounting standard.

"As we benefit from further efficiencies from the investments we have made and deploy our strong balance sheet, Pearson is now well placed, in time, to grow in a profitable and sustainable way," said Chief Executive John Fallon.

Pearson declared a final dividend of 13.5 pence, up 4% from 13p paid a year earlier. For 2019, payout totalled 19.5p compared to 18.5p paid the year before.

In January, the London-headquartered company started a GBP350 million share buyback programme in connection with the sale of its 25% interest in Penguin Random House. Pearson has completed GBP79 million of the share buyback so far.

Pearson shares were 0.7% lower early Friday.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.5% at 7,398.59

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Hang Seng: down 1.1% at 27,316.77

Nikkei 225: closed down 0.4% at 23,386.74

DJIA: closed down 128.05 points, 0.4%, at 29,219.98

S&P 500: closed down 0.4% at 3,373.23

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GBP: flat at USD1.2890 (USD1.2882)

EUR: flat at USD1.0796 (USD1.0794)

Gold: up at USD1,634.12 per ounce (USD1,621.15)

Oil (Brent): down at USD58.62 a barrel (USD59.75)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Friday's Key Economic Events still to come

0930 GMT UK public sector finances

0930 GMT UK CIPS-Markit flash purchasing managers index for manufacturing and services

1000 CET EU eurozone flash PMI

1100 CET EU harmonised consumer price index

0930 CET Germany flash PMI

0945 EST US flash manufacturing and services PMI

1000 EST US existing home sales

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Left-wing republican Sinn Fein leader Mary Lou McDonald won most votes in the election to become Ireland's next prime minister on Thursday as the new Irish parliament met, but with 45 votes, she still fell far short of the 80 required. The political impasse since the February 8 general election looks set to continue as the leaders of ruling centre-right Fine Gael, Leo Varadkar, and opposition centre-right Fianna Fail, Micheal Martin, also failed. Varadkar got 36 votes and Martin received 41 votes. The outgoing prime minister - or taoiseach - Varadkar, offered his resignation to President Michael D Higgins late on Thursday. He said that he would continue in a caretaker capacity.

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Dozens of Britons who have been trapped on a coronavirus-hit cruise ship in Japan are set to fly home on Friday after the UK government sent a plane to repatriate them. Around 70 people who have been held in quarantine on the Diamond Princess are due to land at Boscombe Down Ministry of Defence base near Salisbury, Wiltshire, in the early hours of Saturday morning. The Diamond Princess was carrying more than 3,700 people in early February when 10 passengers were diagnosed with the Covid-19 strain of the disease. Since being quarantined in the port of Yokohama, a total of 634 passengers and crew have been infected, accounting for more than half of all the confirmed coronavirus cases outside of China.

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Japan's private sector output in February saw its worst rate of decline since early 2014, Jibun Bank flash PMI estimates showed, as the country desperately looks to avoid a technical recession. The Jibun Bank flash composite purchasing managers' index for Japan fell to 47.0 points in February from a final reading of 50.1 in January. A reading above 50 indicates expansion in the sector and one below contraction. IHS Markit Economist Hoe Hayes said: "Latest PMI data dash any hopes of a first quarter recovery in Japan and significantly raise the prospect of a technical recession in the world's third largest economy." The flash services PMI sank to 46.7 in February from 51.0 in January. Jibun Bank said the sector had seen a "solid fall" in February, with output seeing its sharpest decline since April 2014. The deadly outbreak of the coronavirus in neighbouring China hit tourism in Japan, which drove down footfall and new business.

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Preparations for the Olympic Games in Tokyo this summer are proceeding as usual despite the coronavirus risk, a Japanese government spokesman said. The International Olympic Committee has confidence in Japan's handling of the Sars-CoV-2 agent, Japanese government spokesman Yoshihide Suga said in Tokyo. Preparations for the games, scheduled to take place from July 24 to August 9, will continue, the spokesman said.

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BROKER RATING CHANGES

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CITIGROUP CUTS UNITED UTILITIES TO 'NEUTRAL' ('BUY') - TARGET 1128 (865) PENCE

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CREDIT SUISSE RAISES BAE SYSTEMS PRICE TARGET TO 710 (620) PENCE - 'OUTPERFORM'

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JPMORGAN RAISES BAE SYSTEMS PRICE TARGET TO 775 (730) PENCE - 'OVERWEIGHT'

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JPMORGAN RAISES SMITH & NEPHEW PRICE TARGET TO 1926 (1711) PENCE - 'NEUTRAL'

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COMPANIES - FTSE 100

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Halma said it bought Utah-based Maxtec, which distributes oxygen analysis and delivery products for use in medical and non-medical applications. Maxtec will be managed as part of Halma's Perma Pure business in the US, it said, medical dehydration products of which are also used in acute care units. The cash consideration for Maxtec is USD20 million, on a cash and debt free basis, which will be funded from Halma's existing facilities, it said. "Maxtec is highly aligned with our purpose, and further extends our presence in diagnostic products and acute healthcare," said Halma Chief Executive Andrew Williams.

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COMPANIES - FTSE 250

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Hammerson sold a portfolio of seven retail parks in the UK for GBP400 million, and separately disposed of two other locations. The sale of the portfolio, to Orion European Real Estate Fund V, is expected to generate net proceeds for Hammerson of GBP395 million. It includes retail parks such as the Forge Shopping Park in Telford and Cleveland Retail Park in Middlesbrough. The total sale price of the portfolio represents a net initial yield of 8.9% and is 23% below the last reported book value as at June 30. "This transaction is the largest UK retail parks portfolio sale in the past decade. The sale follows Hammerson's strategic decision, announced in July 2018, to exit the retail parks sector over the medium term to create a focused portfolio of flagship assets, premium outlets and City Quarters across major European cities," the property investor said.

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Energy services provider Hunting said it acquired Enpro Subsea for USD33.0 million, plus a potential maximum earn out of USD3.0 million based on earnings performance in 2020. Enpro has developed subsea production technology that has been adopted by offshore operators within the global oil and gas industry, Hunting said. "The acquisition of Enpro further strengthens Hunting's subsea offering and adds a high technology product group to our portfolio," said Hunting Chief Executive Jim Johnson.

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Property firm Daejan has secured a final cash offer from Dock Newco and the independent non-executive director of Daejan. Dock Newco is offering GBP80.50 in cash for each Daejan share. On Thursday, Daejan shares closed flat at GBP51.70 each. The offer price values the entire issued share capital of Daejan at GBP1.31 billion and 21% of free float shares at GBP269.5 million. The financial terms of the offer are final and will not be increased, Dock Newco noted.

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Friday's Shareholder Meetings

Caledonian Trust

Edenville Energy

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Smith & Nephew PLC 1,553.00 GBX -2.63
United Utilities Group PLC 885.60 GBX -1.62
BAE Systems PLC 492.10 GBX -0.02
Pearson PLC 565.80 GBX -1.19

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