Underlying sales rose 5% for the full year, and underlying operating profits of £455m were up 11% and better than expected. This reflects ''good'' results from English Language Learning (which was up 24%), Virtual Learning, Workforce Skills and Assessment & Qualifications. Higher Education revenues continue to decline, with lower college enrolments and an increase in popularity for non-mainstream publishers.
The integration of recent acquisitions is ''progressing well'', and Pearson is on track to deliver approximately £120m of cost efficiencies in the 2023 financial year.
Pearson has net debt of £600m and the £350m share buyback has been completed. More detailed full year results are expected on 3 March.
The shares were unmoved following the announcement.
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Our view
Pearson has its foot to the floor when it comes to executing its digital transformation.
That's being achieved by some well-suited acquisitions, as well as organic growth through its own efforts. These include, focussing on direct-to-consumer business and slimming the group's physical footprint.
Digital sales are potentially highly cash generative and higher margin than physical sales, while digital subscribers are potentially stickier. We said that this would represent a significant improvement to earnings quality if Pearson can deliver the transition - especially in the core education courseware business. And we are starting to see digital make up a bigger part of the whole - largely thanks to accelerated demand for virtual learning and exams brought on by the pandemic.
But much of the group's revenues are still anchored to physical teaching and testing. Demand for physical textbooks has been on the decline for years and that's made Pearson's pivot to digital protracted and painful.
Even where Pearson has been able to grow sales, profits haven't historically flowed smoothly. Huge investment has caused some short-term pain to margins too. We're heartened that extra cost savings have upped the outlook here, but as the strategic pivot continues, we're mindful that budgets and margins projections can turn at short notice, particularly in an inflationary environment.
We're also aware that those currently dipping their toes in online education for the first time could swim away when more traditional alternatives become available.
Overall, the group's poured an enormous amount of cash into securing a new digital-focussed future. Although net debt's more manageable on an annual basis, providing the foundation for shareholder returns. Please remember no shareholder returns are ever guaranteed.
Pearson is putting in a good showing, and we're feeling more positive that it can convince customers to stick with its digital shift. If this is achieved, the pain of the last few years will have been worth it. If not, the group risks becoming a lesson in how not to handle the digital revolution. The price to earnings ratio is slightly higher than the ten-year average, reflecting confidence from the market.
Pearson key facts
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
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