a7244k
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the
month of April
2020
PEARSON plc
(Exact
name of registrant as specified in its charter)
N/A
(Translation
of registrant's name into English)
80 Strand
London, England WC2R 0RL
44-20-7010-2000
(Address
of principal executive office)
Indicate
by check mark whether the Registrant files or will file annual
reports
under
cover of Form 20-F or Form 40-F:
Form
20-F
X
Form 40-F
Indicate
by check mark whether the Registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934
Yes
No X
Pearson 2020 Q1 Trading Update (Unaudited)
24th April
2020
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Pearson,
the world's learning company, is today providing an update on
Q1 trading.
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Trading in line with revised expectations, decline versus prior
year driven by COVID-19
As we announced in March, there are three major trends that are
impacting trading as a result of the COVID-19
pandemic:
● Firstly, we are seeing disruption in our
businesses which rely on physical locations such as our Global
Assessment and International divisions where the closure of testing
centres has impacted Professional Certification and the Pearson
Test of English.
● Secondly, school closures have impacted our
Clinical Assessment and International courseware businesses, as
well as North American Courseware to a lesser extent to
date.
● Thirdly, we have seen a significant uplift in the
use of our digital products and services, and rapidly growing
interest in our Global Online Learning business.
During the pandemic we have
made many of our online resources available for free to support
learners. In time, we expect this growing interest to accelerate
our digital growth.
Highlights for the first quarter
● Trading is in line with revised expectations,
revenue declined by 5% versus prior year driven by
COVID-19.
● Global Assessment revenue declined 3% due to the
closure of testing centres in our Professional Certification
business, and a decline in Clinical Assessment attributable to
school closures.
● International revenue declined 10% due to test
centre and school closures across many of our International markets
and also the phasing of courseware sales in the
UK.
● North American Courseware revenue declined 10% due
to the expected continuation of trends seen in US Higher Education
in 2019, exacerbated by the closure of campus-based bookstores and
a weaker performance in courseware in Canada as a result of school
closures.
● Global Online Learning revenue grew 6% with a
strong performance in Virtual Schools driven by good enrolment
growth and planned new school openings as well as growth in Online
Program Management.
COVID-19 update
● In March we provided a financial trading update on
the potential impact of the pandemic on our global businesses.
First quarter results are consistent with this.
● If social distancing extends significantly, the
effect on our North American and International courseware
businesses may be more pronounced as campuses and schools remain
closed for longer.
● We have identified actions to reduce discretionary
spend to partially mitigate the potential impact, while ensuring
that Pearson is still well placed to benefit as the
macroeconomic landscape recovers.
● We have chosen not to furlough staff and are
instead re-deploying people as much as we possibly can around the
business to support the areas of greatest need and
opportunity.
● The Chief Executive and Chief Financial Officer
are taking a temporary voluntary reduction in their remuneration of
25% and 20% respectively, and the Chair and Non-Executive Directors
are also taking a voluntary reduction in fees of 50% and 25%
respectively. This will be donated to charities engaged in
COVID-19 related activities.
● Pearson has continued to make an array of digital
learning tools, services and resources available to students,
educators and parents affected by school, college and university
closures.
● Today we announce the upcoming launch of 'UK
Learns' - an online portal which contains free, digital,
skills-based courses to help re-skill and broaden employability
prospects for employees who have been impacted by
COVID-19.
Further strategic progress
● We are continuing to invest in the Pearson
Learning Platform and our product road map for 2020 is on
track.
● We are accelerating the shift to digital in US
Higher Education through our move to access
models.
● We are investing in Global Online Learning to
reflect the growing demand for online
education.
● Our recently completed
simplification programme has enabled us to identify a further
c.£50m of structural cost savings to be realised in 2021
through further corporate cost efficiencies.
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Strong financial position
Pearson has significant financial headroom with immediately
available liquidity of c.£0.8bn at the end of March through
committed facilities and cash balances and we received $675m
(£530m) after quarter end as we completed the sale of our
remaining stake in Penguin Random House. In addition, we have
recently secured new lines of credit to enhance our existing
Revolving Credit Facility. At 31st March
2020, net debt was c.£1.4bn, increased from c.£1.2bn at
the same point in 2019 primarily due to higher opening net debt at
the beginning of the year and the impact of the recently paused
share buyback.
The Board proposed a final dividend for 2019 of 13.5p (2018: 13p),
an increase of 4%, which results in an overall dividend of 19.5p
(2018: 18.5p) subject to shareholder approval at today's AGM. This
will be payable on the 7th May
2020.
John Fallon, Chief
Executive said:
"We are in a strong financial position with
a healthy balance sheet, low net
debt and good liquidity. This enables us to deploy
all our people and resources to support our communities as the
world's learning moves online at an unprecedented speed and scale.
I'd like to thank my colleagues, and our customers and partners,
for the speed and spirit with which we're working together to
achieve this goal. In that spirit, we will launch next month
UK Learns, a richly curated portfolio of employment enhancing short
courses personalised to meet the needs of the furloughed and the
unemployed.
"When the threat of the pandemic eventually eases, it will be even
clearer that the future of learning is increasingly digital.
Through the crisis, we are continuing to invest in the platform,
products and services that will make the next generation of digital
learning a reality."
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Financial summary
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Underlying
growth
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Sales
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Global
Online Learning
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6%
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Global
Assessment
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(3)%
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North
American Courseware
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(10)%
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International
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(10)%
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Total
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(5)%
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Notes
Throughout this announcement: growth rates are stated on an
underlying basis unless otherwise stated. Underlying growth rates
exclude both currency movements and portfolio changes.
Q1 Trading
Global Assessment
In Pearson VUE, underlying revenue declined modestly as a result of
the COVID-19 outbreak leading to the closure of test centres. We
estimate that the financial impact of these closures is on average
£20m to £30m to operating profit for each month the
centres remain closed.
We continue to evaluate local regulations, opening sites with
limited capacity to enable social distancing, to address essential
testing services for health care workers. We expect to open test
centres in a phased approach and as tests run throughout the year
this provides time for pent up demand to be partially realised in
the second half of the year. In addition, we are working with
clients who are able to take advantage of our VUE Online Proctoring
offering.
In Student Assessment, revenue was slightly favourable as a result
of early Spring testing. However, a number of states and boards
have decided to postpone or waive testing for the academic year and
test cancellations to date will impact our 2020 operating profit by
around £20m after mitigating actions. We continue to believe
there could be further state test cancellations which could
modestly impact on operating profit further.
In
Clinical Assessment revenue declined modestly as a result of school
closures. To partially mitigate this, we have launched a website
which enables the remote use of some of our products.
Global Online Learning
In Connections Academy, our Virtual Schools business, revenue grew
strongly due to growth in enrolments and new school openings. We
have seen a surge in applications in March compared to 2019 as many
explore full time digital learning for the first time. Pearson is
well placed to benefit from the increased interest in and appetite
for online learning. We are seeing many administrators and
educators reach out to discuss large scale solutions for virtual
schooling as well as potential interest from new states which have
not previously considered virtual schooling as a choice for
students.
In Online Program Management, revenue grew slightly. As detailed in
our full year results, we have deliberately slowed the rate of
growth in this business in order to transition to a new operating
model. With growing demand from universities to support online
learning and unemployment rising rapidly, we are planning to launch
a range of initiatives that provide learners with high quality,
flexible and affordable options to acquire new skills and knowledge
that will enhance their employability.
International
In International, revenue declined 10% as a result of school and
test centre closures having an impact on courseware sales and the
Pearson Test of English.
In the UK the decline in courseware was mainly due to a strong
comparative as a result of phasing in 2019. With regard to the UK
government's decision to cancel exams due to be sat in May and
June, we continue to work closely with the Department for
Education, Ofqual and the other awarding bodies to award
qualifications and expect any impact on profits to be
modest.
We expect to see impact from site closures in our Higher Education
institution in South Africa, our franchise and sistema businesses
in Brazil and the Pearson Test of English across the
region. The
impact to courseware is uncertain, especially given that the period
for which educational institutions may be closed is unclear, and
our sales periods are seasonal.
Pearson has continued to make an array of digital learning tools,
services and resources available to students, educators and
parents. In the UK, hundreds of thousands of teachers,
schools, colleges, parents and learners have accessed our free
online resources. In Italy and China combined, we have
had over 1.2 million teachers and students access
our online platforms, with thousands of interactive
lessons.
North American Courseware
North American Courseware declined 10% due to the expected
continuation of trends seen in US Higher Education in 2019,
including further expected declines in print revenue, and a small
impact from the closure of campus based book stores which we expect
to continue in the second quarter due to the ongoing pandemic.
Product returns are trending lower, in line with our expectations.
We also saw a weaker performance in courseware in Canada as a
result of school closures.
Q1 is a small quarter and this year has seen less of a benefit from
print sales in Q4 shifting to digital sales in Q1 given the
extensive decline of print in 2019.
To support colleges and institutions to transition to virtual
teaching we have made Pearson eText and digital learning tools
available for free and are providing a wide range of related
services and support.
Mitigating actions
We have identified actions to reduce discretionary spend to
partially mitigate the potential impact of COVID-19, while ensuring
that Pearson is still well placed to benefit as the
macroeconomic landscape recovers.
The accrual of our 2020 Annual Incentive Plan moves in line with
the performance of the business.
Audit tender
In our 2019 Annual Report, we stated that the audit committee had
agreed to proceed with an audit tender during 2020, with a view to
changing audit firm for the financial year ending
31st December
2021. Owing to the current environment and noting guidance from the
Financial Reporting Council (FRC), the audit committee has decided
it prudent to postpone the audit tender until further
notice.
Analyst call
We will hold a conference call for analysts at 8.45am today Friday,
24th April
to discuss our first quarter results. A replay will be available
soon after on our website www.pearson.com. Our AGM will be held
today at 12 noon attended only by the minimum necessary quorum of
shareholders.
Contacts
Investor Relations
|
Jo
Russell
Anjali
Kotak
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+44
(0) 7785 451 266
+44
(0) 7802 890 724
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Media
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Tom
Steiner
Gemma
Terry
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+44
(0) 7787 415 891
+44
(0) 7841 363 216
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Brunswick
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Charles
Pretzlik, Nick Cosgrove, Simone Selzer
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+44
(0) 207 404 5959
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Conference call dial
in details
URL for international
dial in numbers
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Analyst
and investor conference call details:
United
Kingdom Toll-Free: 08003589473
United
Kingdom Toll: +44 3333000804
PIN:
18750365#
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
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Forward looking statements: Except for the historical information
contained herein, the matters discussed in this statement include
forward-looking statements. In particular, all statements that
express forecasts, expectations and projections with respect to
future matters, including trends in results of operations, margins,
growth rates, overall market trends, the impact of interest or
exchange rates, the availability of financing, anticipated cost
savings and synergies and the execution of Pearson's strategy, are
forward-looking statements. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that will occur in future. They
are based on numerous assumptions regarding Pearson's present and
future business strategies and the environment in which it will
operate in the future. There are a number of factors which could
cause actual results and developments to differ materially from
those expressed or implied by these forward-looking statements,
including a number of factors outside Pearson's control. These
include international, national and local conditions, as well as
competition. They also include other risks detailed from time to
time in Pearson's publicly-filed documents and you are advised to
read, in particular, the risk factors set out in Pearson's latest
annual report and accounts, which can be found on its website
(www.pearson.com/corporate/investors.html). Any forward-looking
statements speak only as of the date they are made, and Pearson
gives no undertaking to update forward-looking statements to
reflect any changes in its expectations with regard thereto or any
changes to events, conditions or circumstances on which any such
statement is based. Readers are cautioned not to place undue
reliance on such forward-looking statements.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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PEARSON
plc
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Date: 24
April 2020
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By: /s/
NATALIE WHITE
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------------------------------------
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Natalie
White
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Deputy
Company Secretary
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