14 October 2020
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Pearson,
the world's learning company, is today providing an update on
trading in the first nine months of 2020.
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Improving trend in Q3 with a strong performance in Global Online
Learning; North American Courseware and Global Assessment in line
with expectations; and International further impacted by
COVID-19
● At the nine months,
Group sales declined by 14% largely reflecting the continuing
impact of COVID-19 and test centre and school closures in Global
Assessment and International, and expected declines in North
American Courseware.
● Global Online
Learning sales grew 14% due to 41% enrolment growth in Virtual
Schools for the academic year 2020/2021 and strong sales growth in
Online Program Management (OPM) driven by undergraduate and
international performance, partially offset by discontinued
programs.
● Global Assessment
sales declined 19% due to the impact of test centre closures in
Professional Certification (Pearson VUE), cancellation of spring
testing in US Student Assessment and school closures impacting
Clinical Assessment.
● North American
Courseware declined 14% with a stronger adoption performance in the
Fall in US Higher Education Courseware and good growth in digital
and subscription take up leading to the faster decline of higher
priced package and print sales.
● International
declined 24% due to the impact of COVID-19 and as the associated
economic effects intensified in several key markets, predominantly
affecting public and private spending on courseware and
assessments.
● Pearson retains a
strong balance sheet and significant financial
headroom.
Execution
of strategy on track with technology and platform development
progressing well
● 41% increase in
Virtual School enrolments for the academic year
2020/2021.
● OPM course
enrolments increased 17% excluding discontinued programs and
declined 10% including discontinued programs, with increased
efficiencies in the student recruitment process and student
acquisition costs following the operational changes made earlier
this year.
● Launch of Pearson
Pathways, a digital marketplace that provides learners with
tailored recommendations for courses and credentials to help them
achieve the skills they need for the job they require.
● Digital roadmap is
on track with the launch of additional Revel titles and c.250 new
eText titles on the Pearson Learning Platform.
● Accelerated shift
to digital in US Higher Education Courseware with digital
registrations including eBooks up by 9% showing signs of secondary
market recapture, and print and bundle units sold into US Higher
Education colleges down by 32%.
2020 outlook
● After nine months
Pearson is on track to deliver an outturn broadly in line with
market expectations1. However, because of
the pandemic, larger than usual uncertainties surround the fourth
quarter, particularly in International.
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John Fallon, Chief Executive said:
"Our digital performance is very strong, as we support
customers and learners around the world as they shift to
fully online and hybrid learning. This has been a
challenging transformation for all of us but we
are starting to see the benefit of all our work
to ensure Pearson becomes the winner in digital
learning. We are focusing on what learners care most about - a
fantastic user experience, enabling better learning outcomes and
offering great value. Pearson is a special company, doing something
that really matters to the wider world, and I wish it every future
success."
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Underlying
growth for the nine months ended 30th September
2020
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Sales
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Global
Online Learning
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14%
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Global
Assessment
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(19)%
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North
American Courseware
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(14)%
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International
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(24)%
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Total
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(14)%
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Underlying
growth by quarter 2020
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Q1
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Q2
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Q3
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Sales
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Global
Online Learning
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6%
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3%
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32%
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Global
Assessment
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(3)%
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(45)%
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(3)%
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North
American Courseware
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(10)%
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(18)%
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(15)%
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International
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(10)%
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(31)%
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(26)%
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Total
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(5)%
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(28)%
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(10)%
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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. Unless otherwise stated,
growth rates relate to the nine month period. 1Vuma consensus
adjusted operating profit excluding Penguin Random House at 1st
June 2020 of £331m at a £:$ rate of $1.25; this equates
to £299m at our £:$ guidance rate of $1.32.
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Nine-month trading
In Global
Online Learning, sales grew 14% with a strong increase in
applications seen in Virtual Schools. To meet the surge in demand
for virtual schooling, we increased capacity at existing schools.
As planned, we opened three new full-time, state-wide partner
schools, and combined with two contract exits this takes the total
partner schools to 43.
In OPM,
we saw strong sales growth driven by our undergraduate and
international performance, partially offset by discontinued
programs. We are also seeing the benefits of the operational
changes made earlier this year, with increased efficiencies in our
student recruitment process and student acquisition
costs.
In Global
Assessment, Pearson VUE testing volumes increased by 8% in
the third quarter compared to the third quarter of 2019 driven by
growth in the IT segment and online proctoring. Online proctoring
test volumes grew significantly from 102,000 at the nine months in
2019 to 1,352,000 in the same period in 2020. Test centres were
largely open but operating with reduced capacity due to social
distancing, although hours were extended to help meet pent-up
demand.
In
School and Clinical Assessment, performance was in line with
expectations with further modest impact. In addition to the new
contract wins and renewals announced in July, we continued to win
contracts in the third quarter and have a strong pipeline which
will continue to support new contract wins in School
Assessment.
In North
American Courseware, sales declined 14% with US Higher
Education Courseware declining 13%. There has also been continued
momentum in Inclusive Access with sales to not-for-profit
institutions up 33% on last year.
In International,
sales were impacted due to the interruption of Australian
immigration and test centre closures impacting PTE in Australia and
India, as well as the impact of COVID-19 on courseware
purchasing.
For
School & HE Courseware, while the majority of schools have now
re-opened, budget constraints have led to purchasing delays, as
well as fewer purchases. Sales in certain markets, such as South
Africa and APAC, remain fourth quarter weighted.
In the
UK, qualifications revenue was impacted as expected by the
cancellation of exams earlier in the year.
In
English, PTE volumes were impacted by the interruption of Australia
immigration due to COVID-19, as well as test centre closures in
India and Australia. However, we have seen signs of market share
gain in China, as our more flexible and digital offering has proven
more suitable for the current environment than the traditional
paper-based sittings our competitors offer. In addition, our UK
SELT contract is now operational. In our franchise business in
Brazil and across courseware, we have seen market contraction as a
result of the pandemic.
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Strong financial position
Pearson
has a strong balance sheet and significant financial headroom with
immediately available liquidity of c.£1.6bn through committed
facilities and cash balances.
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We will hold a conference call at 8.30am today
14th October
2020 to discuss our Q3 trading update. A replay will be available
soon after on our website www.pearson.com/corporate.
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Contacts
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Investor Relations
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Jo
Russell
Anjali
Kotak
Teddy
Symington
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+44 (0)
7785 451 266
+44 (0)
7802 890 724
+44 (0)
7443 354 088
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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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Webcast details
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Audience URL:
https://www.speakservecloud.com/register-for-call/9f76e1a6-8675-401e-a0b9-42f51c3df2e1
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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
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because they relate to events and depend on circumstances that will
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number of factors which could cause actual results and developments
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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.
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PEARSON
plc
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Date: 14
October 2020
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By: /s/
NATALIE WHITE
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Natalie
White
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Deputy
Company Secretary
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