Shares rise as Pearson eyes profit growth but ‘there’s still a lot to do’

Simon English
John Fallon is chief executive at Pearson: EPA

PEARSON is still struggling to turn around its key US arm, but thinks it will return to profit growth this year.

The education group, best known for owning the Financial Times until 2015, has endured a miserable run until recently, with profit warnings smashing the share price and questions being raised about chief executive John Fallon’s abilities.

The news was better today, as a nine-month trading update reported revenue up 2% at the core business, which includes the UK and Australia.

Sales in the US were flat, however, with the higher education unit seeing a fall of 3%. That business is regarded as vital to Pearson’s future, but has been buffeted by lower education spending in America.

Fallon said: “We are on track to return to underlying profit growth and, with a strong balance sheet, are set up well for the future.

“We are picking up the pace in our growth opportunities, performing well competitively and making good progress in our digital transformation.”

Fallon admitted: “There’s a lot still to do.”

The strain in the US has prompted Fallon to rebuild Pearson as a digital outfit. A tax benefit allowed Pearson to increase its earnings per share target from 53p to between 68p and 72p.

Operating profit for 2018 should be between £520 million and £560 million, well up on previous estimates. The shares rose 35p, 4%, to 852p. They were 957p in July.