Pearson FY13 Profit Declines, Warns On FY14; Stock Down

(RTTNews) - Shares of Pearson Plc (PSO, PSON.L) declined nearly 7 percent in the morning trade in London after the UK-based learning company reported lower profit and revenues in its fiscal 2013, and said it expects lower earnings in fiscal 2014 amid challenging trading conditions.

The company's fiscal 2013 results mainly reflected weak results from Penguin publishing unit following its disposal to form Penguin Random House, in which the company holds 47 percent stake.

Chief Executive John Fallon said, "We are in the middle of what we believe will be a short, but difficult, transition - one that through our combined investment and restructuring programs will drive a leaner, more cash generative, faster growing business from 2015."

For the year 2013, pre-tax profit declined 2 percent to 382 million pounds from prior year's 391 million pounds. The latest results mainly included intangible charges of 196 million pounds, while prior year's results included intangible charges of 179 million pounds and other gains and losses of 123 million pounds.

Adjusted pre-tax profit, before items, plunged to 664 million pounds from 867 million pounds a year ago.

Including a gain from the discontinued Penguin business, following the merger of Penguin and Random House, the company's profit attributable to equity holders surged to 538 million pounds from previous year's 311 million pounds.

Adjusted earnings per share including net restructuring charges were 70.1 pence, and excluding net restructuring charges were 83.4 pence. This is in comparison to last year's 82.6 pence.

Adjusted operating profit dropped 21 percent to 736 million pounds, while adjusted operating profit before net restructuring charges declined 7 percent to 871 million pounds. The results were hurt by the accounting impact of the Penguin Random House merger, lower margins in North America, sustained investment, and revenue mix, the company said.

Total sales for Pearson, which generates approximately 60 percent of its sales in the US, declined 7 percent to 5.69 billion pounds from last year's 6.11 billion pounds, reflecting a sharp decline in Penguin revenues following the merger. Adjusted sales from continuing operations, excluding Penguin, were 5.18 billion pounds, a growth of 2 percent from last year. At constant exchange rates, sales increased 2 percent.

The company attributed the increase in adjusted sales to good growth in digital, services and emerging markets, partly offset by cyclical weakness in US higher education and school curriculum change in the US and UK.

Further, Pearson said its board proposed a dividend increase of 7 percent to 48 pence, subject to shareholder approval.

Looking ahead for fiscal 2014, the company said its expects trading conditions to remain challenging in 2014. The company projects adjusted earnings per share of between 62 pence and 67 pence.

The company warned that cyclical and policy-related pressures in its largest markets would persist, impacting revenues and margins.

Further ahead, Pearson expects that cyclical pressures would begin to ease from 2015 as curriculum change is implemented in the US and UK and US college enrollments stabilize and, in due course, return to growth.

In London, Pearson shares are currently trading at 1001 pence, down 75 pence or 6.97 percent.