Pearson loss widens amid falling sales in U.S. education business

Andrew Cummings
February 25, 2017

Pearson, the global education company battling a collapse in demand in its biggest market, posted a 2016 statutory loss of 2.3 billion pounds ($2.9 billion) after writing down the value of the business.

The Penguin-Random House owner made a £2.6bn pre-tax loss after taking a £2.55bn non-cash charge for "impairment of goodwill reflecting trading pressures in our North American businesses".

Loss for the year from continuing operations widened to 2.3 billion pounds or 286.8 pence per share from a loss of 352 million pounds or 43.3 pence.

Net debt nearly doubled to £1.1bn from £654m the year before, which the company blamed on the strengthening of the dollar against the pound and restructuring costs, much lower than analyst consensus of £1.3bn. Adjusted operating profit was 635 million pounds, down 21% in underlying terms.

Chief executive John Fallon plans to sell China-focused English-language learning business Gedu and offload a stake in the Wall Street English unit.

'Our priorities for 2017 are clear.

"We are keen to maintain and add to our holding in the company to take advantage of the digital transformation of educational coursework", it said.

A spokesman said that the charge mainly relates to historic acquisitions of Simon & Schuster Education and National Computer Systems, purchased in 1998 and 2000 respectively, as a "necessary consequence" of the lower profit expectations announced last month.

'The results show that the group's financial position is much more robust than expected/feared by investors, ' said Thomas Singlehurst, an analyst at Citi.

Last month it put a price on the market change, cutting its 2017 profit forecast, scrapping its 2018 target and warning it would cut the dividend in 2017, the first cut in more than 20 years.

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