Pearson : braces for another year of U.S. textbook pain

Pearson said it was braced for further declines in its U.S. textbook business, which since 2012 has shrunk by about 90%, but from next year, the impact on profits would start to ease.

Chief Executive John Fallon, who will retire this year, has sought to transform the British group into a world leader in digital learning and assessment.

The shift from textbooks, which can cost hundreds of dollars, has been faster and steeper than he forecast, resulting in a number of profit downgrades during his seven-year tenure.

In 2012 Pearson sold more than 20 million college textbooks. This year it expects to sell around 2 million.

As the slide continued, Fallon said U.S. print textbook sales were down 30% in 2019 on the prior year, offsetting growth in the rest of the business to result in flat underlying revenue.

"We are now approaching the bottom of the valley in U.S. higher education courseware," Fallon told reporters.

Pearson said in January, its 2020 profit would be lower than the market expected as textbook sales continued to slide.

But Fallon said the financial hit would start to lessen.

"Its ability to hurt us financially is now substantially less," he said.

Operating profit rose 6% to 581 million pounds, broadly in line with its forecast last month.

The analog-to-digital transformation has been painful for investors. Pearson shares have dropped around 35% in the last 12 months. They were trading around 4 lower at 558 pence by 1144 GMT.

Barclays said the 2019 numbers were broadly in line with consensus but they were a little light versus its forecasts.

For 2020 Pearson sees operating profit of between 410 million and 490 million pounds, after excluding the contribution from its 25% stake in Penguin Random House, which it is selling to Bertelsmann.

With Fallon set to go this year, and Chief Financial officer Coram Williams off to Swiss staffing group Adecco, investors will have to wait for any changes in strategy.

Fallon said the search for his successor was progressing, but did not give further details.

He said the outbreak of coronavirus would have a short-term commercial impact as schools, universities and testing centres remained closed.

However, students were benefiting from Pearson's online resources and partnerships with major Chinese technology companies to keep learning at home, he said.

By Paul Sandle