Pearson’s digital shift boosted by demand for online learning

The company logo is displayed outside the Pearson offices in London, Britain August 4, 2017. REUTERS/Neil Hall

Pearson’s (PSON.L) switch to become a digital provider of global education services gathered momentum in the first quarter with demand for eBooks, digital courseware and online learning helping it to outperform expectations.

Shares in the British company rose 3% as analysts said a 5% rise in underlying revenue growth indicated a stronger trajectory than expected after the pandemic helped to accelerate the move from analogue to digital learning.

The positive outlook will give a lift to new boss Andy Bird, the former Disney executive who wants Pearson to build digital ties with school pupils, college students and workers wanting to retrain and re-skill through their career.

It also comes despite the continued drag from the pandemic restrictions, which have forced the closure of schools, the cancellation of exams and a halt to international travel which affects demand for English-language visa tests.

“It’s a steady, positive performance across the board and we’re very pleased with where we’ve landed, especially given the circumstances,” finance director Sally Johnson told Reuters, adding that it was too soon to review the full-year outlook.

Bird said the group was “building pace and momentum”.

The standout performance came from its Global Online Learning division, which produced a sales rise of 25% as people around the world enrolled at virtual schools.

Analysts welcomed the improvement after Pearson endured years of tumultuous trading as students in the United States moved to rent or download textbooks, hitting its profits.

Pearson said in the United States it had increased the amount of product sold into colleges as digital sales rose, helping to eradicate a secondary-market for textbooks that had eaten into its income.

Analysts noted however that the first quarter was a traditionally smaller quarter and the group retained its annual forecast for adjusted operating profit of 377 million pounds ($525 million), up 20%.

“Pearson’s 1Q trading update will make for uncomfortable reading for bears,” said Citi analysts in a note, who rate the company as a “buy”.

($1 = 0.7181 pounds)

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