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Pearson pounded after COVID hits U.S. community college enrolment

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Pearson pounded after COVID hits U.S. community college enrolment

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

  • U.S. enrolments hit by COVID, job demand
  • Shares drop 10%, lowest level since Jan.
  • Demand for virtual learning remains strong

LONDON, Oct 15 (Reuters) – Global education group Pearson said enrolments at community colleges in the United States had been hit by a recent surge in COVID-19 cases and a tight labour market, limiting growth and sending its shares to their lowest level since January.

In a key trading update covering the period when students buy textbooks and materials for the academic year ahead, Pearson (PSON.L) said revenue from its U.S. Higher Education Courseware had fallen by 9% in the first nine months.

Pearson said it remained on course for its full-year targets, however, as demand for Virtual Learning and English Language Learning helped sales to rise by 14% and 15% respectively.

Its new Pearson+ app was also being used by more than two million people. “That’s pretty good going for 12 weeks,” CEO Andy Bird told Reuters.

Shares in the group were down 10% at 657 pence, marking a disappointment for the former Disney executive Bird who has been running the group for almost a year.

“We are left with a slight sense of ‘what might have been’: had enrolments been more robust, we would surely have been talking about consensus upgrades,” analysts at Citi said. They rate Pearson a ‘Buy’.”

Ian Whittaker, an independent analyst, said with a new reporting structure and only growth rates given, it was difficult to track quite how the company had performed in the third quarter.

He noted that revenues at the U.S. Higher Education Courseware division, often the source of Pearson profit downgrades in recent years, was down 9% in the nine months, compared with a 2% fall in the first half of the year.

Having been buffeted by rental markets and second-hand options for once-expensive textbooks, Pearson has embarked on a direct-to-consumer strategy offering unlimited access to content to provide more reliable subscription revenues.

It hopes that the new app, which launched in the United States in July, will also deter students from buying second-hand books that had eaten into its profit.

Trying to broaden its appeal, it is also pitching itself as a consumer-facing group offering training and skills for life beyond its core schools and college remit. Its assessment and qualifications revenue rose 24%.

Overall, group underlying revenue rose by 10% for the nine-months, down from 17% in the first six months, due to tough comparatives for the third quarter. The full-year consensus had been for adjusted operating profit of 377 million pounds.

Reporting by Kate Holton, Editing by Paul Sandle and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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