Pearson has reported revenue fell 17% in the first half of 2020 as the result of “significant disruption” caused by Covid-19. However, the company has said “things are improving”, citing better sales in June.
Pearson’s revenue for the first half to 30th June 2020 totalled £1,492m, down from £1,829m the year before, and it recorded a loss of £23m for the first half versus a profit of £144m a year earlier.
In its first quarter global revenues had dipped 5% as a result of Covid-19.
Pearson’s c.e.o. John Fallon was however encouraged that “things are improving”, despite the ongoing uncertainty, citing better sales in June following their deterioration between March and May, and emphasising “encouraging” indicators of digital take-up.
Fallon said that the pandemic had a “major impact”, especially on its global assessment and international businesses, down 27% and 23%, respectively. There was a “modest impact” from the closure of campus-based bookstores, particularly in Canada, and North American Courseware declined by 14%, due also to the expected performance of HE courseware. The worldwide closures of schools and testing centres and their subsequent reopening at limited capacity hit first half sales by around £260m and profits by around £140m.
Pearson reported an adjusted operating loss of £23m, as a result, compared to £144m profit for the first half of 2019, with the impact only partially offset by cost savings. Statutory operating profit increased to £107m next to £37m last year, mainly due to the profit on the disposal of Penguin Random House and reduced restructuring costs.
Fallon said “things are improving”, though, with June’s sales better than May’s, after sales deteriorated in March. He was also encouraged by an apparent “long-term shift” to online learning it’s believed “will outlast the pandemic” and promising lead indicators of digital take-up that should translate into revenue in the second half of the year. While Global Online Learning sales grew 5% for the first half, Fallon highlighted Virtual School applications are up 61% for the 2020/21 academic year and, in Higher Education Courseware, digital registrations including e-books are up 5%. It also delivered through its VUE Online Proctoring offering an eight-fold increase in testing volumes to 580,000 in the six months through to June.
Fallon said “uncertainty remains” and the company conceded in its interim report that it “remains difficult to predict the ultimate disruptive impact of the Covid-19 pandemic on Pearson’s performance for the full year”. However, it said, “the second quarter performed in line with our expectations and, while risks remain, particularly around enrolments in the back to school period and local lockdowns impacting schools reopenings, based on our current assessment of these trends we are on track to deliver adjusted operating profit broadly consistent with market expectations”.
“Covid-19 has had a major impact on trading, but we are encouraged by the improving trends and pick up in sales in June," said Fallon. "Uncertainty remains, but the purpose, grit, speed and ingenuity shown by Pearson colleagues is helping educators and learners around the world to adapt to the pandemic and will ensure that the company itself emerges stronger from it. The long-term shift to online learning is accelerating. The lead indicators of digital take up of our products are encouraging, and signals that our focus on experience, outcomes and affordability will prove a winning combination”
Pearson’s new chief finance officer Sally Johnson said many parts of the business were starting to return to a “new normal”; test centres have largely reopened albeit with social distancing measures in place, children are starting to return to schools and universities are planning to return to campus or hybrid models. She also emphasised Pearson has “an ongoing focus on cost competitiveness”, with costs 19% lower in the first half of 2020 compared to last year and overall corporate costs less than 1% of full year sales. She confirmed it also has a further £50m in cost savings to be realised in 2021. It has available liquidity of approximately £1.6bn.
Sidney Taurel, chairman, confirmed the company is declaring an interim dividend of 6.0p for shareholders and that the search for a new chief executive to replace Fallon is “well advanced”.