Revenue drop at Pearson, but PRH 'solid'

Revenue drop at Pearson, but PRH 'solid'

Pearson's sales dropped 2% over the first nine months of the year in underlying terms, although Penguin Random House put in a "solid" performance in the third quarter thanks to big hits from E L James, Paula Hawkins and Lee Child, the company has reported.

In a nine-month interim management statement, Pearson said sales were down 2% at constant exchange rates and in underlying terms (up 2% in headline terms), blaming factors including a drop in US university enrolments and poor textbook sales in South Africa. No actual revenue figures were included in the statement.

For the third quarter, sales were down 2% in headline terms, down 5% at constant exchange rates and down 4% in underlying terms. 

Pearson's chief executive John Fallon said: "The key cyclical and policy-related factors which have been hurting our markets for some years have yet to improve.”

In the company’s core markets, which includes the UK, sales dropped 5% across the nine months in underlying terms (8% in headline terms)  because of UK policy changes in school accountability measures, which had an adverse effect on revenues, and overall declines in western Europe. North American revenues increased by 7% in headline terms because of the strength of the US dollar but were down 1% at constant exchange rates.

However, Penguin Random House had a good third quarter thanks to sales of The Girl on the Train by Paula Hawkins, Harper Lee's Go Set A WatchmanGrey by E L James and Lee Child's Make Me, although revenues were said to be partly offset by "weaker" e-book sales.

In February, when Pearson released its 2014 results, including a 4% revenue drop for the year, it said it expected adjusted earnings of 75-80p per share in 2015.

However, it has now reduced its reported adjusted earnings to 70-75p per share because of movements in exchange rates, as well as the disposal of PowerSchool (an online education tool), FT Group and The Economist Group.

“Given a strong competitive performance but continued challenging marketing conditions, we expect our adjusted earnings per share to be around the bottom end of this range,” said the firm.