Pearson forecasts flat operating profit for 2012 -UPDATE

-Adds comments from Investec

Learning company Pearson anticipates good revenue growth in 2012 in spite of the 120m pound cost of closing the group's UK adult training business, Pearson in Practice.

That despite weakness in the key fourth-quarter selling season for higher education, consumer publishing and corporate advertising, as well as the ongoing structural changes in the industry.

For the year as a whole, the group stated that it expects to report an operating profit in EBITA (earnings before interest taxes and amortisation) terms of approximately £935m (Investec: £951m) and adjusted earnings of approximately 84p per share (Investec: 84.5), broadly in line with the year before at constant exchange rates.

Last year the company reported annual operating profits of £942m.

The total interest charge to adjusted earnings is forecast by the group to be approximately £50m including a £12m pensions finance credit and Pearson's effective tax rate is expected to be around the low-end of its guidance of 24-26%.

Geographical business performanceThe group's North American education business is expected to report "modest revenue growth" at constant exchange rates.

The international education business should report "double digit sales growth" and the professional business is forecast to report operating profits significantly lower than in 2011.

However, the group stated that it had faced a "dramatic fall in demand with changes to the apprenticeships programme" - as a result of new government legislation - leading to the conclusion that its Pearson in Practise UK adult training business no longer had a sustainable model. The cost of closure and impairments are expected to be approximately £120m.

Financial Times GroupThe Financial Times Group is expected to report "good revenue" growth for the full year, in spite of a slow fourth quarter caused by weaker advertising sales.

Digital and subscription-based revenues were described as having continued to grow well at both the FT and Mergermarket.

However, it stated that the FT Group's full-year profits would be significantly lower than in 2011, reflecting the absence of a contribution from FTSE International following its disposal and further actions to accelerate the shift from print to digital.

PenguinThe group stated that Penguin benefited from a good fourth-quarter publishing performance and traded in line with expectations in its key selling season.

Following Pearson and Bertelsmann's announcement of their plans to combine Penguin with Random House, the two companies are seeking clearance for the proposed merger from appropriate regulatory authorities around the world.

Completion of the process is expected to "prompt significant restructuring" as the group demerges Penguin from Pearson and integrates it with Random House.

FTSE 100-listed Pearson generates approximately 60% of its sales in the US.

On this last point it may be worth noting that one of the main risks identified by Investec pertains to US state financing.

Lastly, Investec points out that the stock is trading at a premium valuation of 13.5 times estimated 2013 calendar year price-to-earnings.

MF

Recommended

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework
Investment strategy

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework

John Stepek talks to Steve Clapham, investor, analyst and author of The Smart Money Method, about the dangers in picking individual stocks and why you…
8 Apr 2021
BP looks set to return more money to shareholders as it beats expectations
Energy stocks

BP looks set to return more money to shareholders as it beats expectations

Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfoli…
6 Apr 2021
Deliveroo has hit the market – but it’s not getting the warmest welcome
UK stockmarkets

Deliveroo has hit the market – but it’s not getting the warmest welcome

Food delivery company Deliveroo made its debut on the stockmarket this morning. But with the share price sliding by 30% straight away, it’s not made t…
31 Mar 2021
Three stocks to buy now that will come back stronger after Covid-19
Share tips

Three stocks to buy now that will come back stronger after Covid-19

Professional investor Ed Wielechowski of Odyssean Capital, chooses three compelling stocks that should thrive in a post-pandemic world.
29 Mar 2021

Most Popular

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021