* 2019 revenue flat, operating profit at bottom of range
* Sees 2020 profit of 500-580 mln pounds, below consensus
* Shares slump to 11-year low
* Graphic-Pearson's shares underperform: tmsnrt.rs/2TslY1X (Adds further comments, reaction, updates shares)
LONDON, Jan 16 (Reuters) - Shares in British publisher Pearson slumped to their lowest in more than a decade on Thursday after it said operating profit would be lower this year because of sharp declines in sales at its U.S. higher education business.
The education company said its operating profit would be between 500 million ($650 million) and 580 million pounds in 2020, below the 590 million pounds it was set to make last year, which itself was at the bottom of Pearson’s expectations.
Shares in Pearson, which previous profit warnings and downgrades show has consistently underestimated the shift from physical text books, slid as much as 14% in early trade to hit 532.6 pence, their lowest since October 2008.
They were down 6% at 580 pence by 1100 GMT.
U.S. Higher Education Courseware, which accounts for 24% of Pearson’s revenue, was in the final stages of “a pretty bumpy and hard analog-to-digital transition”, said Chief Executive John Fallon.
The division’s revenue fell 12%, steeper than the 5% decline expected, with text book sales down 30%, resulting in $70 million of lost revenue.
Fallon, who will retire this year once a successor is appointed, said it had been an especially challenging few years.
“Students are now moving from print to digital far more quickly,” he told reporters. “That gets us to the future state of the business more quickly, but it’s painful in the year in which it happens.”
The numbers tell the story. In 2010 Pearson sold 21 million college textbooks. In 2019 it sold fewer than 4 million, and this year is expected to sell fewer than 3 million.
The miss in U.S. Higher Education overshadowed progress in the rest of the business, where digital products such as professional certification and online degree courses resulted in aggregate 4% growth.
Fallon’s seven-year tenure at Pearson has been marked by his failure to predict the speed of digital transition, leading to a string of profit warnings.
The 2020 guidance is likely to trigger further downgrades from analysts, who had on average pencilled in adjusted operating profit of 597 million pounds for 2020, according to a company-supplied consensus.
Barclays, which has an “underweight” rating on the stock, said the guidance was worse than expected. “The outlook is weak when we make all the necessary adjustments - and this is where the focus will be,” it said.
Citi said U.S. Higher Education had come in towards the lower end of the forecast range, and it was clear that trends would remain “extremely tough” this year.
Pearson said its overall revenue for 2019 would be unchanged from a year earlier, and that its operating profit guidance for 2020 included the 25% stake in Penguin Random House it said in December that it was selling.
In addition to Fallon’s departure, announced last month, Pearson said on Thursday that finance chief Coram Williams was leaving to take up a position with an unnamed company. He will be replaced by his deputy Sally Johnson, Pearson said.
($1 = 0.7662 pounds)
Editing by James Davey, David Clarke and Jan Harvey
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