July 27, 2018 / 6:37 AM / 10 months ago

Britain's Pearson pursues return to growth with digital courses

LONDON (Reuters) - British education publisher Pearson (PSON.L) said it was on track to return to underlying profit growth this year after demand for digital course material in the United States helped it report slightly better-than-expected first-half results.

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

Shares in the 174-year-old group were up 3 percent in early trading as Pearson, which earns around 80 percent of its income in the second half, said its transformation to a digital provider was taking shape.

The company has been through a tumultuous few years, with Chief Executive John Fallon forced to cut thousands of jobs and sell assets such as the Financial Times newspaper to fund a move into ebooks, rental schemes and online courses.

The group has been particularly hard hit in the United States where students in higher education have moved rapidly to rent and download books rather than pay hundreds of dollars to buy hefty textbooks.

Pearson signaled it was turning a corner in February this year when it said it expected its 2018 underlying profit to increase for the first time in six years. It reiterated that position on Friday.

“We’ve had another good quarter and every quarter that goes on is encouraging,” Fallon told reporters.

“But our sales are second-half weighted, we have our biggest sales season ahead of us. We’re clear we have a lot still to do,” he added, referring to the period covering the start of the academic year in September.

Pearson reported first-half adjusted operating profit of 107 million pounds ($140 million), ahead of a company-compiled consensus of 85 million pounds.

Profit for 2017 was 576 million pounds, down 9 percent on 2016. For 2018 it expects profit of between 520 and 560 million pounds which it says represents underlying growth when stripping out disposals and currency moves.

Analysts have said the first half of the year is a quiet one for Pearson and the shares, up 26 percent year to date prior to Friday, will be pegged to what happens in the third quarter when most enrolments happen and students buy course material.

On the problematic U.S. Higher Education Courseware business, which accounts for nearly 30 percent of the group, it said it had received fewer book returns from retailers but it still expects a decline in net sales in the second half.

It said digital revenue at the division grew modestly.

Pearson has put its U.S. K12 school courseware business up for sale. It said in February it was in talks with potential buyers and gave no further update on Friday.

Reporting by Kate Holton; Editing by Keith Weir

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