Pearson holds dividend as school closures hit revenue
Education publisher Pearson today said it will pay out a dividend for 2019 even as the closure of schools and test centres pushed down revenue in the first quarter.
The FTSE 100-listed firm reported a five per cent decline in year-on-year revenue in the first three months of the year, which it said was a direct result of Covid-19.
The company, which provides training and assessment services such as its English language qualification, said the closure of test centres had harmed its business
School closures also hit its clinical assessment and international courseware business.
However, Pearson’s online learning division posted growth of six per cent over the quarter amid growing demand for homeschooling software.
Shares in Pearson were down more than three per cent in early trading.
The company said it would not furlough staff or introduce pay cuts, adding that it would pay a dividend of 13.5p for 2019 — up four per cent on the previous year.
Chief executive John Fallon said the company’s financial position was strong enough to justify the payout, adding it had a “wider responsibility” to look after its shareholders, many of whom are pensioners.
Nevertheless, Fallon and chief financial officer Sally Johnson will take a pay cut of 20 and 25 per cent respectively, while board members will also take a voluntary reduction in fees.
Pearson said it has also taken measures to cut discretionary spending, while it had identified a further £50m of cost savings in 2021.
At the end of March the group’s net debt was £1.4bn, up from £1.2bn the same time last year. Pearson said this was primarily due to a share buyback launched earlier this year, which the firm has since paused.
Pearson’s liquidity was boosted by £530m from its recently completed sale of Penguin Random House, while the company also secured a new line of credit through its revolving credit facility.
The education group refused to state when it was expecting schools and testing centres to reopen, but warned of a more severe impact to its North American and international courseware businesses.
Person estimated that its the company’s computer-based testing division Pearson Vue would suffer a hit to operating profit of between £20m and £30m for each month test centres remained close.
The crisis comes amid the textbook maker’s effort to transform into a digital-first company.
Boss Fallon said the pandemic had accelerated this process, and the company was quickly scaling up new products and services.
Pearson will next month launch UK learns, an online platform providing free, skills-based courses designed for people who have been furloughed or laid off as a result of the crisis.
“We are in a strong financial position with a healthy balance sheet, low net debt and good liquidity. This enables us to deploy all our people and resources to support our communities as the world’s learning moves online at an unprecedented speed and scale,” Fallon said.
“When the threat of the pandemic eventually eases, it will be even clearer that the future of learning is increasingly digital. Through the crisis, we are continuing to invest in the platform, products and services that will make the next generation of digital learning a reality.”
Fallon, who previously announced plans to step down in 2020, said the process for finding his successor had been “complicated” by the crisis but that he still planned on ending his tenure this year.