Pearson shares rose 6.8% to 808.2p in early morning trading on Monday following an adjusted operating profit growth of 22% to £160 million in HY1 2022.
Pearson attributed its profit climb to a positive trading performance, FX benefit and property savings, slightly offset by inflation, portfolio investment and phasing costs in 2021.
The education group reported an underlying sales increase of 6% to £1.7 billion, driven primarily by a 16% rise in its Assessment and Qualifications business as a result of US Student Assessment and UK & International Qualifications after exam timetables started to normalise post-Covid.
Sales were also boosted by a 22% surge in Pearson’s English Language Learning sector, as improved global mobility aided expansion in the Pearson Test of English (PTE).
The company announced an adjusted EPS increase to 22.5p compared to 10.5p in HY1 2021.
Pearson noted an operating cash flow of £9 million against £10 million the last year, with the drop through of climbing profits offset by a growth in receivables on the back of strong revenue increases in HY1 which will be collected in HY2.
The group mentioned a HY1 net debt of £810 million from £646 million, with operating cash offset by dividends, share buyback and tax.
Pearson confirmed an available liquidity of £1.2 billion compared to £1.4 billion year-on-year at the end of HY1.
The company reiterated its outlook, including unchanged revenue and adjusted operating profit expectations for FY 2022.
The education firm highlighted the upside potential in English Language Learning, Virtual Schools and Clinical Assessment as a result of outperformance in HY1 and likely increased pressure in enrolments in OPM and higher education.
Meanwhile, the company said the growth in Pearson+ subscriptions would probably lead to a move in HE revenue recognition from Q3 to Q4.
“Pearson has delivered another encouraging financial performance in the first half of the year. We continue to make excellent strategic and operational progress, with momentum across the business,” said Pearson CEO Andy Bird.
“We are already seeing clear benefits from our increasingly diverse learning ecosystem, with Pearson serving more people across their lifelong learning journeys. Our digital strategy is progressing well; Pearson+ grew to 4.5m registered users, increasingly taking us direct to consumers.”
Pearson added it expected a net interest charge of £10-£15 million and an effective tax rate of 15% to 17%, reflecting the statute of limitations on a range of tax provisions which lapsed in April 2022.
“Our focus on delivery and execution remains and full year 2022 expectations are reaffirmed. In addition, the more integrated platform we are building across the company is creating efficiencies, underpinning our new guidance for accelerated margin improvement,” said Bird.
“We have a robust balance sheet which, together with our cash generation, will support continued investment in growth and create value for our shareholders.”
Dividend and share buyback
Pearson recommended a HY1 dividend of 6.6p from 6.3p in HY1 2021, with a £350 million share buyback currently in progress and over £165 million in shares repurchased as of 29 July 2022.