Shares in education group Pearson (PSON) jumped over 8% to 652p following the publication of results for the 12 months to the end of December.
The figures confirmed the encouraging precedent set with January’s trading update when the firm raised its full year operating profit guidance to £385 million versus a consensus forecast of £375 million.
Underlying revenue increased by 8% to £3,428 million, and adjusted operating profit of £385 million was in line with expectations.
Net debt declined to £350 million versus £463 million the previous year, and the firm declared a 19.5p per share full year dividend.
Revenue growth and profitability for the current year is expected to be in line with market expectations, with mid single-digit compound annual revenue growth expected for 2022 to 2025 and stable margins in the near term.
INCREASING IMPORTANCE OF ON-LINE LEARNING
Many workers have started to re-assess their priorities in an increasingly tight labour market. On-line learning has become increasingly important for corporates who need to remain competitive and retain staff.
To strengthen its position in this area, Pearson recently acquired the 80% stake in Credly that it did not already own. Credly is described as the market leader in digital credentials and certifications for the workforce.
The deal adds depth to Pearson’s offering in the fast-growing workforce skills sector and expands its digital footprint, accelerating its growth prospects.
EXPERT VIEW
According to Shore Capital media analyst Roddy Davidson, ‘Our current estimates suggest that the group is trading on full year 2022 and 2023 price earnings and EV to EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation) ratios of 15.2x, 7.3x, and 13.7x and 7.1x respectively
As this appears modest, particularly in view of a period of disappointing share price performance (-22% over six months), we have decided to upgrade our recommendation from HOLD TO BUY.’
