Publisher Pearson’s shares took another hit today after the group said sales of its print college course books continued to decline, offsetting growth elsewhere.
Former Financial Times owner Economist and Penguin, who now focuses primarily on higher education courseware, has struggled to adapt to the digital shift quickly enough.
The group said overall sales fell to less than £ 3.9 billion last year, driven by a 12% drop in its key higher education courseware business in the United States, which accounts for much of its sales.
Pearson said physical book sales fell 30% last year, with growth in digital products only slightly offsetting with “modest” growth
Sales of physical books fell 30% last year, with growth in digital products only slightly offsetting with “modest” growth. Half of all learners now prefer e-books, the company said.
Adjusted operating profit was £ 581m, up 6% from a year earlier but slightly below expectations, which it lowered last month to £ 590m sterling, when it also issued a profit warning for 2020, crashing stocks.
The profit figure is lower than expected due to currency movements.
Pearson shares fell again, closing 4.2% lower at 559.07p on Friday. They are down about 35% from a year ago.
The company warned in January that its profit for 2020 would be lower than expected as textbook sales continued to decline.
Managing Director John Fallon, who will retire this year, was positive about what the future might bring, promising an “exciting pipeline” of new products and services.
During his seven years at the helm, he tried to make Pearson a global leader in digital education, but struggled to make up for a rapid decline in profitable college textbook sales.
“The future of learning will be increasingly digital and we have built, in terms of revenue, the world’s leading digital learning company by far,” he said.
Pearson said 36% of revenue now comes from digital, up 2% from last year.
A further 30%, an additional 2 point increase, came from digitally enabled products, while non-digital products fell 4 points to 34%.
The company remains heavily dependent on North America, which accounted for 65% of its sales and 62% of adjusted operating income in 2019.
Pearson sold his remaining 25% stake in Penguin Random House to Bertelsmann for £ 530million in December last year
Hargreaves Lansdown analyst Nicholas Hyett believes Pearson is a “classic example” of the risks businesses face as a result of digital disruption.
“Unfortunately, convincing customers to shell out the best prices for digital alternatives is proving to be quite a challenge and the transition has seen Pearson lose market share,” he said.
While he believes the impact of North American activities on the number of groups will diminish as the division shrinks, he said the pain of the past few years cannot be underestimated.
“Funding the transition has required the sale of trophy assets like Penguin Random House and the Financial Times and profits are hardly more than half of what they were at the start of the last decade.
“We see Pearson as a classic example of the risks incumbents face as a result of digital disruption.”
Pearson sold his remaining 25% stake in Penguin Random House to Bertelsmann for £ 530million in December last year.
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