Online education supported Pearson’s gains. Here’s what investors could learn


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Pearson is moving away from its campus sales business model.

(Olivier Douliery / AFP via Getty Images)

Online learning sales at an education giant


Pearson

rose 25% in the first quarter of 2021, the company said on Monday, boosting sales across the board and adding weight to the group’s restructuring plans around digital learning in the wake of the pandemic.

Shares of the UK publishing giant climbed more than 3% in London trading as the market applauded the first quarter trade update.

The comeback story. The Covid-19 pandemic had two profound impacts on Pearson, which is part of the FTSE 100 index. The first was that it put the company’s finances under strain, with the mandatory closure of educational testing centers on top of a slow decline in income from the sale of physical textbooks. Sales in 2020 are down 12% from 2019 levels, with profits falling 46%.

But the pandemic has also greased the wheels of the company’s much-touted transition to digital learning, with millions of home-confined students around the world turning to online education. At the start of the 2020-2021 school year, online education enrollments had increased by 41% from the previous year.

The digital pivot is at the heart of CEO Andy Bird’s strategy for the company. After joining Pearson in October 2020, the former president of Walt Disney International announced in March that the group would focus on direct-to-consumer sales, moving away from campus sales, and reorganizing into five new divisions, including one dedicated to virtual. learning. The reorganization is expected to be implemented in the second quarter of this year with one-time costs of between £ 40m and £ 70m in 2021.

Read also : The market encourages the publication of the new strategy of the giant Pearson. Here’s why.

What’s new. Pearson’s sales were up 5% in the first three months of 2021 compared to the same period last year, the company said in an unaudited trade update for the quarter.

By far, the growth was driven by the group’s global e-learning division, which saw sales increase 25% from the first quarter of 2020. The products and services division in North America only increased only 1%, and sales in the appraisal and international segments declined. by 2%.

“We are making good strategic progress in our ongoing digital transition, we are at an advanced stage of preparation for the upcoming launch of our new university app and our organizational overhaul is on track,” said Bird.

Pearson expects to generate year-round revenue and profit growth as the group benefits from improving business conditions as restrictions related to the Covid-19 pandemic relax, a said Bird. The company also confirmed that performance was in line with the 2021 outlook from March.

More: Pearson sales plummet despite boom in e-learning as more students study at home

Look forward. Pearson’s business update shows that the group is not only on the right track in its massive transformation, but the digital switchover is where the money is. The market and analysts welcomed the trading update as stocks moved higher, with the stock now rising more than 20% this year.

“Pearson is rewriting the book on virtual education. The pandemic has massively increased the demand for digital testing and learning and has started a fire under Pearson’s efforts to rejuvenate, ”said Sophie Lund-Yates, analyst at broker Hargreaves Lansdown. “Digital tutorial sales are expected to be more lucrative, and a digital subscriber base should mean that a higher proportion of revenue is recurring. “


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