US textbook woes hand Pearson the dunce’s hat

CONCERNS over the health of its US education business sent shares in Pearson tumbling.

The publisher’s stock fell 4.7pc, or 33.4p, to 685p, after revealing a drop in sales in its US textbook division as cautious customers put-off spending.

It came despite Pearson saying its profits for the full year will come in at the upper end of its guidance, at £570m to £575m.

The publisher, however, reported a 2pc drop in sales for 2017, largely driven by a 4pc fall in its North American operations where sales of US higher education courseware dropped 3pc.

It said its 2018 profits will be below levels recorded last year and forecast a profit of between £520m to £560m for 2018.

Pearson’s North American business is vulnerable to the slowdown in America’s for-profit college enrolments and the rise in people renting text books.

Its online educational resource platform is also facing increased competition. George Salmon, an equity analyst at Hargreaves Lansdown, said: ‘When a company raises profit guidance, it is usually accompanied by a glowing set of numbers. That’s not the case at Pearson. The uptick in profits leans on a more favourable-thanexpected tax rate, and the improvement in net debt has been driven by the disposals, such as the sale of its 22pc interest in Penguin Random House.’

He added that while digital revenues were growing, that growth was on the back of a move which slashed prices on 2,000 titles.

The FTSE 100 was down 0.4pc, or 30.5 points to 7725.43 points while the FTSE 250 fell 0.5pc, or 107.94 points to 20769.36 points. Health stocks Mediclinic International

and NMC Health were among the biggest gainers on the blue-chip index thanks to favourable upgrades from Jefferies.

Mediclinic soared 3.1pc, or 18.8p, to 619p after the investment bank said it expects the company to meet its long-term performance targets for 2019.

NMC Health rose 1.6pc, or 50p, to 3152p despite Jefferies giving it a hold rating and maintaining its target price at 3085p.

FTSE 250 firm Spire Healthcare also jumped 3.5pc, or 8.4p, to 250p after Jefferies gave it a buy rating and said it had a customer advantage due its scale and exposure to the UK private hospital sector.

Retailers Debenhams and Marks and Spencer finished lower after Liberum dubbed them Christmas losers. The bank, which gave both stocks a sell rating, said the struggles facing traditional retailers are persisting.

Asos and B&M were among Liberum’s Christmas winners, up 0.1pc, or 6p, to 6760p and 0.1pc or 0.6p to 417p respectively.

Office space rental firm IWG – previously known as Regus – jumped up amid rumours that Canadian firm Brookfield Asset Management is planning put in another bid.

Brookfield submitted a £2.5bn offer for IWG in December, alongside private equity company Onex, but the bid was rebuffed by the company, which claimed it was too cheap.

Brookfield, which has just two days to make a firm offer under ‘ put- up or shut- up rules’ is rumoured to be preparing a heftier bid for the firm.

IWG has 3,000 office locations worldwide, and it operates a series of flexible shared offices under the ‘Spaces’ name.

It increased 0.6pc, or 1.6p, to 266p following the news.

Provident Financial was again dealt heavy blows following its £120m writedown in its doorstep lending arm.

Its shares dropped 13.1pc, or 105p, to 699p yesterday, meaning £313.7m has been knocked off its market value since revealing the write-off on Tuesday.