Pearson marked up despite posting record £2.6bn loss
EDUCATION publisher Pearson enjoyed some light relief after its full-year results came in slightly better than expected after last month’s shock profits warning.
On Jan 18, the FTSE 100 company cut its 2017 profit forecast, scrapped its 2018 target and warned it would cut the dividend this year, resulting in a 30pc share price plunge.
Yesterday’s price action differed. In a rollercoaster trading session, the bluechip index swung from an intraday low of 625.5p to a high of 699.5p, after it said trading had not deteriorated any further, despite booking a record £2.6bn loss due to a writedown on the value of its North American business.
The group’s full-year operating profit tumbled 21pc to £635m, slightly ahead of January’s guidance, while net debt increased to £1.1bn, better than the £1.3bn consensus estimate. Pearson also announced plans to sell its English language learning business GEDU.
It is looking ahead to operating profit of between £570m to £630m this year. However, Neil Campling, of Northern Trust Capital Markets, said “The high end of 2017 guidance assumes an improvement from the key channel partner inventory correction that has taken place through 2016 but given Pearson’s poor execution and visibility we feel this end of guidance is likely too optimistic.” Shares closed up 11p, or 1.7pc, at 657p.
On the wider market, the FTSE 100 dipped 27.67 points, or 0.38pc, to 7,243.70, weighed down by the bank stocks. Royal Bank of Scotland’s shares dropped 11.2p to 238.2p as losses rose sharply, up from £1.98bn in 2015 to £6.96bn. Its peer Standard Chartered faltered, down 20.5p to 730½p, after it said it would not pay a 2016 dividend due to restructuring costs. Barclays shed 3.2p to 255.9p, HSBC lost 2½p to 650.3p, and Lloyds dipped 0.3p to 69.3p.
Elsewhere, concerns about demand for metals in China and a firmer dollar weighed on the mining sector. BHP Billiton surrendered 39½p to £13.08, Rio Tinto lost 102½p to £33.16, Antofagasta shed 17p to 807½p and Glencore closed down 3.9p at 327½p.
Hospital provider Mediclinic lost ground, 13p lower at 737½p, after UBS cut its rating to “neutral” from “buy”, while London Eye owner Merlin Entertainments fell 6.2p to 498.3p on a downgraded price target by JP Morgan.
On the other side, British Airways owner IAG flew 22.5p higher to 527p, on an 8.6pc rise in full-year operating profit to €2.5bn buoyed by cost-cutting and lower fuel costs. Low cost carrier easyJet jumped 17p to 931½p.
Ahead of the Mobile World Congress next week, shares in Vodafone edged up 0.6p to 202.9p amid speculation it might announce another international joint venture.
On Aim, health and fitness-focused wearable technology specialist Cloudtag plunged 41pc after its nominated adviser resigned. It also raised £975,000 placing shares at 3.75p apiece.