Maths lesson

17 January 2018 By Liam Proud Follow @liamwardproud

The $8 bln education publisher’s revenue has stopped cratering after it stemmed a decline in sales of U.S. textbooks. The relief may be temporary. Colleges are shifting to cheaper course materials and a price war is looming. That is hard to square with a rich valuation.

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Pearson said on Jan. 17 that its 2018 operating profit would be between 520 million pounds and 560 million pounds, higher than last year’s 570 million pounds to 575 million pounds once the effects of business disposals and currency moves are stripped out.

The British education publisher also said that revenue excluding the effects of currencies and business disposals fell 2 percent in 2017.

Underlying sales in its U.S. higher education courseware business – the source of a profit warning last January that wiped almost a third off its market value in one day – fell 3 percent in 2017.

Pearson expects that division’s 2018 sales to be flat or to decline by around 5 percent “due to the similar underlying pressures seen in the last two years”. The increasing availability of rental textbooks, lower college enrolments and so-called open educational resources – which provide open-access course materials either for free or at a heavily discounted price – have caused U.S. students to turn away from high-priced course textbooks in recent years.

Pearson shares were down more 4.7 percent to 685 pence at 0815 GMT.

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