Shares in educational publisher Pearson dropped by over a quarter on Wednesday, after withdrawing its profit guidance for 2018 in light of “continued challenges and uncertainty” in the market.
In a statement, Pearson said they still expected to hit the profit guidance given for 2016, despite an 8 percent fall in revenue. The company sees 2017 operating profit between £570 million and £630 million, driving adjusted earnings per share of between 48.5 pence and 55.5 pence. Pearson withdrew their profit guidance for 2018 due to the weak results.
Pearson have issued a string of profit warnings over the last couple of years, selling their stake in the Financial Times and the Economist in order to focus on their education business. However, the company attributed the weak results to “unprecedented decline in Q4 2016 in our North American higher education courseware business”, showing it may be struggling to keep up in its chosen market.
Pearson explained in a statement: “Our net revenues fell 30 percent during the final quarter resulting in an unprecedented 18 percent decline for the full year.
“We estimate 2 percent of this decline was driven by lower enrolment, particularly in Community College and amongst older students; 3-4 percent by an accelerated impact from rental in the secondary market; and approximately 12 percent due to an inventory correction in the channel reflecting the cumulative impact of these factors in prior years.”
Pearson’s chief executive John Fallon commented:
“The education sector is going through an unprecedented period of change and volatility. We have already taken significant steps on restructuring, reducing our cost base by £375 million last year.
“However our higher education business declined further and faster than expected in 2016… So we are taking more radical action to accelerate our shift to digital models, and to keep reshaping our business.”
Pearson (LON:PSON) shares are currently down 25.72 percent at 600.26 (0902GMT).