Pearson’s share price falls as Covid-19 hits US college enrolment

Global education group Pearson said enrolments at community colleges in the US were hit by a recent surge in Covid-19 cases and a tight labour market, limiting growth and sending its share price to its lowest level since January.

In a key trading update for the period when students buy textbooks and materials for the academic year ahead, Pearson said revenue from its US Higher Education Courseware had fallen 9% in the first nine months.

But Pearson said it was still on course for its full-year targets, as demand for Virtual Learning and English Language Learning helped sales to rise 14% and 15%, respectively.

Its new Pearson+ app was also being used by more than 2-million people.

“That’s pretty good going for 12 weeks,” said CEO Andy Bird.

The group’s share price was down 10% at 657 pence, which was a disappointment for former Disney executive Bird who has been running the group for almost a year.

“We are left with a slight sense of ‘what might have been’. Had enrolments been more robust, we would surely have been talking about consensus upgrades,” analysts at Citi said. They rate Pearson a buy.

Independent analyst Ian Whittaker said that with a new reporting structure and only growth rates given, it was difficult to track quite how the company had performed in the third quarter.

He said that revenue at the US Higher Education Courseware division, often the source of Pearson profit downgrades in recent years, was down 9% in the nine months, compared with a 2% fall in the first half of the year.

Having been buffeted by rental markets and second-hand options for once-expensive textbooks, Pearson has embarked on a direct-to-consumer strategy offering unlimited access to content to provide more reliable subscription revenues.

It hopes that the new app that launched in the US in July will also deter students from buying second-hand books, which had eaten into its profit.

Trying to broaden its appeal, it is also pitching itself as a consumer-facing group offering training and skills for life beyond its core schools and college remit. Its assessment and qualifications revenue rose 24%.

Overall, group underlying revenue rose 10% for the ninemonths, down from 17% in the first six months, due to tough comparatives for the third quarter. The full-year consensus had been for adjusted operating profit of £377m.