We continue to expect revenue to stabilise this year but weaker than expected trading in our US Higher Education Courseware business in the key selling season means we now expect adjusted operating profit to be at the bottom of the guidance range of £590m to £640m · At the nine months, we expect group underlying revenue to be broadly flat with Core markets up 5%, Growth up 3% and North America down 3%. Businesses generating 75% of Pearson revenue growing in aggregate by around 3% · Strong performance in structural growth businesses - continued strong growth in Online Program Management (OPM), Connections Academy, our K12 virtual schools business, Pearson Test of English Academic (PTE Academic) and Professional Certification driven by the incremental investment we have made in these businesses over the past two years. US Higher Education Courseware (25% of revenue) down by around 10%. Digital : print split expected to shift from 55% : 45% at the end of last year to 65% : 35% at the end of this year · Underlying pressures from lower college enrolments and use of Open Educational Resources (OER) are all largely as expected. However, we believe the weaker than expected trading has been driven by the following factors: o The key selling season has seen a significant industry wide acceleration of print attrition as channel partners and students turn away from print products more rapidly than anticipated. o Modest (c. one percentage point) adoption share loss likely caused by the delivery issues due to the implementation of our new Enterprise Resource Programme (ERP) in H2 last year as well as our sales force re-organisation. Over time, we expect to re-gain this share following the roll out of our next wave of digital products on the Global Learning Platform which launched in September, along with a sales force which is strategically aligned to our customer base. o Digital revenues are up modestly but registrations are down slightly due to a continuation of the trends we identified at half year with greater than anticipated pressure in Developmental Mathematics, the strategic retirement and deprioritisation of long tail products, and some impact from loss of market share. · Our strategy to move to more affordable access based models such as Inclusive Access, digital products and partner print rental will result in a more sustainable and predictable business. Over the last three years, we have moved significantly more of our business into digital and access based models, we have transformed our technology platform laying the foundations for our next generation of digital products and reduced cost substantially through re-organisation of the sales force and product services and implementation of a modern ERP system. Simplification plans on track and strong balance sheet · We remain on track to deliver in excess of £330m1 of annualised cost savings, with the full benefits accruing from the end of 2019 onwards. · Our financial position remains robust and we continue to expect year end net debt to be broadly in line with 2018. Underlying adjusted operating profit at the bottom of the guidance range · We now expect US Higher Education Courseware revenue to decline between 8% to 12% in 2019, weaker than our original guidance for a 0% to 5% decline. · We now expect Pearson to deliver adjusted operating profit in 2019 at the bottom of the guidance range of £590m to £640m with trading impact from our US Higher Education Courseware business offset by good underlying growth in the rest of the business and temporary additional cost savings. We expect to deliver adjusted EPS at the bottom of the guidance range of 57.5p to 63.0p. |