Pearson January Trading Update (Unaudited)

In North America, underlying revenue declined 3% due to a weaker performance in US Higher Education Courseware, partially offset by strong growth in Connections, OPM and VUE.

US Higher Education Courseware was down just under 12% for the year with print declining close to 30% partially offset by modest growth in digital. This reflects rapidly changing market dynamics that are reshaping the industry, as illustrated by the fact that in 2019 we sold 3.7 million textbooks to students at US universities, compared to 7.4 million in 2016 and 21 million a decade ago.

In 2019 the weaker performance was driven by a number of factors:
Unbundling of premium priced print and digital products for digital only formats as students are increasingly relying solely on the embedded eBook within platform based MyLab and Mastering products. Sales of bundle units declined 45% during 2019.

Campus bookstores are buying less physical inventory due to changing student behaviour with over 50% of learners now preferring an eBook to a physical text. This is shown in good eBook growth.

Both these trends provide more affordable options for students giving them less reason to turn to the secondary market and over time will increasingly create a more predictable, visible revenue stream.

Modest adoption share loss caused by the delivery issues due to the implementation of the new ERP system in H2 2018 as well as sales force re-organisation.

We remain confident that we will re-gain this share over time as we build traction from the rollout of our next wave of digital products on the Global Learning Platform which launched in September.

The recent acquisition of Smart Sparrow, a small ed-tech company which will accelerate Pearson’s ability to produce more engaging, interactive and personalised content for learners, including eBooks.

Digital revenue grew modestly but registrations were, as expected, down slightly due to greater than anticipated pressures in Developmental Maths, the strategic retirement of long tail products, and some impact from loss of share.

In US Higher Education Courseware, we continued to grow our direct-to-institution (Inclusive Access) channel with enrolments increasing to 1.8m and this now makes up 9% of US Higher Education Courseware revenue, at non-profit and public institutions.

Continued strong growth in Connections and OPM was driven by enrolment growth. OPM will be further strengthened by the recent acquisition of Lumerit, an ed-tech company that helps address college degree completion and affordability issues, which was our first acquisition in five years. Pearson VUE also delivered a strong performance driven by new contracts and higher test volumes.–unaudited-.html

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