Pearson Reports Mixed 2025 Interim Results Amid Market Challenges
Why we think this is neutral
Pearson's 2025 interim results present a mixed picture. On the positive side, the company reported a 2% underlying sales growth and a 2% increase in adjusted operating profit. They've also maintained their full-year guidance and expect stronger growth in the second half. However, these positives are balanced by several challenges. Net debt has increased, and there are multiple mentions of headwinds and challenging market conditions across various segments. The company faces delays in contracts and external factors affecting performance. While Pearson remains optimistic about its medium-term outlook, the current economic uncertainties and competitive landscape pose significant hurdles. The flat profit margins and decline in some business segments further underscore the challenges. Given this balance of positive developments and ongoing challenges, a neutral stance seems most appropriate.
Key Points
- Underlying sales up 2% to £1,722m, but down 2% on headline basis
- Adjusted operating profit up 2% underlying to £242m, down 3% headline
- Net debt increased to £1,027m from £853m at end of 2024
- Maintained 2025 guidance with stronger H2 growth expected
- Interim dividend up 5% to 7.8p per share
- Strategic partnerships with Microsoft, AWS, and Google Cloud progressing
- Challenges in Virtual Learning and English Language Learning segments
- Completed acquisition of eDynamic Learning for $225m
- Medium-term outlook: mid-single digit sales growth CAGR and sustained margin improvement
Summary
Pearson's 2025 interim results show a 2% underlying sales growth to £1,722m, with adjusted operating profit up 2% to £242m. However, headline figures were impacted by currency movements, with sales down 2% and adjusted operating profit down 3%. The company faces challenging market conditions and economic uncertainties, particularly in segments like Virtual Learning and English Language Learning. Despite these headwinds, Pearson maintains its full-year guidance and expects stronger growth in H2, particularly in Q4. The company's strategic initiatives, including AI transformation and enterprise business expansion, are progressing. However, net debt has increased to £1,027m from £853m at the end of 2024. Pearson remains optimistic about its medium-term outlook, projecting mid-single digit sales growth and sustained margin improvement. The interim dividend was increased by 5% to 7.8p per share.