Pearson now a ‘growth stock’ as it bids to be digital-first education group
Publisher seeks to expand in life-long learning sector after years of disappointing returns
Pearson’s chief executive has said it is becoming a “growth stock” as the publisher seeks to turn itself into a digital-first company that is a “one-stop shop” for life-long education.
Two years after he took the helm at Pearson, former Disney executive Andy Bird said the company was positioned to defy economic headwinds by offering investors the “real sales and real profits and real cash flows” of its longstanding business, combined with innovations in the fast-growing life-long learning sector.
The comments restate Bird’s ambitious vision for Pearson, which he said has the potential to “rewrite how everything is done” in education by offering consumers and employers more accessible, technology-enabled methods of training. After years of disappointing returns, however, the company must cope with a flagging higher education market and stiff competition in the workforce training sector, where it has only a tentative foothold.
“I think you’ve seen Pearson move from being a value stock to being perceived as and seen as a growth stock,” Bird said in an interview with the Financial Times. “We’re attracting different investor classes. The message is starting to resonate that we are more than an educational textbook publisher.”
Pearson is among best performing FTSE 100 stocks this year, at 904p a share after rising 50 per cent. However the increase is from a low base, with Pearson issuing seven profit warnings in as many years before Bird took over.
In the past year the company has launched an online subscription service, Pearson+, where students can access all its textbooks as well as videos, social platforms and partner services for $14.99 a month.
It also hopes to move further into the workforce training market. This year it acquired Credly, a service that stores and verifies work accreditation, and Faethm, a company that assesses companies’ skills needs.
Bird said Pearson would capitalise on the “expansion of the definition of higher education” as more employers looked to upskill their workforces and learners sought alternatives to university.
He quoted from a recent conversation that he said captured a shift to more jobs-focused learning offering opportunities beyond the traditional university: “There used to be higher education. There’s now hire education.”
Some commentators remain sceptical about the company’s ability to turn itself round, noting Pearson’s workforce-skills division remains small and faces stiff competition from more established companies such as 2U and Coursera. “In workforce solutions they are so far behind — they don’t really have anything,” said one analyst who declined to be named.
While sales in the workplace-training division increased 6 per cent, the business accounted for just 7 per cent of total sales, according to interim results this year. Higher education, in comparison, was 21 per cent and assessments and qualifications 39 per cent. The relatively modest workforce skills division may struggle to make up for losses in the higher education unit, where sales fell 4 per cent.
As inflation rises and borrowing costs increase, Bird said the company would need to grapple with a period of “free money” coming to an end. “There’s going to be a more discerning use of capital,” he said. But he insisted that Pearson remained attractive, including to Silicon Valley investors.
A spokesperson said one-fifth of the company stock was now held by US shareholders, up from 10 per cent two years ago.