Pearson’s 25% stake in Penguin Random House earned the company £65 million in operating profit in 2019, down slightly from the £68 its stake in the trade publisher generated in 2018.
In brief comments on PRH’s performance, Pearson said the company “performed solidly with underlying revenue growth from a rise in audio sales [and] stable print sales.” Pearson pointed to strong sales from two of America’s biggest books last year, Where the Crawdads Sing by Delia Owen and Becoming by Michelle Obama, as driving results.
Pearson has sold that 25% share in PRH to its parent company, Bertelsmann, in a deal set to close in early 2020. The sale is expected to earn Pearson net proceeds of $675 million, Pearson said.
The update on PRH came as part of Pearson’s release of its financial performance for 2019. After two years of cutting costs in response to the changing demands of the education market, Pearson said sales fell 6%, to £3.87 billion, compared to 2018. Operating profit was nearly cut in half, dropping to £275 million from £553 million in 2018. In its release, Pearson attributed the profit decrease mainly to the reduced gains on disposals together with increased intangible and restructuring charges, which more than offset the increase in adjusted operating profit.
In 2019 Pearson continued its digital transformation, with revenue split 36% digital (2018: 34%), 30% digitally-enabled (2018: 28%) and 34% non-digital (2018: 38%). Restructuring efforts resulted in incremental cost savings of £130 million in 2019. The simplification program, Pearson said, will enable ongoing efficiencies over time.
In prepared remarks, chief executive John Fallon observed: "With 76% of the company already growing strongly, and all parts of Pearson profitable, we are a simpler and more efficient company, completely focused on empowering people to progress through a lifetime of learning. The future of learning will be increasingly digital and we have built, by revenue, by far the world's leading digital learning company.” With the investments the company has made in new products as well as streamlining its business, Fallon said, “Pearson is now well placed, in time, to grow in a profitable and sustainable way.”
For 2020, Pearson expects to deliver an adjusted operating profit of between £410 million to £490 million.