Pearson suspends share buyback amid Covid-19
By Josh White
Date: Monday 23 Mar 2020
(Sharecast News) - Pearson announced on Monday that, as it managed the impact of the Covid-19 coronavirus pandemic on its business, and with the likelihood of prolonged uncertainty, it had decided it was prudent to pause its share buyback.
The FTSE 100 education publisher also updated the market on the impact on its trading, along with the measures it was taking to mitigate those impacts and satisfy the "significant" uptake in demand for online learning.
It said the actions were underpinned by its "strong" financial position, with significant headroom on liquidity and scope for further cost savings reported.
"Our priority remains the health and safety of our employees, learners and customers," the Pearson board said in its statement, adding that trading to the end of February was in line with its expectations.
Since then, as a result of the Covid-19 pandemic, it said it was seeing three major trends in its businesses, with the first being uncertainty in its operations that relied on learners and staff being able to access physical sites, such as Pearson VUE, the Pearson Test of English, US Student Assessments, Higher Education institutions in South Africa and, to a lesser extent, UK qualifications, which would have a negative impact on profits.
"If the crisis broadens, it could also impact our English franchise business in Brazil.
"We are making both variable and discretionary cost savings to partially mitigate these impacts and are considering further actions."
Secondly, Pearson said it had seen a "significant" uplift in the use of its digital products and services, as it enabled its existing courseware and assessment customers to migrate to online learning and testing.
"This will strengthen and deepen these relationships, and should, in time, accelerate the shift to online learning."
Thirdly, it said it had seen a "rapidly growing interest" in its Global Online Learning businesses, focussed initially on its virtual school offerings, but expected also to include fully online university programmes.
"We believe that this growing interest should translate into increased billings later in the year and thereafter, although the scale will depend in part on how long the disruption to face to face teaching and learning persists."
The company said that, following the completion of its 2017-2019 restructuring programme, it was a more efficient company "than ever before", allowing it to act with agility to ensure its cost base remained appropriate in challenging trading conditions.
It said it had already identified actions to reduce operating expenditure and discretionary spend to partially mitigate the potential impact from Covid-19, adding that it was "actively exploring" further efficiencies.
"We are also exploring whether we qualify for governmental relief in key territories, as a result of the closure of schools and testing centres."
Pearson added that it had "significant" financial headroom, explaining that it was working to protect its cash flow and was proactively managing its working capital.
At the end of February, the firm had around ?1bn in total liquidity immediately available from cash and its revolving credit facility, and was looking at all options to further maximise liquidity.
It said it balance sheet was strong, it had low levels of net debt with leverage of 1.3x net debt-to-EBITDA, post IFRS 16, at the end of 2019, and "significant" headroom against its covenants/
Looking at the paused share buyback scheme, Pearson said about ?167m million of the ?350m programme had been completed to date.
"While we are experiencing unprecedented times as a result of Covid-19, we have a diversified business with a presence in multiple geographies, a strong balance sheet with relatively low net debt, and we are taking immediate measures to contain our costs and protect our financial position.
"In the longer term the growing interest in digital products and online learning mean Pearson is well-placed given the investment we have made in this space."
Pearson said it would continue to monitor the situation, and would update the market as appropriate, adding it was "taking every step" to secure future value for its stakeholders.
"The board remains confident of the long term strategy of Pearson and is encouraged by the growing importance of its global leadership in online learning."
At 0814 GMT, shares in Pearson were down 9.51% at 452.1p.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN