ii view: Pearson extends AI drive with new AWS tie-up
Promoting itself as the world's leading learning company and with the need for workplace reskilling expected to increase. Buy, sell, or hold?
28th February 2025 15:45
by Keith Bowman from interactive investor
Full-year results to 31 December
- Adjusted revenue up 3% to £3.55 billion
- Adjusted operating profit up 10% to £600 million
- Net debt of £900 million, up from £700 million a year ago
- Final dividend of 16.6p
- Total 2024 dividend payment up 6% to 24p per share
- New £350 million share buyback programme
Guidance:
- Expects adjusted 2025 revenues to grow around 4.4%
- Expects adjusted 2025 operating profit of around £656 million
Chief executive Omar Abbosh said:
“2024 was another year of delivery and strategic progress for Pearson. The application of innovative technologies, like AI, in our learning experiences, alongside a sharper focus on how we go to market, is building good momentum across our businesses.
"We also continue to focus on expanding our presence in the highly attractive Enterprise skills market at a time where Pearson can play an important role in helping bridge the critical skills gap that impacts the economy, workforce and individuals.”
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ii round-up:
Pearson (LSE:PSON) today detailed annual profits which matched City expectations, as well as a new collaboration with Amazon Web Services (AWS) to unlock AI-powered personalized learning for millions of people globally.
Full-year adjusted profits rose 10% to £600 million, aided by a return to profit for its Workforce Skills division and helping to fuel a new £350 share buyback programme.
Shares in the FTSE 100 company rose 2% in UK trading having come into these latest results up 41% over the last year. That’s similar to digital publisher and owner of the Daily Express, Reach (LSE:RCH), and way ahead of a 15% improvement for the FTSE 100 index itself over that time.
Pearson operates across five divisions, highlighting itself as the world's leading learning company. Adjusted or organic sales for the year ahead are expected to grow by around 4.4%, pushing adjusted operating profit up to a potential £656 million.
Headed by former Microsoft executive, Omar Abbosh, the expanded AWS (Amazon.com Inc (NASDAQ:AMZN)) relationship adds to an existing partnership with Microsoft Corp (NASDAQ:MSFT). It comes as Pearson continues to reshape in order to try and better capture growth under expected changes in demographics and Artificial Intelligence advancements.
A final dividend of 16.6p per share, payable to eligible shareholders on 9 May, leaves the total payment for 2024 up 6% to 24p per share.
Broker UBS reiterated its ‘buy’ stance on Pearson shares post the update, flagging a target price of £14 per share. A first-quarter trading update is scheduled for 2 May.
ii view:
Started as a construction company in 1844, Pearson today employs over 17,000 people. Assessments & Qualifications generated most sales over 2024 at 45%. That was followed by Higher Education at 23%, Virtual Learning 14%, English Language Learning 12% and Workforce Skills 6%.
For investors, predicting the exact impact of AI on the education sector offers difficulty and uncertainty. Adjusted profit for both Virtual Learning and Higher Education fell marginally year-over-year. Costs for businesses generally remain elevated, while a forecast price/earnings (PE) ratio above the three- and ten-year averages may suggest the shares are not obviously cheap.
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More favourably, a refocused strategy and what Pearson previously noted as an addressable $80 billion marketplace cannot be overlooked. A push to enhance products via AI is now being further aided by AWS as well as Microsoft. Demand for IT skills regularly assists its A&Q business, while there's an increased emphasis on its Work Skills division as it attempts to help the one billion people estimated by the World Economic forum that will require reskilling by 2030.
In all, risks remain, and Pearson shares have come a long way. That said, Pearson’s raised technology emphasis and a likely growing need for increased workplace re-training over coming years should continue to offer support.
Positives:
- Diversity of business divisions
- Refocused strategy
Negatives:
- Uncertain economic outlook
- Currency movements can hinder performance
The average rating of stock market analysts:
Strong hold
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