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Pearson H1 Headline Results Mixed; Introduces New MT Guidance

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Rating: Baa3[P]/NR/BBB EUR/GBP Spreads Muted

  • H1 revenue looks slightly soft at +2% underlying growth (reported -3.9% vs. mean BBG consensus of three estimates or -1.3% vs. the lowest estimate). Op profit +4% underlying growth (+7.3% vs. single BBG estimate).
  • OCF stronger at GBP 129mn vs, GBP 79mn in H123 feeding through to FCF of GBP 27mn vs. GBP -50mn last year. Net debt of GBP 1.2bn up from GBP 0.7bn at FY23 and GBP 0.9bn at H123 on the back of buybacks. Dividend +6% to 7.4p from 7p at H123.
  • FY24/FY25 guidance confirmed. Beyond 2025 Pearson sees “mid-single digit underlying sales CAGR and sustained margin improvement that will equate to an average increase of 40 basis points per annum” while maintaining 90-100% FCF conversion. The sales growth is broadly in line with the current guidance out to 2025 though the margin guidance looks encouraging.
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