(Rewrites, adds detail.)
By Simon Zekaria and Razak Musah Baba
LONDON–Shares in Pearson PLC (PSON.LN) tumbled on Monday after its sales dropped on weaker-than-expected trading across higher-education in North America.
The U.S.-focused educational-products specialist, which has faced a prolonged bout of restructuring amid multibillion-dollar asset disposals, said sales adjusted for currency changes, as well as merger and acquisition activity, in the first nine months fell 7% year-over-year reflecting "expected" declines in revenue from student-testing contracts in the U.S. and U.K., two of its key Western markets.
It also recorded declines in North American higher- education-courseware, reflecting a further draw down of inventories by retailers in July and August.
The strength of the U.S. dollar verses the sterling helped limit the decline in total sales to 3%. The decline was steeper at 10% at constant exchange rates.
At 1032 GMT, Pearson shares were down 9.5% at 754 pence. Analysts said the sales slump was wider than expected. In recent trading, its stock has been boosted by improved sentiment following the pound's weakness.
Still, Pearson said trends are improving and it reaffirmed its 2016 targets and 2018 goals.
"Our competitive performance is good," it said in a statement." Our markets have been challenging but we are managing discretionary costs tightly."
The company expects to report adjusted operating profit, before restructuring costs, of between 580 million pounds ($706 million) and GBP620 million in 2016, and adjusted earnings per share of share of between 50 pence and 55 pence.
It also said if current exchange rates persist until the end of 2016 the earnings per share guidance range will increase by approximately 4.5 pence.
U.K.-headquartered Pearson, which used to own the Financial Times newspaper–once its flagship publishing asset–and a stake in the publisher of the Economist magazine, expects to report at least GBP800 million in operating profit by 2018.
At the start of the year, the company launched cost-savings worth half a billion dollars and released plans to ax 4,000 staff, or 10% of its workforce world-wide.
At the time, it said it had underestimated the impact of trading pressures across its key markets. Rapid growth in employment and increasing education regulation in the U.S. has roiled higher-education enrollments in the company, which has put pressure on Pearson's business.
To counter a slowdown in mature educational markets, it has pushed into emerging economies, such as Brazil and China, where there is greater demand for learning services.
The company plans to simplify its structure by merging businesses and focus on fewer, bigger opportunities. This year, the costs of its reorganization are forecast to hit GBP320 million, as it books savings of about GBP350 million across this year and next.
News Corp, which owns Dow Jones & Co., publisher of The Wall Street Journal, competes with Pearson's book publishing, business-news and education divisions.
Write to Simon Zekaria at firstname.lastname@example.org and Razak Musah Baba at email@example.com
(END) Dow Jones Newswires
October 17, 2016 05:31 ET (09:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.