Pearson Trading Statement

[idpickering]

"We expect to deliver operating profit in line with guidance for 2016, despite a further unprecedented decline in Q4 2016 in our North American higher education courseware business. Our 2016 restructuring program has been delivered in full and the financial benefits are a little higher than planned.



We are today announcing actions to accelerate our digital transition in higher education, to manage the print decline, and to reshape our portfolio. Our guidance for 2017 reflects continued challenges and uncertainty in the North American higher education courseware market and we no longer expect to reach our prior operating profit goal for 2018. The Board intends to recommend a final dividend of 34p for an overall 2016 dividend of 52p in line with our guidance, but as a result of the factors above we intend to rebase our dividend from 2017 onwards."

Full item here;

http://www.investegate.co.uk/pearson-pl ... 00114396U/

disc - No holding.

[Arborbridge]

but as a result of the factors above we intend to rebase our dividend from 2017 onwards."

Well, that will blow the SP out of the water.

Here's an interesting point of discussion concerning SI! Does continuing to hold come under "vanilla ignorance of current facts" or does SI kick in since we cannot know what will happen two years out?


Arb.

[idpickering]

but as a result of the factors above we intend to rebase our dividend from 2017 onwards."

Well, that will blow the SP out of the water.

Here's an interesting point of discussion concerning SI! Does continuing to hold come under "vanilla ignorance of current facts" or does SI kick in since we cannot know what will happen two years out?


Arb.

Morning Arb. I got out of Pearson a fair while back, and have no intention of buying. Regarding your comment above though, PSON are what, one of 32 holdings for you? I'd be inclined to let them be in the HYP, happy that they form a small portion of it. Unless you're desperate for that rising income from PSON that is. Somehow I doubt that.

Ian.

[Wizard]

"...The Board intends to recommend a final dividend of 34p for an overall 2016 dividend of 52p in line with our guidance, but as a result of the factors above we intend to rebase our dividend from 2017 onwards."

Well, jolly glad I have not bought any Pearson as part of the assembly of my HYP!

Terry.

[Dod1010]

Pearson has been a bit of a lost cause since they decided print was dead and sold the FT and the Economist.

Now holders need to try to make a judgement on what they mean by 'rebasing' in terms of the quantum of dividend per share. A dividend cut starting with the Interim for this year but how much?

Today I do not suppose would be a day to get out even if that is the decision but not a share to hold I would have thought for those drawing dividends.

I fancy that dividends in general may come under pressure this year notwithstanding higher inflation and the weakness of sterling. (Pearson cannot be very confident of their results since so far they are the only share not apparently benefiting from the strength of the US Dollar. In the original currency their US results must be pretty dire.)

Dod

[Wizard]

Today I do not suppose would be a day to get out even if that is the decision but not a share to hold I would have thought for those drawing dividends.

Spot on Dod, share price "rebasing" as well, down nearly 21% as I write.

Terry.

[Horsey]

I never held PSON. I think their corporate strategists foresaw a world of online and e-education in which printed coursewares were pretty much dead. Problems with that are (IMHO)

i) face-to-face learning is much better (and valued more highly by employers)
ii) hardcopy learning materials are better (the humble book is far from dead)
iii) online and e-learning courses are pretty much for people with little cash to paý (or who are unwilling to pay)
iv) electronic resources are easily shared/pirated by tech-savvy kids.

I think this one will end badly.....

[Raptor]

PSON was numero 1 for my top-up for the last 3 occasions, each time I decided that I still had no idea where they were going with this. Phew, sometimes I do make the right decision, only sometimes though.

For now LTBH.

Raptor.

[Raptor]

I never held PSON. I think their corporate strategists foresaw a world of online and e-education in which printed coursewares were pretty much dead. Problems with that are (IMHO)

i) face-to-face learning is much better (and valued more highly by employers)
ii) hardcopy learning materials are better (the humble book is far from dead)
iii) online and e-learning courses are pretty much for people with little cash to paý (or who are unwilling to pay)
iv) electronic resources are easily shared/pirated by tech-savvy kids.

I think this one will end badly.....

Last 2 companies I have worked at have a mix. Repetitive courses are always on-line, regulatory stuff, etc. However have seen a slow but measurable move to on-line, but I see it abused a lot with "managers" sitting there telling the staff the answers so as to be able to tick the "boxes". They do keep telling me an advantage is I can do it at home, and will they compensate me for my time, yes right, so always do them in their time.

BTW I wrote the first on-line course for IBM (UK) education in 1985 for Telephony, but had to produce a hardcopy version as "pictures" at that time could not be put on Green Screens.

Raptor.

[Arborbridge]

PSON have been in my HYP almost since the beginning. Like many holdings, they are deemed successful - until they aren't!

They were in the top two or three for all 2016 and I resisted toppingup most of the year, but somehow fell into making a top up in October. Hardly life changing as it was only 10% of the value at that time.

I would think that the near future would be a time to wait until the knees stop twitching. PSON accounts for 3.08% of my income, so I'm guessing this might see me down by, say, 1.5% in the year. By no means a desperate result, but not something I'd be proud of!

Hopefully Dod's favourite companies like Schroders and Lgen will hold the fort for me

Arb.

PS Doris wouldn't even know this was happening.

[Horsey]

Last 2 companies I have worked at have a mix. Repetitive courses are always on-line, regulatory stuff, etc. However have seen a slow but measurable move to on-line, but I see it abused a lot with "managers" sitting there telling the staff the answers so as to be able to tick the "boxes". They do keep telling me an advantage is I can do it at home, and will they compensate me for my time, yes right, so always do them in their time.

BTW I wrote the first on-line course for IBM (UK) education in 1985 for Telephony, but had to produce a hardcopy version as "pictures" at that time could not be put on Green Screens.

Raptor.

I was more thinking of the universities markets, and must admit that I have limited knowledge of workplace education schemes. From my personal experience (Open Uni, MBA (not completed)) is that "the worm has turned" and that only degrees from the very best schools are worth much.

http://fortune.com/2013/11/08/b-school- ... -worth-it/

A recruiter at GSK told me similar - MBA just not worth it, prefering real skills and experience.

[Wizard]

but as a result of the factors above we intend to rebase our dividend from 2017 onwards."

Well, that will blow the SP out of the water.

Here's an interesting point of discussion concerning SI! Does continuing to hold come under "vanilla ignorance of current facts" or does SI kick in since we cannot know what will happen two years out?


Arb.

Unless somebody holds onto the view that "rebasing" could mean up as well as down there is no need to apply any form of ignorance, strategic or vanilla. The company has said it is going to cut its dividend, for most I imagine that takes them out of consideration for new purchases or top ups.

If looking at a potential 'tinker' my understanding of the original PYAD doctrine is that there should be no unforced disposals, so I guess PYAD would say SI is not an appropriate concept. Putting that to one side, I guess it is partial ignorance, direction looks clear but quantum is not so there is no way of knowing what dividend you are giving up for what return of capital you would get to reinvest in replacement income. I took vanilla ignorance to be a somewhat pejorative term suggesting not taking account of things you could know and take account of if you did reasonable research, the quantum if IMHO unknowable at this point, so this can't be vanilla ignorance.

Terry.

I now wonder if I have taken a tongue in cheek comment seriously, apologies if that is the case

[Arborbridge]

I think the difference is that we know a cut is coming so to ignore it would be vanilla ignorance (suggesting one should act in some way) - but that is only something happening in the immediate future. We still cannot know what will happen in the "SI future" of several years.

In either case, PYAD would be unlikely to recommend selling since he generally did not approve of voluntary trading.
A cut rather than a disappearance of the dividend completely, would not trigger his selling finger, I would say. A significant idea from PYAD was that companies and HYPs "self-heal", and that there are best left alone for that to take place. It happens, but takes years.

Ironically, Luni always used to complain that PSON was too parsimonious with its dividend - that is too cautious and should have paid out more.

[OhNoNotimAgain]

I fancy that dividends in general may come under pressure this year notwithstanding higher inflation and the weakness of sterling. (Pearson cannot be very confident of their results since so far they are the only share not apparently benefiting from the strength of the US Dollar. In the original currency their US results must be pretty dire.)

Dod

Dividends this year are forecast to be the highest on record at £95 billion and that is why the stock market has been going up. The main reason is weaker sterling but deals like BAT and general economic growth are also helping the asset class.

Rob

[Dod1010]

Hopefully Dod's favourite companies like Schroders and Lgen will hold the fort for me

Arb.

I really try to avoid having favourites but it seems to me to that Legal & General and Schroders (amongst others) should be OK. As I said it would not surprise me if this turns out to be a somewhat difficult year for dividends, what with inflation set to rise and the Brexit uncertainty. I note Rob's comments re dividends but I am not investing in the entire UK economy. However I hope he is right. Anyway I think the stock market is 'going up' mostly because of the weakness in sterling although I note a very positive trading statement from Henry Boot (which sadly I do not hold) from an almost wholly UK exposed company as far as I know.

Those who hold Pearson are in good company because the last time I looked Pearson was still in most of Nick Train's portfolios.

Dod

[StepOne]

They are going to love this on the FT Alphaville blog this morning

[idpickering]

PSON was numero 1 for my top-up for the last 3 occasions, each time I decided that I still had no idea where they were going with this. Phew, sometimes I do make the right decision, only sometimes though.

For now LTBH.

Raptor.

Or is it a buy for the contrarians amongst us I wonder? Anyone taking a bite? Not one for me though.

Good luck to holders whatever you decide upon.

Regards,

Ian.

[Arborbridge]

I really try to avoid having favourites but it seems to me to that Legal & General and Schroders

Dod, I know - but I was just going by the number of times you seem to mention them favourably

Or is it a buy for the contrarians amongst us I wonder? Anyone taking a bite?

Well, Ian -The thought had occurred to me. However, it's best to see what that divi cut amounts to first, unless one is an ultra contrarian with great confidence in the management. Although the management seems to be the problem here! I'd also suggest for the contrarian, Tesco is one to consider - maybe before PSON - being further down the recover route and with a top manager in place.
PSON as contrarian ploy? apparently not according to Alistair Mundy of Temple Bar for it isn't (yet) in his portfolio. Alistair is a contrarian investor much of the time. He's happy to buy and wait it out with a small % of Temple Bar - rather as I am.

I do occasionally indulge in none-HYP ploys - such as buying small tranches of Lloyds well before the dividend was announced.
Arb.

[Arborbridge]

Or is it a buy for the contrarians amongst us I wonder? Anyone taking a bite?

At least someone thinks so - a buy went through for £58000 earlier today, apparently. (I say apparently, because whether it's a buy or a sell is determined by the price on HL's site, I think)

[OhNoNotimAgain]

I note Rob's comments re dividends but I am not investing in the entire UK economy.

Those who hold Pearson are in good company because the last time I looked Pearson was still in most of Nick Train's portfolios.

Dod

The LSE is not a reflection of the UK economy it has a preponderance of international companies. 62% of its dividends come from 20 companies, all large multi-national banks, oils, miners and drug companies. In any case it was established long ago that there was a low correlation between an economy and its stock market.

Holding a stock just because another manager does is a really bad reason. It is a simply an extension of "the greater fool theory" and suggests zero confidence in a person's stock picking ability and assuming that because someone else holds it he or she knows a) if the business is any good and b) it is correctly priced. The answer to both questions is always no. No one does otherwise stocks would not suddenly fall 26%.

Rob