numberbiter
22 Jan 2017
Re: Liberum Jan 18 Well we know that is true as we found out who was honered to the US President,
gamesinvestor
22 Jan 2017
Break Up? [link] final sell off of more consistent income streams (FT etc) with the loss of Penguin will leave Pearson completely exposed to a fragmenting and seemingly falling educational business.That's according to these guys anyhoo!!Games
Fabius1
21 Jan 2017
Re: Liberum Jan 18 My own view is the they can no longer rely on their tradional corporate strengths of distribution, franchise and size. The world has moved on and the internet is a dagger to the heart. Besides, the world has become increasingly illiterate anyway. F1
Michaelhighbar
21 Jan 2017
Liberum Jan 18 Well, no need to mention that what a lot of broker write ups can be old news, highly subjective or are to be taken with a pinch of salt. Also, it's not as if Liberum hasn't got it wrong in the past (e.g Xcite Energy). Though, re PSON in particular, it is probably the most pessimistic broker since the others have higher target prices. I've actually gone long as I thought that a 30% or so drop may be a little exaggerated - given the new profit guidance- on the assumption that no more profit warnings are to follow.On this note, the Liberum write up follows:"PearsonNo end in sight to the painSELLTarget price 470p | Published price 586pPearson’s conference call will do little to reassure the market after today’sprofit warning. Management are still clinging to the mantra of a longer-termstable business but, with visibility so low on their key profit driver (USHigher Education) and given the increasing signs of structural pressure, wedo not see how management can have confidence they can turn thingsaround. On the dividend, management commentary that the dividend levelneeds a greater level of coverage suggests a significant reduction in itslevel while a PRH disposal would mean significant earnings dilution.Reiterate as top Sell.Click here to attend Liberum’s newly introduced 2017 TV conferenceConference call does not answer the key concernsSince we initiated back on Pearson in 2011 (Link to initiation), our biggest concern has been its US Higher Education business (estimated c. 45% of group profits) and the fact that students were looking at cheaper options, particularly rentals. Pearson management has now accepted publicly the problems but we do not think its plans will be able to reverse the problems. We would take the following key points away from the call:1. Pearson's end game here seems to move to something like the increasingly successful music streaming market i.e. you get consumers (students) to subscribe and pay you a regular fee for your product. One of the core problems is that much of Pearson's content, at the end of the day, is not proprietary e.g. the principles of calculus have been known for centuries, and so it can be replicated in one form or another. Pearson's previous strength was derived from control of the distribution network and this is now breaking down.2. Rentals will continue to impact the market and also impact visibility on the inventory levels.Management stated that part of the reason for the -12% inventory impact on US Higher Education sales in 2018E was due to changes in incentivising staff on a net sales basis (I.e adjusted for returns), not gross sales. The concern has to be that not only do rentals continue to grow but there is an acceleration effect and that its impact grows more and more each year. We do not think Pearson’s plans will offset this effect.3. Piracy might be becoming an issue in the US Higher Education business. Pearson admitted that one of the reasons for looking to move to a more subscription based model is to reduce the threat from piracy and also suggested the industry will take more measures to tackle piracy. Reading between the lines, this suggests that the problem is growing and is becoming of concern. We have been focused on the impact of rentals but this might be another area to track, as well as Open Education Resources, which Pearson said is a small but growing share of the market.4. The dividend is likely to be cut substantially. Pearson management stated that there needed to be greater coverage of the dividend moving forwards. If we assumed a mid-point of 2017E EPS guidance (48.5p-55.5p) at 52p and assumed 2x coverage that implies a 26p dividend, half of the previous 52p guidance level. However, it could be lower because that guidance includes Penguin Random House, which might be sold, so the dividend could be lower.5. Penguin Random House sale could lead to significant dilution. Depending on what
Hardboy
20 Jan 2017
Re: Liberum "Interesting to read Lombard in the FT putting the boot into Pearson (not for the first time) today."FT were part of Pearson. Pearson didn't want them. Employees of the FT are critical of Pearson. We can not be sure if this is rational or emotional criticism. Robert Evans (former head of Paramount) said in a divorce there are 3 versions of the truth; and the version which is the real truth never gets heard.
LK Hyman
20 Jan 2017
Re: Liberum Nk,I enjoyed this extract from an Evening Standard article of three years ago:"Now Fallon is primed for the next chapter. The message to staff and investors wedded to the old way of learning is clear: put down your pen, your time is up."[link] on the flybridge
LK Hyman
20 Jan 2017
Re: Liberum Nk,"360p .... I hope not !!"Interesting to read Lombard in the FT putting the boot into Pearson (not for the first time) today.My prediction is that Fallon will be gone by 1 February.LKH on the flybridge not a minute too soo
nk1999
19 Jan 2017
Liberum "Liberum slashed its price target on education publisher Pearson to 360p from 470p following the company's profit warning in the previous session.The brokerage said Pearson remains its key 'sell' in the media sector, as it has been for several years, with the profit warning on Wednesday demonstrating why. It pointed out that the company has finally admitted that its US higher education business is facing significant structural pressures.Liberum, which expects Pearson to issue another profit warning in 2017, said its FY17 earnings per share estimate of 45.3p is below guidance of 48.5p to 55.5p as it reckons rental may have reached a tipping point where its effects accelerate and Pearson cannot adjust for them.The brokerage said Pearson faces a "double whammy", i.e. earnings downgrades and a de-rating as the market recognises that it has structural issues in its business."We do not see an end to the pain in Pearson's US higher education business as students switch to cheaper options (such as rentals)."From ADVFN.360p .... I hope not !!
Akis1999
19 Jan 2017
Selling itself for parts Yesterday I was looking up "cash flow" which is one metric sadly missing from my shares' analysis and investopedia has this to say which struck me as profound:" A company that is selling itself for parts may be building up liquidity, but it is limiting its potential for growth in the long term, and perhaps setting itself up to fail."PSON has sold the crown jewels and is continuing with Penguin it's like having a madman at the wheel and no one is reacting. Before long there will be nothing left and nothing iconic like the Economist and the FT and Penguin.And the CEO will walk away into the sunset taking with him huge perks, pension, bonuses, and what have you. Just like Eric Daniels.This is in my opinion an inherent fault of our "democracy" and the PLCs we are all speculating on (will not say "investing", that would be too rich): the "bosses" have zero personal accountability, they can drive a company to the wall, or take a country to war and nothing happens to them. We need ... vigilantes in this world. Nothing should be without consequence. It is like a lawless environment for the guys at the top.Rant over.
LK Hyman
19 Jan 2017
Re: Beaufort Securities' View: Hardboy,"Confidence in the management's steering of the operation has been severely knocked. Beaufort accordingly takes Pearson off its Buy list"Hmmm. Some might say that confidence in Beaufort's competence has been similarly severely knocked ....LKH on the flybridge
Hardboy
19 Jan 2017
Deutsche Bank Have upgraded it this morning
Hardboy
19 Jan 2017
Re: Beaufort Securities' View: I think Beauforts' summary & conclusion is about right. Taking any business through a major transition is tricky with a degree of uncertainty; but management have got to be on top of things with realistic projections. (I always think it is better to promise low & deliver higher, I love reading the line "ahead of expectations."
Maybe the business is in trouble; but it's still profitable and has sector leading position, but for the BoD to say one thing then give a completely different view 3 months later is completely out of order. So Beauforts' conclusion: "Confidence in the management's steering of the operation has been severely knocked. Beaufort accordingly takes Pearson off its Buy list, moving down to Hold, until confidence is reasserted" is spot on.
Hardboy
19 Jan 2017
Beaufort Securities' View: Pearson (PSON.L, 573.00p) – HoldPearson, the world's leading education company providing products and services to institutions, governments and direct to individual learners, yesterday provided a trading update for the full year FY2016. The Group expect revenue to drop by c.-8% in underlying basis due primarily to continued weakness in North American higher education courseware business, which saw net revenue fell by -30% in Q4, taking full year decline to -18%. The challenging environment was driven by inventory correction in the channel, accelerated impact from rental in the secondary market and lower enrolment. Beside this, the Group said its other businesses in aggregate have performed in line with expectations. Adjusted operating profit for the full year is expected at c.£630m, in line with guidance, resulting adjusted earnings per share to be around 57p. The Group's tight management of discretionary cost resulted to accrue c.£55m less than originally planned for its 2016 staff incentive programme. On the operational front, the Group has fully delivered its 2016 restructuring program and said the financial benefits are slightly above the expectation. The Board proposed a final dividend of 34p per share, bringing full year dividend to 52p per share, in line with its guidance. Looking ahead into FY2017, the Group has revised down its expectation for North American higher education courseware market and said downward pressures will continue. Within the announcement, Pearson has outlined some actions to accelerate its digital transition in higher education, to manage the decline in print, and to reshape its portfolio. For the digital transition, the Group will increase its investment by £50m to enable faster product innovation, accelerate product roadmap by 2 years and drive faster adoption of institution-wide Digital Direct Access for Pearson courseware. The Group will also increase its presence in the courseware rental market. For the portfolio reshaping, the Group intend to sell its 47% stake in Penguin Random House or recapitalising the business and extract a dividend. The proceeds will be used to maintain its strong balance sheet, investment and return excess capital to shareholders whilst retaining an investment grade credit rating. The Group will continue to reduce its exposure to large scale direct delivery services and focus more on scalable online, virtual, and blended services, across its portfolio. Pearson will announce its preliminary results on 24 February 2017.Our view: Pearson's full year trading update was rather shocking. In its Q3 trading update (announced on 17 October 2016), the Group said inventory correction in North American Higher Education courseware business had improved in September and was continuing into October. Despite indicating these "improving trends", the Group reported Q4 FY2016 net revenue from this business fallen by -30%, opening a wide gap with the full year consensus expectation. Moreover, the announcement confirmed that the North American higher education courseware market is set for further decline in FY2017 against the "stable" expectation that was previously guided, with the remaining of business areas expected only to perform broadly in line with the trends seen in FY2016. Given that the challenging environment persists, despite meeting its guidance for the FY2016 at around the middle of the range boosted by favourable exchange rates (2015: just c.5% of revenue generated from the Eurozone), the Group issued a stark profit warning for the FY2017. Underlying profitability will now be c.-£180m lower than previously guided, with operating profits now expected to be in the rage of £570m-£630m, quite significantly lower than the consensus analyst's expectation of £682m and resulting in adjusted earnings per share of in a lower 48.5p-55.5p range. The Group also detailed its intension to rebase its dividend for FY2017, while scrapping its 2018 goal to deliver adjusted operating pro
LK Hyman
19 Jan 2017
Re: Still believes ...... Games,"There have been numerous examples where Pearson has jeopardised this trust by not delivering and hence losing contracts I believe."One example was Saudi Arabia, where they lost a big contract. There must be a massive moat around Saudi, so such a loss surely points to underlying failings on the part of the management.In addition the reference in one of your links to Amazon eating PSON's lunch via renting books to students sounds like really bad news for the company.Dropping the pilot is the first thing to do, methinks:[link] on the flybridge You have sat too long here for any good you have been doing. Depart, I s
gamesinvestor
19 Jan 2017
Fall-on his sword !! [link] must be edging toward the exit sign, no?Games
