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Pearson buoys FTSE and fund manager backers

Publisher jumps to top of FTSE 100 on tentative turnaround signs, boosting a number of fund managers who have built big positions.

 
Pearson buoys FTSE and fund manager backers
 

Pearson (PSON) has led a rebound on the FTSE 100 as the struggling educational publisher showed signs of a turnaround, saying it was on track to return to profit growth this year.

Shares in Pearson jumped 5% to 871.6p, helping the UK blue-chip index rise 31 points, or 0.4%, to 7,534. Today's rise has rounded off a positive week for the FTSE 100, helped by the pound's fall, as our exclusive Accumulator data table shows.

Pearson said it had made a good start to 2018 and expected to report its first annual rise in profits for six years.

That buoyed a number of fund managers who have built heavy positions in the shares, which  have fallen from a peak of nearly £15 in early 2015, amid a series of profit warnings as the company has struggled to adapt to digital publishing.

Chris Reid and Yuri Khodjamirian hold 5.9% of their £931 million Majedie UK Income fund in Pearson, and the stock is also a favourite of value-focused managers Kevin Murphy and Nick Kirrage. The company is a top three holding in their £1.1 billion Schroder Recovery , £1.1 billion Schroder Income Maximiser and £2.1 billion Schroder Income funds.

Ben Whitmore holds 5.2% of his £1.8 billion Jupiter UK Special Situations and £2.3 billion Jupiter Income funds in the shares.

Among the most high-profile backers of the company is Citywire AA-rated rated Nick Train, who has repeatedly apologised to investors in Finsbury Growth & Income (FGT ) over the impact of Pearson's share price falls on his £1.3 billion investment trust. 

Train also holds Pearson in his £206 million Lindsell Train (LTI ) investment trust and his £4.8 billion Lindsell Train UK Equity  and £4 billion Lindsell Train Global Equity funds.

Alex Wright, Citywire A-rated manager of the £707 million Fidelity Special Values (FSV ) investment trust, this week described Pearson as 'the most interesting thing in the portfolio', arguing the quality of the business was 'dramatically improving'. Wright also holds Pearson in his £3.2 billion Fidelity Special Situations fund.

Shore Capital analyst Roddy Davidson said he was 'cautiously reasurred' following Pearson's update and that he remained 'positive on the potential for Pearson to tap into long-term growth in global learning spend'.

'That said, we remain wary on trading conditions in the North American higher education space (which has experienced several "false dawns" and is in our view highly suited to disruptive offerings) and on execution risk as the company continues to negotiate the substantial organisational and cultural change required to realign itself to a digital future.'

But Liberum analyst Ian Whittaker, who is among the most bearish analysts on the company, said the update had not changed his view.

'While the full-year guidance has been reiterated, we highlight that the first quarter is not representative for Pearson and the group's profits are largely weighted towards the second half,' he said.

Joining Pearson at the top of the FTSE 100 was International Airlines Group (ICAG), up 5.2% at 673.6p as the British Airways owner announced a 75% rise in first quarter operating profit, with revenue up 2.1%.

HSBC (HSBA) fell to the bottom of the index, down 2.6% at 703p as the bank reported an unexpected 45 drop in first quarter profits.

On the FTSE 250, Dixons Carphone (DC) led the way, up 7.3% at 218.9p as analysts at RBC hiked their target price on the stock to 230p.

 

1 comment so far. Why not have your say?

Novgorod

May 04, 2018 at 16:03

Nick Train's faith in Pearson seems to be slowly paying off and it looks like management is getting its act together.

What always put me off from investing in Pearson is that the education sector has long been unhappy about the pricing of educational products and more and more free or nearly free educational products are appearing - in fact the whole business model of universities is steadily changing. Also students generally don't have a lot of money.

How well positioned is Pearson for these changes, which appear to be structural?

Personally, I always thought they should have sold the educational business and invested in developing the FT instead, which is a fantastic brand, there are lots of data / niche info opportunities in that space -- and crucially it has a very wealthy client base in which to promote new products to.

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