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Moody's Expects Challenges To Continue For US Textbook Publishers

Tue, 28th Feb 2017 16:13

LONDON (Alliance News) - Moody's Investor Service said Tuesday it expects the US textbook publishing industry continue to be challenged by declining enrolment in higher education, increased competition, and cost pressures in the year ahead.

This creates a bleak outlook for the likes of UK-listed education publisher Pearson PLC, which earlier this year issued a comprehensive profit warning, primarily due to weakness in the US higher education market.

Last Friday, Pearson booked a goodwill impairment of GBP2.55 billion in its 2016 figures as a result of the challenging outlook for its US Higher Education business, leading it to report a wider pretax loss for the year as a whole.

Moody's said in a report on Tuesday that it expects declines in revenue and total billings from major textbook publishers through 2017 after a weak 2016.

"We anticipate low to mid-single digit declines in both revenues and total billings will last through 2017, despite what we expect to be a stronger front list of new titles for some publishers, and a better forward-looking adoption calendar," said Moody's Senior Analyst Alina Khavulya.

Textbook sales have been hit by declining enrolment numbers as the US economy has recovered, which Moody's expects to continue. Meanwhile, a "robust" inventory in the used and rental marketplace has resulted from the high price of printed textbooks.

"The heightened focus on rising student-debt levels may lead post-secondary institutions to rely on open educational resources and non-traditional learning-material acquisition models in order to further reduce students' out-of-pocket costs," Moody's said.

Whilst the major publishers are continuing to invest heavily in digital courseware platforms and realigning their cost structure, Khavulya said secular headwinds and increased competition remain threats to their performance and balance sheet de-levering.

Following Pearson's profit warning in January, the credit rating agency downgraded its outlook for Pearson's credit rating to negative, but affirmed its existing credit rating.

Moody's downgraded its outlook on Pearson's ratings to negative from stable, but kept its Baa2 senior unsecured credit rating and its Prime-2 guaranteed short-term rating.

Shares in Pearson were up 2.5% at 676.00 pence Tuesday.

By Hana Stewart-Smith;; @HanaSSAllNews

Copyright 2017 Alliance News Limited. All Rights Reserved.

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