Pearson, ex-owner of Financial Times, plans to cut 4,000 in an attempt to salvage its earnings after falling textbook sales and shrinking college enrollments have weakened the company’s profitability. The cut in jobs is equivalent to 10 percent of the publisher’s workforce.
Nicola Clark of The New York Times had the day’s news:
Pearson, the troubled British publisher, said on Thursday that it would eliminate 4,000 jobs worldwide as part of a continuing restructuring by the former owner of The Financial Times and The Economist to shift its focus primarily to its international education business.
The move comes as Pearson, which makes the bulk of its sales from its educational-testing activities in the United States, warned of weaker profit as an improving American job market slows college enrollments. That, by extension, has slowed demand for its textbooks and standardized testing services, which are the most commonly used for higher education admissions in the United States. The group also pointed to falling university enrollments in other major English-language markets, including Britain and South Africa.
“Our competitive performance during the last three years has been strong, but the cyclical and policy-related challenges in our biggest markets have been more pronounced and persisted for longer than anticipated,” said John Fallon, Pearson’s chief executive.
“Faced with these challenges, we are today announcing decisive plans to further integrate the business and reduce the cost base, rationalize our product development and focus on fewer, bigger opportunities,” he said.
Sneha Shankar of the International Business Times detailed what changes the company has been implementing in recent months:
Pearson has simplified its portfolio amid a challenging environment with several measures — including a merger of Penguin with Random House to create a strong trade publisher, and exiting the market of financial news and information through the sale of the Financial Times Group, Mergermarket and its stake in the Economist group. The company also sold PowerSchool and Fronter, along with several print textbook lists.
“The Board believes that the restructuring that we’re announcing today will help build on these strengths and position Pearson to take advantage of its market opportunities, enjoying sustained growth,” Sidney Taurel, Pearson’s chairman, said in the statement.
The latest restructuring will include merging its businesses producing courseware for teachers as well as integrating its assessment centers in North America. The company also plans to reduce exposure to large-scale direct delivery services to focus more on its “scalable” online and virtual services, along with exiting loss-making businesses. Along with strategic changes, Pearson announced changes to the company’s leadership team.
“We are broadly encouraged that Pearson has decided to redouble its efforts to meet external and internal challenges,” Roddy Davidson, an analyst for Shore Capital, said, according to Wall Street Journal.
Following Thursday’s announcement, Pearson’s shares rose over 15 percent on the London Stock Exchange.
Simon Zekaria of The Wall Street Journal explained what the company’s restructuring means for its balance sheet:
It has restructured its operations and booked hundreds of millions of dollars in cost savings in recent years to counter a slowdown in mature educational markets and boost its push into emerging economies, such as Brazil and China, where there is greater demand for learning services.
The company said Thursday it expects to report adjusted operating profit in 2015 of approximately £720 million and adjusted earnings per share of between 69 pence and 70 pence. It previously forecast EPS to come in at the lower end of a range of 70 pence to 75 pence. In October, the company also cut its forecasts.
It intends to propose an unchanged final dividend of 34 pence a share, giving a total dividend for 2015 of 52 pence a share, up 2% year-over-year on 2014.
In 2016, it expects to report operating profit and adjusted earnings per share before restructuring costs of between £580 million and £620 million and between 50 pence and 55 pence, respectively. Operating profit after restructuring charges is expected to be in a range of £260 million to £300 million.
