Industry & Business

Pearson to cut 4,000 jobs due to weak earnings

Pearson to cut 4,000 jobs due to weak earnings

January 21
11:39 2016

coversTroubled British education publisher Pearson plans to cut 4000 jobs, cap its dividend and restructure yet again after cutting earnings forecasts for 2015 and 2016.

Pearson has announced a string of earnings downgrades in recent years due to a slowdown in its US markets and unpredictable emerging market demand.

It said today it was rebuilding the group to cut costs and focus on fewer, bigger opportunities.

Pearson, which sold the Financial Times and its stake in The Economist last year to focus on education publishing, said it would cut 4,000 roles and spend £320m this year to restructure.

It forecast adjusted earnings per share below forecasts for both 2015 and 2016 but said the changes it was making would enable it to deliver much higher earnings growth in 2018.

Pearson will hold the dividend at the 2015 level while it seeks to recover.

“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,” its chief executive John Fallon said.

Pearson shares are down more than 55% since last March.

Fallon has endured a rough ride since he took over in 2013, with a series of profit warnings marking his tenure, in an abrupt end to the steady growth enjoyed by his predecessor Marjorie Scardino during her 16 years in charge.

Better than expected employment levels in the US have reduced the number of mature students enrolling in further education while governments around the world, particularly in emerging markets, have spent less than expected on education.

Students are also starting to hire books rather than buy them.

The group now expects its adjusted earnings per share for 2015 to come in between 69 and 70 pence, slightly below forecasts, and to fall to between 50 pence and 55 pence in 2016 before the costs of restructuring.

As part of its restructuring, the second major programme under Fallon, it will combine different divisions such as its school testing and professional testing divisions in North America to try to reduce back office costs.

As a company that has been built up via acquisitions, it will also look to make further savings across the board in technology, HR, finance and across its property portfolio.

Analysts noted that the 2018 forecast earnings growth was stronger than expected but cautioned that there was risk around the delivery of the plan.

Pearson Education is a British-owned education publishing and assessment service to schools and corporations, as well as directly to students. Though Pearson generates approximately 60% of its sales in North America, they operate in more than 70 countries. Pearson International is headquartered in London with offices across Europe, Asia and South America.

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