Pearson posts 'good progress' on restructuring as revenues fall

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John Fallon, chief executive of Pearson

Credit: Pearson

Pearson said it was "making good progress" in its shift from media conglomerate to education specialist, as its £320m restructuring weighs on profits this year but sets the firm up for expansion in online learning.

Revenues were down by 4pc in the first three months of the year, which Pearson blamed on a decline in exam revenues and the loss of certain US contracts. The firm’s first quarter is traditionally quiet, with most of its sales timed to coincide with the new academic year.

Almost half of the 4,000 staff facing redundancy have now been told their fate, with most of the remaining job cuts coming in the second half of the year, the group said. Pearson is ridding itself of one in 10 employees worldwide as part of an overhaul announced in January alongside a profit warning. 

The firm’s results for the first half of the year will appear worse following the sale of the Financial Times to Nikkei, which completed in November, and it expects to post only a “modest” adjusted operating profit at its interim results.

Pearson share price

Pearson said its overhaul was on track to save £350m a year, after restructuring costs of £320m booked this year.

The firm’s net debts jumped from £100m to £800m in the quarter, as Pearson drew more working capital to prepare for its busiest period.

"Clearly there’s still a lot to do in the rest of the year and our three biggest quarters lie ahead of us, but we are off to a pretty good start,” said chief executive John Fallon. “We are making good progress on our growth and simplification plan.”

Mr Fallon said he hoped to see Pearson’s online school services expand into China and India as internet access spreads. The group’s Connections Education arm has begun enrolling students to four new virtual public schools in the United States, which aim to tutor youngsters outside of the public school system.

He told reporters there were “reasons to feel quite confident” in the US, despite the rise in massive open online courses (Moocs). He added that he saw no impact from the forthcoming presidential election as most education policy is set by states and individual districts.

Penguin Random House, the publisher in which Pearson has a 47pc stake, has had a “solid” three months, having released bestsellers from Mary Berry and Paula Hawkins in the past year

The firm is holding its AGM in central London today. Pearson is proposing a flat final dividend of 34p, resulting in a 2pc rise in shareholder payments for the year to 52p.

Shore Capital analyst Roddy Davidson said the steady trading update was "a positive in itself given recent form".

"The group still faces a number of near-term challenges including uncertainty around curriculum change (particularly in the US), an uninspiring outlook for US college enrolments, and the potentially risky and cumbersome transition to digital delivery," he added in a research note.