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February 25, 2013 9:33 am
Pearson, the global education group that owns the Financial Times, unveiled a £200m global restructuring on Monday as it seeks to free cash to invest in faster growing emerging markets and digital and services businesses.
The restructuring, to be implemented over the next two years, would result in unspecified job losses but would deliver annual costs savings of £135m, £50m of which would be ploughed into its digital and emerging market operations, the company said.
John Fallon, Pearson’s chief executive, said the restructuring was “designed to strengthen dramatically Pearson’s position in digital education services” as the company looked to increase digital and services revenues to 70 per cent of total revenues within the next three years.
At its preliminary results for the full year to the end of December, the company announced annual sales of £6.1bn, a rise of 5 per cent in constant exchange rates, with digital and services businesses accounting for over half of group revenues for the first time.
Mr Fallon said trading conditions remained “tough” with structural changes across the education sector meaning “many of our traditional publishing activities are under pressure”. However, he pointed to continued growth in the middle class worldwide that would benefit providers of education services.
Mr Fallon sought to quell speculation over the future of the FT saying that no sale conversations had taken place and that neither he nor Robin Freestone, chief financial officer, were aware of any approaches made to Pearson for the newspaper group.
FT Group revenues climbed 4 per cent over the year to £443m with digital subscriptions to the FT up 18 per cent over the period to 316,000, overtaking print circulation for the first time.
In the US, the company’s biggest market, sales climbed 2 per cent in constant exchange rates to £2.7bn amid industry-wide declines of 10 per cent in US school and higher education publishing revenues.
Mr Freestone said Pearson hoped to show modest growth in the US in 2013, fuelled by the strength of its digital products and ecollege offerings.
Revenues in international education rose 13 per cent to £1.6bn in constant exchange rates, supported by good enrolment trends in emerging markets. A recovery in Japan following the 2011 tsunami and strong competitive performance in Italy more than offset difficult markets in Spain, the company said.
Pre-tax profits fell 59 per cent to £434m. The sharp decline reflected a £412m positive contribution the previous year from the company’s sale of its 50 per cent stake in FTSE International, and closure costs of £113m in the 2012 results relating to Pearson in Practice, its adult training business.
Pearson raised its dividend by 7 per cent to 45p per share (42p).
At the end of 2012 the company’s net debt stood at £918m, compared with £499m a year earlier. Mr Fallon said Pearson retained £500m in headroom for acquisitions that would focus on opportunities in services, digital operations and emerging markets.
In London trading, Pearson shares fell 3.7 per cent to close at £11.71.
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