Pearson has announced a fresh set of restructuring measures and cost cuts as the education group gears up for what is set to be a fiery annual meeting on Friday with its chief executive in the crosshairs.
The FTSE 100 group said it is looking at ways to save an additional £300m by the end of 2019, having already reduced around £650m in costs over the last four years.
The group also announced it has begun “a strategic review” of its US school publishing business, known as US K12 courseware publishing, saying the business was under pressure in “a challenging competitive and market environment” and was failing to keep pace with its digital-focused high school businesses. The group said the moves would “create a more scaleable, more digital business capable of growth and margin improvement.”
Pearson has been steadily transforming itself in recent years, slimming down from a broader media and publishing group to one focused on education, a strategy which resulted in the sale of the Financial Times as well as its stake in the Economist.
However the transition has been far from smooth. In January the group issued its fifth profit warning in four years and subsequently posted a record pre-tax loss of £2.5bn in 2016.
Chief executive John Fallon is under growing pressure, with two major shareholder advisors having urged investors to reject plans to hand him a 20 per cent pay rise. It was also reported this week that a group of six international teaching unions have written to the board of Pearson calling for him to be sacked. Led by the American Federation of Teachers (AFT) and including representatives from the UK, Denmark and South Africa, they argue that under his leadership Pearson has “pursued a flawed business strategy that is neither in the interests of kids, parents [or] teachers”.
On Friday Pearson said first quarter sales rose 6 per cent on an underlying basis but added that its US higher education business, which accounts for just under a third of revenues and has suffered amid a fall in demand for printed text books from college students, remained under pressure.
Mr Fallon said:
Though the bulk of our sales come later in the year, our first quarter trading is encouraging and in line with expectations.
We are creating a leaner Pearson, equipped to innovate and win in digital education. The measures we are announcing today build on the work completed last year and will allow us to further simplify our portfolio, reduce costs and accelerate our digital transformation.
The group said its performance in the first quarter was in line with expectations, and its outlook for the full-year was unchanged. It anticipates operating profit between £570m to £630m.