Pearson, the world’s biggest education publisher, is to cut 4,000 jobs in its second round of restructuring in three years. This job cut is 10% of the total workforce and will be completed by the end of the year. Critics said it ‘naïve and ignorant’ of the company.
Pearson’s chief executive John Fallon said that restructuring will cost £320 million to implement this year but it is expected to produce £350 million in cost saving by the end of year of 2017 and return operating profits to at least £800 million by 2018.
“Our competitive performance during the last three years has been strong, but the cynical and policy related challenges in our biggest markets have been more pronounced and persisted for than anticipated,” said Mr. Fallon in a statement. “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 further added.
Pearson’s chairman Sidney Taurel said, “Pearson is a company with strong market positions, real competitive advantage and a significant medium-term market opportunity. 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.”
The restructuring will include merging all Pearson’s businesses producing courseware materials for teachers. Its assessment business in North America will also be integrated. This time Pearson has decided to sell material online rather than direct delivery in UK, as it will save expenditure in areas like technology, Finance and HR.
In 2013 and 2014 Pearson did similar restructuring by cutting 5,000 jobs and it cost £260 million then. It also closed numerous warehouses in the US and reduced its presence in some countries where it now works through distributors.
But the company’s financial report has declined sharply in recent years. Last year, it sold Financial Times and its stake in the Economist group to focus on its core education business but fall in college enrollment in US, decline in text book sales created problem to the company. Also, Pearson is one of the worst performing stocks in the FTSE 100.
Pearson said its expected earning per share has come in at between 69p to 70p, below 70p to 75p as guidance given in October. In 2016, it will downgrade to 50p to 55p, it is lowest since 2007.
Some analysts explained the reason behind the falling in sales is that students are opting to rent books and using free online source. In South Africa, textbook sales have fallen 60 per cent in local currency since 2013.
“It’s another three years of minimal growth even on their optimistic scenario. There is still no sign of the long-term vision of education growth coming through,” said Jonathan Helliwell, an analyst at Panmure Gordon, Corporate Investment Banking Company.
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