News on Pearson
Pearson’s executive chief, John Fallon, sold the Financial Times and its 50% stake in the publisher of the Economist in 2015 for more than £1.3bn as part of shifting their focus on the educational publishing business.
Since then, Pearson has been having difficulties in trading as sales were reported to have fallen 7% in the first nine months of the year while in its biggest market, North America, sales has decreased 9%. These were beyond the analysts’ forecasts of about 5-6% decline.
Pearson has cited the slow demand for higher education textbooks in the US and the decline in its exam marking businesses in the UK and America as the reasons for the decrease in revenue. In its effort to reduce negative feedback surrounding the drop in sales, the company has reiterated its full-year financial guidance and also alluded to the strength of the US dollar against the pound since the Brexit vote.
These did not stop investors from focusing on the issue of sales, sending Pearson’s share price plunging 10%.
Pearson said sales trends between September and October have improved and when combined with cost cuts, allowed the company to stay within its forecast of adjusted operating profit of between £580m to £620m this year.
“While market conditions continue to be challenging, particularly in higher education, thanks to tight cost management we are on track to deliver our guidance this year and to achieve our long-term growth goal,” said Fallon.
Pearson also announced in January that it was cutting 4,000 jobs as part of the “simplification” programme and will allow the company to save £350m a year. This was done after issuing two profit warnings in three months.
Pearson has 47% stake in Penguin Random House but is expected to sell it off next year, which would make about £400m in profits, valued at more than £2.3bn. Penguin Random House is the world’s largest book publisher, with titles including Fifty Shades of Grey, The Girl on the Train and Pippa Middleton and Nigella Lawson’s recipe and craft books.
Ian Whittaker, an analyst at Liberum, said that Pearson’s attempt to put the blame on US higher education weakness on bookstores’ changing their buying patterns were not convincing and that their explanations as to why things will get better sound unconvincing.