Pearson Education: Further Cuts Ahead

Pearson has begun “a strategic review” of its U.S. school publishing business which has been a drag on growth due to intense competition. Their goal is to speed up the company’s transition to a slimmer, more digital group.

They intend to either sell, or seek a joint venture partner, for their schoolbooks division that represents about 8% or £360 ($466) million of the company’s business.

Until now more attention had been focused on the group’s college education business, which account for 27% of the group’s overall revenues and has been hit by lower college enrolements and an accelerating structural shift away from traditional textbook sales. To add to the problems Pearson’s testing business is down and more students are purchasing used books rather than buying new ones.



Earnings from its US higher education business were down 18 per cent in 2016, forcing the company to slash its dividend and profit forecasts for 2017 and to scrap its £800m profit target for 2018.

Pearson revealed Friday that it will slash its costs by £300 million ($388 million) a year in job cuts and office closures through 2019 to help restore earnings growth. This third round of restructuring comes after 4,000 staff were cut last year, when the company sought similar savings. Pearson has already stripped £650 million in costs out of the business over the last four years.



Chief executive, John Fallon, said, "We are creating a leaner Pearson, equipped to innovate and win in digital education.”

At Pearson’s meeting last year, the American Federation of Teachers, AFT, which has 1.6m members, proposed a resolution asking the board to implement a deeper strategic review of the business. The move was rejected by about 98 per cent of shareholders, the company said.

In 2016 Pearson posted a record pre-tax loss of £2.5 billion ($3.24 billion).