Pearson to Cut Jobs After Predicting Stagnant 2013 Earnings
Pearson Plc (PSON), the publisher of the Financial Times newspaper, predicted operating profit will be stagnant in 2013 as it cuts jobs and spends more quickly to shift its education business to online from print.
Pearson will have about 150 million pounds ($227 million) of restructuring costs in 2013 as it accelerates the move of its education business to fast-growing economies and digital service and separates its Penguin book business in preparation to merge it with Bertelsmann AG’s Random House, the London-based company said in an earnings statement today. The stock fell as much as 6.3 percent, the biggest intraday decline since October 2008.
The company forecast 2013 operating profit and adjusted earnings per share to be “broadly level” with 2012 before restructuring costs and including Penguin for the full year. Education budgets remain tight and the business is shifting from print sales to digital subscriptions, Pearson said. John Fallon, who succeeded Marjorie Scardino as chief executive officer last month, declined to say how many jobs will be eliminated.
“The outlook is likely to be taken very negatively,” Ian Whittaker, an analyst at Liberum Capital, said in a note. “There are also significant restructuring charges.”
The stock was down 5.9 percent at 1,144 pence at 12:21 p.m. in London trading, wiping about 600,000 pounds from Pearson’s market value, which fell to 9.36 billion pounds.
Adjusted operating profit in 2012 fell to 936 million pounds from 942 million pounds. Sales rose 4.3 percent to 6.11 billion pounds, missing the 6.18 billion-pound average estimate of analysts, according to data compiled by Bloomberg.
“Trading conditions are tough and structural changes mean many of our traditional publishing activities are under pressure,” Fallon said in today’s statement.
Pearson said the restructuring will generate about 100 million pounds of annual cost savings in 2014. The moves will strengthen digital education services and result in job cuts in some operations, Fallon said on a conference call today, declining to specify a figure. Pearson employed more than 48,000 people at the end of 2012, he said.
“The FT is a valued and valuable part of the business,” Fallon said. “There is no process and no conversations about the sale of the FT. We continually ask ourselves if we are the best owners of the business, and we are.”
Adjusted operating profit at the FT Group, which publishes the pink Financial Times newspaper, dropped 36 percent to 49 million pounds. Advertising was “generally weak and volatile with poor visibility,” Pearson said, even as the newspaper increased its number of digital subscriptions by 18 percent to almost 316,000.
The company reported adjusted earnings per share of 84.2 pence, matching the average estimate of analysts surveyed by Bloomberg.
Adjusted operating profit at Pearson’s International Education unit rose 10 percent to 216 million pounds. Profit on that basis at the Professional unit dropped 44 percent as the professional training business remained “very weak” and the company faces an impairment charge of 113 million pounds to exit its Pearson in Practice U.K. adult training business.
North American education revenue rose to 2.66 billion pounds from 2.58 billion pounds.
The Penguin-Random House merger, announced in October, is expected to be completed in the second half of 2013, Pearson said.
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