Pear­son to axe 3,000 jobs af­ter slump at main US busi­ness

The Star (St. Lucia) - - BUSINESS -

Pear­son is to cut 3,000 jobs as the em­bat­tled com­pany looks to slash costs af­ter a slump at its US higher ed­u­ca­tion busi­ness.

The world’s largest ed­u­ca­tion com­pany, which has is­sued five profit warn­ings in the past four years, in­tends to axe about 10% of its 32,000 global work­force by the end of 2019.

The lat­est round of cuts means that the chief ex­ec­u­tive, John Fal­lon, will have shed 10,000 staff, about 25% of Pear­son’s global work­force, since he took over from Dame Mar­jorie Scardino in 2013.

“No one takes plea­sure in this sort of trans­for­ma­tion we have to do but it is fun­da­men­tal to the long-term fu­ture of the com­pany,” Fal­lon said. “I am look­ing for­ward to get­ting the rev­enue growth of the com­pany go­ing again.”

The cuts, which will save the firm about £300m an­nu­ally, will come from across the com­pany with a ma­jor fo­cus on its strug­gling US busi­ness, where its higher ed­u­ca­tion unit is strug­gling with a de­cline in text­book sales and the tran­si­tion to­wards dig­i­tal learn­ing.

“In North Amer­ica we need to ad­just the cost base to the re­al­ity of a smaller higher ed­u­ca­tion course­ware busi­ness,” said Co­ram Williams, Pear­son’s fi­nance chief.

Jobs are ex­pected to go in ar­eas in­clud­ing IT, fi­nance and hu­man re­sources as well as com­pany man­age­ment, as the busi­ness looks to be­come leaner and more dig­i­tally fo­cused.

Fal­lon re­cently at­tended a com­pany sales event at its US busi­ness, which ac­counts for two-thirds of Pear­son’s rev­enues and profits, and he said that the “mood and morale was very strong, buoy­ant”.

“Peo­ple are con­fi­dent about the year ahead,” he said. “They un­der­stand the chal­lenges in the busi­ness over the next two or three years but are also ex­cited by the op­por­tu­nity. There is plenty of time to plan and pre­pare.”

Since Fal­lon took the top role in 2013 through to 2020 the com­pany’s cost base will have been re­duced by £950m, in­clud­ing three tranches of job cuts: 3,000 in 2013-14; 4,000 in 2016; and the lat­est round by the end of 2019.

Pear­son, which con­ducts most of its busi­ness in the sec­ond half of the year, re­ported first-half rev­enues up 1% to £2.05bn and re­it­er­ated that it would hit its re­vised tar­gets for 2017.

The North Amer­i­can busi­ness man­aged flat growth, with rev­enue of £1.28bn, bet­ter than fore­casts.

Pear­son has fac­tored in a 6% de­cline at its US higher ed­u­ca­tion busi­ness this year and in 2018 be­fore it is ex­pected to re­cover. It hopes to ben­e­fit from a sta­bil­i­sa­tion in the drop in school en­rol­ments and its dig­i­tal strat­egy – such as in­creas­ing fo­cus on cut­ting e-book prices and text­book rentals – start­ing to pay off.

The com­pany an­nounced it has added book chain Barnes & Noble to its text­book rental scheme.

In Fe­bru­ary, Pear­son re­ported a pre-tax loss of £2.6bn for 2016, the big­gest in its his­tory. In May, Fal­lon, who has faced calls to step down, en­coun­tered a mas­sive share­holder re­volt with al­most 70% vot­ing against, or fail­ing to sup­port by ab­sten­tion, his £1.5m pay pack­age.

In Jan­uary, the com­pany slashed its profit fore­cast for this year by £180m and scrapped its tar­get of £800m for next year.

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