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