Pearson cuts manager jobs and dividend

Pearson made good on a pledge to cut costs, slashing 3,000 jobs and cutting its interim dividend to preserve cash as it works on a turnaround of its struggling education business.

The staff cuts, almost 10% of the company’s total work force, will have “a particular focus” on managerial positions and office locations will also be reduced, Pearson said on Friday.

It lowered its interim dividend by 72% to 5p a share, a move signalled in July.

CE John Fallon has promised to cut annual expenses by £300m by 2019, as he tries to create a leaner company more focused on digital education.

Fallon has had to accelerate savings initiatives as challenges mount in the US, where college enrolment has fallen and online learning and rentals are putting pressure on textbook sales. Fallon said he had cut 10,000 jobs since becoming CEO in 2013.

“As you move from being a largely analogue, print-led company to a primarily digitaldriven company, that’s the sort of cost savings and changes in the company you should expect,” Fallon said.

The shares fell as much as 3.3%, negating an earlier rise, as investors digested the new dividend rate. The interim payout announced on Friday suggests an annual distribution of about 14p-15p, or a 2% yield, Liberum analyst Ian Whittaker said. The overall 2016 dividend was 52p.

“The dividend is at the low end of expectations,” said Jonathan Helliwell, an analyst at Panmure Gordon who rates the stock “sell”. “There was hope they might have a rabbit to pull out the hat, but I see no rabbit.”

Pearson declined 3.2% to 647.5p in morning trading in London.

The stock had lost 18% in 2017 to Thursday, after the company issued a profit warning in January and forecast years of gloom in the US market.

The company also reported a first-half operating profit of £16m, after a loss of £286m a year earlier, and reiterated its full-year forecasts.

The cost-savings campaign is the latest in Pearson’s efforts to revive earnings amid a transforming education market. The company, which sold the Financial Times and its stake in The Economist in 2015 to invest in its education business, announced 4,000 job cuts in 2016 and reduced thousands of jobs in 2013 and 2014.

The job cuts will play out over two-and-a-half years and focus on areas such as technology, as the company shifts to fewer, more scalable systems, Fallon said, as well as finance, human resources and general management. The highereducation courseware business that had struggled was still strong and had opportunities.

Pearson said in July it was selling a 22% stake in book publisher Penguin Random House to majority owner Bertelsmann for about $1bn to help bolster its balance sheet.

DIVIDEND IS AT LOW END …. THERE WAS HOPE THEY MIGHT HAVE A RABBIT TO PULL OUT THE HAT, BUT I SEE NO RABBIT