Pearson fighting for Footsie future
Share price falls another 9 per cent Profit forecasts are slashed again Top executive quits the business
Pearson is fighting for its place on the FTse100 after a bleak warning about its prospects sent shares tumbling.
More than £411m was wiped off the publisher’s market value yesterday as the company, once a titan of the business world which now sells text books, said profits for 2019 would total around £590m.
This was at the lower end of its september guidance, of £590m to £640m.
Pearson added that profits in 2020 were likely to fall to between £500m and £580m. shares plummeted 8.9pc, or 55p, to 563.4p, its lowest level for more than 11 years.
The rout has left Pearson, formerly owner of publishers Ladybird and Penguin, with a market value of just £4.4bn – right at the bottom of Britain’s bluechip index.
It is in danger of being relegated to the FTse250 when the index provider, FTse russell, completes its next reshuffle in March.
Pearson started out as a construction company, founded by samuel Pearson in Yorkshire in 1844.
It was later passed on to his grandson Weetman, who built up the family business and later took the title Lord Cowdray following a career in politics.
one of Pearson’s construction agents, ernest Moir, helped build the Blackwall Tunnel under the river Thames.
since then, the company has owned a stable of famous brands.
Marjorie scardino, boss of Pearson until 2012, said owning the Financial Times could help open doors for Pearson’s education business in countries such as China.
Its sale under the current chief executive, John Fallon, in 2015 has since proved controversial.
Pearson is now languishing in the doldrums, as it struggles to find its feet as an educationfocused publisher in an increasingly digital world.
Its unit which provides print and digital textbooks for Us higher education course accounts for 24pc of revenue, but performance declined by almost 12pc in 2019.
In 2020, Pearson expects to make between just £500m and £580m in profit – including the money it made from selling its final 25pc stake in Penguin random House for around £510m.
The company has slimmed down its business enough to be saving £335m per year from the end of 2019, and said revenues in its wider course-ware units and assessment businesses had stabilised. But Pearson will have to fight to keep up the pace of change as Fallon is retiring this year.
Chief financial officer Coram Williams had been the heir-apparent. But he announced yesterday that he too would be stepping down to take up a role in continental europe. He will be succeeded by his deputy sally Johnson, who has been with the company for almost 20 years.
russ Mould, investment director at aJ Bell, said: ‘John Fallon and Coram Williams are hardly getting out while the going is still good, but you do wonder whether they are getting out before things get even worse. This could still happen, even after multiple warnings, a dividend cut and a steady share price decline over time, despite the cost-cuts and efforts to recondition the business for the digital world. The outlook is potentially very difficult for the company.’