Pearson cuts 4,000 jobs to save dividend

SHareS in publishing house Pearson spiked yesterday as it announced 4,000 job cuts in a bid to get back on track.

The world’s biggest education company revealed more pain in its trading update, which saw it publish its second profit warning in three months.

However, there was relief for shareholders as the firm confirmed it would keep its dividend following fears it would be stopped.

The changes are part of Pearson’s second major restructuring in three years. They will cost £320m in 2016 and involve warehouse closures as well as a simplification of its back office.

The turnaround plans were well received by investors and Pearson’s stock rose 17.4pc to 772p.

The company, which sold the Financial Times paper and its stake in The economist magazine last year, said it would make £350m of savings by the end of 2017.

Pearson has still been able to issue a dividend, albeit lower than initially forecast. earnings per share for 2015 could now come in at 69p, well below the minimum of 75p initially predicted, and lower than a subsequent downgrade which set a minimum of 70p.

The company has revised down profit predictions further for this year, with earnings per share, excluding the bill for jobs cuts, to fall to about 50p to 55p. But Pearson predicted better performance in 2017 and 2018.

The company has struggled amid a fall in student numbers attending university in the US, a halving of the number of UK students taking vocational courses and a decline in the South african textbook market of 60pc.

roddy Davidson, analyst at Shore Capital, said: ‘Whilst it is disappointing to see further restructuring costs and little if any improvement in underlying markets we are broadly encouraged that Pearson has decided to redouble its efforts to meet external and internal challenges.

‘We believe the market will also be relieved by its decision to maintain dividends at 2015’s level.’

Pearson’s chief executive John Fallon said: ‘Our competitive performance during the last three years has been strong, but the policy-related challenges in our biggest markets have been more pronounced and persisted for longer than anticipated.

‘Faced with these challenges, we are announcing decisive plans to further integrate the business and reduce the cost base, rationalise our product development and focus on fewer, bigger opportunities.’