Publisher soars despite a bruising investor revolt

DESPITE being hit with a revolt over boss John Fallon’s £1.5m pay, education firm Pearson was by far the FTSE’s biggest winner yesterday.

The textbook publisher’s shares rose by as much as 15pc in early trading after Fallon sought to stave off anger at the firm’s AGM by announcing it will cut costs by £300m a year.

It also said it would consider selling its US school courseware business which has been the major concern behind its 33pc drop in shares since last July.

It has also had five profit warnings in four years.

The firm has struggled to compete against online competition and growing numbers of US students choosing to rent textbooks rather than buying them.

The change of strategy was enough to boost the hopes of investors and shares finished up 12.4pc, or 81.5p, to 739.5p, adding £670m, to Pearson’s value.

But the joy was muted by the news that two-thirds of share- holders rejected the firm’s pay report at its AGM.

The non-binding vote is reported to be the largest shareholder rebellion at a FTSE 100 company in five years.

Pearson has been under pressure to change its remuneration policy since reporting that Fallon was given a 20pc pay rise last year despite the company recording a record annual loss of £2.6bn.

The firm said it was ‘disappointed’ by the vote.

Fallon has faced widespread calls for his resignation since his pay was revealed.

Most recently, the American Federation of Teachers accused him of pursuing a ‘flawed business strategy that is neither in the interests of kids, parents, or teachers’. The chief’s attempt to placate Pearson’s shareholders by investing his bonus back into the company is therefore likely to go largely un-noticed.

Chairman Sidney Taurel and chief financial officer Coram Williams will also re-invest parts of their bonuses.

The FTSE 100 rose 0.68pc, or 49.33 points, to 7297.43 in a particularly choppy session, driven by volatile oil prices. A top performer was British Airwaysowner International Consolidated Airlines Group.

The firm rallied after reporting a near 10pc rise in profits over the first three months of the year, normally its weakest quarter.

Despite total revenues dropping 2.8pc to £4.2bn, profits came in at £ 144.6m, exceeding analysts’ expectations. Bookings for its new long-haul low-cost airline, called Level, also came in ‘well ahead of expectations’. Level will launch in June, offering flights from Barcelona to the US and Brazil.

Shares rose 5.5pc, or 31.5p, to hit a five-month high of 603.5p.

Knee operations gave medical technology firm Smith & Nephew a leg-up. In its update for the first quarter, the firm reported 4pc revenue growth in its knee implant arm. But as a whole the company reported flat revenues over the quarter, in line with expectations, driven by the sale of its gynaecology unit last year and currency headwinds. However, it remains on track to deliver 3pc to 4pc revenue growth for the full year. Shares jumped 2.8pc, or 36p, to 1306p. Theme park operator Merlin

Entertainments dropped after its chief new openings officer sold a large chunk of shares.

John Jakobsen sold 150,000 shares at around 500p each, totalling more than £750,000.

It is likely Jakobsen wished to cash in on Merlin’s strong performance of late; it is up 12.6pc this year alone.

Shares fell 1.6pc, or 8p, to 505p.