Pearson to Slash Jobs, Warns on Profit

LONDON—Pearson PLC on Thursday launched a fresh cost-savings plan and announced plans to cut 10% of its workforce, after it cut its full-year earnings guidance and again warned on profit.

The London-based educational-products specialist, which makes most of its revenue from educational services in the U.S., said it underestimated the impact of trading pressures across its key markets, plans to simplify its business, cut costs and focus on fewer, bigger opportunities.

Pearson, which recently sold high-profile publishing assets to raise funds for growth and cut operating profit, said it expects adjusted operating profit to be at or above £ 800 million ($1.13 billion) in 2018, based on a recovery of its business in the U.K. and U.S.

In August, Pearson sold its 50% noncontrolling stake in the publisher of the Economist magazine for £ 469 million. The disposal followed its sale of the FT Group, which includes the Financial Times newspaper, to Nikkei Inc. of Japan for £ 844 million.

Pearson said Thursday it plans to cut 4,000 jobs.

"We are moving quickly to implement this restructuring and are planning to complete the majority of it by the half year, and all of it by the end of the year," it said in a statement.

The group said will take on restructuring costs of approximately £ 320 million in 2016 and expects to book yearly savings of approximately £ 350 million, with approximately £ 250 million in 2016 and a further 100 million in 2017.

Pearson's shares jumped 10% in early trading, as investors reacted favorably to the company's update. "We are broadly encouraged that Pearson has decided to redouble its efforts to meet external and internal challenges," said Shore Capital analyst Roddy Davidson.

Pearson is plowing proceeds from the sales of publishing assets into its global education business, which includes textbooks in Western markets, digital learning programs and English language schools.

It has restructured its operations and booked hundreds of millions of dollars in cost savings in recent years to counter a slowdown in mature educational markets and boost its push into emerging economies, such as Brazil and China, where there is greater demand for learning services.

The company said Thursday it expects to report adjusted operating profit in 2015 of approximately £ 720 million and adjusted earnings per share of between 69 pence and 70 pence. It previously forecast EPS to come in at the lower end of a range of 70 pence to 75 pence. In October, the company also cut its forecasts.

It intends to propose an unchanged final dividend of 34 pence a share, giving a total dividend for 2015 of 52 pence a share, up 2% year-over-year on 2014.

In 2016, it expects to report operating profit and adjusted earnings per share before restructuring costs of between £ 580 million and £ 620 million and between 50 pence and 55 pence, respectively. Operating profit after restructuring charges is expected to be in a range of £ 260 million to £ 300 million.

News Corp, which owns Dow Jones & Co., publisher of The Wall Street Journal, competes with Pearson's book publishing, business-news and education divisions.

Write to Simon Zekaria at [e-mail]

(END) Dow Jones Newswires

January 21, 2016 04:45 ET (09:45 GMT)

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