Education giant Pearson will make major job cuts after new chief executive John Fallon today admitted annual profits slumped 59% but insisted, in the strongest terms yet, that the Financial Times is not for sale.
Fallon is setting aside £150 million to cover the restructuring at the group, which employs 48,000 worldwide. He would not reveal the scale of the job losses, but said “I do know how many” will be made.
The cuts come on top of a huge shake-up at books arm Penguin, which is being spun off in a merger with Random House. Fallon said he was sticking with the “settled and sound” strategy of predecessor Dame Marjorie Scardino, who stepped down after 16 years in January.
However, he wants to “accelerate” change as he looks to “strengthen dramatically Pearson’s position in digital education services” and reduce reliance on print. There has been widespread talk in the City that the FT does not fit with this strategy but Fallon rejected suggestions that he had failed to quash this speculation.
“I don’t think I’ve sent any mixed messages whatsoever,” said Fallon. “I’ve said it’s a valued and valuable part of Pearson. I’ve said it’s not for sale.”
He stressed that he has not “initiated, conducted or encouraged” any talks with bankers or possible buyers. “I hope that might actually get reported,” he added, in a sign of his irritation at how rumours have persisted.
He maintained that the FT’s appeal to a growing, global “aspirational middle class” in emerging markets meant there was a good fit with Pearson’s education business. But he admitted “I honestly don’t know” if the FT will remain in print in 10 years’ time.
Fallon’s 64-page presentation to City investors focused almost exclusively on the future of the education business, and made virtually no mention of the FT. He delivered the results without Penguin, which is now being treated as a “discontinued operation”.More than 90% of sales come from education, and FT Group represents less than 9%.
Pre-tax profits crashed to £434 million against £1.05 billion a year earlier. They were hit by a £113 million write-off on the closure of UK adult training business Pearson in Practice.
The group also ran up £32 million in costs on Penguin, related to the Random House deal and the settlement of an e-book pricing case with the US Department of Justice. Underlying sales fell 1% to £6.11 billion, which Fallon blamed on “tough” trading.
Even without exceptional items, adjusted operating profits fell — a rare event for Pearson — and Fallon warned of no increase in 2013.
The shares fell 65p to 1151p.