John Fallon, new chief executive of Pearson, looks to have inherited quite a few problems from his predecessor, Dame Marjorie Scardino, as he has been forced to cut the education giant's profit forecast.
The downgrade comes just three weeks after Mr Fallon took over, and follows his warning a fortnight ago that the group would take a £120m hit on the planned closure of its troubled UK adult training business.
Some City analysts were surprised by yesterday's trading statement, as it was the first time in years that the owner of the Financial Times and Penguin Books has cut its profit guidance. Mr Fallon, previously Pearson's head of international education, blamed "tough market conditions" as he revised down earnings per share to 84p – nearly a penny lower than Dame Marjorie's forecast last October.
Ian Whittaker, analyst at broker Liberum, expects Pearson's 2012 operating profits will be £935m. He warned that revenue growth in the fourth quarter might even have turned negative. While the downgrade may seem small, said Mr Whittaker, it was significant because it was "the first time in a long time" and it shows "structural pressures are increasing within the business".
He added it was a "double whammy" for Pearson because it is "a share with such a high rating and a reputation for upgrades".
Others were less downbeat. Numis Securities described Pearson's trading as merely "a touch light", but warned it sees "better value and excitement elsewhere in the sector".
The City's reaction will increase pressure on Mr Fallon, who is already facing questions about a possible sale of the FT for £1bn. Investment banks are said to have been lining up buyers, amid talk from analysts that Pearson should focus on its education business. There have also been reports that the Rothschild and Schroder families are looking to buy back Pearson's 50 per cent stake in The Economist, which is part of FT Group.
Pearson insists that Mr Fallon has "initiated no sale process", but the group recently admitted that the ownership of the FT "could change". Dame Marjorie had said the FT would be sold "over my dead body".
Full-year profits at the FT Group will be "significantly lower", after selling off non-core assets and incurring costs on the switch from print to digital. In a memo to staff, the editor of the Financial Times Lionel Barber said the newspaper was going to cut its headcount by 25, after adding 10 more digital jobs.
The publisher Penguin had a "good fourth-quarter". Shares fell 36p to 1,202p.Reuse content