Pearson poaches top finance man from Dorling Kindersley

A strengthening of the management team at Pearson is being seen as a move to avoid a repetition of the accounting scandal at its Penguin. Cathy Newman reports.
Pearson has appointed Peter Gill, former group finance director at Dorling Kindersley, as director of financial operations, to tighten up its financial reporting and control procedures. City analysts said the appointment would safeguard Pearson from the appearance of any further "black holes" in its accounting systems. The company was forced to set aside pounds 100m earlier in the year after the discovery of an accounting fraud in its Penguin subsidiary.

Meg Geldens, media analyst at Merrill Lynch, said Mr Gill's skills would "come in very useful". She added: "There don't seem to be any black holes around at the moment, but having someone who's been in a business which is very similar to many of Pearson's businesses will help them have closer control across their operations."

Mr Gill's appointment co-incided with two other management changes. John Fallon, PowerGen's director of communications, will take charge of Pearson's internal and external communications and Paul Vickers, legal services director at Cable & Wireless, will have responsibility for legal and company secretarial affairs.

John Makinson, Pearson's finance director, said the additions were not just a reaction to events at Penguin, but he admitted they were designed to improve financial controls. He added: "We're obviously extremely scrupulous about strengthening controls in the light of the Penguin business."

Anthony de Larrinaga, media analyst at Panmure Gordon, said: "Pearson needs to tighten up its financial reporting and controls within the group. Mr Gill's appointment will enable Mr Makinson to think more strategically and to look at acquisitions and so on."

The news was unwelcome for Dorling which saw its shares fall14.5p to close at 270.5p. The City was concerned about the exit of another senior member of staff so soon after the departure in July of Kristina Peterson, chief executive officer of the US division.

A cautious statement about future trading from Dorling's chairman, Peter Kindersley had also not helped, analysts said. Mr Kindersley said that although he was "confident" of future prosperity, there were "a number of challenges in the short term".

The group announced a 21 drop profits to pounds 10.2m for the year to June, in line with market forecasts. However, a pounds 2.5m exceptional reorganisation charge was higher than analysts had expected.

Mr Kindersley said yesterday cost-cutting would continue, and there would be some redundancies. It also emerged that staff bonuses have been slashed in an attempt to contain costs. Staff have in recent years been paid an extra month's salary as a discretionary bonus at the end of the summer.

However, this year, employees have been given a flat bonus of pounds 250.The company said the US, where turnover was down 1 per cent, was problematical because of adverse retail conditions. In the UK turnover rose 17 per cent to pounds 47.6m. The autumn publishing list was, Dorling added, "one of the strongest of recent years".

Shares in Dorling fell to 202.5p earlier in the year from a high of 660p.