The educational publisher Pearson has revealed that it plans to cut 4,000 jobs, or 10 per cent of its workforce, in an attempt to return the business to growth.
The news came as it warned that profits for last year would remain flat at £720m and would fall to around £600m this year, with an upturn to £800m predicted in 2018.
Part of the decline stems from the sale of the Financial Times and The Economist and separation of Penguin books, which together accounted for £180m of the group’s operating profit.
But big changes in its top three education markets – the US, UK and South Africa – have also knocked £230m off earnings in the past three years, said the chief executive, John Fallon. In America, rising employment has meant fewer college enrolments, which are now back down to 2008 levels.
In Britain, Michael Gove, during his tenure as Education Secretary, pushed schools away from the kind of vocational courses provided by Pearson’s offshoot Edexcel, with enrolments in some areas halving. In South Africa, where Pearson has a market share of 40 per cent, sales of text books have declined by 70 per cent in two years.
The company said it had undertaken a bottom-up review of its markets, operations and financial plans. Mr Fallon added: “We need to make sure every part of Pearson is pulling its weight and generating growth. That means cutting the cost base and focusing on fewer, bigger opportunities.”
About 500 jobs are expected to go in the UK, where Pearson has a presence in London, Northamptonshire, Oxford, Manchester, Essex and South Yorkshire. In total the company has 40,000 employees in 70 countries.
Pearson’s shares rose by 114.5p or more than 17 per cent, to 772p, partly because it committed to continue paying the same dividend for the next two years even as its earnings fall. Steve Liechti, an analyst at Investec, said the downgrades for 2016 “look nasty but are not unexpected”.
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