Industry NewsPearson warns on profit as it announces £320m restructuring

Announcing its latest troubling update, Fallon blamed “the cyclical and policy-related challenges in our biggest markets”, which have “persisted for longer than anticipated”, but that explanation has seemed flimsy to some analysts.

And in August, Pearson offloaded its 50-percent stake in The Economist Group, owner of prestigious magazine The Economist.

Pearson has been hit hard by a difficult education market in the United States, where fewer people are going to university, instead seeking to go straight into employment in a buoyant jobs market.

Pearson is set to cut 4,000 jobs to deal with worse-than-expected earnings, the publisher announced on 21 January.

Pearson said the restructuring is expected to cost it £320m.

Pearson looming over this space hasn’t made it the most well-liked of companies, but its move into testing has been important – it means less reliance on old-fashioned publishing.

Last July, the publishing giant sold the Financial Times to Japanese media group Nikkei for £844 million, saying it wanted to focus exclusively on the education publishing sector which accounts for most of its business.

“In combination, these factors have reduced Pearson’s operating profit by approximately £ 230 million from its peak. We over-estimated how quickly those markets would return to sustainable levels of revenues and profits from their peak”.

Mr. Fallon also noted a paring of the company’s focus.

And yet despite what seemed a positive outlook in 2010, boosted by demand from emerging markets and unemployed Americans heading off to college following the financial crisis, the following years Pearson reported annual organic growth of 1%, -1%, 1% and 0%.

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.

The restructure, which begins this year, will see the group refocus on fewer, bigger opportunities and cost £320 million.

The warning comes after Pearson previously cut forecasts in October.

The company added that it intends to propose an unchanged final dividend of 34 pence per share giving a total dividend for 2015 of 52 pence per share, up 2% on 2014.

The company also issued a profits downgrade for this year, with adjusted earnings per share to fall to about 50p to 55p, but it expects to improve performance in 2017 and 2018. Operating profit after restructuring charges is expected to be in the 260 million pounds to 300 million pounds range.