21st Jan 2016 09:52
LONDON (Alliance News) - Pearson PLC on Thursday said it will miss its previous guidance for calendar 2015 as it outlined plans to cut 4,000 jobs and simplify its business.
However, the education publisher also edged up its dividend and pledged to maintain it at this level.
Pearson shares led the FTSE 100 on the news, up 10% Thursday morning at 723.00 pence, the biggest gainer in the FTSE 100.
The company now expects to report adjusted earnings per share of between 69 and 70 pence for 2015, falling short of its previous guidance of the lower end of a range of 70p to 75p.
Pearson also outlined guidance for 2016, saying it expects to report adjusted earnings per share before restructuring costs of between GBP580 million and GBP620 million, down from the approximately GBP720 million it is now guiding for 2015, and earnings per share of between 50 and 55 pence.
The company cited a loss of operating profits from the high-profile sales it made in 2015, including of the Financial Times Group and of its stake in The Economist, ongoing challenging conditions in its largest markets, and the reinstatement of its employee incentive pool, as well as other operational factors.
Pearson will take "further action" to simplify its business and cut its costs, the majority of which it expects to complete by mid-year, for a one-off cost of around GBP320 million in 2016. It expects these actions to produce savings of around GBP350 million on an annual basis, with around GBP250 million to be made in 2016 and a further GBP100 million in 2017.
Including these restructuring charges, Pearson expects its 2016 operating profit to be between GBP260 million and GBP300 million.
The company said it will cut about 4,000 jobs, or about 10% of its workforce, as part of the restructuring actions. Amongst the changes planned, it intends to combine its business lines for courseware under a single product organisation, integrate its North America based assessment operations, and rationalising its property portfolio.
Despite the weaker short-term outlook, the education media company said it expects its restructuring programme, along with the launch of new products, and stability returning to US college enrolments and the UK qualifications market, to help drive its adjusted operating profit to at or above GBP800 million in 2018.
Additionally, Pearson said it expects to propose a total dividend for 2015 of 52 pence per share, up from the 51p it paid in 2014. It plans to sustain its dividend at this level whilst it rebuilds cover, which it said reflects its confidence in its medium term outlook.
The company acknowledged that some challenges in some of its largest markets had been "more pronounced and extended" than it had expected, including falling US higher education enrolments, few students taking vocational courses in England and Wales, and South Africa purchasing significantly fewer textbooks. It estimates that these factors have reduced its operating profit by around GBP230 million from its peak.
Pearson said it had over-estimated how quickly these markets would return to sustainable levels of revenues and profits from their peak.
"Our competitive performance during the last three years has been strong, but the cyclical and policy related challenges in our biggest markets have been more pronounced and persisted for longer than anticipated," said Chief Executive John Fallon in a statement.
"Faced with these challenges, we are today announcing decisive plans to further integrate the business and reduce the cost base, rationalise our product development and focus on fewer, bigger opportunities," Fallon added.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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