Pearson Plc made good on a pledge to cut costs, slashing 3,000 jobs and cutting its interim dividend to preserve cash as it works on a turnaround of its struggling education business. The stock advanced.
The staff cuts, about a 10th of the company’s total work force, will have “a particular focus” on managerial positions and office locations will also be reduced, Pearson said Friday. It lowered its interim dividend by 72 percent to 5 pence a share, a move signaled last month.
The staff reductions are part of Chief Executive Officer John Fallon’s plan to cut annual costs by 300 million pounds ($394 million) by 2019, as he tries to create a leaner company more focused on digital education. Fallon has had to accelerate savings initiatives as the business faces challenges in the U.S., where college enrollment has fallen and online learning and rentals are putting pressure on textbook sales. On a call, he said he’s cut 10,000 jobs since 2013.
“As you move from being a largely analog, print-led company to a primarily digital-driven company that’s the sort of cost savings and changes in the company you should expect,” Fallon said on the call with reporters. “It is fundamental to the long-term future of the company.”
The shares rose as much as 4.3 percent, and was up 1.6 percent to 679.50 pence at 8:22 a.m. in London. The stock had lost 18 percent this year through Thursday, after the company issued a profit warning in January and forecast years of gloom in the U.S. market.
The company also reported a first-half operating profit of 16 million pounds, after a loss of 286 million pounds a year earlier, and reiterated its full-year forecasts.
The cost-savings campaign is the latest in London-based Pearson’s efforts to revive earnings amid a transforming education market. The company announced 4,000 job cuts last year and also reduced thousands of jobs in 2013 and 2014.
“No one takes pleasure in this sort of transformation that we’ve had to do,” Fallon said.
Last month, Pearson said it was selling a 22 percent stake in book publisher Penguin Random House to majority owner Bertelsmann SE for about $1 billion to help bolster its balance sheet. The company sold the Financial Times and its stake in the Economist in 2015 to invest in its education business.