By Kate Holton
LONDON Feb 28 Britain's Pearson warned
its earnings would fall sharply again in 2014 as the publisher
entered the second year of a restructuring sparked by the
deterioration in its main U.S education market.
Pearson, the 170-year-old world leader in education which is
under new leadership after years of good growth, suffered a
tough 2013 and downgraded its outlook twice.
The weaker-than-expected outlook for this year wiped another
700 million pounds off its market value in early Friday trading,
to take the fall in the share price since the beginning of the
year to more than 25 percent.
"This is the biggest restructuring in Pearson's history and
we're doing it at a time when our biggest business, North
America, is facing the most difficult trading conditions it has
in a decade," Chief Executive John Fallon said on Friday.
"It is going to pay off and we will start to see it pay off
Pearson shares were down 7.1 percent, the biggest faller on
the FTSE 100 index of blue-chip shares.
"Results from Pearson have kicked investor hopes of quick
recovery into the long grass," said Jonathan Helliwell, analyst
at Edison Investment Research.
Pearson, which also owns the Financial Times and a 47
percent stake in the Random House Penguin book group, for years
beat market expectations as it rolled out its education and
testing business around the world. But it was hit by a string of
managerial changes and slowing growth in 2013.
Fallon took over from the 16-year veteran Marjorie Scardino
last year and, faced with stalling earnings growth, embarked on
a 150 million pound restructuring programme to boost margins and
counter tighter educational budgets.
It has been hit particularly in the United States where
fewer people are enrolling in college courses as the economy
recovers, and where states have put off spending on school books
as they wait for a new Common Core education programme to roll
The British group warned in January that its 2013 earnings
would be lower than expected due to higher restructuring costs
and poor demand for its North America education business in its
key selling period, the fourth quarter.
Prior to Pearson's 2013 results published on Friday, Reuters
data showed that of 25 analysts covering the company, 18
recommend investors to either hold or sell its shares.
Pearson's restructuring programme is designed to accelerate
the move from print to digital services, and increase its
presence in fast-growing emerging markets such as China, Brazil
and India to tap into the rise in spending by a burgeoning and
aspirational middle class.
The 2013 results showed that North American education made
up more than 53 percent of the 5.2 billion pounds of group
sales, while international education made up 30 percent.
Adjusted earnings per share fell to 70.1 pence, after
restructuring charges, from 82.6 pence in 2012. The company said
at current exchange rates, adjusted EPS should be between 62
pence and 67 pence this year.
The only bright spot in the numbers was a 7 percent rise in
the dividend, which the group said reflected its confidence that
it would return to growth in 2015.