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Pearson overhauls business structure to target growth markets
May 23, 2013 / 2:00 PM / 5 years ago

Pearson overhauls business structure to target growth markets

LONDON (Reuters) - UK-based publisher Pearson, buffeted by a string of managerial changes and slowing growth, unveiled a further shake-up on Thursday that it said would take some time to implement.

Shares in the educational publisher and owner of the Financial Times dropped in reaction to the news as analysts said there were risks that the reorganization, which increases its focus on emerging markets and digital products, would drag on performance.

“This is a significant change in the way we run the company that will take time and sustained commitment, but it is one we must make to be able to accelerate the execution of our global education strategy,” said Chief Executive John Fallon.

Main board director and head of the group’s North American Education unit, Will Ethridge, is the highest profile casualty of the changes. He will step down from running the North American Education division, which contributes more than half of the group’s profit, at the end of the year, when he will also leave the board.

Ethridge was overlooked for the top job when former chief executive Majorie Scardino left at the end of last year after 16 years at the helm.

Earnings growth has since stalled, however, and the company in February launched an overhaul costing 150 million pounds ($226 million) this year to counter a tough advertising market and tighter spending by educational authorities in its key U.S. market.

Under the new structure the company said it will be organized around three global lines of business - School, Higher Education and Professional, which embraces the Financial Times business - and three geographic market categories - North America, Growth and Core.

Doug Kubach, Tim Bozik and John Ridding will head the School, Higher Education and Professional units respectively, while Don Kilburn will be in charge of North America, Tamara Minick-Scokalo will lead Growth Markets and Rod Bristow will be in charge of Core Markets.

Analysts at Citi said the changes meant Pearson was adopting a structure used by consumer goods companies.

“This, to us, acknowledges that Pearson’s future will look quite different from its past, with emphasis shifting geographically ..., in terms of format (from print to digital/services) and also, critically, in terms of customer (from government to private institution/ consumers).”

Pearson’s shares were down 2.6 percent at 1232 pence by 1242 GMT, when the FTSE 100 index was down 1.75 percent.

Analysts at Liberum said there might be some concern that the reorganization, which is due to be in place by January 1 2014, might not take full effect at the lower levels of management until later on next year, thereby prolonging the impact on operational performance.

Earlier this year Fallon denied persistent media speculation that the Financial Times business was for sale.

“The FT is a valued and valuable part of Pearson. I have said the business is not for sale, nor have we initiated, conducted, encouraged in any shape or form, any sort of process whatsoever, nor have I had any conversations with anybody about the sale of the FT,” he told reporters.

($1=0.6647 British pounds)

Editing by Greg Mahlich

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