Pearson warned of a fall in profits and revealed the departure of its chief finance officer, further complicating the struggling company’s turnround plans a month after chief executive John Fallon announced he would step down this year.
Coram Williams, previously seen by insiders as a potential successor to Mr Fallon, will be replaced by his deputy Sally Johnson, who had also been due to leave the FTSE 100 company before she was offered the job.
Pearson said its 2019 results, out next month, would show adjusted operating profit at the bottom of its previously guided range of £590m-£640m, weighed down by sliding US textbook sales. Guidance for 2020 was gloomier still, with adjusted operating profit expected to fall to £500m-£580m.
The company’s shares, which have fallen 40 per cent in the past four years, were down as much as 14 per cent in morning trading before recovering some poise.
Under Mr Fallon, Pearson has sold off assets including Penguin, the Financial Times and a stake in The Economist, slimming a sprawling media conglomerate into a company solely focused on education services.
However, confidence in Pearson’s transition has been repeatedly knocked as the company struggled to offset the rapidly shrinking market for textbooks with revenue from its new digital products and services. It has warned on profit six times during Mr Fallon’s seven-year tenure.
Part of Pearson’s digital offering is a rapidly growing language test business, which makes up roughly 7 per cent of sales. Having worked with Australian authorities since 2014, the company recently won a contract to help the UK Home Office test the English proficiency of people applying to work and study in the country.
But the success of this business has been outweighed by plummeting sales of university textbooks in the US, which account for roughly a quarter of revenues. A decade ago it sold 21m textbooks to US students but that volume has since plunged by more than 80 per cent.
Mr Fallon said the company’s electronic transition had been “the most difficult we have seen anywhere in the media and publishing industry”, but he added that “the direction of travel is very clear, we are at a point where digital transformation is complete”.
However, analysts did not share the chief executive’s positive tone.
Shore Capital’s Roddy Davidson said the upcoming departure of the company’s two top directors was likely to lead to a “period of uncertainty and possibly a loss of momentum”.
Nick Dempsey from Barclays said the “weak” 2020 guidance had been “worse than expected”.
Mr Fallon said the process to find his replacement was well under way and that both internal and external candidates were being considered. Both he and Mr Williams will stay on for another few months before the chief finance officer moves to a “comparable role at a company based in continental Europe”.
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January 16, 2020 at 03:14PM
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Pearson warns of fall in profit as leadership contender quits - Financial Times
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