Pearson was founded in 1844 by Samuel Pearson as S. Pearson and Son, a small building firm in Yorkshire in the North of England. Today Pearson is the world’s leading learning company with 41,041 employees in more than 70 countries. Since the completion of the Penguin Random House merger, Pearson’s operations have focused on education strategy.
In 2014, Pearson implemented a new operating and reporting structure that organizes the publisher’s learning operations into two streams: global lines of business and geographic market categories. The former targets the School, Higher Education and Professional segments and the latter is focused on the North American market, Growth markets and Core markets.
Pearson divested all remaining assets other than education and learning in 2015. The new strategy began with the merger of trade publisher Penguin with Bertelsmann’s Random House, and was followed by the sale of the Financial Times and Pearson’s 50% share of the Economist.
Analysis & Key Developments
Pearson’s overall corporate revenues dropped from a restated 4.54 billion GBP in 2014 to 4.47 billion GBP, a decline of 2%. Pearson’s adjusted operating profit was 723 million GBP—also down 2%--but adjusted earnings per share grew 5% for the year.
North America revenues grew 1% in headline terms, due to the depreciation of the sterling against the US dollar, but fell by 5% at CER and 1% in underlying terms. Sales declined slightly from 3 billion GBP in 2014 to 2.9 billion GBP in 2015, while the adjusted operating profit increased by 16 million GBP to 480 million GBP.
Revenues of the Core division declined by 8% in headline terms and 5% at both CER and in underlying terms. Sales increaed from 836 million GBP in 2014 to 1.2 billion GBP in 2015. Modest growth in Italy and strong growth from testing services provider PearsonVUE was offset by declines in UK assessment revenues, due to the impact of policy changes on Pearson’s UK school qualifications business and reduction in partner market revenues from divestments and a move to distributor models implemented in 2013.
The Growth units revenues fell 4% in headline terms, were flat at CER and fell 1% in underlying terms. Sales slipped from 746 million GBP to 692 million GBP in 2015. The segment’s adjusted operating profit decreased by 44 million GBP to a loss of 12 million GBP, due to the strength of the Sterling against key emerging market currencies.
In January 2016 Pearson rebranded to reflect its 100% focus on education. The company is intending to roll out its redesign globally over the next two years.
Also in January 2016 Pearson announced the dismissal of 4,000 employees in mid-2016 in a bid to cut further costs. According to the company this action will reduce the company's headcount by 10%. The restructure is expected to cost around 320 million GBP, and to generate 250 million GBP savings in 2016 and a further 100 million GBP savings in 2017.
Changes in Management
Chairman Glen Monroe stepped down before the end of 2015, after more than a decade in the role. He was replaced by Sidney Taurel, former CEO and chairman of pharmaceutical firm Eli Lilly, in January 2016.
During 2015 the Group disposed of its interest in the FT Group. The Financial Times sale to Nikkei was completed on 30 November 2015 for 858 million GBP. Pearson completed the sale of its 50% share of The Economist Group to EXOR in October 2015 and the sale of PowerSchool in July 2015 for 222 million GBP. “These disposals enable us to focus more fully on our education business, which was where we faced our biggest challenge last year,“ said Pearson’s Chief executive John Fallon.
Digital and services businesses provided 65% of the Pearson’s revenue share and amounted to 2.9 billion GBP in 2015.