Pearson's legacy textbook business was hit hard by the Covid-19 pandemic.
Getty ImagesPearson will undergo a major restructuring to focus on direct-to-consumer sales and digital learning, the publishing and education giant announced on Monday as it reported financial results for 2020.
The market cheered Pearson, which counts on North American products and services for more than a quarter of its sales. While the stock opened lower, the shares surged more than 9% higher in London trading.
The back story. FTSE 100-listed Pearson saw profits hit hard by the Covid-19 pandemic, with the closure of educational testing centers last year piling on top of the slow decline in revenues from the sale of physical textbooks. Covid-19 helped push the company further down the road of its long-touted transition to digital, and by the beginning of the 2020-2021 school year, online-education enrollment had risen 41% from the year prior.
The company welcomed a new chief executive in October, when Andy Bird—the former chair of Walt Disney International—replaced John Fallon, who oversaw seven profit warnings in his seven years in the top job. Bird’s compensation, including a base salary of $1.25 million and another $9.375 million from a “co-investment” program, has drawn ire from shareholders, with a third of investors voting against the pay package in September.
Plus:Sales Fall at Pearson Despite Boom in Online Learning as More Students Study at Home
What’s new. Pearson reported that sales declined 12% across 2020, to £3.4 billion ($4.7 billion), as adjusted operating profit—the metric preferred by management and watched by analysts—tumbled 46% from the year prior to £313 million. The company proposed a full-year dividend of 19.5 pence ($0.27) per share, unchanged from 2019.
Beyond the financial results, Pearson also outlined an update to the company’s strategy under its new chief executive. The group will now focus on direct-to-consumer sales, pivoting away from selling on campuses, and will reorganize into five new divisions, including one devoted to virtual learning. The reorganization is expected to incur one-time costs between £40 million and £70 million in 2021.
“Pearson’s strategy is now geared around three key demand-led global market opportunities which play to all our strengths: the rise in online and digital learning; addressing the workforce skills gap; and meeting the growing demand for dependable accreditation and certification,” said Bird.
In addition, the company plans to cut its property portfolio to occupy a significantly smaller corporate footprint. The property restructuring is expected to eat into profits to the tune of £130 million in 2021, before bringing £10 million in cost-savings in 2022 and £20 million annually in the following years.
Also read:Pearson Stock Surges as Activist Investor Cevian Discloses 5.4% Stake
Looking ahead. Pearson stock opened sharply lower on Monday, as analysts eyed the poor yearly performance due to the Covid-19 pandemic. But the shares have seen a remarkable rally as the day went on, likely as the market absorbed Bird’s new plan for the company and decided it was a good one.
A reorganization and new strategy with a careful eye on the future is what the expensive former Disney executive was hired to deliver. This may be the first real taste of changes to come. But it will take time, and investors in Pearson—which has seen its share price slide 20% since early 2019—will have to be patient. In the near term, the company expects steady revenue growth to continue into 2021.
"strategy" - Google News
March 09, 2021 at 03:52AM
https://ift.tt/2O4yrc5
The Market Is Cheering Publishing Giant Pearson’s Bold New Strategy. Here’s Why. - Barron's
"strategy" - Google News
https://ift.tt/2Ys7QbK
https://ift.tt/2zRd1Yo
Bagikan Berita Ini
0 Response to "The Market Is Cheering Publishing Giant Pearson’s Bold New Strategy. Here’s Why. - Barron's"
Post a Comment