Marked down

28 February 2014 By Quentin Webb

The educational publisher has followed a profit warning for 2013 with surprisingly low guidance for the current year, sending the shares tumbling again. Pearson is struggling to adapt to change in its U.S. market. CEO John Fallon has yet to demonstrate it’s just a cyclical blip.

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Pearson warned 2014 earnings would fall between 4 and 12 percent as it entered a second year of restructuring, sending shares in the educational publisher to a two-year low.

The London-listed company, which also owns the Financial Times newspaper and 47 percent of book publisher Penguin Random House, reported full-year operating profit of 736 million pounds ($1.23 billion). Adjusted earnings per share of 70.1 pence fell 15 percent compared to the previous year. Before currency moves, it now expects EPS of 62 to 67p a share in 2014.

Chief Executive John Fallon, who took charge last year, said Pearson would need to spend less on restructuring next year.

“We are in the middle of what we believe will be a short, but difficult, transition – one that through our combined investment and restructuring programmes will drive a leaner, more cash generative, faster growing business from 2015,” he said.

Pearson shares touched a low of 981 pence a share, their lowest since January 2011. By 1100 GMT the stock stood 6.3 percent lower at 1,009 pence, giving the company a market capitalisation of about 8.3 billion pounds.

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