4,000 jobs to go in Pearson shake-up

Sign in school warning that testing is in progress Image copyright AP
Image caption Changes in Pearson's major markets have hit its business

Education publisher Pearson is to shed 4,000 jobs - 10% of its worldwide workforce - in an effort to cuts costs.

Pearson has been hit by falling enrolments in education in the US and changes to education policy in the UK.

The firm employs about 5,000 people in the UK and about 10% of those jobs are expected to be affected by the cuts.

The majority of the cuts are expected to be completed by the middle of this year. Pearson also warned that profits would be lower next year.

Pearson said it expected underlying operating profits for 2015 of about £720m, but warned its profits in 2016 were expected to drop to between £580m and £620m, before the costs of the restructuring are taken into account.

"The cyclical and policy related challenges in our biggest markets have been more pronounced and persisted for longer than anticipated," says chief executive John Fallon.

"In combination, these factors have reduced Pearson's operating profit by approximately £230m from its peak. We over-estimated how quickly those markets would return to sustainable levels of revenues and profits from their peak".

Pearson said the restructuring is expected to cost it £320m. However, it said the shake-up of its business, combined with new product launches and the easing of pressure in the key US and UK markets, meant profits should be at or above £800m by 2018.

The restructuring will include merging all Pearson's businesses producing courseware material for teachers. Its assessment businesses in North America will also be integrated.

Its further education establishments in South Africa and the UK will shift focus to online rather than direct delivery, and there will be savings in areas such as technology, finance and HR.

Pearson got out of financial news and information last year when it sold the Financial Times Group and its stake in the Economist Group. It has also merged publisher Penguin with Random House.

Following the latest announcement, shares in Pearson rose by nearly 9%.

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