Pearson has said in a press communication today that operational profits will be below initial expectations for 2016 and it will not now achieve its target of £800 million in 2018. Pearson reported that North American higher education market sales in 2016 were worse than forecast, with a poor fourth quarter and a revenue drop of 30% compared with the last quarter of 2015.
The press release reveals that Pearson has decided to accelerate efforts to meet the higher demand for digital products and textbook rentals. In an effort to streamline the company 4,000 jobs have already been eliminated and it has also announced a host of measures to reshape its portfolio. This includes selling its 47% share in Penguin Random House (PRH). Pearson merged with Bertelsmann in 2013, who control a 53% stake in PRH.
“With the integration of Penguin Random House complete, and with greater industry-wide stability on digital terms, we intend to issue an exit notice regarding our 47% stake in Penguin Random House to our JV partner Bertelsmann in the contractual window, with a view to selling our stake or recapitalising the business and extracting a dividend.”
Pearson intends using the proceeds from the sale of PRH to maintain a strong balance sheet, invest in its long term business, and return excess capital to shareholders whilst retaining an investment grade credit rating.
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