Pearson

Company Information & Key Figures

About

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 30,339 employees in more than 70 countries. After the completion of the Penguin Random House merger, Pearson’s operations are focused on education strategy.

In 2014, Pearson implemented a new operating and reporting structure that organizes the publisher’s learning operations in two streams: global lines of business and geographic market categories. The global lines of business centered around the School, Higher Education and Professional segments and the new geographic streams focus on the North American market, Growth markets and Core markets.

2015 saw the final divestment of Pearson of all assets other than education and learning. The new strategy had at first put trade publisher Penguin into a merger with Bertelsmann’s Random House, followed by the sale of the Financial Times newspaper (FT) and Pearson’s 50% share of the Economist magazine.

Analysis & Key Developments

Financial

In 2017, Pearson’s sales decreased by 39mGBP in headline terms to 4,513mGBP. Adjusted operating profit fell 59mGBP to 576mGBP (2016: 635mGBP). Chairman Sidney Taurel stated that despite the loss the company has stabilized on the operational level „We are still in the midst of a transformation and the environment in our largest business, US higher education courseware, remains challenging.“ (AR 2017)

To deliver on the strategy, Pearson is continuing to focus on the following three priorities:

1. Grow share through the digital transformation of our courseware and assessment businesses
2. Invest in the biggest structural growth markets
3. Simplify the company, becoming more efficient and delivering better customer experiences. (AR 2017)

As a further part of this three points strategy Pearson announced that its US K12 courseware is held for sale, which accounts for 9% of Pearson’s turnover, but just 2% of its profit (11mGBP). (AR 2017 & BS 23.02.2018)

• Revenues of the North America division declined from 2,981mGBP (2016) to 2,929mGBP (2017), primarily due to anticipated declines in higher education and school courseware, school assessment and Learning Studio, a learning management system we are retiring. Adjusted operating profits fell 10% in underlying terms, due primarily to the impact of lower sales and other operating factors partially o set by restructuring savings. (AR 2017)
• During 2017 the revenues of the Core unit rose 1% in headline terms and were down 1% at both CER and at on underlying terms, primarily due to growth in OPM in the UK and Australia and growth in Pearson Test of English offset by declines in school, higher education, English courseware and student assessment and qualifications. Moreover, adjusted operating profit declined by 8mGBP, in underlying terms due to revenue mix, investment in new products and services and business exits, partially offset by restructuring savings. (AR 2017)
• The Growth segments revenues were unchanged in both headline and underlying terms. The consistent result was due to growth in China, school courseware in South Africa and Pearson Test of English, offset by declines in higher education services primarily due to lower enrolment at CTI and business disposals in India, and declines in Brazil. Revenues were down 4% at CER due to the disposal of GEDU. Besides the adjusted operating profit rose to 38mGBP in 2017. (AR 2017)

Internal organization

Restructure

• In January 2016 Pearson has rebranded to reflect its 100% focus on education. The company is intending to roll out its redesign globally over the next two years. (BS 06.01.2016)
• 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 restructuring is expected to cost around 320mGBP, to generate 250mGBP savings in 2016 and a further 100mGBP savings in 2017. (BS 26.01.2016)
• In August 2017 Pearson announced its strategy to save another 300mGBP. The company wants to generate the savings mainly by cutting further 3,000 jobs. (PW 04.08.2017)

Mergers & Strategic Partnerships

• In April 2017 Pearson announced, as part of a new „rental-only“ model, its cooperation with the American online textbook rental company Chegg to make its higher education textbooks more affordable to use. (BS 10.04.2017)
• Pearson also disclosed in April 2017 a textbook rental deal with the National Association of College Stores subsidiary, indiCo. The joint venture is part of Pearson’s its effort to remake its higher education business. (PW 21.04.2017)
• In August 2017, the company announced a partnership with Duolingo, an education app with more than 200m users worldwide. The aim is to provide college and university students a new personalized way to learn foreign languages, delivered to students using Duolingo’s platform. (PR 16.08.2017)
• Also in August 2017, Pearson announced to bring it’s Pearson’s textbook rental program to Barnes & Noble Education’s, serving more than 6 million students through 1,490 physical and virtual bookstores (PR 09.08.2017)
• In September 2017, Pearson announced a digital learning partnership with the University of North Texas (UNT) to offer 38,000 students the opportunity to showcase effective career development and job search skills from their classroom and co-curricular activities. (PR 21.09.2017)
• In February 2018, Pearson and Microsoft Research Asia (MSRA) jointly announced they have signed a three-year strategic partnership agreement to integrate artificial intelligence capabilities into market-leading English language learning curriculum. The Longman English+ app is available in China through WeChat. (PR 02.02.2018)

Divestment

• In August 2017, Pearson completed the sale of the Global Education (GEDU), Pearson’s test preparation business in China, for 80mUSD to Puxin Education, a private education company. (PR 16.08.2017)
• In October 2017, Pearson completed the sale of its 22% stake in PRH and the trade publisher accounted for 94mGBP of the company’s adjusted operating profit during the course of the year, down from 129mGBP a year earlier. (BS 23.02.2018)
• In November 2017, Person announced the sale of Wall Street English (WSE) to a consortium consisting of funds affiliated with Baring Private Equity Asia and CITIC Capital. (PR 27.11.2017)

Digital

• Digital and services businesses provided 69% (up 1% from 2016) of the Pearson’s revenue share. (AR 2017)
• Pearson continued to focus on Inclusive Access (direct digital access) solutions, signing 210 new institutions in 2017. Besides, the company reduced the rental price of 2,000 ebooks, which boosted revenues growth by 22% during the year. (BS 23.02.2018)