Can Pearson's new CEO turn the company around?
Pearson, the educational publishing group, endured seven profit warnings in seven years under its previous boss. Can new CEO Andy Bird steady the ship? Matthew Partridge reports.
This week Andy Bird took over as CEO of education-publishing firm Pearson with shareholders “close to open revolt”, says Christopher Williams in The Sunday Telegraph. One big bone of contention is his pay, with Bird in line for up to $9.4m over the next three years.
Other shareholders are “angry” with his plans to run the FTSE 100 firm remotely, splitting his time between his home in Malibu and New York, thousands of miles away from Pearson’s London headquarters. As a result, Bird is under “extreme pressure” to overturn “years of disappointment” that included a run of “seven profit warnings in seven years”.
Bird has a lot of work to do, with the latest figures showing that the pandemic has hit Pearson’s revenue, says Simon Duke in The Times. Last week, Pearson reported that sales fell by a tenth year-on-year in the third quarter, on top of a 28% fall in the second quarter, with the result that overall revenue is down 14% in the first nine months of the year. A large part of this was due to Covid-19, with exam cancellations and lockdowns badly disrupting Pearson’s qualifications and assessment business.
Selling off peripheral fripperies
Pearson’s problems predate Covid-19, says The Economist. Departing boss John Fallon deserves credit for restoring focus by selling off peripheral “fripperies” as well as slashing costs and paying down debts. However, he failed to prevent its core publishing business from being “hammered” by the rise of online book trading, which made the second-hand book market “massive”. Textbook rental services have also reduced the need to buy new copies.
Both of these have meant that Pearson’s “beancounters” have “repeatedly underestimated” the speed at which text-book sales would decline. They fell from 21 million in 2010 to fewer than four million in 2019. Despite all this gloom, there are still a few positive signs, says James Warrington in CityAM. For example, while overall revenue is still falling, sales of digital products surged by 32% in the last quarter.
To take advantage of this, Pearson has already announced plans to unveil a “reimagined” website and offer more online courses. In the longer run, the appointment of Bird, who led Walt Disney’s digital transformation, is a clear signal that the company believes that the move online is permanent, and will continue even after social distancing ends.
However, even if Andy Bird manages to turn Pearson “into a story worth reading”, there may be further short-term turbulence ahead, says Kate Burgess in the Financial Times. If Pearson shares continue to decline, one possible casualty is its chairman, Sidney Taurel, who has been lambasted for having left Fallon “in charge for too long”. He has also incurred criticism for Bird’s “hulking pay package”. After all, the job of chairman is to ensure there are “stringent checks” on the CEO.