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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Merryn Somerset Webb: Pension funds shouldn't be pushed into private equity sectorOpinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
A fund that looks past the short term in AsiaGrowth should remain strong, but successful managers also need to focus on governance. Here's how to find active opportunities in Asian markets.
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
-
Two ways to tap into monopoly profits from airportsMost investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?The latest weight-loss treatments could transform public health and the world economy. Should you invest?
