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. Since the completion of the Penguin Random House merger, Pearson’s operations have focused on education strategy.

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

Pearson divested all remaining assets other than education and learning in 2015. The new strategy began with the merger of trade publisher Penguin with Bertelsmann’s Random House, and was followed by the sale of the Financial Times and Pearson’s 50% share of The Economist.

Analysis Key Developments

Financial

In 2017, Pearson’s sales decreased by 39 million GBP in headline terms to 4.5 billion GBP. Adjusted operating profit fell 59 million GBP to 576 million GBP (2016: 635 million GBP). 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.”

To deliver on the strategy, Pearson will continue to prioritize growth through the digital transformation of their courseware and assessment businesses, investment in the biggest structural growth markets, and by simplifying the company to become more efficient and improve customer experiences.

As a further part of this three points strategy Pearson announced it would sell the US K-12 courseware, which accounts for 9% of Pearson’s turnover, but just 2% of its profit (11 million GBP).

Revenues of the North America division declined from 2.98 billion GBP (2016) to 2.93 billion GBP (2017), primarily due to anticipated declines in higher education and school courseware, school assessment and Learning Studio, a learning management system that will be retired. Adjusted operating profits fell 10% in underlying terms, due primarily to the impact of lower sales and other operating factors partially offset by restructuring savings.

During 2017 the revenues of the Core unit rose 1% in headline terms and were down 1% at both CER and 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 8 million GBP, in underlying terms due to revenue mix, investment in new products and services and business exits, partially offset by restructuring savings.

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. The adjusted operating profit rose to 38 million GBP in 2017.

Internal Organization

In January 2016 Pearson rebranded to reflect its sole focus on education and announced the dismissal of 4,000 employees to cut further costs. The restructuring cost 320 million GBP and generated 350 million GBP savings over 2016 and 2017.

In August 2017 Pearson announced a strategy to save another 300 million GBP with 3,000 additional job cuts.

Mergers Strategic Partnerships

In April 2017 Pearson announced its cooperation with the American online textbook rental company Chegg to make its higher education textbooks more affordable to use.

Pearson also discloseda textbook rental deal in April 2017 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.

In August 2017, the company announced a partnership with Duolingo, an education app with more than 200 million 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.

Also in August 2017, Pearson announced to bring its Pearson’s textbook rental program to Barnes Noble Education’s, serving more than 6 million students through 1,490 physical and virtual bookstores.

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.

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. Divestment

In August 2017, Pearson completed the sale of the Global Education (GEDU), Pearson’s test preparation business in China, for 80 million USD to Puxin Education, a private education company.

In October 2017, Pearson completed the sale of its 22% stake in PRH and the trade publisher accounted for 94 million GBP of the company’s adjusted operating profit during the course of the year, down from 129 million GBP a year earlier.

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.

Digital

Digital and services businesses provided 69% (up 1% from 2016) of the Pearson’s revenue share.

Pearson continued to focus on Inclusive Access (direct digital access) solutions, signing 210 new institutions in 2017. The company reduced the rental price of 2,000 e-books, which boosted revenues growth by 22% during the year.

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