Pearson (PSON) boss to step down as remaining Penguin Random House stake sold

Share buyback scheme will return part of the sale proceeds back to shareholders

Article updated: 18 December 2019 10:00am Author: Ian Forrest

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  • Pearson will sell its final 25% stake in Penguin Random House as problems in the education business have contributed to a number of profit warnings
  • CEO John Fallon, who will be stepping down next year, did say that 75% of the business is growing
  • The shares have significantly underperformed the market this year but responded positively to today’s news with an initial 5% rise
  • Recommendation: While the Penguin sale and share buyback are positives for investors we would still suggest that the shares no more than a Hold for medium to higher risk investors

Educational publishing group Pearson announced today that its CEO John Fallon will retire next year but will stay on until a successor is in place. The company also reported the sale of its remaining 25% stake in publishing group Penguin Random House for £530m, and said it will return £350m of that to shareholders via a share buyback. Fallon has been CEO since 2012 and the last few years have been tough for the company as it has moved away from printed publications and towards digital products and services. Problems in the education business in the US have contributed to a number of profit warnings in recent times, the last being in September, but today Fallon said that 75% of the company is growing.

The shares have significantly underperformed the market this year but responded positively to today’s news with an initial 5% rise in early trading. Investors who’ve seen the shares halve in value during Fallon’s tenure may be tempted to cheer his departure, but his successor will not have an easy time turning around the struggling US higher education business and addressing the longer term challenges facing the sector. While the Penguin sale and buyback are positives for investors we would still suggest that the shares are no more than a hold for medium to higher risk investors.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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