John Fallon has lived to lead another day at Pearson (PSON). The board of the FTSE 100 education company voted comprehensively in favour of keeping the chief executive in place, despite calls for his removal from six teachers' unions earlier this month.
Pearson and its chief executive have faced criticism from international teaching unions over its standardised approach to the US schooling process, as well as its support of private schools in developing countries.
Mr Fallon - who took the top job in 2013 - has overseen the sale of the Financial Times Group (owner of this publication), The Economist Group and Powerschool and led the group into its first net loss position since 2002. Under his tenure the group's share price has halved. It's therefore perhaps unsurprising that two-thirds of shareholders rejected the group's annual remuneration report in a non-binding vote at this month's annual general meeting (AGM). Mr Fallon was awarded a 20 per cent pay rise in 2016, including a £343,000 performance bonus. Almost a third of shareholders also voted against the remuneration policy proposed for the next three years in a binding vote.
But the first-quarter trading update published alongside the AGM hinted at turnaround plans. Investors were seemingly pleased to note management's launch of a strategic review of its US school business to accelerate the move to digital. The shares rose 10 per cent on the day of the announcement, despite continued slow revenue growth.
Pearson has been hurt by the increasing demand for digital education material - and subsequent decline in traditional textbooks - which has been felt particularly strongly in the North American higher education business. In 2016 revenue here fell 18 per cent and although planned 'phasing' helped boost sales in the first quarter, this is not expected to continue.
But management has worked hard to cut costs. The current restructuring programme is expected to deliver annual savings of £300m by the end of 2019. Therefore, despite the slow top-line growth, management continues to forecast an 11 per cent increase in operating profit to £630m in the year to December 2017.
