Bertelsmann says open to raising Penguin Random House stake

Brittany BishopJan 19, 2017

It's now ramping up efforts to progress a digital move in higher education - "to manage the print decline" and said it intends to issue an exit notice on its 47 per cent share in Penguin Random House, with a view to selling its stake or recapitalising the business. The company sees 2017 operating profit between £570 million and £630 million, driving adjusted earnings per share of between 48.5 pence and 55.5 pence.

"The education sector is going through an unprecedented period of change and volatility", Pearson said.

Pearson, which has been highly focus on the United States market has endured a lengthy session of shakeup including multibillion-dollar asset sales, also announced that it will finish its Penguin Random House book-publishing joint venture with Bertelsmann SE, the German publishing giant.

Pearson explained in a statement: "Our net revenues fell 30 percent during the final quarter resulting in an unprecedented 18 percent decline for the full year".

"However our higher education business declined further and faster than expected in 2016..."

For the group, which was a serial profit warner a year ago, said it is paying £55mln less in staff incentives than it did in 2015.

The embattled publishing and education giant admitted it had misjudged its own markets and that profits for at least the next two years will be far lower than the City was expecting.

One way it will do this is to be more competitive in the courseware rental market and the publisher plans to reduce e-book rental prices by up to 50% across 2,000 titles - "making digital rental the best option for price-conscious students".

Penguin Random House comprises approximately 250 editorially independent individual publishers on five continents, that together publish more than 15,000 new books a year. Bertelsmann owns the other 53% of Penguin Random House.

Fallon sold the Financial Times newspaper and its stake in The Economist magazine in 2015 to concentrate on its education businesses. The dividend will also be "rebased" in 2017 to reflect lower earnings.

Last year, Rabe told reporters that Bertelsmann would not buy Pearson's entire stake and said it had been approached by a number of investors who would be interested in participating in a deal.

The world's largest education company withdrew its profit goal for 2018 after sales of materials for US higher education dropped 30 percent in the fourth quarter.

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