Pearson is to axe 4,000 jobs by the middle of this year in a bid to cut further costs.
The action will reduce the company's headcount by 10%, but will not affect staff at Penguin Random House, which Pearson owns a 47% stake in, a spokesperson told The Bookseller.
The company has recently been hit by changes in UK education policy and lower enrolments in the US, amid high unemployment, cuts to state spending and an increase in students renting books. Its share price has also fallen by more than half since March 2015, taking its sharpest tumble in October following a profits warning.
Pearson c.e.o John Fallon said: "The cyclical and policy related challenges in our biggest markets have been more pronounced and persisted for longer than anticipated."
The news was announced as part of the company's trading update, released today (21st January). Pearson said it expected underlying adjusted operating profit to be "approximately £720m" in 2015 and earnings per share of between 69p and 70p. However, it said operating profits were expected to drop between £580m and £620m in 2016 and earnings dive to 50p-55p per share.
The new streamlining strategy will position Pearson "for growth in our major markets," the company said.
The restructure is expected to cost around £320m, to generate £250m savings in 2016 and a further £100m savings in 2017.
David Reynolds, an analyst at Jefferies International Ltd told The Bookseller he thought the cost cuts proposed by Pearson were "aggressive" and would be "unpalatable" for Pearson staff.
"I think the cost-cutting exercise is aggressive - 10% of their workforce will go this year," he said. "It was aggressive but a necessity. I think some elements, depending on your perspective, would be unpalatable, particularly if you work at Pearson. But from a financial perspective, they've taken some fairly unpleasant medicine but absolutely had to. I think in the main it was what Pearson needed to do."
Pearson also issued "2018 goals" saying that it expected to achieve adjusted operating profit "at or above" £800m following the restructure. It will reach this figure with "the launch of new products, and stability returning to US college enrolments and the UK qualifications market by the end of 2017," it said.
Pearson shares have risen this morning following the news.
It is the second restructure by Pearson in three years. The company said it would restructure in February 2013, resulting in more than 3,000 job losses.
During a briefing to journalists this morning, Fallon added: "The restructuring we did two years ago did deliver the cost benefits that we expected it to, and those are reflected in our results, and it did enable us to increase investments in new business models, such as digital services.
"With hindsight, what we got wrong was that we underestimated the impact of the cyclical factors, and we thought we would be through them by now. They have been more persistent and more prolonged than we expected.
"What’s different this time is we now have very good solid grounds for why they’ll start to stabilise and then recover. But more than that, over the last two years, we have recruited new talent from other industries who brought a fresh perspective to Pearson, and one of the things that has resonated with me is actually there are still very big opportunities to improve productivity, particularly by upgrading the technology in the systems we have.
"Clearly, when we then came to the October trading update... that gave that work an edge and bite to it. I am very confident that – as an investment, as we very much see it, in productivity and growth – it will bring the benefits and will ensure that by 2018 the profits of Pearson are at least £800m a year."
Pearson rebranded at the start of January. A Pearson spokesperson said at the time: "Investing in the brand is about investing in the future of the company."