What to watch: Pearson restructures business as profits fall, Direct Line hit by home insurance division, G4S rejects GardaWorld offer

LaToya Harding
·Contributor
·4 min read
Stack of  books on the table of public library.
FTSE 100 firm Pearson said the restructuring of its corporate offices will cost £140m ($193m) this year, but would lead to annual cost savings of roughly £20m in the coming years. Photo: Getty

Here are some of the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.

Pearson restructures business as profits fall

Educational publisher Pearson (PSON.L) has announced that it will cut a significant amount of its office space as part of a major restructuring of the company.

The FTSE 100 firm said the restructuring of its corporate offices will cost £140m ($193m) this year, but would lead to annual cost savings of roughly £20m in the coming years.

It is also creating five new divisions across the business: virtual learning; higher education; English language learning; workforce skills; and assessment and qualifications.

Each division will have full responsibility for its overheads, product development and operations, as it seeks to sell directly to consumers.

READ MORE: Sales at textbook publisher Pearson fall despite rise in online courses

"As we change the way we work, we will simplify our property portfolio and occupy a significantly smaller square footage which will be fully technology enabled supporting collaboration and creativity," it said.

"The resulting strategy, based on a simpler, more agile operating model, is focused on three global market opportunities – the rise in online and digital learning tools, the workforce skills gap and the growing demand for accreditation and certification."

It came as the company posted a 10% fall in underlying revenue for the year amid UK school closures and exam cancellations. Sales in its virtual learning division, however, jumped by almost a fifth.

Pearson proposed a final dividend of 13.5p, bringing its full-year payout to 19.5p.

Shares climbed around 3% on the back of the news.

Pearson shares rose on Monday despite a fall in full-year revenue. Chart: Yahoo Finance
Pearson shares rose on Monday despite a fall in full-year revenue. Chart: Yahoo Finance

Direct Line hit by home insurance division

Direct Line (DLG.L) posted a fall in full-year profit on Monday as weather-related costs weighed on its home insurance division.

The company, whose brands also include Churchill, Green Flag and Privilege, added that national lockdowns caused reduced claims frequencies within its motor and commercial books.

Operating profit fell 4.5% to £522m, while pre-tax profit slumped 11.4% to £451m as weather costs increased to £43m from £6m the year before.

“The results have been affected by the usual variability around weather events but the addition of the factors surrounding COVID-19 make them more difficult to navigate than in previous years,” Direct Line said.

READ MORE: How to get the best price on your car insurance

Direct Line said it would buyback up to £100m of shares and declared a final dividend of 14.7p.

William Ryder, equity analyst at Hargreaves Lansdown, said: "There’s still some way to go here, so shareholders could see further special payouts in the future. Of course, that relies on a smooth recovery as conditions normalise. But general insurance is a tough market to do well in, so Direct Line’s recovery plan will need to bear fruit if the group is to capitalise.”

European stocks lifted

European stock markets opened higher on Monday as UK business confidence hit a 12-month high on hopes of economic recovery.

The FTSE 100 (^FTSE) climbed 0.45% after the bell, while the CAC (^FCHI) jumped 0.46% and the DAX (^GDAXI) was 0.57% higher, after hitting a record high last week.

According to the latest Business Trends report from accountancy and business advisory firm BDO, its services optimism index surged 7.53 points in February to 94.13, as the number of Brits getting inoculated against COVID-19 continued to climb.

The growth of the index, which includes a range of industries from retail and hospitality to professional services, suggests that many businesses had anticipated a significant return to normality even before the UK government outlined its lockdown roadmap at the end of last month.

It came after the Senate approved the latest $1.9trn US stimulus programme over the weekend, lifting hopes for a gradual global recovery.

WATCH: $1.9trn relief package heads back to House

G4S board rejects GardaWorld offer

The board of G4S (GFS.L) has unanimously rejected a final takeover offer from GardaWorld.

GardaWorld, which has extended the final acceptance deadline for its offer, received just 0.06% acceptances from shareholders.

Garda and rival bidder Allied Universal both recently were put into an auction process for outsourcer G4S, however, both companies stood firm on their offers.

In a brief update the company said: "The board of G4S unanimously recommends that shareholders accept the superior final offer from Allied Universal of 245 pence per share, and in order to ensure the successful closing of the Allied Universal offer, urges G4S shareholders to accept immediately."

On Monday, Garda said its offer will remain open until 16 March.

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