By Kate Holton
LONDON (Reuters) - Britain's Pearson warned its earnings would fall sharply again in 2014 as the publisher entered the second year of a restructuring sparked by the deterioration in its main U.S. education market.
Pearson, the 170-year-old world leader in education which is under new leadership after years of good growth, suffered a tough 2013 and downgraded its outlook twice.
The weaker-than-expected outlook for this year wiped another 700 million pounds off its market value in early Friday trading, to take the fall in the share price since the beginning of the year to more than 25 percent.
"This is the biggest restructuring in Pearson's history and we're doing it at a time when our biggest business, North America, is facing the most difficult trading conditions it has in a decade," Chief Executive John Fallon said on Friday.
"It is going to pay off and we will start to see it pay off in 2015."
Pearson shares were down 7.1 percent, the biggest faller on the FTSE 100 index <.FTSE> of blue-chip shares.
"Results from Pearson have kicked investor hopes of quick recovery into the long grass," said Jonathan Helliwell, analyst at Edison Investment Research.
Pearson, which also owns the Financial Times and a 47 percent stake in the Random House Penguin book group, for years beat market expectations as it rolled out its education and testing business around the world. But it was hit by a string of managerial changes and slowing growth in 2013.
Fallon took over from the 16-year veteran Marjorie Scardino last year and, faced with stalling earnings growth, embarked on a 150 million pound restructuring programme to boost margins and counter tighter educational budgets.
It has been hit particularly in the United States where fewer people are enrolling in college courses as the economy recovers, and where states have put off spending on school books as they wait for a new Common Core education programme to roll out.
The British group warned in January that its 2013 earnings would be lower than expected due to higher restructuring costs and poor demand for its North America education business in its key selling period, the fourth quarter.
Prior to Pearson's 2013 results published on Friday, Reuters data showed that of 25 analysts covering the company, 18 recommend investors to either hold or sell its shares.
Pearson's restructuring programme is designed to accelerate the move from print to digital services, and increase its presence in fast-growing emerging markets such as China, Brazil and India to tap into the rise in spending by a burgeoning and aspirational middle class.
The 2013 results showed that North American education made up more than 53 percent of the 5.2 billion pounds of group sales, while international education made up 30 percent.
Adjusted earnings per share fell to 70.1 pence, after restructuring charges, from 82.6 pence in 2012. The company said at current exchange rates, adjusted EPS should be between 62 pence and 67 pence this year.
The only bright spot in the numbers was a 7 percent rise in the dividend, which the group said reflected its confidence that it would return to growth in 2015.
(Reporting by Kate Holton; Editing by Erica Billingham)