Pearson (PSON) has soared to the top of the FTSE 100, providing some relief to big backer Nick Train, as the educational publisher unveiled ambitious cost-cutting plans and said it could sell its US school teaching materials division.
Shares in the group jumped 10.8% to 728.6p, topping the FTSE 100, which edged 11 points higher to 7,259.
Pearson said it was targeting £300 million of cost savings a year by the end of 2019, equivalent to 12% of its 2016 cost base.
The news helped the shares claw back some of the losses made in January's crash as the publisher delivered its fifth profit warning in four years. But even with today's rise, the shares have lost half their value since an early 2015 peak, as Pearson battles the disruption caused by the move to digital publishing.
Finsbury Growth & Income (FGT ) manager Nick Train, one of the company's biggest backers, has confessed to agonising over whether to sell the stock or buy more as its troubles have worsened.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said Pearson's move was typical of its management's aggressive bid to turn around the business.
'You've got to hand it to Pearson chief executive John Fallon, he doesn't do things by halves,' he said. 'Every quarter it seems that another part of the staid publishing house he inherited is laid on the block in the drive to move the group into the digital age - this time it's the turn of the K12 US courseware business.
'However, Pearson's current strategy remains a higher risk bet on the group's ability to seize market share in the emerging digital education space. Even then, with plenty of free resources already available online, questions remain about whether the group will be able to make that market share profitable.'
An unchanged full-year outlook for the group also provided some relief to shareholders who had feared another profit warning.
'For loyal investors it's a case of small mercies, after 2017 guidance was cut and 2018's withdrawn so abruptly in January,' said Mike van Dulken, head of research at Accendo Markets.
But the news wasn't enough to shift the opinion of Liberum analyst Ian Whittaker, who has long rated the company his 'top sell'.
'While there may be a positive reaction to the disposals announcement, Pearson has admitted in their own words a major driver of the savings is that the US higher education market is structurally impacted and Pearson's profits have gone backwards despite their previous £650 million-plus of cost savings, suggesting little confidence the new plan will improve profitability.
'To us, therefore, this looks like the newspapers all over again, ie continued cost savings and disposals to help shore up profitability while the top line continually disappoints.'
Investors applaud Archie
Joining Pearson at the top of the FTSE 100 was Marks and Spencer (MKS), up 5.2% at 376p as the retailer named Archie Norman, who helped engineer turnarounds at Asda and B&Q-owner Kingfisher (KGF), as its new chairman.
The former supermarket boss and Conservative MP will replace the retiring Robert Swannell, and is the retailer's second major appointment in a week, after the hiring of Halfords (HFD) boss Jill McDonald to run its clothing division.
Miners also rose, as metal prices recovered. Risers included:
- Fresnillo (FRES) +4.5% at £14.26;
- Randgold Resources (RRS) +3.3% at £68.05;
- Glencore (GLEN) +2.2% at 293.3p;
- Rio Tinto (RIO) +1.9% at £29.67;
- BHP Billiton (BLT) +1.9% at £11.38;
- Antofagasta (ANTO) +2% at 767p;
- Anglo American (AAL) +1.7% at £10.18.
It was the same story on the FTSE 250, where miners led the way, with Acacia Mining (ACAA) up 8.2% at 409p and Hochschild Mining (HOCM) rising 3.5% to 243.3p.
Among 'small cap' stocks, Sepura (SEPU) crashed 27% to 11.5p on news the German government was reviewing the digital radio maker's planned takeover by China's Hytera Communications (002585.SZ).