It was carnage for investors in Pearson PLC (LON:PSON) as the shares tanked by almost a quarter after another horror show of a trading update.
Along with recalibrating earnings guidance, it unveiled plans to cut the dividend and potentially offload its stake in Penguin Random House.
Employees will also feel the impact of the publishing and education giant’s travails.
For the group, which was a serial profit warner last year, said it is paying £55mln less in staff incentives than it did in 2015.
This and tight cost control will allow the company to hit City guidance. Pearson is expected to make operating profit of £630mln, giving earnings per share of 57p for 2016.
The company’s forward guidance suggests it will struggle to match last year’s performance with operating profit seen in the range of £570-£630mln.
Pearson’s problems are rooted in the North American higher education market, where it endured a “further unprecedented decline” in activity in the fourth-quarter.
Part of Pearson’s self-help strategy is to sell its 47% stake in Penguin Random House, or failing recapitalise the business to extract a dividend.
The proceeds will be used to “maintain a strong balance sheet and invest in the business”, the firm said.
Investors will share employees’ pain with company planning to cut the 2017 dividend to “reflect portfolio changes, increased investment, and our earnings guidance”.
At 8.25am, shares in the company were down 23% at 627p, wiping around £1.5bn from the business.
"We are facing difficult trading conditions in our largest business as we transition to digital,” said chairman Sidney Taurel.
“But as a board, we are confident that the plan announced today will allow the company to navigate these conditions and build on its leading position in higher education."