Pearson cuts 3,000 jobs, slashes dividend in latest recovery push

* Will cut 3,000 jobs by 2020 in latest cost-savings plan

* Business trying to adapt to rapid move to digital

* Slashes interim dividend by 72 percent

* Reiterates full-year guidance; shares down 0.9 pct (Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, Aug 4 (Reuters) - British education group Pearson (Amsterdam: PR8.AS - news) is cutting 3,000 jobs and slashing its dividend in its latest attempt to revive a business hit by the shift to digital from paper textbooks.

The job losses, accounting for almost 10 percent of the group total, are part of Chief Executive John Fallon's third attempt since 2014 to reshape a company whose main U.S. college business has also been hit by a drop in student enrollments.

"The structural challenges in our biggest market, in higher education courseware, have been more challenging than any of us thought they would be three years ago," he said on Friday.

"We are running the business that our biggest market will continue to decline by around 6 or 7 percent for each of the next two years."

Pearson (Xetra: 858266 - news) , the world's largest educational publisher, sells everything from school textbooks to academic books and electronic tests. It competes with companies such as John Wiley & Sons and public providers of education tests.

The 173-year-old group has sold off its best-known assets including the Financial Times newspaper and the Economist magazine to generate cash to invest in its core education business. Last month, it also announced the sale of a 22 percent stake in book publisher Penguin Random House.

But it has struggled to respond quickly enough to a changing and shrinking U.S. education market. U.S college enrollments fell 1.5 percent in the Spring, the company said, as more young people went into jobs rather than studying. Students are also increasingly renting textbooks rather than buying them.

Most of the job cuts will come in late 2018 and early 2019, and will be across operations, Fallon said, as the group shifts to fewer digital platforms for its back office and products.

By early 2020, Fallon will have reduced Pearson's staff by 10,000 from around 39,000 when he took over, and cut costs by 950 million pounds ($1.3 billion) in three restructurings.

'PERPETUAL RESTRUCTURING'

Pearson also said it would slash its dividend payout for the first half of the year by 72 percent to 5 pence a share.

Investors had been braced for a reduction since February, when Pearson announced a 2.6 billion pounds pretax loss due to a writedown on the value of its North American business.

The company said revenue for the six months to the end of June rose an underlying 1 percent to 2.05 billion pounds, and adjusted operating profit more than trebled to 107 million, helped by currency moves and its last restructuring plan.

Fallon said the group had put in a "steady" performance ahead of the second half, when it makes the majority of its sales as students return to schools and colleges.

"That steady start through the end of June has continued through the end of July, which is one of our biggest sales months of the year, which is obviously encouraging but there's still a long way to go," he said.

After previous false dawns, he was wary of calling Pearson's recovery and said there was no change to the outlook for the full year.

"We are being very clear and realistic about the short-term challenges that we face (in the next two years)," he said.

"But at that point, as college enrollments start to stabilise and as we see the benefits of all the digital investments that we are making, the business will first stabilise and then start to grow again."

Analyst Neil Campling at Northern Trust Capital Markets said the reiteration of guidance may give some comfort to investors, but given the reliance on fourth-quarter results he was wary.

"We see Pearson as a perpetual restructuring story, with no reliability in execution, dividend cuts, no growth and selling quality, profitable assets," he said.

"That is our view. And we are sticking to it."

Shares (Berlin: DI6.BE - news) in Pearson, which have fallen 25 percent in 12 months, were down 0.9 percent to 663 pence at 1050 GMT.

($1 = 0.7603 pounds) (Editing by Guy Faulconbridge and Mark Potter)