Slide 1: Pearson 2024 Full Year Results
Pearson 2024 Full Year Results 28th February 2025 1
Slide 2: Forward-looking statements
Forward-looking statements Except for the historical information contained herein, the matters There are a number of factors which could cause actual results discussed in this statement include forward-looking statements. In and developments to differ materially from those expressed or particular, a
Slide 3: Delivered on our 2024 priorities
Delivered on our 2024 priorities Delivered financial performance in line with market expectations • Underlying sales growth of 3%* • Adjusted operating profit +10% underlying to £600m • Strong cash performance Sharpened our focus on the Enterprise market • Signed partnerships with AWS, Microsoft, Se
Slide 4: Strategic framework remains the same
Strategic framework remains the same Initial Observations Strategic Priorities Strong Business Driving performance in the Core Business Trusted Business Assessments & Execution Synergies Verification Core Targeted Market Expansion Two Seismic Trends Demographic Shift Medium Term Growth Vectors AI, A
Slide 5: Driving performance in the Core Business
Driving performance in the Core Business ASSESSMENT & QUALIFICATIONS HIGHER EDUCATION Execution Execution • Contract wins and 99% customer retention in VUE • Improved selling performance leading to adoption share gain • VUE enterprise customer wins (ServiceNow & SalesForce) and enhanced customer rel
Slide 6: Driving performance in the Core Business
Driving performance in the Core Business VIRTUAL LEARNING ENTERPRISE LEARNING & SKILLS ENGLISH LANGUAGE LEARNING Execution Execution Execution • 3 new school openings • Landed strategic partnerships with • Strong sales performance in Institutional • Scaling career and college readiness enterprise cu
Slide 7: Driving performance in the Core Business
Driving performance in the Core Business Improvements in core operations benefitting Pearson as a whole AI content generation AI in customer services Driving a Performance culture Drive Operational Performance – Improved Customer Service – Enhanced Productivity 7 7
Slide 8: Personalisation
Execution Synergies ▪ Formation of Pearson Product Group Product Management ▪ Implementation of modern software A&Q HE VL ELL ELS management Product Product Product ▪ Speed of innovation ▪ Sharper investment focus ▪ Deployment of common services Personalisation Automation Design ▪ AI Product enhance
Slide 9: Targeted Market Expansion
Targeted Market Expansion School Higher Ed Enterprise Simplified our Go- To-Market approach for this segment: ~$2T Delivery US Learning • Large market Market opportunity • Building dedicated strategic account ~$15B Tech & management Services (2% CAGR) • Customer Proof Core Business Points ~$80B+ (5%
Slide 10: Medium Term Growth Vectors
Medium Term Growth Vectors Early Careers Enterprise Skilling 10
Slide 11: Financial Review & Outlook
Financial Review & Outlook 11
Slide 12: 2024 Financial Highlights
2024 Financial Highlights • 10% increase in adjusted operating Sales £3,552m Adjusted operating up 3% underlying* profit £600m up 10% profit with margin expanding from underlying 15.6% to 16.9% (2023: £3,674m) (2023: £573m) • Adjusted EPS increased 7% to 62.1p • Cash performance was excellent with O
Slide 13: Financial progress provides foundation for ongoing confidence
Financial progress provides foundation for ongoing confidence +5% CAGR* Group Sales excluding OPM and Strategic Review businesses* (£bn) Sales 3.6 3.6 3.4 2.9 2.9 2020 2021 2022 2023 2024 17% 16% Group Adjusted Adjusted operating profit 12% Operating Profit (£m) 11% 9% Group Adjusted Operating Margi
Slide 14: 2024 Sales
2024 Sales Headline £m 2024 2023 CER growth* Underlying growth* growth Assessment & Qualifications 1,591 1,559 2% 4% 3% Virtual Learning 489 616 (21%) (19%) (4%) Higher Education 826 855 (3%) (1%) 1% English Language Learning 420 415 1% 8% 8% Workforce Skills 226 220 3% 4% 6% Strategic Review - 9 (1
Slide 15: 2024 Adjusted Operating Profit
2024 Adjusted Operating Profit £m 2024 2023 Margin 2024 Margin 2023 Underlying growth* Assessment & Qualifications 368 350 23% 22% 7% Virtual Learning 66 76 13% 12% (9%) Higher Education 108 110 13% 13% 12% English Language Learning 50 47 12% 11% 30% Workforce Skills 8 (8) 4% (4%) 200% Strategic Rev
Slide 16: Key cash flow movements
Key cash flow movements £m 2024 2023 YOY change Adjusted Operating Profit 600 573 27 Capex cash (170) (168) (2) Depreciation 193 202 (9) Net capex investment 23 34 (11) Product development cash (284) (300) 16 Amortisation 291 284 7 Net product development investment 7 (16) 23 Working capital, FX and
Slide 17: Cash & Balance Sheet
Cash & Balance Sheet Operating Operating cash Net debt Net debt: Free cash ROC cash flow flow (£m) Adj. EBITDA conversion flow (£m) (£m) 2024 853 1.1x 10.4% 662 110% 490 2023 744 1.0x 10.3% 587 102% 387 2022 577 0.8x 8.7% 401 88% 222 2021 350 0.6x 7.9% 388 101% 133 2020 463 0.8x 6.6% 315 101% 229 RO
Slide 18: Group Financial Expectations
Group Financial Expectations Underlying sales growth In line with current market expectations* & adjusted operating profit Free cash flow 90 - 100% + £0.1bn State Aid repayment 2025 Group conversion expectations Interest c.£65m Tax 24 - 25% • Assessment & Qualifications will grow low to mid-single d
Slide 19: 2025 Phasing
2025 Phasing Group Q1, which is our smallest quarter, will be muted. H1 will see low single digit growth, with stronger growth in H2. Growth will generally be weighted to H2 given the known business unit dynamics. ASSESSMENT & QUALIFICATIONS ENGLISH LANGUAGE LEARNING • We expect Q1 to decline given
Slide 20: Capital Allocation – uses of cash
Capital Allocation – uses of cash 2020 2021 2022 2023 2024 Strong balance sheet|Net debt / EBITDA around 2x Capex + Product Development spend (£m) 518 493 553 468 454 Capex and product 1. Invest in the development for organic growth business to accelerate growth Acquisition consideration (£m) opport
Slide 21: Financial Summary
Financial Summary 2024 financial performance in line with expectations Excellent margin expansion Strong Free Cash Flow Strong Balance Sheet and £350m share buyback Confidence in our guidance for 2025 and beyond 21
Slide 22: Wrap up
Wrap up 22
Slide 23: Pearson's New Power Metrics
Pearson’s New Power Metrics Why The World’s Lifelong Learning Company Helping people realise the life they imagine through learning Assessments & Verification Core 1a Customer retention* 1b Contract value from new customers* Product Bundling Product Development Strategic Partnering Synergies What Ea
Slide 24: Three priorities for 2025
Three priorities for 2025 Financial Performance Innovative Technologies Enterprise Deliver financial Continue to lead on Grow Pearson’s performance in line application of business across the with market innovative enterprise customer expectations technologies, like AI, segment across our products an
Slide 25: Key takeaways
Key takeaways Happy with execution focus and strategic and financial progress in 2024 Momentum building, confident in guidance for 2025 and beyond 25
Slide 26: Appendix
Appendix 26 26
Slide 27: M&A Principles
M&A Principles Strategic Deals must be part of pre-agreed strategy, aligned Rationale with our corporate priorities. Returns Deals need to demonstrate strong financial returns, with confidence in value creation. Synergies Deals need to have very clear synergies with our core business. Strategic M&A
Slide 28: Measuring Our Success
Measuring Our Success Strategic KPIs* Enabling sustainable growth, driving shareholder value and contributing to a more equitable world KPI KPI Measure Digital growth Underlying growth in Objective Higher Education Group digital and Virtual Schools US OnVUE volumes US digital PTE volume Drive digita
Slide 29: Measuring Our Success
Measuring Our Success Strategic KPIs* Enabling sustainable growth, driving shareholder value and contributing to a more equitable world KPI KPI Measure Consumer Engagement NPS for Pearson+ Credly new Objective NPS for PTE Mondly paid Connections registered registered users subscriptions Create engag
Slide 30: Measuring Our Success
Measuring Our Success Strategic KPIs* Enabling sustainable growth, driving shareholder value and contributing to a more equitable world KPI KPI Measure Product Effectiveness Workforce Higher Education Credly enterprise PTE speed of VUE Partner Skills number Objective VUE test volumes product usage -
Slide 31: Measuring Our Success
Measuring Our Success Strategic KPIs* Enabling sustainable growth, driving shareholder value and contributing to a more equitable world KPI KPI Measure Culture of Engagement & Inclusion Employee Investing in Culture of Inclusion Index Increasing diverse talent Objective engagement diverse talent Bui
Slide 32: Measuring Our Success
Measuring Our Success Strategic KPIs* Enabling sustainable growth, driving shareholder value and contributing to a more equitable world KPI Sustainability KPI Measure Strategy Progress against achieving Net Zero Carbon by 2050 as measured through percent carbon reduction Objective Reduce Reduction i
Slide 33: Sales by business – select businesses
Sales by business – select businesses £m 2024 2023 Underlying change* Assessment & Qualifications 1.59 1.56 3% Pearson VUE 0.67 0.65 3% US Student Assessment 0.36 0.37 1% Clinical Assessment 0.28 0.27 4% UK & International Qualifications 0.28 0.26 8% Virtual Schools 0.49 0.50 (1)% Higher Education 0
Slide 34: US Higher Education
US Higher Education US Higher Education Courseware college units Units by format 2024 units (m) 2023 units (m) Year on year change Print 0.8 0.8 4% Bundles 0.1 0.2 (35)% Platform 5.6 5.6 0% Rental 0.3 0.3 (8)% UNITS KEY Print: College textbooks eText 3.8 3.4 8% Bundles: College textbooks and platfor
Slide 35: 2024 Cash Flow Reconciliation
2024 Cash Flow Reconciliation Costs of major Other net Intangible Purchase/ Net addition Interest ` Statutory Property charges disposal of PPE Dividends received Adjusted restructuring gains and losses charges of RO U assets received and software Profit before tax + net finance costs 541 (2) 20 41 6
Slide 36: Other modelling assumptions
Other modelling assumptions Evolution of Workforce Skills ▪ From January this year, Workforce Skills 2024 Higher Education Workforce Skills/ELS became Enterprise Learning and Skills, Revenue as reported £826m £226m bringing together Pearson’s enterprise IT Pro -£45m +£45m sales capabilities globally