Slide 1: Pearson 2024 Interim Results & Strategic Update
Pearson 2024 Interim Results & Strategic Update 29th July 2024
Slide 2: Forward-looking statements
Forward-looking statements There are a number of factors which could cause actual results and developments to differ materially from those expressed or Except for the historical information contained herein, the implied by these forward-looking statements, including a number matters discussed in thi
Slide 3: Agenda
Agenda First Impressions Interim Financials Strategy update Financial Strategy Wrap up and Q&A 3
Slide 4: First six months
First six months
Slide 5: Pearson Does Three Things
Pearson Does Three Things Create and Curate Distribute Content Build and Content Digitally and Physically Verify Skills Produce Assessments Deliver Assessments Score Assessments Author Learning IP Distribute Lessons Assess Gaps Design Courses Interactive Content Credential Skills Write Curriculum St
Slide 6: Initial Observations
Initial Observations Assessments & Strong Business Trusted Business Verification Core • Assessment & Qualifications • Great People and Strong • ~2/3 Pure Assessments Culture • Virtual Schools • ~1/3 Embedded Assessments • Domain Expertise • English Language Learning • Networks • Workforce Skills • H
Slide 7: Interim Financials
Interim Financials
Slide 8: H1 Financial Results
H1 Financial Results Confident in Group outlook Revenue £1,754m Adjusted operating Operating cash flow up 2% underlying* profit £250m up £129m, up £50m 4% underlying from last year Underlying profit growth Strong Free Cashflow performance (2023: £1,879m) (2023: £250m) (2023: £79m) Adjusted Free cash
Slide 9: H1 2024 Sales
H1 2024 Sales £m 2024 2023 CER growth* Underlying growth Assessment & Qualifications 811 796 4% 2% Virtual Learning 254 373 (31)% (8)% Higher Education 358 379 (4)% (2)% English Language Learning 188 184 11% 11% Workforce Skills 143 140 3% 6% Businesses under strategic review*** 0 7 (100)% (100)% To
Slide 10: H1 2024 Adjusted Operating Profit
H1 2024 Adjusted Operating Profit £m 2024 2023 Margin (%) 2024 Underlying growth Assessment & Qualifications 187 174 23% 7% Virtual Learning* 31 47 12% (32)% Higher Education (1) (1) (0)% 100% English Language Learning 4 8 2% 38% Workforce Skills 29 21 20% 27% Businesses under strategic review*** 0
Slide 11: Strategic Update
Strategic Update
Slide 12: Conclusions
Conclusions Targeted Driving Two Seismic Trends Market performance in Expansion the Core Business A Powerful Why Execution Medium Term Synergies Growth Vectors 12
Slide 13: Two Seismic Trends
Two Seismic Trends Demographic Shift AI, AI, AI 10% GenAI Of US jobs will be vacated by retiring Boomers (‘24-’30) The birth rate is below the Multi-Modal Text Audio replacement rate in many developed Models countries Images AI Video ~7% AI Models Reasoning Risk to US GDP growth by 2030 as a direct
Slide 14: The World's Lifelong Learning Company
The World’s Lifelong Learning Company Economically Socially Purposefully Emotionally Helping People Realise The Life Physically They Imagine Through Learning Cognitively Learning 14
Slide 15: Market Context – USA Example
Market Context – USA Example School University Enterprise ~$2T • K-12 students • Undergrads • Job seekers • Teachers • Grad students • Vocational students US Learning • Government • Professors • Vocational institutions Market • Institutions • Employees • Government • Employers Schools In-person deli
Slide 16: Targeted Market Expansion
Targeted Market Expansion School Higher Ed Enterprise Delivery ~$15B (2% CAGR) Core Business ~$2T ~$80B+ (5%+ CAGR) US Learning Core + Adjacent Market Tech & Opportunities Services Content 16 *Scale of above visual is not indicative of segment size
Slide 17: Technology Drives Performance
Technology Drives Performance Improved product AI in customer AI content generation design processes services and data tools Drive Operational Performance, Improved Customer Service, Enhanced Productivity 17
Slide 18: Driving Performance in the Core Businesses
4 Driving Performance Unlocking in the Value from theFive CoreBusinesses Business Assessment Higher Education Virtual Learning English Language Workforce Skills & Qualifications Learning • AI Integration into • Career Pathways • Product bundling • Vertical Integration Courseware • Institutional & •
Slide 19: Execution Synergies
Execution Synergies Product and Service Bundling Product Management Strategic Partnerships Select examples: A&Q HE VL ELL WFS Product Product Product Learning Content Personalisation Automation Design Technology Data Engine 19
Slide 20: Medium Term Growth Vectors
Medium Term Growth Vectors Early Careers Enterprise Skilling • Career Pathways • Skills Pre-Assessment • Apprenticeship • Learning Pathways • New Collar and Digital • Redesign of Future Workforce Employment • Verification and Certification • Bundled Solutions 20
Slide 21: Financial Strategy
Financial Strategy
Slide 22: Financial Outlook
Financial Outlook Reaffirmation of existing 2024 & 2025 Guidance Medium term outlook Revenue Margin Free Cash Flow 90 –100 % free cash Mid-single digit Average margin conversion, a level of underlying growth of 40 bps p.a. capital optionality sales CAGR beyond 2025 maintained to invest in high retur
Slide 23: Capital allocation
Capital allocation Focus areas for investment Balance Sheet Shareholder Return Invest organically and Robust balance Progressive and inorganically for growth and sheet with Net debt: sustainable dividend returns - Assessments and EBITDA of around with surplus Verifications, and then Enterprise 2x. c
Slide 24: Technology Drives Performance
Technology Drives Performance A number of technology enabled initiatives we expect to unlock tens of millions of savings over the medium term. This includes: Consolidation of Partnerships technology services Improved product AI in customer AI content generation design processes services and data too
Slide 25: Stepping back...
Stepping back... From To Holding Company… Operating Company Analogue… Digital Analogue 18% Learning & Content Publisher… Assessment Company Modern, High- 82% Legacy... Performance Culture Digital 25
Slide 26: Executive summary
Executive summary B&C design The World’s Lifelong Learning Company Why 3 Helping people realise the life they imagine through learning Core • Assessments & Verification What Synergies 1 • Product Bundling • Product Development • Strategic Partnering Growth pillars • Early Careers • Enterprise Skilli
Slide 27: Appendix
Appendix
Slide 28: Group Financial Expectations – 2024/2025 Guidance
Group Financial Expectations – 2024/2025 Guidance 2024 expectations Underlying sales 2025 Margin 3-year CAGR Adjusted expectations** 2022 to 2025* Sales growth Tax Interest operating profit Expected to be in line with c.£45m Mid-single digit 16-17% c.24% current market expectations*** *Excluding the
Slide 29: Measuring Our Success: Strategic KPIs
Measuring Our Success: Strategic KPIs Enabling sustainable growth, driving shareholder value and contributing to a more equitable world. KPI Objective KPI Measure H1 2024 H1 2023 OnVUE volumes 1.2m 1.5m* Digital Drive digital Higher Education US digital subscriptions 4.5m 4.4m** Growth sales growth
Slide 30: Measuring Our Success: Strategic KPIs
Measuring Our Success: Strategic KPIs Enabling sustainable growth, driving shareholder value and contributing to a more equitable world. KPI Objective KPI Measure H1 2024 H1 2023 NPS for Connections Academy +67 +67 NPS for PTE +57 +56 Create engaging Consumer 5.0m 4.7m and personalised Pearson+ regi
Slide 31: Measuring Our Success: Strategic KPIs
Measuring Our Success: Strategic KPIs Enabling sustainable growth, driving shareholder value and contributing to a more equitable world. KPI Objective KPI Measure H1 2024 H1 2023 PTE speed of score return 1.1 days 1.1 days VUE test volumes 10.9m 10.8m* Improve the effectiveness Product of our produc