Pearson 2024 Trading Update (Unaudited)

Delivered on financial(1) and strategic priorities for 2024. Entering 2025 with continued confidence. New strategic partnership with Microsoft progressing our Enterprise focus and technology transformation.

LONDON--(BUSINESS WIRE)--January 16, 2025-- 

Highlights

   -- 
 Underlying Group sales growth2 of 3% for the full year, excluding OPM3 
      and the Strategic Review4 businesses. 
 
 
   -- 
 Group adjusted operating profit of GBP595-600m at GBP:$ of 1.28 for the 
      full year, up c.10% on an underlying basis compared to 2023, resulting in 
      a margin of c.16.8% (2023: 15.6%). 
 
 
   -- 
 Free cash flow conversion in excess of 100%5, ahead of guidance. 
 
 
   -- 
 Successfully delivered our 2024 strategic priorities with progress in 
      Enterprise and scaling AI across our products and services including the 
      recent launch of an AI powered Digital Language Tutor (link here). 
 
 
   -- 
 New multi-year strategic Enterprise AI partnership with Microsoft (link 
      here): 
 
          -- 
 Extending our commercial relationship with Pearson VUE; 
 
 
          -- 
 Future collaboration on innovation and joint go-to-market 
             activities, including in AI upskilling; and 
 
 
          -- 
 Opportunity to enhance our AI and technology capabilities across 
             the business. 
 
 
 

Omar Abbosh, Pearson's Chief Executive, said:

"I am pleased with the progress Pearson has made in 2024, successfully executing against our financial and strategic priorities. I'm particularly encouraged to see the growing commercial momentum of our AI enhanced offerings and the strategic Enterprise partnerships that we have established, such as the latest with Microsoft. These reflect the strength of our proposition and the opportunities that lie ahead.

The Group is well positioned, with continued confidence, as we look to build on our strategic and operational progress and deliver long-term future value for our shareholders."

Underlying sales growth(2) of 3% for 2024, excluding OPM(3) and Strategic Review(4) businesses; 2% in aggregate

   -- 
 Assessment & Qualifications sales were up 3% for the full year and 4% 
      in Q4. Pearson VUE performance was driven by favourable mix, with PDRI 
      seeing good growth. In Clinical Assessment, sales grew due to pricing, 
      digital product growth and successful new product launches. UK & 
      International Qualifications benefited from volume, pricing, and 
      International growth. US Student Assessment performance was supported by 
      several key contract renewals. 
 
 
   -- 
 Virtual Schools sales decreased 1% for the full year, due to the 
      previously announced partner school losses, the impact of which will 
      normalise in H1 2025. 2024/25 academic year enrolments were up 4% on a 
      same school basis and we opened 3 new schools in 2024 taking our total 
      number of schools to 40. Virtual Learning sales declined 4% for the full 
      year attributable to the final portion of the OPM ASU contract in the 
      first half of 2023. Virtual Learning sales declined 5% in Q4 as expected, 
      driven by a tough comparator which saw funding improvements in Virtual 
      Schools in 2023 
 
 
   -- 
 Higher Education sales grew 1% for the full year and 2% in Q4, in line 
      with expectations. In US Higher Education full year sales growth was 
      driven by continued gains in adoption share, enrolments, and pricing, 
      partially offset by mix impacts. In the year, there was growth of 3% in 
      US digital subscriptions and 24% in Inclusive Access. We accelerated the 
      rollout of AI within our products in the fourth quarter. Pearson+ 
      registered users increased 1% compared to the prior Fall semester, with 
      paid subscriptions flat over the same period and in addition we have been 
      successful in monetising our Channels product. 
 
 
   -- 
 English Language Learning sales increased 8% for the full year with all 
      three business sub-units contributing to growth. Institutional continues 
      to deliver strong performance especially in the Middle East and LatAm. 
      Pearson Test of English $(PTE)$ performed well against a tough market 
      backdrop of tightening migration policies. We continue to incorporate AI 
      within our English Language business unit, launching our first AI powered 
      Digital Language Tutor in the fourth quarter. In Q4 sales grew 11%, an 
      improvement on Q3 due to phasing of revenue in Institutional as 
      expected. 
 
 
   -- 
 Workforce Skills sales grew 6% for the full year, with a solid 
      performance in both Vocational Qualifications and Workforce Solutions. Q4 
      sales increased by 4% driven by a strong performance in Workforce 
      Solutions partially offset by Vocational Qualifications, as the business 
      had a tough comparator with strong double digit growth in the prior 
      year. 
 

Evolution of Workforce Skills

   -- 
 Pearson has a significant opportunity to help enterprises drive 
      productivity and growth by transforming how they evaluate, assess, and 
      reskill their workforce, as well as delivering world-class vocational 
      training and qualifications. To sharpen our focus on the enterprise 
      customer segment, we have formed a global enterprise sales team to enable 
      us to better meet the needs of these customers with a full suite of 
      Pearson solutions. From January this year, Workforce Skills will evolve 
      to become Enterprise Learning and Skills, bringing together Pearson's 
      enterprise sales capabilities globally (excluding those of Pearson VUE). 
      The Enterprise Learning and Skills business unit will be led by Vishaal 
      Gupta. 
 
 
   -- 
 This simplification of the business unit structure will result in 
      modest revenues and costs being transitioned into the Enterprise Learning 
      and Skills business unit from Higher Education. More detail on the 
      financial impact of this change will be outlined at the full year 
      results. We also note that the sub-unit Workforce Solutions becomes 
      Enterprise Solutions. 
 

Strong financial position

   -- 
 Pearson's financial position remains robust, with a strong balance 
      sheet, net debt of less than GBP0.9bn and 2024 free cash flow conversion 
      in excess of 100%5. 
 

Executive Changes

   -- 
 We announce the appointment of Naseem Tuffaha as Chief Business 
      Officer. Naseem has a successful track record of high growth and 
      operational excellence at Microsoft, and more recently The Trade Desk. 
 

Financial calendar

   -- 
 Full year results will be announced on 28 February 2025. We will hold 
      an in-person presentation and Q&A session, during which we will outline 
      the 2025 outlook. 
 

Financial summary

Underlying growth for the fourth quarter and financial year ended 31(st) December 2024 compared to the equivalent period in 2023.

 
Sales                                               Q4    Full Year 
Assessment & Qualifications                           4%         3% 
Virtual Learning                                    (5)%       (4)% 
Higher Education                                      2%         1% 
English Language Learning                            11%         8% 
Workforce Skills                                      4%         6% 
Strategic Review(4)                               (100)%     (100)% 
Total                                                 3%         2% 
Total, excluding OPM(3) and Strategic Review(4)       3%         3% 
 

For an accompanying data sheet providing 2024 metrics relating to sales across select key businesses as well as a breakdown of US Higher Education Courseware college units and Pearson+ metrics, please follow this link.

(1) 2024 consensus on the Pearson website dated 30th August 2024; adjusted operating profit of GBP598m at GBP:$ 1.27. As a reminder, every 1c movement in GBP:$ rate will equate to approximately GBP5m adjusted operating profit impact.

(2) Throughout this announcement growth rates are stated on an underlying basis unless otherwise stated. Underlying growth rates exclude currency movements, and portfolio changes.

(3) We completed the sale of the Pearson Online Learning Services (POLS) business in June 2023 and as such have removed it from underlying measures throughout. Within this specific measure we exclude our entire OPM business (POLS and ASU) to aid comparison to guidance.

(4) Strategic Review is sales in international courseware local publishing businesses which have been wound down. As expected, there are no sales in these businesses in 2024.

(5) Free cash flow conversion calculated as free cash flow divided by adjusted earnings.

About Pearson

At Pearson, our purpose is simple: to help people realise the life they imagine through learning. We believe that every learning opportunity is a chance for a personal breakthrough. That's why our Pearson employees are committed to creating vibrant and enriching learning experiences designed for real-life impact. We are the world's lifelong learning company, serving customers with digital content, assessments, qualifications, and data. For us, learning isn't just what we do. It's who we are. Visit us at pearsonplc.com.

Notes

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January 16, 2025 02:15 ET (07:15 GMT)