Registered address: Pearson Plc, 80 Strand, London WC2R ORL Registered in England 53723
Pearson 2021 Preliminary Results and strategy update (Unaudited)
25 February 2022 Strong financial performance and building growth momentum
Andy Bird, Pearson's Chief Executive, said:
"2021 has been a year of strong progress with the Group's financial performance ahead of expectations. This reflects disciplined management of the business, operational execution, commitment of colleagues around the world and their ability to successfully navigate challenging market conditions.
Pearson has been reorganised and refocused with a new purpose to 'add life to a lifetime of learning' at the heart of everything we do. Our direct-to-consumer strategy is being driven by Pearson+, which had 2.75 million registered users at the end of 2021, with a strategy in place to engage more consumers and grow beyond Higher Education. Pearson is a digital first business, with consumer grade products, and the momentum across the company underpins our confidence for further growth in 2022 and beyond."
Underlying sales growth1 of 8%
- Led by Assessment & Qualifications up 18%, driven by 19% growth in Professional Certification (VUE) with OnVUE continuing to benefit from growth in the IT sector. US Student Assessment grew 17% and Clinical Assessment was up 30% with strong product launches in the year. Pearson VUE and Clinical Assessment revenues have now grown in comparison to 2019, showing more than post-COVID-19 recovery.
- Virtual Learning up 11% due to strong enrolment growth in Virtual Schools in the prior academic year (2020-21). Underlying enrolment growth of 7% in Online Program Management (OPM).
- English Language Learning up 17% due to COVID-19 recovery in both International courseware and Pearson Test of English (PTE).
- Workforce Skills up 6% with strong growth in GED and TalentLens.
- Higher Education down 5%, with growth in Canadian and UK Courseware offset by a 6% decline in US Higher Education Courseware.
Adjusted operating profit¹ up 33% on an underlying basis to £385m
- Driven by operating leverage on revenue growth and cost savings offsetting cost inflation and investment to accelerate future growth.
-
Adjusted earnings per share¹ of 34.9p (2020: 28.7p) after an effective tax rate charge of 20% (2020:
14%) and net interest charge of £57m (2020: £61m).
Strong cash performance
- Operating cash inflow¹ increased on a headline basis from £315m in 2020 to £388m in 2021 due to the drop-through of increased operating profits and an improvement in net working capital partially offset by an increase in capital expenditure.
Balance sheet strength supports investment and increased shareholder returns
- Acquisitions of Credly and Faethm to support growth strategy in Workforce Skills division.
- Year-endnet debt reduced to £350m (2020: £463m) with leverage at 0.6x (2020: 0.8x).
- Proposed final dividend of 14.2p (2020: 13.5p), which equates to a full year dividend of 20.5p (2020: 19.5p).
- Intention to commence a buyback to repurchase shares of £350m in 2022.
1 Measures are non-GAAP measures. Reconciliations to the equivalent statutory heading under IFRS are included in notes to the attached condensed consolidated financial statements 2, 3, 4, 5, 7 and 14. Underlying growth rates exclude currency movements, and portfolio changes.
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Statutory results
- Sales increased 1% to £3,428m (2020: £3,397m), reflecting underlying performance, portfolio changes and currency movements.
- Statutory operating profit was £183m (2020: £411m). The decrease in 2021 is mainly due to the gain on sale of PRH recognised in 2020 and restructuring costs in 2021 partially offset by improved trading profits, reduced intangible charges and gains on the 2021 business disposals.
- Net cash generated from operations of £570m (2020: £450m).
- Statutory earnings per share of 21.1p (2020: 41.0p).
Significant strategic progress
- Direct to Consumer: Launched direct to consumer strategy led by new digital learning service, Pearson+, which continues to make good progress with 2.75m registered users at the end of 2021, reflecting a strong uptake from MyLab and Mastering users, 133k paid subscriptions, and a latest app store rating of 4.8.
- Higher Education: Pearson's flagship Higher Education product, Revel, completed the move to incorporate the Pearson Learning Platform's capabilities, providing enhanced features, and a new visual design for mobile.
- Workforce Skills: Acquired Faethm, the workforce AI and predictive analytics company in September 2021, and in January 2022, Credly, the market leader in digital workforce credentialing, to further enhance Pearson's Workforce Skills capabilities.
- Simplification: The disposal of Pearson's Brazilian K12 Sistemas business completed on 1 October 2021. Marketing is progressing well with other businesses under strategic review.
- Today, we are announcing the acquisition of Clutch Prep, an online video-based learning service that will rapidly fuel Pearson+ with quality original video tutorials.
2022 outlook
- Confident of further group revenue growth, with adjusted operating profit, interest and tax expected to be in line with current market expectations2.
- Assessment & Qualifications revenue growth of low to mid-single digits with strong margins maintained.
- Growth in Virtual Learning with low-single digit growth in Virtual Schools and high-single digit growth in Online Program Management (OPM) and further margin expansion through operational efficiency improvements in OPM.
- English Language Learning revenue growth of mid-single digits. Business continues to recover from COVID-19 with further margin improvement expected.
- Significant revenue growth in Workforce Skills underpinned by the acquisitions of Faethm and Credly. Margins will be break-even as we invest to accelerate growth.
- Higher Education revenue to decline, but by less than last year, with margin stabilisation reflecting cost efficiencies. We expect enrolments to decline, but at a lower rate than in 2021, although that could improve. We also expect pricing pressure to continue due to the shift from print to ebooks and Pearson+, and from bundles to digital only, offset by continued recapture of the secondary market.
2025 ambition
- We expect the Group to achieve mid-single digit revenue CAGR from 2022 to 2025 and for margins to remain relatively stable in the near term, as we invest to drive growth, improving by 2025 to mid-teens.
Strategy update
In March 2021, we presented our lifetime of learning strategy. Our priorities continue to centre on building a company that is digital first, puts the consumer at its heart, and delivers high quality learning products at scale to more people than ever before.
To do that, we created a new organisational structure with five core divisions, underpinned by a dedicated direct to consumer team that successfully launched Pearson+ last July. We have also recently introduced a new company purpose: 'to add life to a lifetime of learning.' We redefined Pearson's purpose for the new reality of a world in which learning is becoming more fluid and exists inside and outside of formal education.
The success of Pearson and the work we do has never been more important. The world is changing, and the very definition of learning is expanding. We no longer move only in a linear fashion through school, into higher education, and then on to employment. All of us are learning all the time. Pearson is re-focused and re-organised to capitalise on this new wave of learning.
We also recognise that learning is no longer a phase of life, it's a lifelong journey. The need to upskill and reskill has never been more urgent. So, while we'll continue to work with long standing partners such as
2Consensus adjusted operating profit as at 12th November 2021 was £416m at average USD:GBP of 1.37.
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schools, universities, and colleges, we are also increasingly working with employers. Companies now play a critical role in that learning lifecycle and we have an opportunity to help individuals and employers turn the great resignation into the great re-engagement. The recent acquisitions of Faethm and Credly in our Workforce Skills division signal the direction of travel you can expect from us, including the expansion into data as a service for employers and into credentialing for workers. In English Language Learning, we are building a business aimed at being the destination for committed English learners. We are focused on continuing to grow our institutional business and high stakes assessments, while building a direct-to-
consumer strategy.
There are three reasons why Pearson will win in this new environment:
- We are the world's leading learning company with a strong brand, an unmatched scope and scale; and have the deep expertise of thousands of employees who deliver high quality, trusted learning solutions every day.
- We have a great foundation of established businesses that are well-managed, cash generative and underpin the company financially.
- We are bringing together the multiple facets of our expertise to deliver innovative digital learning products through a more connected commercial and consumer strategy.
Pearson is not just a collection of individual businesses, but, increasingly, a highly interconnected company, with capabilities that work together to help people learn at multiple points in their lives. Pearson has the potential to accelerate growth when we leverage our businesses in a coordinated fashion across the entire spectrum of learning.
Pearson+ is critical to fulfilling that strategy. We're building Pearson+ as the premier digital learning ecosystem for life - whether through school, university, work, languages, or life skills - for a growing addressable market globally. Pearson+ will become the core digital offering for this company, reaching multiple demographics and learners, giving us the opportunity to create a meaningful business on a global scale. Consumers need a way to discover, learn, build skills, and show credentials and they want a great user experience. We can deliver that with a broader Pearson+ vision, by drawing on the assets of each Pearson business and leveraging our growing relationships with students, consumers, and enterprises. We can also support this with a robust data infrastructure. The possibilities are vast when we can connect these assets into one trusted ecosystem designed to meet consumer-led learning where it happens.
We also continue to evolve our sustainable business plan to align with our company strategy and purpose and to drive learning for everyone. We have placed renewed energy into building our talent and our innovation culture, so our people can make a difference at scale. As we become more digital, we're providing products with a smaller carbon footprint, along with products and services that meet the demands of a green economy and content that influences action. As such, we are on track with our goal to make Pearson a net zero carbon business by 2030.
We believe our strategic priorities, combined with our disciplined approach to capital allocation, will enable us to create sustainable, long-term value for every Pearson stakeholder. Today, we are setting out the financial framework that underpins our strategy and have ambition through leveraging the opportunities across the business to exceed these targets. Importantly, we believe that Pearson is now in a position to sustainably grow not only revenues but also profits and cashflows after allowing for continued investment in our growth ambition. Furthermore, progress on our growth priorities can be measured through our Key Performance Indicators (KPIs).
Financial expectations
Segment | 2021 | Margins | 2022 expectations | Revenue | Margins 2025* | ||
Revenue | 2021* | Revenue | Margins* | CAGR 2022 to | |||
(£m) | 2025 | ||||||
Assessment & | 1,204 | 18% | Low to mid- | Maintained | Low to mid- | Maintained | |
Qualifications | single digit | single digit | |||||
Incremental | |||||||
improvement | |||||||
Virtual Learning | 713 | 4% | Low to mid- | in Virtual | Mid-high single | Low double digit | |
single digit | Learning due | digit | |||||
to OPM | |||||||
efficiencies | |||||||
English Language | 238 | 6% | Mid-single | Improvement | Mid-high single | Mid-teens | |
Learning | digit | versus 2021 | digit | ||||
Existing | 2025 revenues | ||||||
Workforce Skills | 172 | 16% | Break-even | more than | Low double digit | ||
business: | |||||||
double 2021 | |||||||
3
Mid-high | ||||||
single digit | ||||||
>40% for | ||||||
Faethm and | ||||||
Credly | ||||||
Higher Education | 849 | 9% | Down less | Stabilisation | Low to mid- | Mid-teens |
than 2021 | single digit | |||||
Strategic review | 252 | 9% | ||||
In line with | ||||||
Group | 3,428 | 11% | Growth | market | Mid-single digit | Mid-teens |
expectations |
*Adjusted operating profit margins
KPIs
KPI | Objective | KPI Measure | 2021 Actual | 2020 Actual |
Underlying growth in Group digital and | 9% | (2)% | ||
digital-enabled sales | ||||
Virtual Schools US enrolments | 111k | 109k | ||
Digital growth | Drive digital revenue | OPM student enrolments | 275k | 245k |
growth | ||||
OnVUE volumes | 3.0m | 2.1m | ||
Higher Education US digital | 11.4m | 12.3m | ||
registrations | ||||
PTE volume | 436k | 350k | ||
Create engaging | NPS for Connections Academy | +62 | +60 | |
Consumer | and personalised | NPS for PTE | +56 | +60 |
Engagement | consumer | |||
Pearson+ registered users | 2.75m | n/a | ||
experiences | ||||
Improve | PTE speed of score return | 1.2 days | 1.5 days | |
Product | the effectiveness of | VUE test volumes | 16.8m | 12.9m |
our products to | VUE Partner retention | 99% | 96% | |
Effectiveness | ||||
deliver better | Higher Education product usage - text | 5.4m | 5.4m | |
outcomes | units | |||
Enhance our | Number of employees upskilling or | 71% | 63% | |
employee experience | ||||
Investing in | reskilling | |||
and help employees | ||||
Talent | ||||
progress through | Employee NPS | +8 | +17 | |
learning | ||||
% of diverse candidates in leadership | 100% of | n/a | ||
programmes | ||||
development and mentoring | ||||
Build an | have a | |||
programmes | ||||
Inclusion & | inclusive culture and | minimum of | ||
Diversity | increase diverse | 50% diversity | ||
representation | ||||
% of diverse candidates in leadership | Women = 72% | |||
succession plans | BIPOC/BAME | n/a | ||
= 24% | ||||
Progress against achieving net zero | ||||
Sustainability | Achieve net | carbon by 2030, as measured through | 26% reduction | 25% |
zero carbon by 2030 | percentage carbon reduction | reduction vs | ||
Strategy | vs 2018 base* | |||
2018 base* | ||||
*Figures have been restated to reflect relevant disposals.
This announcement contains inside information.
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Contacts
Investor Relations | Jo Russell | +44 (0) 7785 451 266 |
Media | Tom Steiner | +44 (0) 7787 415 891 |
Gemma Terry | +44 (0) 7841 363 216 | |
Teneo | Charles Armitstead | +44 (0) 7703 330 269 |
Pearson's full year results hybrid presentation | ||
Virtual event | today at 0900 (GMT). Register to receive log in | |
details:https://pearson.connectid.cloud/register | ||
Notes
Forward looking statements: Except for the historical information contained herein, the matters discussed in this statement include forward-looking statements. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated cost savings and synergies and the execution of Pearson's strategy, are forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in future. They are based on numerous assumptions regarding Pearson's present and future business strategies and the environment in which it will operate in the future. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including a number of factors outside Pearson's control. These include international, national and local conditions, as well as competition. They also include other risks detailed from time to time in Pearson's publicly-filed documents and you are advised to read, in particular, the risk factors set out in Pearson's latest annual report and accounts, which can be found on this website (www.pearsonplc.com). Any forward-looking statements speak only as of the date they are made, and Pearson gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on such forward-looking statements.
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Pearson plc published this content on 25 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 February 2022 07:21:06 UTC.