Continued progress on 2024 priorities with good financial and
operational performance; all divisions delivered underlying sales
growth in Q3; on track to meet full year expectations.
Highlights
- Advancing our 2024 strategic priorities:
- Progressing in Enterprise: signed a new meaningful
multi-year enterprise deal with ServiceNow and expanded our
partnership with Degreed.
- Scaling AI across our products and services: double-digit
year-over-year billings growth in Higher Education products with AI
study tools, and developing English Language Learning Teaching Pal
to create customised lesson content and activities.
- Underlying Group sales growth1: up 5% in Q3, resulting in 3%
growth for the nine-month period, excluding OPM2 and Strategic
Review3 businesses.
- Delivered a comprehensive performance: all divisions grew in
Q3, including Higher Education.
- On track to meet full-year expectations.
Omar Abbosh, Pearson’s Chief Executive, said:
“Pearson is delivering on the three priorities for 2024 that I
identified at the start of the year. First, our focus on
operational and financial performance has driven growth across all
divisions this quarter and we are on track to meet full-year
expectations. Second, we are accelerating our AI capabilities
across the business and starting to see the commercial benefit.
Third, expanded enterprise relationships with companies such as
ServiceNow demonstrate progress on our intention to expand in
workforce learning.”
Underlying sales growth1 of 3% for the nine months, 5% for
Q3, excluding OPM2 and Strategic Review3 businesses; 2% in
aggregate for the nine months
- Assessment & Qualifications sales were up 3% for the
nine-month period, with growth accelerating in Q3, as expected, and
all businesses contributing to growth.
- Virtual Learning sales were up 4% for Q3 due to 4% growth in
Virtual Schools, with 2024/25 academic enrolments up 4% on a same
school basis. Virtual Learning sales declined 4% for the nine-month
period attributable to the final portion of the OPM ASU contract in
the first half of 2023.
- Higher Education returned to growth in Q3 with sales up 4% and
is on track to grow for the full year, driven by the operational
and business changes implemented over the past 18 months. Higher
Education sales were flat for the nine-month period.
- English Language Learning sales were up 7% for the nine-month
period driven by a strong performance in Institutional. In Q3,
sales were up 2% with some Institutional sales moving to Q4.
- Workforce Skills sales were up 6% for the nine-month period and
also for Q3, with solid performances in both Vocational
Qualifications and Workforce Solutions.
Strong financial position
- Pearson’s financial position remains robust, with a strong
balance sheet.
- Moody’s recently upgraded Pearson’s long-term issuer rating to
Baa2 and moved the outlook to stable
- We completed our £500m share buyback with 7% of shares bought
back.
- We issued a £350m Educational Bond.
- The UK government and other parties have successfully appealed
against the 2019 European Commission decision that the UK
controlled foreign company group financing partial exemption
partially constitutes State Aid. This means that the £105m
previously paid in relation to this will be recovered at some point
in the future and we will release the related £63m tax provision in
2024, with the impact of the provision release captured outside of
adjusted earnings.
2024 outlook – full year guidance reaffirmed
- Group underlying sales growth, adjusted operating profit,
interest and tax outlook for 2024 remain in line with market
expectations4. As guided, free cash flow conversion is expected to
be 95-100%.
- We expect interest to be in line with guidance of c.£45m with
recovery of interest on the State Aid payment offset by increased
interest given our recent bond issue.
Financial summary Underlying growth for the third quarter
and nine months ended 30th September 2024 compared to the
equivalent period in 2023.
Sales
Q3
Nine months
Assessment & Qualifications
6%
3%
Virtual Learning
4%
(4)%
Higher Education
4%
0%
English Language Learning
2%
7%
Workforce Skills
6%
6%
Strategic Review
(100)%
(100)%
Total
4%
2%
Total, excluding OPM2 and Strategic
Review3
5%
3%
1Throughout this announcement growth rates
are stated on an underlying basis unless otherwise stated.
Underlying growth rates exclude currency movements, and portfolio
changes.
2We 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.
3Strategic 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.
42024 consensus on the Pearson website
dated 30th August 2024; adjusted operating profit of £598m at £:$
1.27. Based on the strengthening of the £:$ rate, our average rate
for profits through the first 9 months of 2024 is 1.28. As a
reminder, every 1c movement in £:$ rate will equate to
approximately £5m adjusted operating profit impact.
Assessment & Qualifications In Assessment &
Qualifications, sales growth accelerated in Q3 to 6%, with the
business unit up 3% for the nine-month period.
Pearson VUE sales were up 3% for the nine-month period driven by
favorable mix and value-added services, with PDRI seeing good
growth. We have launched a new Generative AI Foundations
certification, to be delivered on Pearson VUE’s online testing
platform (OnVUE) and in physical test centres. This certificate
will equip professionals and students with the essential skills
needed to work with these technologies.
In US Student Assessment, sales were up 1% for the nine-month
period as phasing normalised.
In Clinical Assessment, sales were up 3% for the nine-month
period, due to pricing, digital product growth and successful new
product launches.
In UK and International Qualifications, sales were up 7% for the
nine-month period largely driven by volume, pricing and
International growth.
We continue to expect low to mid-single digit sales growth for
the full year.
Virtual Learning In Virtual Learning, sales were up 4%
for Q3 due to 4% growth in Virtual Schools with 2024/25 academic
enrolments up 4% on a same school basis. Virtual Learning sales
declined 4% for the nine-month period attributable to the final
portion of the OPM ASU contract in the first half of 2023.
In Virtual Schools, we previously announced the opening of 3 new
schools this year and a further 19 career programmes. This brings
our total number of schools to 40, with 24 career programmes,
across 30 states for the 2024/25 academic year. Students now have
access to expanded college and early career readiness offerings,
including through credentials via Credly, and college cost savings
via new partnerships with institutions like Southern New Hampshire
University.
We have also embedded AI study tools into our Virtual Schools
content so that when high school students struggle with quizzes and
practice tests, they can receive step-by-step help to walk them
through tough material.
Full year expectations for Virtual Schools remain unchanged with
sales expected to be down a similar rate to 2023 reflecting the
previously announced school losses. As a reminder, Q4 performance
will be impacted by the catch up in funding that we saw in Q4 last
year.
Higher Education In Higher Education, sales grew 4% in Q3
and were flat for the nine-month period, in line with
expectations.
In US Higher Education, Q3 sales growth was driven by gains in
adoption share, enrolments and pricing partially offset by mix
impacts and revenue deferral. In the nine-month period, there was
3% growth in US digital subscriptions and Inclusive Access growth
of 24%.
We continue to see good engagement with our AI study tools with
over 5 million student interactions in the nine-month period to
September following the roll out of our AI study tools. We extended
the AI study tools to more than 90 titles for Fall Back to School.
This has helped to drive double-digit billings growth
year-over-year in products with AI study tools.
On 1st October 2024, Pearson began to directly distribute our
proprietary Advanced Placement (AP®), Dual Enrollment, and Career
and Technical Education (CTE) materials into states and school
districts, which were previously distributed by a third party. The
dedicated sales team that Pearson has invested in will enable us to
expand and strengthen customer relationships with US school
administrators as the demand for college and career readiness
programmes grows.
We continue to expect sales growth for the full year.
English Language Learning In English Language Learning,
sales increased 2% for Q3 and 7% for the nine-month period.
Institutional performance continued to be strong for the
nine-month period, with particularly good growth in LATAM and
Middle East markets, albeit sales were down in Q3 due to phasing
shifts to Q4.
We are infusing AI into our English Language Learning division
with the development of Teaching Pal, an AI-powered tool designed
to simplify educators' work by creating customised lesson content
and activities, leveraging our trusted IP.
We continue to expect high-single digit sales growth for the
full year.
Workforce Skills In Workforce Skills, sales increased 6%
for Q3 and the nine-month period.
There was solid performance in both the Vocational
Qualifications and Workforce Solutions businesses.
Pearson has many of the assets that enterprises need to address
their problems in talent planning, talent sourcing and talent
development, and through bundling our existing products we can
unlock synergies across the company. We have recently signed a
meaningful multi-year deal with ServiceNow. The first phase is
aimed at reshaping how their employees and professional communities
develop and verify critical skills and drive productivity in the
era of AI, using Pearson’s research, insights and Credly
capabilities.
We are also expanding our partnership with Degreed through
integrating Faethm data sets into Degreed’s platform, offering
real-time insights into the most relevant skills across industries,
allowing companies to benchmark skills, identify gaps, and
prioritise key areas for upskilling.
Contacts
Investor Relations
Jo Russell
+44 (0) 7785 451 266
Alex Shore
+44 (0) 7720 947 853
Gemma Terry
+44 (0) 7841 363 216
Brennan Matthews
+1 (332) 238 8785
Media
Teneo
Ed Cropley
+44 (0) 7492 949 346
Pearson
Laura Ewart
+44 (0) 7798 846 805
Virtual event
Pearson’s 2024 nine month trading update
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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 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 its 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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version on businesswire.com: https://www.businesswire.com/news/home/20241029832586/en/
Investor Relations Jo Russell +44 (0) 7785 451 266 Alex
Shore +44 (0) 7720 947 853 Gemma Terry +44 (0) 7841 363 216 Brennan
Matthews +1 (332) 238 8785
Media Teneo Ed Cropley +44 (0) 7492 949 346
Pearson Laura Ewart +44 (0) 7798 846 805
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