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Segment information
 12 Months Ended
Dec. 31, 2022
Text block [abstract]  
Segment information
2. Segment information
On 8 March 2021, the Group announced a new strategy, which included a new management structure and operating model. As a result, the primary operating segments reported to the Group’s chief operating decision-maker, the Pearson Executive Management team, changed from 1 July 2021 to reflect the new Group structure. There are five main global business divisions, which are each considered separate operating segments for management and reporting purposes. These five divisions are Assessment & Qualifications, Virtual Learning, English Language Learning, Higher Education and Workforce Skills. In addition, the International Courseware local publishing businesses, which were under strategic review, were being managed as a separate division, known as Strategic Review. In 2022, some of the businesses from the Strategic Review division have been disposed of (see note 31) and the decision was made to retain the English-speaking Canadian and Australian K12 courseware businesses. Both of these businesses have been transferred from the Strategic Review division to the Assessment & Qualifications division to reflect changes to the management and reporting structure. Comparative figures for 2021 and 2020 have been restated to reflect the move between segments, resulting in £34m of sales being transferred from the Strategic Review division to the Assessment & Qualifications division in 2021 and £36m in 2020. The Group has separately disclosed the results from the Penguin Random House associate to the point of disposal in April 2020.
The following describes the principal activities of the five main operating segments:
 
—
Assessment & Qualifications – Pearson VUE, US Student Assessment, Clinical Assessment, UK GCSE and A Levels and International academic qualifications and associated courseware including the English-speaking Canadian and Australian
K-12
businesses;
 
—
Virtual Learning – Virtual Schools and Online Program Management;
 
—
English Language Learning – Pearson Test of English, Institutional Courseware and English Online Solutions;
 
—
Workforce Skills – BTEC, GED, TalentLens, Faethm, Credly, Pearson College and Apprenticeships; and
 
—
Higher Education – US, Canadian and International Higher Education Courseware businesses.
 
                   
                                                      
2022
  
                       
English
                      
Penguin
         
           
    Assessment &
    
Virtual
    
    Language
    
    Workforce
    
Higher
    
    Strategic
    
     Random
         
All figures in £ millions
   
Notes 
     
Qualifications
    
    Learning
    
Learning
    
Skills
    
    Education
    
Review
    
House
     
        Group
  
                   
Sales
   
 
3 
 
   
 
1,444
 
  
 
820
 
  
 
321
 
  
 
204
 
  
 
898
 
  
 
154
 
  
 
–
 
   
 
3,841
 
                   
Adjusted operating profit
            
 
258
 
  
 
70
 
  
 
25
 
  
 
(3
) 
  
 
91
 
  
 
15
 
  
 
–
 
   
 
456
 
                   
Cost of major restructuring
            
 
(39
) 
  
 
(29
) 
  
 
(11
) 
  
 
(7
) 
  
 
(63
) 
  
 
(1
) 
  
 
–
 
   
 
(150
) 
                   
Intangible charges
            
 
(14
) 
  
 
(21
) 
  
 
(6
) 
  
 
(12
) 
  
 
(3
) 
  
 
–
 
  
 
–
 
   
 
(56
) 
                   
UK Pension discretionary increases
            
 
(1
) 
  
 
(1
) 
  
 
–
 
  
 
–
 
  
 
(1
) 
  
 
–
 
  
 
–
 
   
 
(3
) 
                   
Other net gains and losses
   
 
 
 
   
 
(2
) 
  
 
(2
) 
  
 
(11
) 
  
 
–
 
  
 
–
 
  
 
39
 
  
 
–
 
   
 
24
 
                   
Operating profit/(loss)
            
 
202
 
  
 
17
 
  
 
(3
) 
  
 
(22
) 
  
 
24
 
  
 
53
 
  
 
–
 
   
 
271
 
                   
Finance costs
   
 
6 
 
                                                            
 
(71
) 
                   
Finance income
   
 
6 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
123
 
                   
Profit before tax
                                                                     
 
323
 
                   
Income tax
   
 
7 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
(79
) 
                   
Profit for the year
   
 
 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
244
 
                   
Other segment items
                                                                           
                   
Share of results of joint ventures and associates
   
 
12 
 
   
 
–
 
  
 
(2
) 
  
 
4
 
  
 
(1
) 
  
 
–
 
  
 
–
 
  
 
–
 
   
 
1
 
                   
Depreciation and impairment
   
 
10 
 
   
 
63
 
  
 
31
 
  
 
7
 
  
 
6
 
  
 
26
 
  
 
3
 
  
 
–
 
   
 
136
 
                   
Amortisation and impairment
   
 
11, 20 
 
   
 
139
 
  
 
77
 
  
 
44
 
  
 
27
 
  
 
175
 
  
 
20
 
  
 
–
 
   
 
482
 
                   
                                                       2021  
                   
                        English                       Penguin         
                Assessment &     Virtual         Language         Workforce     Higher          Strategic          Random         
All figures in £ millions
   
Notes 
      Qualifications         Learning     Learning     Skills         Education     Review     House            Group
1
  
                   
Sales
      3         1,238       713       238       172       849       218       –        3,428  
                   
Adjusted operating profit               219       32       15       27       73       19       –        385  
                   
Cost of major restructuring               (48 )      (48 )      (27 )      (28 )      (63 )      –       –        (214 ) 
                   
Intangible charges               (13 )      (25 )      (3 )      (7 )      (2 )      (1 )      –        (51 ) 
                   
Other net gains and losses   
 
 
 
      –       –       –       (2 )      –       65       –        63  
                   
Operating profit/(loss)
               158       (41 )      (15 )      (10 )      8       83       –        183  
                   
Finance costs      6                                                                  (68 ) 
                   
Finance income      6      
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
      62  
                   
Profit before tax
                                                                        177  
                   
Income tax      7      
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
      1  
                   
Profit for the year
   
 
 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
      178  
                   
Other segment items
                                                                           
                   
Share of results of joint ventures and associates      12         –       (1 )      3       (1 )      –       –       –        1  
                   
Depreciation and impairment      10         92       48       14       9       63       15       –        241  
                   
Amortisation and impairment      11, 20         134       67       34       25       165       21       –        446  
 
1.
  Comparative balances have been restated to reflect the move between operating segments.
 
                   
                                                      
2020
  
                   
                       
English
                      
Penguin
         
           
    Assessment &
    
Virtual
    
    Language
    
    Workforce
    
Higher
    
     Strategic
    
     Random
         
All figures in £ millions
   
Notes 
     
Qualifications
    
    Learning
    
Learning
    
Skills
    
    Education
    
Review
    
House
     
      Group
1
  
                   
Sales
   
 
3 
 
   
 
1,118
 
  
 
692
 
  
 
218
 
  
 
163
 
  
 
956
 
  
 
250
 
  
 
–
 
   
 
3,397
 
                   
Adjusted operating profit
            
 
147
 
  
 
29
 
  
 
1
 
  
 
26
 
  
 
93
 
  
 
16
 
  
 
1
 
   
 
313
 
                   
Cost of major restructuring
            
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
   
 
–
 
                   
Intangible charges
            
 
(29
) 
  
 
(30
) 
  
 
(7
) 
  
 
(8
) 
  
 
(3
) 
  
 
(3
) 
  
 
–
 
   
 
(80
) 
                   
Other net gains and losses
   
 
 
 
   
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
(2
) 
  
 
180
 
   
 
178
 
                   
Operating profit/(loss)
            
 
118
 
  
 
(1
) 
  
 
(6
) 
  
 
18
 
  
 
90
 
  
 
11
 
  
 
181
 
   
 
411
 
                   
Finance costs
   
 
6 
 
                                                            
 
(107
) 
                   
Finance income
   
 
6 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
76
 
                   
Profit before tax
                                                                     
 
380
 
                   
Income tax
   
 
7 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
(50
) 
                   
Profit for the year
   
 
 
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
330
 
                   
Other segment items
                                                                           
                   
Share of results of joint ventures and associates
            
 
–
 
  
 
–
 
  
 
4
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
1
 
   
 
5
 
                   
Depreciation and impairment
            
 
53
 
  
 
21
 
  
 
7
 
  
 
5
 
  
 
28
 
  
 
11
 
  
 
–
 
   
 
125
 
                   
Amortisation and impairment
   
 
            
 
   
 
154
 
  
 
64
 
  
 
34
 
  
 
24
 
  
 
167
 
  
 
29
 
  
 
–
 
   
 
472
 
 
1.
  Comparative balances have been restated to reflect the move between operating segments.
There were no material inter-segment sales in either 2022, 2021 or 2020.
Corporate costs are allocated to business segments on an appropriate basis depending on the nature of the cost and therefore the total segment result is equal to the Group operating profit.
Adjusted operating profit is shown in the above tables as it is the key financial measure used by management to evaluate the performance of the Group. The measure also enables investors to more easily, and consistently, track the underlying operational performance of the Group and its business segments over time by separating out those items of income and expenditure relating to acquisition and disposal transactions, major restructuring programmes and certain other items that are also not representative of underlying performance, which are explained below and reconciled within this note.

Cost of major restructuring – In August 2022, the Group announced a major restructuring programme to run in 2022. The programme includes efficiencies in product and content, support costs, technology and corporate property. The restructuring costs in 2022 of £150m mainly relate to staff redundancies and impairment of
right-of-use
property assets. In 2021, restructuring costs of £214m mainly related to the impairment of
right-of-use
property assets, the write-down of product development assets and staff redundancies. The 2022 charge includes the impact of updated assumptions related to the recoverability of
right-of-use
assets made in 2021. The costs of these restructuring programmes are significant enough to exclude from the adjusted operating profit measure so as to better highlight the underlying performance (see note 4). There was no major restructuring in 2020.
Intangible charges – These represent charges relating to intangibles acquired through business combinations. These charges are excluded as they reflect past acquisition activity and do not necessarily reflect the current year performance of the Group.
Intangible amortisation charges in 2022 were £56m compared to a charge of £51m in 2021. This is due to increased amortisation from recent acquisitions which is partially offset by a reduction in amortisation from intangible assets at the end of their useful life and recent disposals. In 2022 and 2021, intangible charges included no impairment charges. In 2020, intangible charges were £80m including impairment charges of £12m.
Other net gains and losses – These represent profits and losses on the sale of subsidiaries, joint ventures, associates and other financial assets and are excluded from adjusted operating profit as they distort the performance of the Group as reported on a statutory basis. Other net gains and losses also includes costs related to business closures and acquisitions. Other net gains and losses in 2022 relate to the gains on the disposal of our international courseware local publishing businesses in Europe, French-speaking Canada and Hong Kong and a gain arising on a decrease in the deferred consideration payable on prior year acquisitions, offset by a loss on disposal of our international courseware local publishing businesses in South Africa due to recycling of currency translation adjustments and costs related to disposals and acquisitions. Other net gains and losses in 2021 largely related to the disposal of PIHE and the disposal of the K12 Sistemas business in Brazil offset by costs related to the acquisition of Faethm and the wind down of certain strategic review businesses. In 2020, they largely relate to the sale of the remaining interest in Penguin Random House (£180m gain).
UK pension discretionary increases - Charges in 2022 relate to
one-off
pension increases awarded to certain cohorts of pensioners in response to the cost of living crisis.
Adjusted operating profit should not be regarded as a complete picture of the Group’s financial performance. For example, adjusted operating profit includes the benefits of major restructuring programmes but excludes the significant associated costs, and adjusted operating profit excludes costs related to acquisitions, and the amortisation of intangibles acquired in business combinations, but does not exclude the associated revenues. The Group’s definition of adjusted operating profit may not be comparable to other similarly titled measures reported by other companies.
The Group operates in the following main geographic areas:
 
           
            
Sales
             
 
   
Non-current assets
  
             
All figures in £ millions
   
2022
     
2021
     
2020
           
2022
     
2021
  
             
UK
   
 
424
 
   
 
355
 
   
 
319
 
        
 
527
 
   
 
578
 
             
Other European countries
   
 
192
 
   
 
249
 
   
 
216
 
        
 
192
 
   
 
122
 
             
US
   
 
2,668
 
   
 
2,182
 
   
 
2,335
 
        
 
2,333
 
   
 
2,034
 
             
Canada
   
 
110
 
   
 
111
 
   
 
91
 
        
 
243
 
   
 
217
 
             
Asia Pacific
   
 
290
 
   
 
359
 
   
 
251
 
        
 
200
 
   
 
190
 
             
Other countries
   
 
157
 
   
 
172
 
   
 
185
 
   
 
   
 
17
 
   
 
18
 
             
Total
   
 
        3,841
 
   
 
        3,428
 
   
 
        3,397
 
   
 
   
 
        3,512
 
   
 
        3,159
 
Sales are allocated based on the country in which the customer is located. This does not differ materially from the location where the order is received. The geographical split of
non-current
assets is based on the subsidiary’s country of domicile. This is not materially different to the location of the assets.
Non-current
assets comprise investment property, property, plant and equipment, intangible assets and investments in joint ventures and associates.