Resilience despite COVID-19 challenges. Repositioning Pearson
for sustainable growth.
|
|
Highlights
|
Resilient sales despite COVID-19 related challenges and
restrictions
● Underlying
revenue declined 10%.
● Global
Online Learning up 18% reflecting increased demand for virtual
learning.
● Global
Assessment 14% lower, and International down 19%.
● North
American Courseware down 13%, with US Higher Education Courseware
in line with pre-COVID expectations.
Performance in line with revised expectations post
COVID-19; with adjusted operating profit of £313m (2019:
£581m)
● Adjusted
earnings per share of 28.7p (2019: 57.8p) after an effective tax
rate charge of 13.7% (2019: 16.5%).
Strong balance sheet and cash performance
● Operating cash flow
of £315m (2019: £418m) with a conversion rate of 101%
reflects lower profit partially offset by good working capital
management.
● Year-end net debt
reduced to £463m (2019: £1,016m) with leverage at 0.8x
(2019: 1.3x).
Dividend maintained
● Proposed final
dividend of 13.5p (2019: 13.5p), which equates to a full year
dividend of 19.5p (2019: 19.5p).
Statutory results
● Sales decreased 12%
to £3,397m (2019: £3,869m), reflecting underlying
performance, portfolio changes and currency movements.
● Statutory operating
profit was £411m (2019: £275m). The increase is due to
the gain on sale of our stake in Penguin Random House (PRH) and
lower restructuring costs which more than offset
the impact of
COVID-19 and portfolio changes on adjusted operating
profit.
● Net cash generated
from operations of £450m (2019: £480m).
● Statutory earnings
per share of 41.0p (2019: 34.0p).
Strategy update highlights
● Repositioning
Pearson for sustainable growth with a strong direct to consumer
focus.
● Three key
demand-led global market opportunities identified: rise in digital
learning tools; workforce skills gap; and demand for accreditation
and certification.
● Creation of five
new divisions - Virtual Learning, Higher Education, English
Language Learning, Workforce Skills and Assessment &
Qualifications.
● Each division
carries full responsibility for its overheads, product development
and operations. They will be supported by the Direct to Consumer
group.
● Launching strategic
review of international courseware local publishing
businesses.
● Simplifying
property portfolio to occupy a significantly smaller square
footage.
|
|
2021 outlook
● Expect year on year
revenue growth, with adjusted operating profit to be in line with
current market expectations.
● Good growth in
Virtual Learning, driven by the Virtual Schools 20/21 academic year
enrolment growth. Enrolments for the 21/22 academic year expected
to be broadly flat, with the 'covid
cohort' partially
returning to bricks and mortar schools, offset by underlying
growth, and waiting lists. Online Program Management (OPM) is also
expected to grow.
● Assessment &
Qualifications revenue growth as lockdowns and social distancing
ease. Expect impacted test centres to reopen - with social
distancing - in April, and normal operations to
resume
progressively in H2
2021. US school assessments expected to resume, and clinical tests
to be taken as schools reopen. UK exams cancelled with modest
profit impact as teacher assessment to
replace
exams.
● English Language
Learning revenue expected to improve as mobility, migration and
school purchasing recover slowly amidst continuing COVID-19
restrictions.
● Higher Education
revenue to decline, but by less than seen in recent years, as the
print base becomes smaller, and as the pricing pressure from the
change in mix from print and bundles, to
platform and
eTexts, is offset by recapture of the secondary market driven by
eText growth and the digital first strategy, and enrolment
recovery.
● Workforce Skills
revenue expected to grow, given the strong business fundamentals
and investments made into digital and direct to consumer
opportunities.
● Revenue phasing
will be impacted by current conditions, with Q1 sales behind a
challenging 2020 comparative, with growth expected in Q2 and Q3
assuming further pandemic recovery, with the
delivery of pent up
testing demand in H2 2020 providing a tougher
comparative.
● Net interest charge
of c.£65m and a tax rate of 18% to 22%.
● As previously
announced, cost efficiencies expected of c.£50m in
2021.
|
Andy Bird, Pearson's Chief Executive, said:
'Despite
the significant challenges of 2020, it is thanks to the tenacity
and commitment of colleagues around the world that Pearson has
delivered a solid financial performance. This year, as we
recover from the impact of the pandemic, we are focused on
delivering revenue and profit growth.
'Our
purpose has never been so relevant: we exist to help everyone
achieve their potential through learning. I have witnessed this
first-hand every day since joining Pearson, having spent time with
customers, employees and other key stakeholders. I have enormous
optimism in the future and our ability to unlock our potential and
drive sustainable growth.
'Pearson's
strategy is now geared around three key demand-led global market
opportunities which play to all our strengths: the rise in
online and digital learning; addressing the workforce skills gap;
and meeting the growing demand for dependable accreditation and
certification. Our existing assets, strong balance sheet, new
organisational structure and priorities will enable us to seize
these opportunities. As the global leader in learning, nobody else
has the breadth and depth of experience, scale, expertise and
relationships across the entire lifelong learning
spectrum.
'Following
significant investments in technology and comprehensive
restructuring, Pearson is moving at pace and ready to enter a new
era as a digital-first company, focused on delivering sustainable
revenue and profit growth for the benefit of all company
stakeholders.'
|
Business divisions
|
Business units
|
Direct to Consumer
|
Virtual Learning
|
Virtual
Schools, OPM
|
|
Higher Education
|
US
Higher Education Courseware, Canadian Higher Education Courseware,
International Higher Education Courseware
|
|
English Language Learning
|
Pearson
Test of English, Institutional Courseware, English Online
Solutions
|
|
Workforce Skills
|
BTEC,
Pearson College, Apprenticeships
|
|
Assessment & Qualifications
|
Pearson
VUE, US School Assessment, Clinical Assessment, UK GCSE and A
level, International academic qualifications
|
Segment
|
Market 5-year CAGR*
|
Long term growth
|
Long term margin**
|
Virtual Learning
|
High
single digit
|
Strong
|
Increase
|
Higher Education
|
Stabilisation
|
Recapture of secondary market, International growth
|
Increase
|
English Language Learning
|
Mid to high-single digit
|
At least in line with market growth
|
Maintain
|
Workforce Skills
|
Mid to high-single digit
|
Strong
|
Maintain
|
Assessment & Qualifications
|
Professional Certification low to mid-single digit
US School Assessment and Clinical Assessment flat
|
Low to moderate
|
Maintain
|
Contacts
|
|
|
Investor Relations
|
Jo
Russell
Anjali
Kotak
Teddy
Symington
|
+44 (0)
7785 451 266
+44 (0)
7802 890 724
+44 (0)
7443 354 088
|
Media
|
Tom
Steiner
Gemma
Terry
|
+44 (0)
7787 415 891
+44 (0)
7841 363 216
|
Teneo
|
Charles
Armitstead
|
+44 (0)
7703 330 269
|
Virtual event
|
Pearson's full year results and strategy update virtual
presentation today 0830 (GMT). Register to receive log in
details: https://pearson.connectid.cloud/register
|
|
Notes
|
£m
|
2020
|
2019
|
Headline
growth
|
CER
growth
|
Underlying
growth
|
Business performance
|
|
|
|
|
|
Sales
|
3,397
|
3,869
|
(12)%
|
(11)%
|
(10)%
|
Adjusted
operating profit
|
313
|
581
|
(46)%
|
(46)%
|
(40)%
|
Operating
cash flow
|
315
|
418
|
|
|
|
Adjusted
earnings per share
|
28.7p
|
57.8p
|
|
|
|
Statutory results
|
|
|
|
|
|
Sales
|
3,397
|
3,869
|
|
|
|
Operating
profit
|
411
|
275
|
|
|
|
Profit
for the year
|
310
|
266
|
|
|
|
Net
cash generated from operations
|
450
|
480
|
|
|
|
Basic
earnings per share
|
41.0p
|
34.0p
|
|
|
|
Dividend
per share
|
19.5p
|
19.5p
|
|
|
|
Net
debt
|
(463)
|
(1,016)
|
|
|
|
£ millions
|
2020
|
2019
|
Headline
growth
|
CER
growth
|
Underlying
growth
|
Sales
|
|
|
|
|
|
Global
Online Learning
|
697
|
586
|
19%
|
19%
|
18%
|
Global
Assessment
|
892
|
1,031
|
(13)%
|
(14)%
|
(14)%
|
North
America Courseware
|
894
|
1,091
|
(18)%
|
(18)%
|
(13)%
|
International
|
914
|
1,161
|
(21)%
|
(18)%
|
(19)%
|
Total sales
|
3,397
|
3,869
|
(12)%
|
(11)%
|
(10)%
|
|
|
|
|
|
|
Adjusted operating profit
|
|
|
|
|
|
Global
Online Learning
|
99
|
84
|
18%
|
19%
|
23%
|
Global
Assessment
|
245
|
351
|
(30)%
|
(30)%
|
(30)%
|
North
America Courseware
|
190
|
231
|
(18)%
|
(18)%
|
(20)%
|
International
|
182
|
299
|
(39)%
|
(38)%
|
(39)%
|
Enabling
Functions
|
(404)
|
(449)
|
10%
|
9%
|
9%
|
Penguin
Random House
|
1
|
65
|
(98)%
|
(98)%
|
-
|
Total adjusted operating profit
|
313
|
581
|
(46)%
|
(46)%
|
(40)%
|
Global Online Learning
Revenue grew 18% on an underlying basis and 19% on a headline basis
reflecting strong enrolment growth in Virtual Schools and good
growth in OPM.
Adjusted operating profit grew 23% in underlying terms, due to
margin on sales growth more than offsetting the investment in our
virtual schools platform and customer care support and margin
impact in OPM due to discontinued programs. Headline profit grew
18% with good growth in adjusted operating profit partially offset
by FX and portfolio changes.
Virtual Schools performed strongly driven by 43% enrolment growth
in new and existing schools for the 2020/2021 academic year. We
opened three new full-time, state-wide partner schools, and
combined with two contract exits this takes the total partner
schools to 43 in 29 states. We are launching two new partner
schools in Florida and Oregon for the 2021/2022 academic
year.
In OPM, we saw good sales growth with a strong performance in
undergraduate and international, partially offset by discontinued
programs. We also saw the benefits of the operational changes made
earlier this year, with increased efficiencies in our student
recruitment process and student acquisition costs. Underlying
course enrolments (excluding discontinued programs) grew 20% and
total course enrolments declined 7%. We are delivering 470 programs
across 34 partners globally. We launched Pearson Pathways, a
digital marketplace that provides learners with tailored
recommendations for courses and credentials to help them achieve
the skills they require.
Global Assessment
In Global Assessment, sales declined 14% on an underlying basis
and 13% on a headline basis.
Adjusted operating profit declined 30% in underlying and headline
terms due to the COVID-19 impact on trading, partially offset by
mitigating actions.
Sales declined 10% at Pearson VUE reflecting the impact of the test
centre closures in the first half of the year, with pent up demand
in the second half partially moderated by further lockdowns in Q4.
Online Proctoring saw strong growth in the year with volumes up
from 0.2m at the end of 2019 to 2.1m at the end of 2020
predominantly driven by demand from the IT sector. Overall testing
volumes were down 22% to 12.9m due to test centre
closures.
In School and Clinical Assessment, cancellation of Spring testing
and school closures impacted both businesses respectively in H1
with a further modest impact due to COVID-19 in H2.
North American Courseware
In North American Courseware, sales declined 13% for the full year on an
underlying basis and 18% on a headline basis reflecting the sale of
US K12 Courseware.
Adjusted operating profit declined 20% in underlying terms, due to
the impact of trading partially offset by restructuring and
discretionary savings. Headline profit was down 18% on last year
due to the underlying profit reduction partially offset by the
disposal of our US K12 courseware business in 2019.
In US Higher Education Courseware sales declined 12% with total
unit sales increasing slightly and digital registrations including
eBooks growing 9%. In Canada, courseware sales were down
significantly due to school and bookstore closures.
We continued to see unbundling of premium priced print and digital
products for digital only formats. In 2020 2.2m textbooks were sold
into US Higher Education colleges, compared with 3.7m in 2019.
Sales of standalone eBook units into colleges grew 33% to 3.7m
units, showing signs of secondary market recapture.
There has also been continued momentum in Inclusive Access with
sales to not-for-profit institutions up 29% on last year
representing 13% of US Higher Education Courseware
revenue.
International
In International, sales were down 19% on an underlying basis due to
the interruption of Australian immigration and test centre closures
impacting PTE, as well as budgetary pressures caused by the impact
of COVID-19 on courseware purchasing. Revenue declined 21% on a
headline basis due to foreign exchange and underlying
performance.
Adjusted operating profit declined 39% in underlying and headline
terms due to the impact of trading partially offset by mitigating
actions.
For School & HE Courseware, budget constraints and school
closures have led to fewer purchases. In the UK, qualifications
revenue was impacted, as expected, by the cancellation of exams in
2020, as well as the end of the NCT contract. In our franchise
business in Brazil and across courseware, we have seen market
contraction as a result of the pandemic.
PTE volumes were down 36% with declines in all key markets except
China where we saw 17% growth due to an improved competitive
performance.
Enabling Functions
Enabling Functions costs were 10% lower in headline terms and 9% in
underlying terms due to restructuring and discretionary
savings.
|
|
|
|
|
All figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
411
|
275
|
Add
back: Cost of major restructuring
|
|
-
|
159
|
Add
back: Intangible charges
|
|
80
|
163
|
Add
back: Other net gains and losses
|
|
(178)
|
(16)
|
Adjusted
operating profit
|
|
313
|
581
|
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
Sales
|
2
|
3,397
|
3,869
|
Cost of
goods sold
|
|
(1,767)
|
(1,858)
|
Gross
profit
|
|
1,630
|
2,011
|
|
|
|
|
Operating
expenses
|
|
(1,402)
|
(1,806)
|
Other
net gains and losses
|
2
|
178
|
16
|
Share
of results of joint ventures and associates
|
|
5
|
54
|
Operating
profit
|
2
|
411
|
275
|
|
|
|
|
Finance
costs
|
3
|
(107)
|
(84)
|
Finance
income
|
3
|
50
|
41
|
Profit
before tax
|
4
|
354
|
232
|
Income
tax
|
5
|
(44)
|
34
|
Profit
for the year
|
|
310
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
Equity
holders of the company
|
|
310
|
264
|
Non-controlling
interest
|
|
-
|
2
|
|
|
|
|
|
|
|
|
Earnings per share (in pence per
share)
|
|
|
|
Basic
|
6
|
41.0p
|
34.0p
|
Diluted
|
6
|
41.0p
|
34.0p
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Profit
for the year
|
|
310
|
266
|
|
|
|
|
Items
that may be reclassified to the income statement
|
|
|
|
Net
exchange differences on translation of foreign operations -
Group
|
|
(109)
|
(113)
|
Net
exchange differences on translation of foreign operations -
associates
|
-
|
(2)
|
|
Currency
translation adjustment disposed
|
|
(70)
|
4
|
Attributable
tax
|
|
(13)
|
5
|
|
|
|
|
Items
that are not reclassified to the income statement
|
|
|
|
Fair
value gain on other financial assets
|
|
14
|
20
|
Attributable
tax
|
|
(6)
|
(4)
|
Remeasurement of
retirement benefit obligations - Group
|
|
(23)
|
(145)
|
Remeasurement of
retirement benefit obligations - associates
|
|
-
|
(4)
|
Attributable
tax
|
|
2
|
22
|
Other
comprehensive expense for the year
|
|
(205)
|
(217)
|
|
|
|
|
Total
comprehensive income for the year
|
|
105
|
49
|
|
|
|
|
Attributable
to:
|
|
|
|
Equity
holders of the company
|
|
105
|
47
|
Non-controlling
interest
|
|
-
|
2
|
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
515
|
618
|
Intangible
assets
|
11
|
2,742
|
2,900
|
Investments
in joint ventures and associates
|
|
6
|
7
|
Deferred
income tax assets
|
|
32
|
59
|
Financial
assets - derivative financial instruments
|
|
45
|
29
|
Retirement
benefit assets
|
|
410
|
429
|
Other
financial assets
|
|
138
|
122
|
Trade
and other receivables
|
12
|
223
|
313
|
Non-current assets
|
|
4,111
|
4,477
|
|
|
|
|
Intangible
assets - pre-publication
|
|
905
|
870
|
Inventories
|
14
|
129
|
169
|
Trade
and other receivables
|
12
|
1,118
|
1,275
|
Financial
assets - derivative financial instruments
|
|
18
|
25
|
Cash
and cash equivalents (excluding overdrafts)
|
|
1,097
|
437
|
Current assets
|
|
3,267
|
2,776
|
|
|
|
|
Assets
classified as held for sale
|
10
|
73
|
397
|
Total assets
|
|
7,451
|
7,650
|
|
|
|
|
Financial
liabilities - borrowings
|
|
(1,397)
|
(1,572)
|
Financial
liabilities - derivative financial instruments
|
|
(40)
|
(24)
|
Deferred
income tax liabilities
|
|
(62)
|
(48)
|
Retirement
benefit obligations
|
|
(85)
|
(92)
|
Provisions
for other liabilities and charges
|
|
(8)
|
(13)
|
Other
liabilities
|
13
|
(80)
|
(86)
|
|
|
|
|
Non-current liabilities
|
|
(1,672)
|
(1,835)
|
|
|
|
|
Trade
and other liabilities
|
13
|
(1,196)
|
(1,278)
|
Financial
liabilities - borrowings
|
|
(254)
|
(92)
|
Financial
liabilities - derivative financial instruments
|
|
(12)
|
(15)
|
Current
income tax liabilities
|
|
(84)
|
(55)
|
Provisions
for other liabilities and charges
|
|
(25)
|
(52)
|
Current liabilities
|
|
(1,571)
|
(1,492)
|
|
|
|
|
Liabilities
classified as held for sale
|
10
|
(74)
|
-
|
Total liabilities
|
|
(3,317)
|
(3,327)
|
|
|
|
|
Net assets
|
|
4,134
|
4,323
|
|
|
|
|
Share
capital
|
|
188
|
195
|
Share
premium
|
|
2,620
|
2,614
|
Treasury
shares
|
|
(7)
|
(24)
|
Reserves
|
|
1,324
|
1,528
|
Total
equity attributable to equity holders of the company
|
|
4,125
|
4,313
|
Non-controlling
interest
|
|
9
|
10
|
Total equity
|
|
4,134
|
4,323
|
|
|
|
|
|||||||
|
Equity
attributable to equity holders of the company
|
|
|
|||||||
all figures in £ millions
|
Share
capital
|
Share
premium
|
Treasury
shares
|
Capital
redemption reserve
|
Fair
value reserve
|
Translation
reserve
|
Retained
earnings
|
Total
|
Non-controlling
interest
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
||||||||||
At
1 January 2020
|
195
|
2,614
|
(24)
|
11
|
39
|
567
|
911
|
4,313
|
10
|
4,323
|
Profit
for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
310
|
310
|
-
|
310
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
14
|
(179)
|
(40)
|
(205)
|
-
|
(205)
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
14
|
(179)
|
270
|
105
|
-
|
105
|
Equity-settled
transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
29
|
29
|
-
|
29
|
Tax on
equity-settled transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Issue
of ordinary shares under share option schemes
|
-
|
6
|
-
|
-
|
-
|
-
|
-
|
6
|
-
|
6
|
Buyback
of equity
|
(7)
|
-
|
-
|
7
|
-
|
-
|
(176)
|
(176)
|
-
|
(176)
|
Purchase of
treasury shares
|
-
|
-
|
(6)
|
-
|
-
|
-
|
-
|
(6)
|
-
|
(6)
|
Release
of treasury shares
|
-
|
-
|
23
|
-
|
-
|
-
|
(23)
|
-
|
-
|
-
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(146)
|
(146)
|
(1)
|
(147)
|
At
31 December 2020
|
188
|
2,620
|
(7)
|
18
|
53
|
388
|
865
|
4,125
|
9
|
4,134
|
|
|
|
|
|||||||
|
Equity
attributable to equity holders of the company
|
|
|
|||||||
all figures in £ millions
|
Share
capital
|
Share
premium
|
Treasury
shares
|
Capital
redemption reserve
|
Fair
value reserve
|
Translation
reserve
|
Retained
earnings
|
Total
|
Non-controlling
interest
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
||||||||||
At 1
January 2019
|
195
|
2,607
|
(33)
|
11
|
19
|
678
|
961
|
4,438
|
9
|
4,447
|
Profit
for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
264
|
264
|
2
|
266
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
20
|
(111)
|
(126)
|
(217)
|
-
|
(217)
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
20
|
(111)
|
138
|
47
|
2
|
49
|
Equity-settled
transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
25
|
25
|
-
|
25
|
Tax on
equity-settled transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
(5)
|
(5)
|
-
|
(5)
|
Issue
of ordinary shares under share option schemes
|
-
|
7
|
-
|
-
|
-
|
-
|
-
|
7
|
-
|
7
|
Buyback
of equity
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Purchase of
treasury shares
|
-
|
-
|
(52)
|
-
|
-
|
-
|
-
|
(52)
|
-
|
(52)
|
Release
of treasury shares
|
-
|
-
|
61
|
-
|
-
|
-
|
(61)
|
-
|
-
|
-
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(147)
|
(147)
|
(1)
|
(148)
|
At 31
December 2019
|
195
|
2,614
|
(24)
|
11
|
39
|
567
|
911
|
4,313
|
10
|
4,323
|
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
Net
cash generated from operations
|
17
|
450
|
480
|
Interest
paid
|
|
(63)
|
(81)
|
Tax
received / (paid)
|
|
2
|
(30)
|
Net
cash generated from operating activities
|
|
389
|
369
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
|
(6)
|
(45)
|
Additional capital
invested in associates
|
|
-
|
(40)
|
Purchase of
investments
|
|
(6)
|
(12)
|
Purchase of
property, plant and equipment
|
|
(53)
|
(55)
|
Purchase of
intangible assets
|
|
(81)
|
(138)
|
Disposal of
subsidiaries, net of cash disposed
|
15
|
100
|
(101)
|
Proceeds from sale
of joint ventures and associates
|
15
|
531
|
-
|
Proceeds from sale
of investments
|
|
-
|
5
|
Proceeds from sale
of property, plant and equipment
|
|
-
|
1
|
Lease
receivables repaid including disposals
|
|
41
|
26
|
Loans
repaid by / (advanced to) related parties
|
|
48
|
(49)
|
Interest
received
|
|
13
|
17
|
Investment
income
|
|
-
|
2
|
Dividends from
joint ventures and associates
|
|
4
|
64
|
Net
cash generated from / (used in) investing activities
|
|
591
|
(325)
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
Proceeds from issue
of ordinary shares
|
|
6
|
7
|
Buyback
of equity
|
|
(176)
|
-
|
Purchase of
treasury shares
|
|
(6)
|
(52)
|
Proceeds from
borrowings
|
|
346
|
230
|
Repayment of
borrowings
|
|
(230)
|
(48)
|
Repayment of lease
liabilities
|
|
(92)
|
(91)
|
Dividends paid to
company's shareholders
|
|
(146)
|
(147)
|
Dividends paid to
non-controlling interest
|
|
(1)
|
(1)
|
Net
cash used in financing activities
|
|
(299)
|
(102)
|
|
|
|
|
Effects
of exchange rate changes on cash and cash equivalents
|
|
(2)
|
(33)
|
Net
increase / (decrease) in cash and cash equivalents
|
|
679
|
(91)
|
|
|
|
|
Cash
and cash equivalents at beginning of year
|
|
434
|
525
|
Cash
and cash equivalents at end of year
|
|
1,113
|
434
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
Global
Online Learning
|
|
697
|
586
|
Global
Assessment
|
|
892
|
1,031
|
North
American Courseware
|
|
894
|
1,091
|
International
|
|
914
|
1,161
|
Total
sales
|
|
3,397
|
3,869
|
|
|
|
|
Adjusted
operating profit
|
|
|
|
Global
Online Learning
|
|
99
|
84
|
Global
Assessment
|
|
245
|
351
|
North
American Courseware
|
|
190
|
231
|
International
|
|
182
|
299
|
Enabling
Functions
|
|
(404)
|
(449)
|
PRH
|
|
1
|
65
|
Total
adjusted operating profit
|
|
313
|
581
|
all figures in £ millions
|
Global
Online Learning
|
Global
Assessment
|
North
American Courseware
|
International
|
Total
|
|
|
|
|
|
|
2020
|
|||||
Courseware¹
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
261
|
409
|
670
|
Products and
services transferred over time
|
-
|
-
|
621
|
75
|
696
|
|
-
|
-
|
882
|
484
|
1,366
|
Assessments
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
96
|
-
|
52
|
148
|
Products and
services transferred over time
|
-
|
796
|
-
|
275
|
1,071
|
|
-
|
892
|
-
|
327
|
1,219
|
Services
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
-
|
44
|
44
|
Products and
services transferred over time
|
697
|
-
|
12
|
59
|
768
|
|
697
|
-
|
12
|
103
|
812
|
|
|
|
|
|
|
Total
sales
|
697
|
892
|
894
|
914
|
3,397
|
2019
|
|||||
Courseware¹
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
448
|
506
|
954
|
Products and
services transferred over time
|
-
|
-
|
627
|
69
|
696
|
|
-
|
-
|
1,075
|
575
|
1,650
|
Assessments
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
113
|
-
|
61
|
174
|
Products and
services transferred over time
|
-
|
918
|
-
|
372
|
1,290
|
|
-
|
1,031
|
-
|
433
|
1,464
|
Services²
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
-
|
86
|
86
|
Products and
services transferred over time
|
586
|
-
|
16
|
67
|
669
|
|
586
|
-
|
16
|
153
|
755
|
|
|
|
|
|
|
Total
sales
|
586
|
1,031
|
1,091
|
1,161
|
3,869
|
all figures in £ millions
|
Global
Online Learning
|
Global
Assessment
|
North
American Courseware
|
International
|
Enabling
Functions
|
PRH
|
Total
|
2020
|
|||||||
Adjusted operating
profit / (loss)
|
99
|
245
|
190
|
182
|
(404)
|
1
|
313
|
Cost of
major restructuring
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Intangible
charges
|
(29)
|
(36)
|
-
|
(15)
|
-
|
-
|
(80)
|
Other
net gains and losses
|
-
|
-
|
3
|
(5)
|
-
|
180
|
178
|
Operating
profit / (loss)
|
70
|
209
|
193
|
162
|
(404)
|
181
|
411
|
|
|
|
|
|
|
|
|
2019
|
|||||||
Adjusted operating
profit / (loss)
|
84
|
351
|
231
|
299
|
(449)
|
65
|
581
|
Cost of
major restructuring
|
-
|
(7)
|
(51)
|
(24)
|
(75)
|
(2)
|
(159)
|
Intangible
charges
|
(35)
|
(27)
|
-
|
(89)
|
-
|
(12)
|
(163)
|
Other
net gains and losses
|
-
|
-
|
13
|
3
|
-
|
-
|
16
|
Operating
profit / (loss)
|
49
|
317
|
193
|
189
|
(524)
|
51
|
275
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Net
interest payable
|
|
(61)
|
(41)
|
Net
finance income in respect of retirement benefits
|
|
6
|
13
|
Fair
value re-measurement of disposal proceeds
|
|
26
|
-
|
Net
foreign exchange losses
|
|
(6)
|
(5)
|
Derivatives not in
a hedge relationship
|
|
(22)
|
(10)
|
Net
finance costs
|
|
(57)
|
(43)
|
|
|
|
|
Analysed
as:
|
|
|
|
Finance
costs
|
|
(107)
|
(84)
|
Finance
income
|
|
50
|
41
|
Net
finance costs
|
|
(57)
|
(43)
|
|
|
|
|
Analysed
as:
|
|
|
|
Net
interest payable reflected in adjusted earnings
|
|
(61)
|
(41)
|
Other
net finance income / (costs)
|
|
4
|
(2)
|
Net
finance costs
|
|
(57)
|
(43)
|
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Profit
before tax
|
|
354
|
232
|
Cost of
major restructuring
|
2
|
-
|
159
|
Other
net gains and losses
|
2
|
(178)
|
(16)
|
Intangible
charges
|
2
|
80
|
163
|
Other
net finance (income) / costs
|
3
|
(4)
|
2
|
Adjusted
profit before tax
|
|
252
|
540
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Income
tax (charge) / benefit
|
|
(44)
|
34
|
Tax
benefit on cost of major restructuring
|
|
-
|
(35)
|
Tax
charge / (benefit) on other net gains and losses
|
|
3
|
(68)
|
Tax
benefit on intangible charges
|
|
(22)
|
(48)
|
Tax
charge on other net finance costs
|
|
4
|
-
|
Tax
amortisation benefit on goodwill and intangibles
|
|
24
|
28
|
Adjusted
income tax charge
|
|
(35)
|
(89)
|
|
|
|
|
Tax
rate reflected in statutory earnings
|
|
12.5%
|
(14.7)%
|
Tax
rate reflected in adjusted earnings
|
|
13.7%
|
16.5
%
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Earnings for the
year
|
|
310
|
266
|
Non-controlling
interest
|
|
-
|
(2)
|
Earnings
attributable to equity holders
|
|
310
|
264
|
|
|
|
|
|
|
|
|
Weighted average
number of shares (millions)
|
|
755.4
|
777.0
|
Effect
of dilutive share options (millions)
|
|
0.0
|
0.5
|
Weighted average
number of shares (millions) for diluted earnings
|
|
755.4
|
777.5
|
|
|
|
|
|
|
|
|
Earnings per share (in pence per
share)
|
|
|
|
Basic
|
|
41.0p
|
34.0p
|
Diluted
|
|
41.0p
|
34.0p
|
|
|
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
Statutory
income statement
|
Cost
of
major
restructuring
|
Other
net
gains and losses
|
Intangible
charges
|
Other
net finance costs
|
Tax
amortisation benefit
|
Adjusted
income
statement
|
|
|
|
|
|
|
|
|
|
2020
|
||||||||
Operating
profit
|
2
|
411
|
-
|
(178)
|
80
|
-
|
-
|
313
|
Net
finance costs
|
3
|
(57)
|
-
|
-
|
-
|
(4)
|
-
|
(61)
|
Profit
before tax
|
4
|
354
|
-
|
(178)
|
80
|
(4)
|
-
|
252
|
Income
tax
|
5
|
(44)
|
-
|
3
|
(22)
|
4
|
24
|
(35)
|
Profit
for the year
|
|
310
|
-
|
(175)
|
58
|
-
|
24
|
217
|
Non-controlling
interest
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Earnings
|
|
310
|
-
|
(175)
|
58
|
-
|
24
|
217
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares (millions)
|
|
|
755.4
|
|||||
Weighted
average number of shares (millions) for diluted
earnings
|
|
|
755.4
|
|||||
|
|
|
|
|||||
Adjusted
earnings per share (basic)
|
|
|
28.7p
|
|||||
Adjusted
earnings per share (diluted)
|
|
|
28.7p
|
|
|
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
Statutory
income statement
|
Cost
of
major
restructuring
|
Other
net
gains and losses
|
Intangible
charges
|
Other
net finance costs
|
Tax
amortisation benefit
|
Adjusted
income
statement
|
|
|
|
|
|
|
|
|
|
2019
|
||||||||
Operating
profit
|
2
|
275
|
159
|
(16)
|
163
|
-
|
-
|
581
|
Net
finance costs
|
3
|
(43)
|
-
|
-
|
-
|
2
|
-
|
(41)
|
Profit
before tax
|
4
|
232
|
159
|
(16)
|
163
|
2
|
-
|
540
|
Income
tax
|
5
|
34
|
(35)
|
(68)
|
(48)
|
-
|
28
|
(89)
|
Profit
for the year
|
|
266
|
124
|
(84)
|
115
|
2
|
28
|
451
|
Non-controlling
interest
|
|
(2)
|
-
|
-
|
-
|
-
|
-
|
(2)
|
Earnings
|
|
264
|
124
|
(84)
|
115
|
2
|
28
|
449
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares (millions)
|
|
|
777.0
|
|||||
Weighted
average number of shares (millions) for diluted
earnings
|
|
|
777.5
|
|||||
|
|
|
|
|||||
Adjusted
earnings per share (basic)
|
|
|
57.8p
|
|||||
Adjusted
earnings per share (diluted)
|
|
|
57.7p
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Amounts
recognised as distributions to equity shareholders in the
year
|
|
146
|
147
|
|
|
|
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Average
rate for profits
|
|
1.28
|
1.28
|
Year
end rate
|
|
1.37
|
1.32
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
48
|
-
|
Investments
in joint ventures and associates
|
|
-
|
397
|
Non-current
assets
|
|
48
|
397
|
|
|
|
|
Trade
and other receivables
|
|
6
|
-
|
Cash
and cash equivalents
|
|
19
|
-
|
Current
assets
|
|
25
|
-
|
|
|
|
|
Total
assets
|
|
73
|
397
|
|
|
|
|
Financial
liabilities - borrowings
|
|
(66)
|
-
|
Non-current
liabilities
|
|
(66)
|
-
|
|
|
|
|
Trade
and other liabilities
|
|
(5)
|
-
|
Financial
liabilities - borrowings
|
|
(3)
|
|
Current
liabilities
|
|
(8)
|
-
|
|
|
|
|
Total
liabilities
|
|
(74)
|
-
|
|
|
|
|
Net
(liabilities) / assets
|
|
(1)
|
397
|
|
|
|
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Goodwill
|
|
2,094
|
2,139
|
Other
intangibles
|
|
648
|
761
|
Non-current
intangible assets
|
|
2,742
|
2,900
|
|
Headroom at 31
December 2020
|
Discount
rate
|
Discount rate for
zero headroom
|
Perpetuity
growth
rate
|
Perpetuity
growth
rate for
zero
headroom
|
Contribution*
reduction p.a. for
zero headroom
|
all figures in £ millions
|
||||||
OPM
|
£176m
|
9.5%
|
11.4%
|
2.0%
|
0.3%
|
£13m
|
North
American Courseware
|
£424m
|
9.5%
|
10.7%
|
2.0%
|
1.0%
|
£32m
|
Brazil
|
£42m
|
13.6%
|
16.2%
|
3.5%
|
1.5%
|
£5m
|
Other
International
|
£368m
|
9.3%
|
10.5%
|
2.2%
|
1.3%
|
£27m
|
|
|
|
|
|
|
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
Trade
receivables
|
|
795
|
903
|
Royalty
advances
|
|
2
|
4
|
Prepayments
|
|
189
|
138
|
Investment in
finance lease receivable
|
|
18
|
25
|
Accrued
income
|
|
12
|
11
|
Other
receivables
|
|
102
|
194
|
|
|
1,118
|
1,275
|
Non-current
|
|
|
|
Trade
receivables
|
|
8
|
15
|
Royalty
advances
|
|
3
|
-
|
Prepayments
|
|
13
|
7
|
Investment in
finance lease receivable
|
|
112
|
171
|
Accrued
income
|
|
1
|
5
|
Other
receivables
|
|
86
|
115
|
|
|
223
|
313
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Within
due date
|
|
668
|
654
|
Up to
three months past due date
|
|
70
|
155
|
Three
to six months past due date
|
|
11
|
35
|
Six to
nine months past due date
|
|
23
|
9
|
Nine to
12 months past due date
|
|
7
|
14
|
More
than 12 months past due date
|
|
24
|
51
|
Trade
receivables
|
|
803
|
918
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
(340)
|
(358)
|
Sales
return liability
|
|
(86)
|
(122)
|
Accruals
|
|
(290)
|
(295)
|
Deferred
income
|
|
(356)
|
(360)
|
Other
liabilities
|
|
(204)
|
(229)
|
Trade
and other liabilities
|
|
(1,276)
|
(1,364)
|
|
|
|
|
Analysed
as:
|
|
|
|
Trade
and other liabilities - current
|
|
(1,196)
|
(1,278)
|
Other
liabilities - non-current
|
|
(80)
|
(86)
|
Total
trade and other liabilities
|
|
(1,276)
|
(1,364)
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
5
|
5
|
Working
in progress
|
|
2
|
2
|
Finished
goods
|
|
116
|
155
|
Returns
asset
|
|
6
|
7
|
Inventories
|
|
129
|
169
|
|
|
|
|
|
all figures in £ millions
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
-
|
(101)
|
Investments
in joint ventures and associates
|
|
|
(418)
|
-
|
Intangible
assets - pre-publication
|
|
|
-
|
(238)
|
Inventories
|
|
|
-
|
(64)
|
Trade
and other receivables
|
|
|
-
|
(70)
|
Cash
and cash equivalents (excluding overdrafts)
|
|
|
-
|
(104)
|
Net
deferred income tax liabilities
|
|
|
-
|
(100)
|
Trade and other liabilities
|
|
|
-
|
520
|
Cumulative translation adjustment
|
|
|
70
|
(4)
|
Net assets disposed
|
|
|
(348)
|
(161)
|
|
|
|
|
|
Cash
proceeds
|
|
|
531
|
20
|
Deferred
proceeds
|
|
|
-
|
180
|
Costs
of disposal
|
|
|
1
|
(23)
|
Gain on disposal
|
|
|
184
|
16
|
|
|
|
|
|
Cash flow from disposals
|
|
|
|
|
Proceeds
- current year disposals
|
|
|
531
|
20
|
Proceeds
- prior year disposals
|
|
|
105
|
-
|
Cash
and cash equivalents disposed
|
|
|
-
|
(104)
|
Costs
and other disposal liabilities paid
|
|
|
(5)
|
(17)
|
Net cash inflow / (outflow) from disposals
|
|
|
631
|
(101)
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
Derivative
financial instruments
|
|
45
|
29
|
Trade
and other receivables - investment in finance lease
|
|
112
|
171
|
Current
assets
|
|
|
|
Derivative
financial instruments
|
|
18
|
25
|
Trade
and other receivables - investment in finance lease
|
|
18
|
25
|
Cash
and cash equivalents (excluding overdrafts)
|
|
1,116
|
437
|
Non-current
liabilities
|
|
|
|
Borrowings
|
|
(1,463)
|
(1,572)
|
Derivative
financial instruments
|
|
(40)
|
(24)
|
Current
liabilities
|
|
|
|
Borrowings
|
|
(257)
|
(92)
|
Derivative
financial instruments
|
|
(12)
|
(15)
|
Net
debt
|
|
(463)
|
(1,016)
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Reconciliation
of profit for the year to net cash generated from
operations
|
|
|
|
|
|
|
|
Profit
for the year
|
|
310
|
266
|
Income
tax
|
|
44
|
(34)
|
Depreciation,
amortisation and impairment charges
|
|
317
|
389
|
Net
profit on disposal of businesses
|
|
(184)
|
(16)
|
Other
net gains and losses
|
|
6
|
-
|
Net
loss on disposal of fixed assets
|
|
2
|
7
|
Net
profit on disposal of right of use assets including transfers to
investment in finance lease receivable
|
|
(6)
|
(4)
|
Net
finance costs
|
|
57
|
43
|
Share
of results of joint ventures and associates
|
|
(5)
|
(54)
|
Net
foreign exchange adjustment
|
|
(34)
|
(21)
|
Investment
income
|
|
-
|
(2)
|
Share-based payment
costs
|
|
29
|
25
|
Pre-publication
|
|
(56)
|
(55)
|
Inventories
|
|
35
|
(20)
|
Trade
and other receivables
|
|
(1)
|
59
|
Trade
and other liabilities
|
|
(26)
|
(157)
|
Retirement benefit
obligations
|
|
(1)
|
5
|
Provisions for
other liabilities and charges
|
|
(37)
|
49
|
Net
cash generated from operations
|
|
450
|
480
|
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Reconciliation
of net cash generated from operations to closing net
debt
|
|
|
|
|
|
|
|
Net
cash generated from operations
|
|
450
|
480
|
Dividends from
joint ventures and associates
|
|
4
|
64
|
Purchase of
PPE
|
|
(53)
|
(55)
|
Addition of new
right-of-use lease assets
|
|
(61)
|
(64)
|
Proceeds from sale
of PPE
|
|
-
|
1
|
Net
disposal of right-of-use lease assets including transfers to/from
investment in finance lease receivable
|
|
18
|
17
|
Purchase of
intangible assets
|
|
(81)
|
(138)
|
Investment
income
|
|
-
|
2
|
Add
back: net costs paid for major restructuring
|
|
38
|
111
|
Operating
cash flow
|
|
315
|
418
|
Operating tax
paid
|
|
(10)
|
(9)
|
Net
operating finance costs paid
|
|
(50)
|
(64)
|
Operating
free cash flow
|
|
255
|
345
|
Non-operating tax
received / (paid)
|
|
12
|
(21)
|
Net
costs paid for major restructuring
|
|
(38)
|
(111)
|
Free
cash flow
|
|
229
|
213
|
Dividends paid
(including to non-controlling interest)
|
|
(147)
|
(148)
|
Net
movement of funds from operations
|
|
82
|
65
|
Acquisitions and
disposals
|
|
619
|
(193)
|
Loans
repaid / (advanced)
|
|
48
|
(49)
|
Proceeds from issue
of ordinary shares
|
|
6
|
7
|
Buyback
of equity
|
|
(176)
|
-
|
Purchase of
treasury shares
|
|
(6)
|
(52)
|
Other
movements on financial instruments
|
|
(29)
|
(9)
|
Net
movement of funds
|
|
544
|
(231)
|
Exchange movements
on net debt
|
|
9
|
24
|
Movement
in net debt
|
|
553
|
(207)
|
Opening
net debt
|
|
(1,016)
|
(143)
|
Adjustment on
initial application of IFRS 16
|
|
-
|
(666)
|
Closing
net debt
|
16
|
(463)
|
(1,016)
|
|
PEARSON
plc
|
|
|
Date: 8
March 2021
|
|
|
By: /s/
NATALIE WHITE
|
|
|
|
------------------------------------
|
|
Natalie
White
|
|
Deputy
Company Secretary
|