Pearson PLC 6-K, filed Jul 29, 2024
Pearson PLC (PSO)
6-K
2024-07-29
For: 2024-07-29
View Original
Added on
April 08, 2026
About this 6-K
Pearson PLC filed this 6-K on July 29, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of July
2024
PEARSON plc
(Exact
name of registrant as specified in its charter)
N/A
(Translation
of registrant's name into English)
80 Strand
London, England WC2R 0RL
44-20-7010-2000
(Address
of principal executive office)
Indicate
by check mark whether the Registrant files or will file annual
reports
under
cover of Form 20-F or Form 40-F:
Form
20-F
X
Form 40-F
Indicate
by check mark whether the Registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934
Yes
No X
Pearson Interim Results for the six months to 30th June
2024 (Unaudited)
|
29th July
2024
|
Solid H1 financial performance; No change to 2024 and 2025
guidance; Beyond 2025, expect to grow at mid-single digits with
expanding adjusted operating margins
|
Financial
Highlights
|
£m
|
H1 2024
|
H1
2023
|
|
£m
|
H1 2024
|
H1
2023
|
|
Business performance
|
|
|
|
Statutory results
|
|
|
|
Sales
|
1,754
|
1,879
|
|
Sales
|
1,754
|
1,879
|
|
Adjusted
operating profit
|
250
|
250
|
|
Operating
profit
|
219
|
219
|
|
Operating
cash flow
|
129
|
79
|
|
Profit
for the period
|
158
|
187
|
|
Free
cash flow
|
27
|
(50)
|
|
Net
cash generated from operations
|
185
|
106
|
|
Adjusted
earnings per share
|
25.6p
|
25.6p
|
|
Basic
earnings per share
|
23.1p
|
26.1p
|
Highlights
|
●
|
Underlying Group sales growth1 of
2%, excluding OPM2 and
the Strategic Review3 businesses
with each segment performing broadly in line with our
expectations.
|
|
●
|
Underlying adjusted operating profit growth1 of 4% to
£250m.
|
|
●
|
Strong free cash flow performance up £77m to
£27m.
|
|
●
|
£500m share buyback substantially complete and raised interim
dividend by 6%, while balance sheet remains robust.
|
|
●
|
Remain on track to deliver on FY24 expectations and reiterate
guidance out to 2025.
|
|
●
|
Beyond 2025, Pearson is positioned to deliver mid-single digit
underlying sales CAGR and sustained margin improvement that will
equate to an average increase of 40 basis points per annum by
continuing to drive performance in the core business, executing
synergies and expanding into adjacent markets.
|
Omar Abbosh, Pearson's Chief
Executive, said:
"Since joining Pearson at the start of the year, I have led a
comprehensive review of our business and the markets in which we
operate. This process has only reinforced my conviction in the
potential of Pearson and the vital role we play in helping people
realise the life they imagine through learning. Significant
demographic shifts and rapid advances in AI will be important
drivers of growth in education and work over the coming years, and
this plays to Pearson's strengths as a trusted provider of learning
and assessment services.
We are implementing plans across all of our businesses that will
see us deliver better products & services with greater
efficiency. We're also focusing on opportunities to progressively
build our presence in materially larger and higher growth markets
in which we are well positioned to succeed, with a particular focus
on early careers and enterprise skilling.
"Our good strategic and financial performance in the first half of
the year sets us up to achieve our guidance for the current year
and for 2025, and we expect thereafter to continue to deliver
attractive growth with progressive improvements in our margins
alongside consistently strong cash generation."
Underlying sales
growth1 of
2%, excluding OPM2 and
Strategic Review3 businesses;
1% in aggregate
|
●
|
Assessment
& Qualifications sales grew 2%, with growth across Pearson VUE,
Clinical, and UK & International Qualifications partially
offset by an expected, small decline in US Student
Assessments.
|
|
●
|
Virtual Schools sales declined 1%, reflecting the previously
announced contract losses for the current academic year. Virtual
Learning sales declined 8% mostly attributable to the final portion
of the OPM ASU contract in the first half of 2023.
|
|
●
|
Higher
Education sales were down 2%, in line with our phasing guidance. We
are seeing encouraging signs of progress in the business with
Spring adoption data indicating small market share
gains.
|
|
●
|
English
Language Learning sales increased 11% due to strong growth in
Institutional as well as growth in Mondly, partially offset by a
sales decline in PTE given market dynamics. The
Argentina FX impact discussed at Q1 has reduced as expected, and
will be immaterial in a full year context.
|
|
●
|
Workforce
Skills sales grew 6%, with strong performances in Vocational
Qualifications, GED and Credly.
|
Adjusted operating
profit1 up
4% on an underlying basis to £250m
|
●
|
Performance
driven by trading alongside net cost phasing and savings, partially
offset by inflation and restructuring charges in Higher Education,
which were weighted to the first half. First half adjusted profit
margin grew to 14% (H1 2023: 13%).
|
|
●
|
Headline
growth was flat reflecting underlying performance, portfolio
changes and currency movements.
|
|
●
|
Adjusted
earnings per share was flat at 25.6p (H1 2023: 25.6p) with higher
net interest costs offset by the reduction in issued shares, both
due to the share buyback.
|
Strong free cash flow with robust balance sheet enabling continued
investment and driving increased shareholder returns
|
●
|
Operating
cash flow was again strong, up £50m to £129m (H1 2023:
£79m) with good underlying fundamentals, as well as some
phasing and FX benefits.
|
|
|
●
|
Free
cash flow was also strong, up £77m to £27m (H1 2023:
(£50)m) given the operating cash performance and no
reorganisation costs this year.
|
|
|
●
|
Our
balance sheet remains robust with net debt of £1.2bn (H1 2023:
£0.9bn), the year on year increase being due to the £500m
share buyback and dividends, partially offset by free cash
flow.
|
|
|
●
|
Proposed
interim dividend of 7.4p (H1 2023: 7.0p) represents an increase of
6%.
|
|
|
●
|
The
previously announced buyback extension to repurchase £200m of
shares continued. As at 30th June 2024
£163m of shares had been repurchased at an average price of
994p per share, representing 81% of the total
programme.
|
|
Continued
operational progress
Operational progress continued across each of our
businesses
|
●
|
In
Assessment & Qualifications, Pearson VUE renewed and won a
number of key contracts, which will support future
growth. Pearson
VUE wins included university entrance tests in the UK and the
teacher licence contract in Georgia, and it renewed key contracts
with the National Council of State Boards of Nursing, the Project
Management Institute, and the American Registry of Radiologic
Technologists. PDRI
also saw good growth, with strong volumes across both the TSA and
United States Airforce contracts.
|
|
●
|
In
Virtual Schools, we have already 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.
|
|
●
|
In
Higher Education, recent
Spring semester market data indicates a small gain in adoption
share, while we also saw 3% growth in core text units, 2% growth in
US digital subscriptions and Inclusive Access growth of 25%.
Pearson+ continued to perform well with 5.0m cumulative registered
users and paid subscriptions for the full academic year increasing
18% to 1.1m. We are seeing good engagement with our AI study tools,
and are on track to extend to a further c.80 titles for Fall back
to school. Pearson will also be launching AI tools for instructors
for the Fall 2024 semester in 25 of our best-selling titles across
business, math, science, and nursing in the US.
|
|
●
|
In
English Language Learning, PTE continued to gain market share,
despite a market which has declined given tightening of policies
around international study and migration across Australia, Canada
and the UK. Given these market dynamics, we expect PTE sales to be
flat to down for the year. Our market share gains in PTE, and the
ramp up for Canada, mean we are well placed for English high stakes
testing market growth, which we expect in the medium term given
demographic projections.
|
|
●
|
In
Workforce Skills, Vishaal Gupta joined Pearson on April
15th to lead the
division, and play a critical role in executing our enterprise
skills strategy.
|
|
●
|
Dave
Treat joined Pearson as Chief Technology Officer on 2nd July 2024.
Dave will report to CEO, Omar Abbosh, and work in close partnership
with Pearson's Chief Product and Chief Information Officers. He
will lead technology innovation and architecture across the
company.
|
|
●
|
Ginny
Cartwright Ziegler joined Pearson, today, 29 July 2024 as Chief
Marketing Officer. Ginny will report to CEO Omar Abbosh and will
lead the next generation of our work in marketing, brand and
communications. Ginny is succeeding Lynne Frank, who has stepped
down from her dual role as Chief Marketing Officer and
Co-President, Direct to Consumer.
|
Positioning
Pearson for sustained growth with continued higher
margins
Through an extensive examination of the business and the markets in
which we operate, we have identified a targeted market expansion
opportunity for Pearson and have updated our strategy to drive
higher performance in the core business and unlock new
synergies
|
●
|
Pearson is in a
strong position today. We are the world's lifelong learning
company, where we are trusted to help individuals realise the life
they imagine through learning. Our five businesses have clear lines
of accountability and improving financial performance, with
particular strength in assessments and verification.
|
|
●
|
We
are leaders today in a c.$15bn subsegment of the U.S. learning
market, and are well positioned to play in a larger, and faster
growing c.$80bn addressable market.
|
|
●
|
The opportunity for
Pearson will be supported by two key secular trends foreseen over
the coming years: shifts in demographic trends and the rapid growth
in the power of AI. The demographic shift will see the baby
boomer generation leave
the workforce, resulting in heightened pressure on talent sourcing,
and the rapid development of increasingly powerful AI models will
significantly change the world of work and skills requirements.
Employers will need to find new pools of talent and continuously
develop and verify the skills of their workforces to keep pace with
and benefit from technology and AI advancements.
|
|
●
|
To
realise the growth opportunity for Pearson we will:
|
|
|
● Drive further
performance from our existing five core businesses to deliver an
improved customer proposition, growth and efficiencies. We have
identified a number of technology enabled initiatives, which we
expect to unlock tens of millions
of savings
over the medium term. Initially these savings will be offset by
restructuring costs, but as these pay back they will enable us to
further invest in growth opportunities.
|
|
|
● Unlock
execution-based synergies across the business units from product
& service bundling, a modern approach to software and product
development, and a focus on strategic partnerships.
|
|
●
|
We
will allocate our investment where we see the best opportunities
for growth and returns: firstly assessments and verifications; then
enterprise skills and early careers.
|
|
●
|
We
will maintain net debt to EBITDA of around 2x, on average over
time, though in the short term we intend to remain below this level
to maintain some investment optionality. Our dividend policy is
progressive and sustainable. At present, we do not plan to extend
our share buyback programme, but are committed to regularly
reviewing this.
|
Outlook
2024 Outlook
reaffirmed4
Group underlying sales growth, adjusted operating profit and tax
outlook for 2024 remain in line with market expectations. As
guided, interest will be c.£45m and free cash flow conversion
95-100%.
In terms of divisional guidance and phasing:
|
●
|
Expect improved growth momentum in the second half of 2024 with the
growth of Higher Education and normalised comparators for the
assessments businesses.
|
|
●
|
In
Assessment & Qualifications, we continue to expect low to
mid-single digit sales growth for the year, with sales growth
weighted to H2.
|
|
●
|
In
Virtual Schools, we continue to expect sales to decline at a
similar rate to 2023, given the previously cited loss of a larger
partner school for the 2024/25 academic year. We expect Virtual
Schools to return to growth in 2025 and beyond.
|
|
●
|
In
Higher Education, we remain confident we will return to growth in
the second half and for the full year. Growth in digital sales will
continue to shift revenue recognition from Q3 to Q4.
|
|
●
|
In
English Language Learning, we continue to expect high single digit
sales growth and growth weighted to the second half given the
outstanding performance in the first half of 2023. The growth will
be driven mainly by Institutional, with PTE being flat to
down.
|
|
●
|
In
Workforce Skills, we expect to achieve high single digit sales
growth.
|
|
●
|
Every
1c movement in £:$ rate equates to approximately £5m
adjusted operating profit impact.
|
2025 Outlook
We continue to expect the Group to achieve mid-single digit
underlying sales 3-year CAGR from 2022 to 2025, excluding OPM and
Strategic Review businesses, and remain on track to achieve our
16-17% adjusted operating profit margin guidance.
Medium Term Outlook
Our future growth and investment focus will lead to mid-single
digit underlying sales CAGR. Through continued operational
improvements, we also expect to deliver sustained margin
improvement that
will equate to an average increase of
40 basis
points per
annum beyond
2025. We will maintain
free cash flow conversion in the region of
90-100% on
average across the period.
Contacts
|
Investor Relations
|
Jo
Russell
Alex
Shore
|
+44 (0)
7785 451 266
+44 (0)
7720 947 853
|
|
|
Gemma
Terry
Brennan
Matthews
|
+44 (0)
7841 363 216
+1
(332) 238-8785
|
|
Media
Teneo
|
Ed
Cropley
|
+44 (0)
7492 949 346
|
|
Pearson
|
Laura
Ewart
|
+44 (0)
7798 846 805
|
|
Results event
|
Pearson's Interim Results presentation will be held today at both
09:30 and 14:00 (BST). If you would like to attend the in-person
session at 09:30, please email amy.plavecky@pearson.com.
Register to join either session virtually here 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 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.
KPIs
|
KPI
|
Objective
|
KPI Measure
|
H1 2024
|
H1 2023
|
|
Digital Growth
|
Drive
digital sales growth
|
OnVUE
volumes
|
1.2m
|
1.5m*
|
|
Higher
Education US digital subscriptions
|
4.5m
|
4.4m+
|
||
|
PTE
volume
|
546k
|
606k
|
||
|
Consumer Engagement
|
Create
engaging and personalised consumer experiences
|
NPS for
Connections Academy
|
+67
|
+67
|
|
NPS for
PTE
|
+57
|
+56
|
||
|
Pearson+
registered users
|
5.0m
|
4.7m
|
||
|
Mondly
paid subscriptions
|
532k
|
473k
|
||
|
Workforce
Skills registered users
|
5.4m
|
5.3m
|
||
|
Product Effectiveness
|
Improve
the effectiveness of our products to deliver better
outcomes
|
PTE
speed of score return
|
1.1
days
|
1.1
days
|
|
VUE
test volumes
|
10.9m
|
10.8m*
|
||
|
VUE
partner retention
|
99.7%
|
98.0%
|
||
|
Workforce
Skills number of enterprise customers
|
1,487
|
1,556
|
||
|
Higher
Education product usage - text units
|
2.1m
|
2.0m
|
*H1 2023 figures have been restated for adjustments made in H2
2023.
+H1 2023 US digital
subscriptions restated from 4.5m to 4.4m due to removal of
non-paying subscribers.
The above table is a subset of our full list of strategic KPIs,
which will be reported on alongside full year results.
For a full list of KPI measure definitions, please refer
to: https://plc.pearson.com/en-GB/purpose/our-targets-kpis
Operational
review
|
£m
|
H1 2024
|
H1
2023
|
Headline
growth
|
CER
growth1
|
Underlying
growth1
|
|
Sales
|
|
|
|
|
|
|
Assessment
& Qualifications
|
811
|
796
|
2%
|
4%
|
2%
|
|
Virtual
Learning
|
254
|
373
|
(32%)
|
(31%)
|
(8%)
|
|
Higher
Education
|
358
|
379
|
(6%)
|
(4%)
|
(2%)
|
|
English
Language Learning
|
188
|
184
|
2%
|
11%
|
11%
|
|
Workforce
Skills
|
143
|
140
|
2%
|
3%
|
6%
|
|
Strategic
review3
|
-
|
7
|
(100%)
|
(100%)
|
(100%)
|
|
Total
|
1,754
|
1,879
|
(7%)
|
(4%)
|
1%
|
|
Total, excluding OPM2 and
Strategic Review3
|
|
|
|
|
2%
|
|
|
|
|
|
|
|
|
Adjusted operating profit/loss
|
|
|
|
|
|
|
Assessment
& Qualifications
|
187
|
174
|
7%
|
10%
|
7%
|
|
Virtual
Learning
|
31
|
47
|
(34%)
|
(32%)
|
(32%)
|
|
Higher
Education
|
(1)
|
(1)
|
0%
|
100%
|
100%
|
|
English
Language Learning
|
4
|
8
|
(50%)
|
38%
|
38%
|
|
Workforce
Skills
|
29
|
21
|
38%
|
33%
|
27%
|
|
Strategic
review3
|
-
|
1
|
(100%)
|
(100%)
|
(100%)
|
|
Total
|
250
|
250
|
0%
|
5%
|
4%
|
1Throughout this announcement:
a) Growth rates are stated on an underlying basis unless otherwise
stated. Underlying growth rates exclude currency movements, and
portfolio changes. b) The 'business performance' measures are
non-GAAP measures and reconciliations to the equivalent statutory
heading under IFRS are included in notes to the attached condensed
consolidated financial statements 2, 3, 4, 6, 7 and 14. c) Constant
exchange rates are calculated by assuming the average FX in the
prior period prevailed through the current
period.
2In 2023, we completed the sale
of the POLS business and as such have removed from underlying
measures throughout. Within this specific measure we exclude our
entire OPM business (POLS and ASU) to aid comparison to guidance.
As expected, there are no sales in the OPM business in
2024.
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 as at 22nd November 2023; organic CER sales growth of 3.7%,
median adjusted operating profit of £621m at £:$ 1.22,
tax rate 24%.
Assessment
& Qualifications
In
Assessment & Qualifications, sales increased 2% on an
underlying basis and 2% on a headline basis. Adjusted operating
profit increased 7% in underlying terms due to operating leverage
on sales growth, and cost phasing and savings partially offset by
inflation and 7% in headline terms due to this, PDRI profit and
currency movements.
Pearson VUE sales were up 4% in underlying terms driven by
favorable mix and value-added services. Test volumes
increased versus the same period last year to 10.9m. PDRI also saw
good growth with strong volumes.
In US Student Assessment, sales decreased 3% in underlying terms
due to reduced scope and phasing of some contracts which will
normalise in the second half.
In Clinical Assessment, sales increased 1% in underlying terms
supported by pricing,
digital product growth and a new product
release.
In UK and International Qualifications, sales increased 7% in
underlying terms driven by volume, pricing and strong International
growth.
Virtual
Learning
Virtual Schools sales were down
1% on an underlying basis, given the previously cited loss of a
larger partner school in the 2023/24 academic
year. In
Virtual Learning, sales decreased 8% on an underlying basis mostly
attributable to the final portion of the OPM ASU contract in the
first half of 2023 and 32% on a headline basis due to currency
movements and the disposal of the OPM business. Adjusted operating
profit declined 32% in underlying terms, as the prior year
comparator benefited from the ASU contract, and decreased 34% in
headline terms due to this and currency
movements.
Higher
Education
In Higher
Education, sales
declined 2% on an underlying basis, in line with our phasing
guidance, and decreased 6% on a headline basis due to this,
currency movements and portfolio changes. Adjusted
operating profit increased in underlying terms driven by cost
savings partially offset by restructuring costs and trading and was
flat in headline terms due to this offset by currency movements and
portfolio changes.
We also saw a strong performance in K-12 with sales growth of 12%,
given strong adoption cycle fundamentals in this market this
year.
English
Language Learning
In
English Language Learning, sales were up 11% on an underlying basis
due to strong growth in Institutional (including hyperinflationary
pricing in Argentina) as well as growth in Mondly, and 2% on a
headline basis due to this offset by currency movements.
Adjusted operating profit increased by 38% in underlying
terms due to increased operating leverage on sales partially offset
by increased investment and decreased 50% in headline terms due to
this and currency movements.
PTE volumes were down 10%, due to declines in the English High
Stakes testing market due to tightening of policies around
international study and migration. PTE has continued to see market
share gains, particularly in India and China, while it also
continues to benefit in the ramp up for Canada.
Within Institutional, performance was strong, with particularly
good growth in Latin America and the Middle
East.
Our Online Self-Study business, Mondly, performed well with paid
subscriptions increasing 12% versus the prior period driven by new
enterprise contracts and DTC users.
Workforce
Skills
In
Workforce Skills, sales were up 6% on an underlying basis and 2% on
a headline basis. Adjusted operating profit increased by 27% in
underlying terms due to trading and cost savings and increased 38%
in headline terms due to this, currency movements and portfolio
changes.
Both the Vocational Qualifications and the Workforce Solutions
businesses grew by 6% in underlying terms.
FINANCIAL REVIEW
Operating
result
Sales
for the six months to 30 June 2024 decreased on a headline basis by
£125m or 7% from £1,879m for the six months to 30 June
2023 to £1,754m for the same period in 2024 and adjusted
operating profit remained at £250m in the first half of 2024
compared to £250m in the first half of 2023 (for a
reconciliation of this measure see note 2 to the condensed
consolidated financial statements).
The
headline basis simply compares the reported results for the six
months to 30 June 2024 with those for the equivalent period in the
prior year. We also present sales and profits on an underlying
basis which excludes the effects of exchange, the effect of
portfolio changes arising from acquisitions and disposals and the
impact of adopting new accounting standards that are not
retrospectively applied, when relevant. Our portfolio change is
calculated by excluding sales and profits made by businesses
disposed in 2023 or 2024 and by ensuring the contribution from
acquisitions is comparable year on year. For prior year
acquisitions, the corresponding pre-acquisition period is excluded
from the current year. Portfolio changes mainly relate to the
disposals of the Group's interest in POLS, Pearson College and our
international courseware local publishing business in India and
businesses within Higher Education in 2023, and the acquisition of
PDRI in 2023.
On
an underlying basis, sales increased by 1% in the first six months
of 2024 compared to the equivalent period in 2023 and adjusted
operating profit increased by 4%. Currency movements decreased
sales by £45m and adjusted operating profit by £12m, and
portfolio changes decreased sales by £93m and increased
adjusted operating profit by £1m. There were no new accounting
standards adopted in the first half of 2024 that impacted sales or
profits.
Adjusted
operating profit includes the results from discontinued operations
when relevant but excludes charges for acquired intangible
amortisation and impairment, acquisition related costs, gains and
losses arising from disposals, the cost of major reorganisation,
when relevant, property charges and one off-costs related to the UK
pension scheme. A summary of these adjustments is included below
and in note 2 to the condensed consolidated financial
statements.
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Operating
profit
|
|
219
|
219
|
498
|
|
Add
back: Intangible charges
|
|
20
|
24
|
48
|
|
Add
back: UK pension discretionary increase
|
|
5
|
-
|
-
|
|
Add
back: Other net gains and losses
|
|
6
|
7
|
16
|
|
Add
back: Property charges
|
|
-
|
-
|
11
|
|
Adjusted
operating profit
|
|
250
|
250
|
573
|
Intangible
amortisation charges to the end of June 2024 were £20m
compared to a charge of £24m in the equivalent period in 2023.
This is due to increased amortisation from recent acquisitions
which is more than offset by a reduction in amortisation from
intangible assets at the end of their useful life and recent
disposals.
UK
pension discretionary increases in 2024 relate to one-off pension
increases awarded to certain cohorts of pensioners in response to
the cost of living crisis.
Other
net gains and losses in 2024 relate to costs related to prior year
acquisitions and disposals, partially offset by a gain on the
partial disposal of our investment in an associate. Other net gains
and losses in 2023 relate largely to the gain on disposal of the
POLS business and a gain resulting from the release of a provision
related to a previous disposal, offset by losses on the disposal of
Pearson College and costs related to disposals and
acquisitions.
Property
charges of £11m in the second half of 2023 relate to
impairments of property assets arising from the impact of updates
in 2023 to assumptions initially made during the 2022 and 2021
reorganisation programmes. There are no such charges in the first
half of 2024.
The
reported operating profit of £219m in the first half of 2024
compares to a profit of £219m in the first half of 2023, with
the disposal of POLS and other businesses in 2023 reducing sales
but having minimal impact on profit, and unfavourable FX movements
and inflation costs being offset by operating leverage on sales and
cost phasing and savings.
Due
to seasonal bias in some of the Group's businesses, Pearson
typically makes a higher proportion of its profits and operating
cash flows in the second half of the year.
Net
finance costs
Net
finance income decreased on a headline basis from income of
£17m in the first half of 2023 to an expense of £7m in
the same period in 2024. The decrease is primarily due to losses on
investments held at fair value through profit and loss (FVTPL)
compared to gains in 2023, a reduction in foreign exchange gains,
increased borrowings and a reduction in returns on cash
deposits.
Net
interest payable reflected in adjusted earnings to 30 June 2024 was
£21m, compared to a payable of £12m in the first half of
2023. The increase is primarily due to increased borrowings and a
reduction in returns on cash deposits.
Net
finance income relating to retirement benefits has been excluded
from our adjusted earnings as we believe the income statement
presentation does not reflect the economic substance of the
underlying assets and liabilities. Also included in the net finance
costs (but not in our adjusted measure) are interest costs relating
to acquisition or disposal transactions, fair value movements on
investments classified as FVTPL foreign exchange and other gains
and losses on derivatives. Interest relating to acquisition or
disposal transactions is excluded from adjusted earnings as it is
considered part of the acquisition cost or disposal proceeds rather
than being reflective of the underlying financing costs of the
Group. Foreign exchange, fair value movements and other gains and
losses are excluded from adjusted earnings as they represent
short-term fluctuations in market value and are subject to
significant volatility. Other gains and losses may not be realised
in due course as it is normally the intention to hold the related
instruments to maturity. Interest on certain tax provisions is
excluded from our adjusted measure in order to mirror the treatment
of the underlying tax item.
In
the period to 30 June 2024, the total of these items excluded from
adjusted earnings was net income of £14m compared to net
income of £29m in the first half of 2023. Net finance income
relating to retirement benefits decreased from £13m in the
first half of 2023 to £11m in 2024 reflecting the comparative
funding position of the plans at the beginning of each year offset
by higher prevailing discount rates. Fair value movements on
investments in unlisted securities are a loss of £8m in the
first half of 2024 compared to a gain of £5m in 2023. For a
reconciliation of the adjusted measure see note 3 to the condensed
consolidated financial statements.
Taxation
The reported tax on statutory earnings for the six months to 30
June 2024 was a charge of £54m compared to a charge of
£49m in the period to 30 June 2023. This equates to an
effective tax rate of 25.5% (2023: 20.8%). The higher effective tax
rate compared to the prior period is primarily due to a tax credit
being recognised on the disposal of the POLS business in 2023 which
is not recurring in 2024.
The total adjusted tax charge for the period was £54m (2023:
£54m), corresponding to an effective tax rate on adjusted
profit before tax of 23.6% (2023: 22.7%). For a reconciliation of
the adjusted measure see note 4 to the condensed consolidated
financial statements.
In the first half of 2024, there was a net tax payment of £69m
(2023: £59m), principally relating to the US and the
UK.
Other
comprehensive income
Included
in other comprehensive income are the net exchange differences on
translation of foreign operations. The loss on translation of
£9m at 30 June 2024 compares to a loss at 30 June 2023 of
£166m. The loss in 2024 arises from an overall weakening of
the majority of currencies to which the Group is exposed, partially
offset by a slight strengthening of the US dollar. A significant
proportion of the Group's operations are based in the US and the US
dollar closing rate at 30 June 2024 was £1:$1.26 compared to
the opening rate of £1:$1.27. At the end of June 2023, the US
dollar rate was £1:$1.27 compared to the opening rate of
£1:$1.21.
Also
included in other comprehensive income at 30 June 2024 is an
actuarial gain of £1m in relation to retirement benefit
obligations. The gain arises largely from losses on assets and
experience losses, offset by a decrease in liabilities driven by
higher discount rates. The gain in 2024 compares to an actuarial
loss at 30 June 2023 of £27m.
Fair
value losses of £4m (2023: gains of £2m) have been
recognised in other comprehensive income and relate to movements in
the value of investments in unlisted securities held at fair value
through other comprehensive income (FVOCI).
In
2023, a gain of £122m was recycled from the currency
translation reserve to the income statement in relation to the
disposal of the POLS business.
Cash
flow and working capital
Our
operating cash flow measure is used to align cash flows with our
adjusted profit measures (see note 14 to the condensed consolidated
financial statements). Operating cash flow increased on a headline
basis by £50m from an inflow of £79m in the first half of
2023 to an inflow of £129m in the first half of 2024. The
increase is largely explained by reduced capital expenditure on
product development, property, plant, equipment and software and FX
as well as favourable working capital movements, some of which
arise from portfolio changes.
The
equivalent statutory measure, net cash generated from operations,
was an inflow of £185m in 2024 compared to an inflow of
£106m in 2023. Compared to operating cash flow, this measure
includes reorganisation costs but does not include regular
dividends from associates. It also excludes capital expenditure on
property, plant, equipment and software, and additions to right of
use assets as well as disposal proceeds from the sale of property,
plant, equipment and right of use assets (including the impacts of
transfers to/from investment in finance lease receivable). In the
first half of 2024, reorganisation cash outflow was £5m
compared to £46m in the same period in 2023.
In
the first half of 2024, there was an overall increase of £23m
in cash and cash equivalents from £309m at the end of 2023 to
£332m at 30 June 2024. The increase in 2024 is primarily due
to the cash inflow from operations of £185m and proceeds from
borrowings of £495m offset by payments for the acquisition of
subsidiaries of £38m, share buyback programme of £278m,
dividends paid of £107m, own share purchases of £37m, tax
paid of £69m, net interest payments of £28m, capital
expenditure on property, plant, equipment and software of £58m
and payments of lease liabilities of £39m.
The
movement on trade and other liabilities is driven by the payment of
deferred consideration relating to previous acquisitions, the net
movement on the accrual for share buyback programmes as well as
movements in working capital balances.
Liquidity
and capital resources
The
Group's net debt increased from £744m at the end of 2023 to
£1,177m at the end of June 2024. The increase is largely due
to free cash flow which is more than offset by the share buyback
programme and dividend payments.
At
30 June 2024, the Group had drawn £495m on its Revolving
Credit Facility.
At
30 June 2024, the Group had approximately £0.5bn in total
liquidity immediately available from cash and its Revolving Credit
Facility maturing February 2027. In assessing the Group's ability
to continue as a going concern for the period until 31 December
2025, the Board analysed a variety of downside scenarios, including
a severe but plausible scenario, where the Group is impacted by a
combination of all principal risks from H2 2024, as well as reverse
stress testing to identify what would be required to either breach
covenants or run out of liquidity. The severe but plausible
scenario modelled a severe reduction in revenue, profit and
operating cash flow from risks continuing throughout 2025. During
the period under evaluation, the Group has a €300m bond
(converted to c£260m) due for repayment in May 2025 and the
model assumes that this is refinanced with a similar sized bond in
2024. In all scenarios, the Group would maintain comfortable
liquidity headroom and sufficient headroom against covenant
requirements during the period under assessment even before
modelling the mitigating effect of actions that management would
take in the event that these downside risks were to
crystallise.
Post-retirement
benefits
Pearson
operates a variety of pension and post-retirement plans. The UK
Group pension plan has by far the largest defined benefit section.
This plan has a strong funding position and a surplus with a very
substantially de-risked investment portfolio including
approximately 50% of the assets in buy-in contracts. We have some
smaller defined benefit sections in the US and Canada but, outside
the UK, most of the companies operate defined contribution
plans.
The
charge to profit in respect of worldwide pensions and retirement
benefits amounted to £30m in the period to 30 June 2024 (30
June 2023: £23m) of which a charge of £41m (30 June 2023:
£36m) was reported in operating profit and income of £11m
(30 June 2023: £13m) was reported against other net finance
costs. In the period to 30 June 2024, a charge of £5m (30 June
2023: nil) related to one-off discretionary pension increases has
been excluded from adjusted operating profit.
The
overall surplus on UK Group pension plans of £491m at the end
of 2023 has decreased to a surplus of £485m at the end of June
2024. The decrease has arisen principally due to asset returns
being lower than expected, an increase in long-term inflation
expectations, and inflation over the period being slightly higher
than was expected at the beginning of the year. In total, our
worldwide net position in respect of pensions and other
post-retirement benefits decreased from a net asset of £455m
at the end of 2023 to a net asset of £449m at the end of June
2024.
Businesses
acquired
The
Group made no acquisitions of subsidiaries in H1 2024. The cash
outflow in H1 2024 relating to acquisitions of subsidiaries was
£38m, arising from the payment of deferred consideration in
respect of prior year acquisitions, mainly Credly and Mondly, which
were acquired in 2022. In addition, there was a cash outflow
relating to investments of £7m.
The
cash outflow in the first half of 2023 relating to acquisitions of
subsidiaries was £173m arising primarily from the acquisition
of PDRI. In addition, there was a cash outflow relating to the
acquisition of associates of £5m and investments of
£6m.
Businesses
disposed
The
Group made no disposals of subsidiaries in H1 2024. In 2024, the
cash outflow relating to costs paid in relation to the disposal of
businesses in prior years was £6m. The cash outflow in the
first half of 2023 relating to the disposal of businesses was
£19m mainly relating to the disposal of POLS and Pearson
College.
In addition, the
Group sold part of its investment in its associate, Academy of Pop,
for £4m (which has not yet been paid), resulting in a gain of
£2m. The remaining stake is now classified as a financial
investment.
Dividend
The
dividend accounted for in the six months to 30 June 2024 is the
final dividend in respect of 2023 of 15.7p. An interim dividend for
2024 of 7.4p was declared by the Board in July 2024 and will be
accounted for in the second half of 2024.
The
interim dividend will be paid on 16 September 2024 to shareholders
who are on the register of members at close of business on 9 August
2024 (the Record Date). Shareholders may elect to reinvest their
dividend in the Dividend Reinvestment Plan (DRIP). The last date
for receipt of DRIP elections and revocations will be 23 August
2024. A Dividend Reinvestment Plan (DRIP) is provided by our
Registrar, Computershare Investor Services. The DRIP enables the
Company's shareholders to elect to have their cash dividend
payments used to purchase the Company's shares. More information
can be found at www.computershare.com/Investor
Share
buyback
On
20 September 2023, the Board approved a £300m share buyback
programme in order to return capital to shareholders, with a
further £200m extension being announced by the Group on 1
March 2024. In the first half of 2024, c28m shares have been bought
back at a cash cost of £278m. The £300m programme
completed in March 2024 and as at 30 June 2024 the £200m
programme was c80% complete. A £40m liability for the
remainder of the £200m programme plus related costs has been
accrued as at 30 June 2024. At 31 December 2023, a liability of
£118m was accrued in relation to the £300m share buyback
programme. The nominal value of the cancelled shares of £7m
has been transferred to the capital redemption reserve. In the
period from 1 to 26 July 2024, an additional c2m of shares have
been repurchased.
Principal
risks and uncertainties
In
the 2023 Annual Report and Accounts, we set out our assessment of
the principal risk issues that face the business under the
categories: accreditation risk, artificial intelligence, content
and channel risks, capability risk, competitive marketplace,
customer expectations, portfolio change, and reputation and
responsibility.
We
also noted in our 2023 Annual Report and Accounts that the Group
continues to closely monitor significant near-term and emerging
risks which have been identified as climate transition, inflation
and interest rates, recession, supply chain, tax and sanctions and
geopolitics.
The principal risks and uncertainties are summarised below. The
selection of principal risks will be reviewed in the second half of
the year alongside the Group's long-term strategic planning
process. However,
these risks have not changed materially from those detailed in the
2023 Annual Report.
Accreditation Risk
Termination
or modification of accreditation due to policy changes or failure
to maintain the accreditation of our courses and assessments by
states, countries, and professional associations, reducing their
eligibility for funding or attractiveness to learners.
Artificial Intelligence, Content and Channel Risk
The
risk that Pearson's intellectual property is harder to protect as a
result of increased content generation through artificial
intelligence and that Pearson's content and method of delivery
(channel) is, or is perceived to be, insufficiently differentiated
in terms of outcomes or learner experience.
Capability Risk
Inability
to meet our contractual obligations or to transform as required by
our strategy due to infrastructure, system or organisational
challenges.
Competitive Marketplace
Significant
changes in our target markets could make those markets less
attractive. This could be due to significant changes in demand or
in supply which impact the addressable market, market share and
margins (e.g. changes in enrolments, in-sourcing of learning and
assessment by customers, open educational resources, a shift from
in person to virtual or vice versa or innovations in areas such as
generative AI).
Customer Expectations
Rising
end-user expectations increase the need to offer differentiated
value propositions, risking margin pressure to meet these
expectations and potential loss of sales if not
successful.
Portfolio Change
Failure
to effectively execute desired or required portfolio changes to
promote scale or capability and increase focus on key divisional
and geographic markets, due to either execution failures or
inability to secure transactions at appropriate
valuations.
Reputation and Responsibility
The
risk of serious reputational harm through failure to meet
obligations to key stakeholders. These include legal and regulatory
requirements, the possibility of serious unethical behaviour and
serious breaches of customer trust.
CONDENSED
CONSOLIDATED INCOME STATEMENT
for
the period ended 30 June 2024
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
2
|
1,754
|
1,879
|
3,674
|
|
Cost of
goods sold
|
|
(875)
|
(960)
|
(1,839)
|
|
Gross
profit
|
|
879
|
919
|
1,835
|
|
|
|
|
|
|
|
Operating
expenses
|
|
(654)
|
(688)
|
(1,322)
|
|
Other
net gains and losses
|
2
|
(6)
|
(7)
|
(16)
|
|
Share
of results of joint ventures and associates
|
|
-
|
(5)
|
1
|
|
Operating
profit
|
2
|
219
|
219
|
498
|
|
|
|
|
|
|
|
Finance
costs
|
3
|
(57)
|
(36)
|
(81)
|
|
Finance
income
|
3
|
50
|
53
|
76
|
|
Profit
before tax
|
|
212
|
236
|
493
|
|
Income
tax
|
4
|
(54)
|
(49)
|
(113)
|
|
Profit
for the period
|
|
158
|
187
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
Equity
holders of the company
|
|
157
|
186
|
378
|
|
Non-controlling
interest
|
|
1
|
1
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from continuing
operations (in
pence per share)
|
|
|
|
|
|
Basic
|
5
|
23.1p
|
26.1p
|
53.1p
|
|
Diluted
|
5
|
22.8p
|
25.9p
|
52.7p
|
|
|
|
|
|
|
The
accompanying notes to the condensed consolidated financial
statements form an integral part of the financial
information.
CONDENSED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for
the period ended 30 June 2024
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Profit
for the period
|
|
158
|
187
|
380
|
|
|
|
|
|
|
|
Items
that may be reclassified to the income statement
|
|
|
|
|
|
Net
exchange differences on translation of foreign
operations
|
|
(9)
|
(166)
|
(177)
|
|
Currency
translation adjustment on disposals
|
|
-
|
(122)
|
(122)
|
|
Attributable
tax
|
|
-
|
1
|
-
|
|
|
|
|
|
|
|
Items
that are not reclassified to the income statement
|
|
|
|
|
|
Fair
value gain on other financial assets
|
|
(4)
|
2
|
1
|
|
Attributable
tax
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Remeasurement of
retirement benefit obligations
|
|
1
|
(27)
|
(85)
|
|
Attributable
tax
|
|
-
|
7
|
20
|
|
Other
comprehensive expense
|
|
(12)
|
(305)
|
(363)
|
|
Total
comprehensive income / (expense)
|
|
146
|
(118)
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
Equity
holders of the company
|
|
145
|
(118)
|
16
|
|
Non-controlling
interest
|
|
1
|
-
|
1
|
CONDENSED
CONSOLIDATED BALANCE SHEET
as
at 30 June 2024
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
207
|
226
|
217
|
|
Investment
property
|
|
75
|
60
|
79
|
|
Intangible
assets
|
9
|
3,050
|
3,126
|
3,091
|
|
Investments
in joint ventures and associates
|
|
11
|
17
|
22
|
|
Deferred
income tax assets
|
|
34
|
27
|
35
|
|
Financial
assets - derivative financial instruments
|
|
4
|
41
|
32
|
|
Retirement
benefit assets
|
|
491
|
554
|
499
|
|
Other
financial assets
|
|
141
|
138
|
143
|
|
Income
tax assets
|
|
41
|
41
|
41
|
|
Trade
and other receivables
|
|
134
|
138
|
135
|
|
Non-current assets
|
|
4,188
|
4,368
|
4,294
|
|
|
|
|
|
|
|
Intangible
assets - product development
|
|
941
|
947
|
947
|
|
Inventories
|
|
89
|
110
|
91
|
|
Trade
and other receivables
|
|
1,081
|
1,060
|
1,050
|
|
Financial
assets - derivative financial instruments
|
|
55
|
17
|
16
|
|
Current
income tax assets
|
|
23
|
10
|
15
|
|
Cash
and cash equivalents (excluding overdrafts)
|
|
332
|
355
|
312
|
|
Current assets
|
|
2,521
|
2,499
|
2,431
|
|
|
|
|
|
|
|
Assets
classified as held for sale
|
|
-
|
15
|
2
|
|
Total assets
|
|
6,709
|
6,882
|
6,727
|
|
|
|
|
|
|
|
Financial
liabilities - borrowings
|
|
(1,300)
|
(1,308)
|
(1,094)
|
|
Financial
liabilities - derivative financial instruments
|
|
(3)
|
(43)
|
(38)
|
|
Deferred
income tax liabilities
|
|
(56)
|
(31)
|
(46)
|
|
Retirement
benefit obligations
|
|
(42)
|
(54)
|
(44)
|
|
Provisions
for other liabilities and charges
|
|
(14)
|
(14)
|
(15)
|
|
Other
liabilities
|
|
(65)
|
(80)
|
(98)
|
|
Non-current liabilities
|
|
(1,480)
|
(1,530)
|
(1,335)
|
|
|
|
|
|
|
|
Trade
and other liabilities
|
|
(1,036)
|
(1,020)
|
(1,275)
|
|
Financial
liabilities - borrowings
|
|
(313)
|
(75)
|
(67)
|
|
Financial
liabilities - derivative financial instruments
|
|
(44)
|
(5)
|
(5)
|
|
Current
income tax liabilities
|
|
(15)
|
(27)
|
(32)
|
|
Provisions
for other liabilities and charges
|
|
(10)
|
(37)
|
(25)
|
|
Current liabilities
|
|
(1,418)
|
(1,164)
|
(1,404)
|
|
|
|
|
|
|
|
Liabilities
classified as held for sale
|
|
-
|
-
|
-
|
|
Total liabilities
|
|
(2,898)
|
(2,694)
|
(2,739)
|
|
|
|
|
|
|
|
Net assets
|
|
3,811
|
4,188
|
3,988
|
|
|
|
|
|
|
|
Share
capital
|
|
167
|
179
|
174
|
|
Share
premium
|
|
2,644
|
2,635
|
2,642
|
|
Treasury
shares
|
|
(15)
|
(20)
|
(19)
|
|
Reserves
|
|
1,000
|
1,381
|
1,177
|
|
Total
equity attributable to equity holders of the company
|
|
3,796
|
4,175
|
3,974
|
|
Non-controlling
interest
|
|
15
|
13
|
14
|
|
Total equity
|
|
3,811
|
4,188
|
3,988
|
The condensed consolidated
financial statements were approved by the Board
on 28 July
2024.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for
the period ended 30 June 2024
|
|
|
|
|
|||||||
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024
half year
|
||||||||||
|
At
1 January 2024
|
174
|
2,642
|
(19)
|
33
|
(12)
|
411
|
745
|
3,974
|
14
|
3,988
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
157
|
157
|
1
|
158
|
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
(4)
|
(9)
|
1
|
(12)
|
-
|
(12)
|
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
(4)
|
(9)
|
158
|
145
|
1
|
146
|
|
Equity-settled
transactions1
|
-
|
-
|
-
|
-
|
-
|
-
|
16
|
16
|
-
|
16
|
|
Issue
of ordinary shares
|
-
|
2
|
-
|
-
|
-
|
-
|
-
|
2
|
-
|
2
|
|
Buyback
of equity
|
(7)
|
-
|
-
|
7
|
-
|
-
|
(204)
|
(204)
|
-
|
(204)
|
|
Purchase of
treasury shares
|
-
|
-
|
(30)
|
-
|
-
|
-
|
-
|
(30)
|
-
|
(30)
|
|
Release
of treasury shares
|
-
|
-
|
34
|
-
|
-
|
-
|
(34)
|
-
|
-
|
-
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(107)
|
(107)
|
-
|
(107)
|
|
At
30 June 2024
|
167
|
2,644
|
(15)
|
40
|
(16)
|
402
|
574
|
3,796
|
15
|
3,811
|
1.
Equity-settled transactions are presented net of withholding taxes
that the Group is obligated to pay on behalf of employees. The
payments to the tax authorities are accounted for as a deduction
from equity for the shares withheld.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for
the period ended 30 June 2024
|
|
|
|
|
|||||||
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
half year
|
||||||||||
|
At 1
January 2023
|
179
|
2,633
|
(15)
|
28
|
(13)
|
709
|
881
|
4,402
|
13
|
4,415
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
186
|
186
|
1
|
187
|
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
2
|
(287)
|
(19)
|
(304)
|
(1)
|
(305)
|
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
2
|
(287)
|
167
|
(118)
|
-
|
(118)
|
|
Equity-settled
transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
20
|
20
|
-
|
20
|
|
Issue
of ordinary shares
|
-
|
2
|
-
|
-
|
-
|
-
|
-
|
2
|
-
|
2
|
|
Buyback
of equity
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Purchase of
treasury shares
|
-
|
-
|
(25)
|
-
|
-
|
-
|
-
|
(25)
|
-
|
(25)
|
|
Release
of treasury shares
|
-
|
-
|
20
|
-
|
-
|
-
|
(20)
|
-
|
-
|
-
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(106)
|
(106)
|
-
|
(106)
|
|
At 30
June 2023
|
179
|
2,635
|
(20)
|
28
|
(11)
|
422
|
942
|
4,175
|
13
|
4,188
|
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for
the period ended 30 June 2024
|
|
|
|
|
|||||||
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
full year
|
||||||||||
|
At 1
January 2023
|
179
|
2,633
|
(15)
|
28
|
(13)
|
709
|
881
|
4,402
|
13
|
4,415
|
|
Profit
for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
378
|
378
|
2
|
380
|
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
1
|
(298)
|
(65)
|
(362)
|
(1)
|
(363)
|
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
1
|
(298)
|
313
|
16
|
1
|
17
|
|
Equity-settled
transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
40
|
40
|
-
|
40
|
|
Tax on
equity-settled transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
1
|
-
|
1
|
|
Issue
of ordinary shares
|
-
|
9
|
-
|
-
|
-
|
-
|
-
|
9
|
-
|
9
|
|
Buyback
of equity
|
(5)
|
-
|
-
|
5
|
-
|
-
|
(304)
|
(304)
|
-
|
(304)
|
|
Purchase of
treasury shares
|
-
|
-
|
(35)
|
-
|
-
|
-
|
-
|
(35)
|
-
|
(35)
|
|
Release
of treasury shares
|
-
|
-
|
31
|
-
|
-
|
-
|
(31)
|
-
|
-
|
-
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(155)
|
(155)
|
-
|
(155)
|
|
At 31
December 2023
|
174
|
2,642
|
(19)
|
33
|
(12)
|
411
|
745
|
3,974
|
14
|
3,988
|
CONDENSED
CONSOLIDATED CASH FLOW STATEMENT
for
the period ended 30 June 2024
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
Profit
before tax
|
|
212
|
236
|
493
|
|
Net
finance costs / (income)
|
|
7
|
(17)
|
5
|
|
Depreciation and
impairment - PPE, investment property and assets held for
sale
|
|
40
|
38
|
90
|
|
Amortisation and
impairment - software
|
|
61
|
64
|
123
|
|
Amortisation and
impairment - acquired intangible assets
|
|
20
|
24
|
46
|
|
Other
net gains and losses
|
|
5
|
7
|
13
|
|
Product
development capital expenditure
|
|
(130)
|
(144)
|
(300)
|
|
Product
development amortisation
|
|
144
|
137
|
284
|
|
Share-based payment
costs
|
|
23
|
19
|
40
|
|
Change
in inventories
|
|
1
|
(9)
|
9
|
|
Change
in trade and other receivables
|
|
(34)
|
(20)
|
(24)
|
|
Change
in trade and other liabilities
|
|
(164)
|
(187)
|
(20)
|
|
Change
in provisions for other liabilities and charges
|
|
(12)
|
(45)
|
(61)
|
|
Other
movements
|
|
12
|
3
|
(16)
|
|
Net
cash generated from operations
|
|
185
|
106
|
682
|
|
Interest
paid
|
|
(41)
|
(34)
|
(60)
|
|
Tax
paid
|
|
(69)
|
(59)
|
(97)
|
|
Net
cash generated from operating activities
|
|
75
|
13
|
525
|
|
Cash
flows from investing activities
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
10
|
(38)
|
(173)
|
(171)
|
|
Acquisition of
joint ventures and associates
|
|
-
|
(5)
|
(5)
|
|
Purchase of
investments
|
|
(7)
|
(6)
|
(8)
|
|
Purchase of
property, plant and equipment
|
|
(18)
|
(16)
|
(30)
|
|
Purchase of
intangible assets
|
|
(40)
|
(47)
|
(96)
|
|
Disposal of
subsidiaries, net of cash disposed
|
11
|
(6)
|
(19)
|
(38)
|
|
Proceeds from sale
of investments
|
|
-
|
3
|
7
|
|
Proceeds from sale
of property, plant and equipment
|
|
6
|
1
|
5
|
|
Lease
receivables repaid including disposals
|
|
9
|
8
|
15
|
|
Interest
received
|
|
13
|
10
|
20
|
|
Net
cash used in investing activities
|
|
(81)
|
(244)
|
(301)
|
|
Cash
flows from financing activities
|
|
|
|
|
|
Proceeds from issue
of ordinary shares
|
|
2
|
2
|
9
|
|
Buyback
of equity
|
|
(278)
|
-
|
(186)
|
|
Settlement of share
based payments
|
|
(37)
|
(25)
|
(35)
|
|
Repayment of
borrowings
|
|
-
|
-
|
(285)
|
|
Proceeds from
borrowings
|
|
495
|
220
|
285
|
|
Repayment of lease
liabilities
|
|
(39)
|
(42)
|
(84)
|
|
Dividends paid to
company's shareholders
|
|
(107)
|
(106)
|
(154)
|
|
Net
cash generated from / (used in) financing activities
|
|
36
|
49
|
(450)
|
|
Effects
of exchange rate changes on cash and cash equivalents
|
|
(7)
|
(13)
|
(8)
|
|
Net
increase / (decrease) in cash and cash equivalents
|
|
23
|
(195)
|
(234)
|
|
Cash
and cash equivalents at beginning of period
|
|
309
|
543
|
543
|
|
Cash
and cash equivalents at end of period
|
|
332
|
348
|
309
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
1. Basis of preparation
The
condensed consolidated financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the UK's Financial Conduct Authority and in
accordance with UK-adopted IAS 34 'Interim Financial Reporting'.
The condensed consolidated financial statements should be read in
conjunction with the annual financial statements for the year ended
31 December 2023, which were prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 and in accordance with IFRS accounting standards
as issued by the International Accounting Standards Board (IASB).
In respect of accounting standards applicable to the Group, there
is no difference between UK-adopted IASs and IFRS accounting
standards as issued by the IASB.
The
condensed consolidated financial statements have also been prepared
in accordance with the accounting policies set out in the 2023
Annual Report and have been prepared under the historical cost
convention as modified by the revaluation of certain financial
assets and liabilities (including derivative financial instruments)
at fair value.
No
new standards and interpretations that apply to annual reporting
periods beginning on or after 1 January 2024 have had a material
impact on the financial position of the Group.
In
assessing the Group's ability to continue as a going concern for
the period until 31 December 2025, the Board analysed a variety of
downside scenarios, including a severe but plausible scenario,
where the Group is impacted by a combination of all principal risks
from H2 2024, as well as reverse stress testing to identify what
would be required to either breach covenants or run out of
liquidity. The severe but plausible scenario modelled a severe
reduction in revenue, profit and operating cash flow from risks
continuing throughout 2025. At 30 June 2024, the Group had
available liquidity of c£0.5bn, comprising central cash
balances and the undrawn element of its $1bn Revolving Credit
Facility (RCF) maturing February 2027. During the period under
evaluation, the Group has a €300m bond (converted to
c£260m) due for repayment in May 2025 and the model assumes
that this is refinanced with a similar sized bond in 2024. Even
under a severe downside case, the Group would maintain comfortable
liquidity headroom and sufficient headroom against covenant
requirements during the period under assessment even before
modelling the mitigating effect of actions that management would
take in the event that these downside risks were to
crystallise.
The
directors have confirmed that they have a reasonable expectation
that the Group has adequate resources to continue in operational
existence and to meet its liabilities as they fall due for the
assessment period to 31 December 2025. The condensed consolidated
financial statements have therefore been prepared on a going
concern basis.
The
preparation of condensed consolidated financial statements requires
the use of certain critical accounting assumptions. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas requiring a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the condensed
consolidated financial statements, have been set out in the 2023
Annual Report.
The financial information for the
year ended 31 December 2023 does not constitute statutory accounts
as defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for that year has been delivered to the
Registrar of Companies. The independent auditors' report on the
full financial statements for the year ended 31 December 2023 was
unqualified and did not contain an emphasis of matter paragraph or
any statement under section 498 of the Companies Act
2006. The
condensed consolidated financial statements and related notes for
the six months to 30 June 2024 are unaudited but have been reviewed
by the auditors and their review opinion is included at the end of
these condensed consolidated financial
statements.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
2. Segment information
The
Group has 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, most of which were disposed in 2022 with the
remainder being wound down in 2023, were being managed as a
separate division, known as Strategic Review. There are no longer
any reported results for the Strategic Review
division.
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
Assessment &
Qualifications
|
|
811
|
796
|
1,559
|
|
Virtual
Learning
|
|
254
|
373
|
616
|
|
English
Language Learning
|
|
188
|
184
|
415
|
|
Workforce
Skills
|
|
143
|
140
|
220
|
|
Higher
Education
|
|
358
|
379
|
855
|
|
Strategic
Review
|
|
-
|
7
|
9
|
|
Total
sales
|
|
1,754
|
1,879
|
3,674
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
|
|
|
|
|
Assessment &
Qualifications
|
|
187
|
174
|
350
|
|
Virtual
Learning
|
|
31
|
47
|
76
|
|
English
Language Learning
|
|
4
|
8
|
47
|
|
Workforce
Skills
|
|
29
|
21
|
(8)
|
|
Higher
Education
|
|
(1)
|
(1)
|
110
|
|
Strategic
Review
|
|
-
|
1
|
(2)
|
|
Total
adjusted operating profit
|
250
|
250
|
573
|
|
There
were no material inter-segment sales.
The
following table reconciles the Group's measure of segmental
performance, adjusted operating profit, to statutory operating
profit:
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
|
250
|
250
|
573
|
|
Intangible
charges
|
|
(20)
|
(24)
|
(48)
|
|
UK
pension discretionary increases
|
|
(5)
|
-
|
-
|
|
Other
net gains and losses
|
|
(6)
|
(7)
|
(16)
|
|
Property
charges
|
|
-
|
-
|
(11)
|
|
Operating
profit
|
219
|
219
|
498
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
2. Segment information continued
The
Group derived revenue from the transfer of goods and services over
time and at a point in time in the following major product
lines:
|
all figures in £ millions
|
Assessment
&
Qualifications
|
Virtual
Learning
|
English
Language
Learning
|
Workforce
Skills
|
Higher
Education
|
Strategic
Review
|
Total
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
2024
half year
|
|||||||||||
|
Courseware
|
|
|
|
|
|
|
|
||||||
|
Products
transferred at a point in time
|
28
|
-
|
60
|
-
|
91
|
-
|
179
|
||||||
|
Products and
services transferred over time
|
9
|
-
|
6
|
-
|
267
|
-
|
282
|
||||||
|
|
37
|
-
|
66
|
-
|
358
|
-
|
461
|
||||||
|
Assessments
|
|
|
|
|
|
|
|
||||||
|
Products
transferred at a point in time
|
93
|
-
|
3
|
3
|
-
|
-
|
99
|
||||||
|
Products and
services transferred over time
|
681
|
-
|
97
|
120
|
-
|
-
|
898
|
||||||
|
|
774
|
-
|
100
|
123
|
-
|
-
|
997
|
||||||
|
Services
|
|
|
|
|
|
|
|
||||||
|
Products
transferred at a point in time
|
-
|
-
|
12
|
-
|
-
|
-
|
12
|
||||||
|
Products and
services transferred over time
|
-
|
254
|
10
|
20
|
-
|
-
|
284
|
||||||
|
|
-
|
254
|
22
|
20
|
-
|
-
|
296
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
Total
sales
|
811
|
254
|
188
|
143
|
358
|
-
|
1,754
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
2023
half year
|
|||||||||||
|
Courseware
|
|
|
|
|
|
|
|
||||||
|
Products
transferred at a point in time
|
30
|
-
|
51
|
1
|
108
|
7
|
197
|
||||||
|
Products and
services transferred over time
|
10
|
-
|
5
|
-
|
268
|
-
|
283
|
||||||
|
|
40
|
-
|
56
|
1
|
376
|
7
|
480
|
||||||
|
Assessments
|
|
|
|
|
|
|
|
||||||
|
Products
transferred at a point in time
|
96
|
-
|
3
|
11
|
-
|
-
|
110
|
||||||
|
Products and
services transferred over time
|
660
|
-
|
103
|
105
|
-
|
-
|
868
|
||||||
|
|
756
|
-
|
106
|
116
|
-
|
-
|
978
|
||||||
|
Services
|
|
|
|
|
|
|
|
||||||
|
Products
transferred at a point in time
|
-
|
-
|
11
|
-
|
-
|
-
|
11
|
||||||
|
Products and
services transferred over time
|
-
|
373
|
11
|
23
|
3
|
-
|
410
|
||||||
|
|
-
|
373
|
22
|
23
|
3
|
-
|
421
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
Total
sales
|
796
|
373
|
184
|
140
|
379
|
7
|
1,879
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
2.
Segment information continued
|
all figures in £ millions
|
Assessment
&
Qualifications
|
Virtual
Learning
|
English
Language
Learning
|
Workforce
Skills
|
Higher
Education
|
Strategic
Review
|
Total
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
2023
full year
|
|||||||
|
Courseware
|
|
|
|
|
|
|
|
||
|
Products
transferred at a point in time
|
57
|
-
|
135
|
2
|
254
|
9
|
457
|
||
|
Products and
services transferred over time
|
20
|
-
|
15
|
-
|
595
|
-
|
630
|
||
|
|
77
|
-
|
150
|
2
|
849
|
9
|
1,087
|
||
|
Assessments
|
|
|
|
|
|
|
|
||
|
Products
transferred at a point in time
|
198
|
-
|
5
|
5
|
-
|
-
|
208
|
||
|
Products and
services transferred over time
|
1,284
|
-
|
204
|
170
|
-
|
-
|
1,658
|
||
|
|
1,482
|
-
|
209
|
175
|
-
|
-
|
1,866
|
||
|
Services
|
|
|
|
|
|
|
|
||
|
Products
transferred at a point in time
|
-
|
-
|
35
|
-
|
-
|
-
|
35
|
||
|
Products and
services transferred over time
|
-
|
616
|
21
|
43
|
6
|
-
|
686
|
||
|
|
-
|
616
|
56
|
43
|
6
|
-
|
721
|
||
|
|
|
|
|
|
|
|
|
||
|
Total
sales
|
1,559
|
616
|
415
|
220
|
855
|
9
|
3,674
|
||
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit is one of the Group's key business performance
measures. The measure includes the operating profit from the total
business but excludes charges for acquired intangibles amortisation
and impairment, acquisition related costs, gains and losses arising
from disposals, the cost of major reorganisation where relevant,
property charges and one-off costs related to the UK pension
scheme.
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 the first half of 2024 were £20m compared to a
charge of £24m in the equivalent period in 2023.
UK
pension discretionary increases - Charges in 2024 relate to one-off
pension increases awarded to certain cohorts of pensioners in
response to the cost of living crisis.
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 in
order to show the performance of the Group on a more comparable
basis year on year. Other net gains and losses also includes costs
related to business closures and acquisitions. Other net gains and
losses in 2024 relate to costs related to prior year acquisitions
and disposals, partially offset by a gain on the partial disposal
of our investment in an associate. Other net gains and losses in
the first half of 2023 relate largely to the gain on disposal of
the POLS business and a gain related to the release of a provision
related to a historical acquisition, offset by losses on the
disposal of Pearson College and costs related to current and prior
year disposals and acquisitions.
Property
charges - In the second half of 2023, charges of £11m relate
to impairments of property assets arising from the impact of
updates in 2023 to assumptions initially made during the 2022 and
2021 reorganisation programmes. There are no such charges in the
first half of 2024.
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 reorganisation 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.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
3. Net finance income / costs
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Net
finance (costs) / income
|
|
(7)
|
17
|
(5)
|
|
Net
finance income in respect of retirement benefits
|
|
(11)
|
(13)
|
(26)
|
|
Interest on
deferred and contingent consideration
|
|
1
|
2
|
4
|
|
Fair
value movements on investments held at FVTPL
|
|
8
|
(5)
|
(13)
|
|
Net
foreign exchange gains
|
|
-
|
(4)
|
(3)
|
|
Fair
value movements on derivatives
|
|
(12)
|
(9)
|
10
|
|
Net
interest payable reflected in adjusted earnings
|
|
(21)
|
(12)
|
(33)
|
|
|
|
|
|
|
|
Analysed
as:
|
|
|
|
|
|
Finance
costs
|
|
(57)
|
(36)
|
(81)
|
|
Finance
income
|
|
50
|
53
|
76
|
|
Net
finance (costs) / income
|
|
(7)
|
17
|
(5)
|
Net
interest payable is the finance cost measure used in calculating
adjusted earnings. Net interest payable primarily consists of
interest costs related to bonds, the RCF and lease liabilities,
partially offset by interest income on cash deposits and lease
receivables. Net interest payable at 30 June 2024 has increased
when compared to 30 June 2023 due to increased borrowings and a
reduction in returns on cash deposits.
The
above table reconciles net finance income to net interest
payable.
Net
finance income relating to retirement benefits has been excluded
from our adjusted earnings as we believe the income statement
presentation does not reflect the economic substance of the
underlying assets and liabilities. Also excluded are interest costs
relating to acquisition or disposal transactions, fair value
movements on investments classified as FVTPL, foreign exchange and
other gains and losses on derivatives. Interest relating to
acquisition or disposal transactions is excluded from adjusted
earnings as it is considered part of the acquisition cost or
disposal proceeds rather than being reflective of the underlying
financing costs of the Group.
Foreign
exchange, fair value movements and other gains and losses are
excluded from adjusted earnings as they represent short-term
fluctuations in market value and are subject to significant
volatility. Other gains and losses may not be realised in due
course as it is normally the intention to hold the related
instruments to maturity. Interest on certain tax provisions is
excluded from our adjusted measure in order to mirror the treatment
of the underlying tax item.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
4. Income tax
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Income
tax charge
|
|
(54)
|
(49)
|
(113)
|
|
Tax on
property charges
|
|
-
|
-
|
(3)
|
|
Tax on
other net gains and losses
|
|
-
|
(8)
|
(10)
|
|
Tax on
intangible charges
|
|
(5)
|
(6)
|
(11)
|
|
Tax on
UK pension discretionary increases
|
|
(1)
|
-
|
-
|
|
Tax on
other net finance income
|
|
4
|
7
|
7
|
|
Tax
amortisation benefit on goodwill and intangibles
|
|
2
|
2
|
4
|
|
Tax
benefit on UK tax rate change
|
|
-
|
-
|
1
|
|
Other
tax items
|
|
-
|
-
|
1
|
|
Adjusted
income tax charge
|
|
(54)
|
(54)
|
(124)
|
|
|
|
|
|
|
|
Adjusted profit
before tax
|
|
229
|
238
|
540
|
|
|
|
|
|
|
|
Tax
rate reflected in statutory earnings
|
|
25.5%
|
20.8%
|
24.5%
|
|
Tax
rate reflected in adjusted earnings
|
|
23.6%
|
22.7%
|
23.0%
|
The adjusted income tax charge
excludes the tax benefit or charge on items that are excluded from
the profit or loss before tax (see note 2). The adjusted tax
charged in the period ended 30 June 2024 has been calculated by
applying management's best estimate of the weighted average annual
effective rate of tax which is expected to apply to the Group for
the year ended 31 December 2024 to the adjusted profit before tax
for the period ended 30 June 2024. Adjusting items have been tax
effected on an item by item basis based
on the applicable statutory tax rate in the country to which the
item relates.
The
tax benefit from tax deductible goodwill and intangibles is added
to the adjusted income tax charge as this benefit more accurately
aligns the adjusted tax charge with the expected rate of cash tax
payments.
The
statutory tax charge in the period ended 30 June 2024 is higher
than the period ended 30 June 2023 due to a tax credit being
recognised on the disposal of the POLS business in 2023 which is
not recurring in 2024.
The
Group is within the scope of the UK legislation in relation to
Pillar Two which was effective from 1 January 2024. Based on the
most recent forecast financial information available for the
constituent entities in the Group, the Pillar Two effective tax
rates in most of the jurisdictions in which the Group operates are
above 15%. However, there are a limited number of jurisdictions
where the transitional safe harbour relief does not apply and the
Pillar Two effective tax rate is close to 15%. There is no material
impact of the Pillar Two legislation for the Group.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
5. Earnings per share
Basic
earnings per share is calculated by dividing the profit or loss
attributable to equity shareholders of the company (earnings) by
the weighted average number of ordinary shares in issue during the
period, excluding ordinary shares purchased by the company and held
as treasury shares. Diluted earnings per share is calculated by
adjusting the weighted average number of ordinary shares to take
account of all dilutive potential ordinary shares and adjusting the
profit attributable, if applicable, to account for any tax
consequences that might arise from conversion of those
shares.
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Earnings for the
period
|
|
158
|
187
|
380
|
|
Non-controlling
interest
|
|
(1)
|
(1)
|
(2)
|
|
Earnings
attributable to equity shareholders
|
|
157
|
186
|
378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares (millions)
|
|
680.5
|
714.0
|
711.5
|
|
Effect
of dilutive share options (millions)
|
|
6.9
|
5.0
|
5.8
|
|
Weighted average
number of shares (millions) for diluted earnings
|
|
687.4
|
719.0
|
717.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
|
|
|
|
Basic
|
|
23.1p
|
26.1p
|
53.1p
|
|
Diluted
|
|
22.8p
|
25.9p
|
52.7p
|
6. Adjusted earnings per share
In
order to show results from operating activities on a consistent
basis, an adjusted earnings per share is presented which excludes
certain items as set out below.
Adjusted
earnings is a non-GAAP financial measure and is included as it is a
key financial measure used by management to evaluate performance
and allocate resources to business segments. The measure also
enables users of the accounts 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 reorganisation programmes and certain other items that are
also not representative of underlying performance (see notes 2, 3
and 4 for further information and reconciliation to equivalent
statutory measures).
The
adjusted earnings per share includes both continuing and
discontinued businesses on an undiluted basis when relevant. The
company's definition of adjusted earnings per share may not be
comparable to other similarly titled measures reported by other
companies. A reconciliation of the adjusted measures to their
corresponding statutory measures is shown in the tables below and
in notes 2, 3 and 4.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
6.
Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
|
|
|
||
|
all figures in £ millions
|
note
|
Statutory
income
statement
|
Property
charges
|
UK
pension
discretionary
increases
|
Other
net
gains
and
losses
|
Intangible
charges
|
Other
net
finance
costs
|
Other
tax
items
|
Adjusted
income
statement
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
2024 half year
|
||||||||||
|
Operating
profit
|
|
2
|
219
|
-
|
5
|
6
|
20
|
-
|
-
|
250
|
||
|
Net
finance income / (costs)
|
|
3
|
(7)
|
-
|
-
|
-
|
-
|
(14)
|
-
|
(21)
|
||
|
Profit
/ (loss) before tax
|
|
|
212
|
-
|
5
|
6
|
20
|
(14)
|
-
|
229
|
||
|
Income
tax
|
|
4
|
(54)
|
-
|
(1)
|
-
|
(5)
|
4
|
2
|
(54)
|
||
|
Profit
/ (loss) for the year
|
|
|
158
|
-
|
4
|
6
|
15
|
(10)
|
2
|
175
|
||
|
Non-controlling
interest
|
|
|
(1)
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
||
|
Earnings
/ (loss)
|
|
|
157
|
-
|
4
|
6
|
15
|
(10)
|
2
|
174
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Weighted average number of shares (millions)
|
|
|
|
|
680.5
|
|||||||
|
Weighted average number of shares (millions) for diluted
earnings
|
|
|
|
|
687.4
|
|||||||
|
|
|
|
|
|
|
|||||||
|
Adjusted earnings per share (basic)
|
|
|
|
|
25.6p
|
|||||||
|
Adjusted earnings per share (diluted)
|
|
|
|
|
25.3p
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
6.
Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
all figures in £ millions
|
note
|
Statutory
income
statement
|
Property
charges
|
UK
pension
discretionary
increases
|
Other
net
gains
and
losses
|
Intangible
charges
|
Other
net
finance
costs
|
Other
tax
items
|
Adjusted
income
statement
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
2023
half year
|
|
||||||||||||||||
|
Operating
profit
|
|
2
|
219
|
-
|
-
|
7
|
24
|
-
|
-
|
250
|
|
||||||||
|
Net
finance income / (costs)
|
|
3
|
17
|
-
|
-
|
-
|
-
|
(29)
|
-
|
(12)
|
|
||||||||
|
Profit
/ (loss) before tax
|
|
|
236
|
-
|
-
|
7
|
24
|
(29)
|
-
|
238
|
|
||||||||
|
Income
tax
|
|
4
|
(49)
|
-
|
-
|
(8)
|
(6)
|
7
|
2
|
(54)
|
|
||||||||
|
Profit
/ (loss) for the year
|
|
|
187
|
-
|
-
|
(1)
|
18
|
(22)
|
2
|
184
|
|
||||||||
|
Non-controlling
interest
|
|
|
(1)
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
|
||||||||
|
Earnings
/ (loss)
|
|
|
186
|
-
|
-
|
(1)
|
18
|
(22)
|
2
|
183
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Weighted
average number of shares (millions)
|
|
|
|
714.0
|
|
||||||||||||||
|
Weighted
average number of shares (millions) for diluted
earnings
|
|
|
|
719.0
|
|
||||||||||||||
|
|
|
|
|
|
|
||||||||||||||
|
Adjusted
earnings per share (basic)
|
|
|
|
25.6p
|
|
||||||||||||||
|
Adjusted
earnings per share (diluted)
|
|
|
|
25.5p
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
6.
Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
all figures in £ millions
|
note
|
Statutory
income
statement
|
Property
charges
|
UK
pension
discretionary
increases
|
Other
net
gains
and
losses
|
Intangible
charges
|
Other
net
finance
costs
|
Other
tax
items
|
Adjusted
income
statement
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
2023
full year
|
|||||||||||||||||||
|
Operating
profit
|
|
2
|
498
|
11
|
-
|
16
|
48
|
-
|
-
|
573
|
|||||||||||
|
Net
finance income / (costs)
|
|
3
|
(5)
|
-
|
-
|
-
|
-
|
(28)
|
-
|
(33)
|
|||||||||||
|
Profit
/ (loss) before tax
|
|
|
493
|
11
|
-
|
16
|
48
|
(28)
|
-
|
540
|
|||||||||||
|
Income
tax
|
|
4
|
(113)
|
(3)
|
-
|
(10)
|
(11)
|
7
|
6
|
(124)
|
|||||||||||
|
Profit
/ (loss) for the year
|
|
|
380
|
8
|
-
|
6
|
37
|
(21)
|
6
|
416
|
|||||||||||
|
Non-controlling
interest
|
|
|
(2)
|
-
|
-
|
-
|
-
|
-
|
-
|
(2)
|
|||||||||||
|
Earnings
/ (loss)
|
|
|
378
|
8
|
-
|
6
|
37
|
(21)
|
6
|
414
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Weighted
average number of shares (millions)
|
|
|
|
711.5
|
|||||||||||||||||
|
Weighted
average number of shares (millions) for diluted
earnings
|
|
|
|
717.3
|
|||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
|
Adjusted
earnings per share (basic)
|
|
|
|
58.2p
|
|||||||||||||||||
|
Adjusted
earnings per share (diluted)
|
|
|
|
57.7p
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Dividends
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Amounts
recognised as distributions to equity shareholders in the
period
|
|
107
|
106
|
155
|
The
directors are declaring an interim dividend of 7.4p per equity
share, payable on 16 September 2024 to shareholders on the register
at the close of business on 9 August 2024. This interim dividend,
which will absorb an estimated £49m of shareholders' funds,
has not been included as a liability as at 30 June
2024.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
8. Exchange rates
Pearson
earns a significant proportion of its sales and profits in overseas
currencies, the most important being the US dollar. The relevant
rates are as follows:
|
|
|
|
|
|
|
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Average
rate for profits
|
|
1.26
|
1.24
|
1.25
|
|
Period
end rate
|
|
1.26
|
1.27
|
1.27
|
9. Non-current intangible
assets
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Goodwill
|
|
2,436
|
2,441
|
2,434
|
|
Other
intangibles
|
|
614
|
685
|
657
|
|
Non-current
intangible assets
|
|
3,050
|
3,126
|
3,091
|
There
were no significant acquisitions or disposals in 2024.
In
2023, business combinations resulted in the recognition of
additional goodwill of £61m and intangible assets of
£117m (see note 10 for further details).
In
2023, business disposals resulted in the disposal of £53m of
intangible assets (see note 11 for further details). A relative
value method was used to allocate goodwill to the disposed business
in the Virtual Learning CGU aggregation. The result of this was
that no goodwill was allocated to the disposed
business.
Other
movements in the goodwill balance relate to foreign exchange
differences. Other movements in the intangibles balance relate to
additions, amortisation and foreign exchange
differences.
The
Group has assessed its remaining goodwill and intangibles for
impairment triggers and concluded that a full goodwill impairment
review is not required at 30 June 2024.
The
2023 Annual Report sets out the key assumptions by segment. The
discount rate, perpetuity growth rate and other assumptions used in
the impairment review, and the sensitivity to changes in those
assumptions remain broadly the same as the position outlined in the
2023 Annual Report.
There
were no impairments to acquisition related or other intangibles in
the first half of 2024 or 2023.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
10. Business combinations
|
|
|
|
|
|
There
have been no significant acquisitions of subsidiaries in H1
2024.
On
22 March 2023, the Group acquired 100% of the share capital of
Personnel Decisions Research Institutes, LLC ('PDRI') for cash
consideration of £152m ($187m). There was no contingent or
deferred consideration. Net assets acquired of £91m were
recognised on the Group's balance sheet including £117m of
acquired intangible assets mainly relating to customer
relationships and contracts, and technology that will be amortised
over periods up to 15 years, and were valued by a third party
specialist. The transaction resulted in the recognition of
£61m of goodwill. Details of the fair values of the assets
that were acquired and the consideration were set out in the 2023
Annual Report.
The net cash outflow relating to
acquisitions in the period is shown in the table below
and relates
to deferred payments for prior year acquisitions, mainly arising
from the acquisitions of Credly and Mondly in
2022.
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Cash -
current year acquisitions
|
|
-
|
(152)
|
(152)
|
|
Cash
and cash equivalents acquired
|
|
-
|
4
|
4
|
|
Deferred
payments for prior year acquisitions and other items
|
|
(38)
|
(25)
|
(23)
|
|
Net cash outflow on acquisitions
|
|
(38)
|
(173)
|
(171)
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
11. Disposals and business
closures
There
have been no disposals of subsidiaries in H1 2024.
On
30 June 2023, the Group disposed of its interests in its POLS
businesses in the US, UK, Australia and India. The business
disposed excluded Pearson's contract with ASU. The consideration to
be received is deferred and comprises a 27.5% share of positive
adjusted EBITDA in each calendar year for 6 years from the disposal
date and 27.5% of the proceeds received by the purchaser in
relation to any future monetisation event. The consideration was
valued at £12m and a pre-tax gain on disposal of £13m was
recognised for the year ended 31 December 2023.
The net
cash outflow relating to disposals in the period is shown in the
table below.
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Proceeds
- current year disposals
|
|
-
|
1
|
1
|
|
Cash
and cash equivalents disposed
|
|
-
|
(12)
|
(12)
|
|
Costs
and other disposal liabilities paid
|
|
(6)
|
(8)
|
(27)
|
|
Net cash outflow from disposals
|
|
(6)
|
(19)
|
(38)
|
In
addition, the Group sold part of its investment in its associate,
Academy of Pop, for £4m (which has not yet been paid),
resulting in a gain of £2m. The remaining stake is now
classified as a financial investment. In 2023, the Group paid
£5m relating to the Group's initial capital
contribution.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
12. Net debt
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
Derivative
financial instruments
|
|
4
|
41
|
32
|
|
Trade
and other receivables - investment in finance lease
|
|
73
|
90
|
82
|
|
Current
assets
|
|
|
|
|
|
Derivative
financial instruments
|
|
55
|
17
|
16
|
|
Trade
and other receivables - investment in finance lease
|
|
19
|
17
|
18
|
|
Cash
and cash equivalents (excluding overdrafts)
|
|
332
|
355
|
312
|
|
Non-current
liabilities
|
|
|
|
|
|
Borrowings
|
|
(1,300)
|
(1,308)
|
(1,094)
|
|
Derivative
financial instruments
|
|
(3)
|
(43)
|
(38)
|
|
Current
liabilities
|
|
|
|
|
|
Borrowings
|
|
(313)
|
(75)
|
(67)
|
|
Derivative
financial instruments
|
|
(44)
|
(5)
|
(5)
|
|
Net
debt
|
|
(1,177)
|
(911)
|
(744)
|
Included
in borrowings at 30 June 2024 are lease liabilities of £521m
(non-current £458m, current £63m). This compares to lease
liabilities of £561m (non-current £492m, current
£69m) at 30 June 2023 and £547m (non-current £483m,
current £64m) at 31 December 2023. The net lease liability at
30 June 2024 after including the investment in finance leases noted
above was £429m (2023 half year: £454m, 2023 full year:
£447m). Net debt excluding net lease liabilities is £748m
(2023 half year: £457m, 2023 full year:
£297m).
In
2024, the increase in borrowings primarily reflects the additional
drawdown on the revolving credit facility of £495m, partially
offset by the repayment of lease liabilities of £39m. In 2023,
the movement on borrowings primarily reflects the drawdown on the
revolving credit facility of £220m and the repayment of lease
liabilities of £42m.
For
the purposes of the cash flow statement, cash and cash equivalents
are presented net of overdrafts of £nil (at 30 June 2023:
£7m; 31 December: £3m) which are repayable on demand.
These overdrafts are excluded from cash and cash equivalents
disclosed on the balance sheet.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
13. Classification of assets and
liabilities measured at fair value
|
|
Level
1
|
Level
2
|
---Level
3---
|
Total
fair
value
|
|
|
all figures in £ millions
|
FVTPL -
Cash
and
cash
equivalents
|
Derivatives
|
FVOCI
Investments
|
FVTPL -
Investments
and
Other
|
|
|
|
|
|
|
|
|
|
2024
half year
|
|||||
|
|
|
|
|
|
|
|
Investments in
unlisted securities
|
-
|
-
|
26
|
115
|
141
|
|
Cash
and cash equivalents
|
42
|
-
|
-
|
-
|
42
|
|
Derivative
financial instruments
|
-
|
59
|
-
|
-
|
59
|
|
Deferred and
contingent consideration
|
-
|
-
|
-
|
12
|
12
|
|
Total
financial assets held at fair value
|
42
|
59
|
26
|
127
|
254
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
-
|
(47)
|
-
|
-
|
(47)
|
|
Deferred and
contingent consideration
|
-
|
-
|
-
|
(21)
|
(21)
|
|
Total
financial liabilities held at fair value
|
-
|
(47)
|
-
|
(21)
|
(68)
|
|
|
|
|
|
|
|
|
2023
half year
|
|||||
|
|
|
|
|
|
|
|
Investments in
unlisted securities
|
-
|
-
|
24
|
114
|
138
|
|
Cash
and cash equivalents
|
39
|
-
|
-
|
-
|
39
|
|
Derivative
financial instruments
|
-
|
58
|
-
|
-
|
58
|
|
Deferred and
contingent consideration
|
-
|
-
|
-
|
12
|
12
|
|
Total
financial assets held at fair value
|
39
|
58
|
24
|
126
|
247
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
-
|
(48)
|
-
|
-
|
(48)
|
|
Deferred and
contingent consideration
|
-
|
-
|
-
|
(56)
|
(56)
|
|
Total
financial liabilities held at fair value
|
-
|
(48)
|
-
|
(56)
|
(104)
|
|
|
|
|
|
|
|
|
2023
full year
|
|||||
|
|
|
|
|
|
|
|
Investments in
unlisted securities
|
-
|
-
|
23
|
120
|
143
|
|
Cash
and cash equivalents
|
31
|
-
|
-
|
-
|
31
|
|
Derivative
financial instruments
|
-
|
48
|
-
|
-
|
48
|
|
Deferred and
contingent consideration
|
-
|
-
|
-
|
12
|
12
|
|
Total
financial assets held at fair value
|
31
|
48
|
23
|
132
|
234
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
-
|
(43)
|
-
|
-
|
(43)
|
|
Deferred and
contingent consideration
|
-
|
-
|
-
|
(57)
|
(57)
|
|
Total
financial liabilities held at fair value
|
-
|
(43)
|
-
|
(57)
|
(100)
|
There
have been no transfers in classification during the
year.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
13. Classification of assets and
liabilities measured at fair value continued
Level
1 valuations are based on unadjusted quoted prices in active
markets for identical financial instruments. Cash and cash
equivalents include money market funds which are treated as FVTPL
under IFRS 9 with the fair value movements recognised as finance
income or cost.
The
fair values of level 2 assets and liabilities are determined by
reference to market data and established estimation techniques such
as discounted cash flow and option valuation models. Within level 3
assets, the fair value of our investments in unlisted securities
are determined by reference to the financial performance of the
underlying asset and amounts realised on the sale of similar
assets. Individually these assets are immaterial and therefore no
sensitivities have been disclosed.
Level 3 assets also include the
contingent consideration receivable in respect of the sale of the
POLS business, which comprises a 27.5% share of positive adjusted
EBITDA in each calendar year for 6 years from the disposal date and
27.5% of the proceeds received by the purchaser in relation to any
future monetisation event. The valuation of the deferred
consideration has been determined on the basis of a discounted cash
flow model, and valued by a third-party
specialist. The
key inputs into the discounted cash flow model are the estimates of
adjusted EBITDA for the 6 year period and the estimate of the
valuation of the business thereafter. Reasonably possible changes
in assumptions for the inputs into the model would not have a
material impact on the carrying value of the contingent
consideration, and therefore sensitivities have not been disclosed.
The deferred and contingent consideration payable in respect of
prior year acquisitions is measured as the net present value of the
expected cashflows.
The
movements in fair values of level 3 financial assets measured at
fair value, being principally the investments in unlisted
securities and contingent consideration receivable, are shown in
the table below:
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
At
beginning of period
|
|
155
|
136
|
136
|
|
Exchange
differences - OCI
|
|
1
|
(5)
|
(5)
|
|
Additions
|
|
9
|
18
|
20
|
|
Disposals and
repayments
|
|
-
|
(6)
|
(10)
|
|
Fair
value movements - Income Statement
|
|
(8)
|
5
|
13
|
|
Fair
value movements - OCI
|
|
(4)
|
2
|
1
|
|
At
end of period
|
|
153
|
150
|
155
|
The
movement in the fair value of the deferred and contingent
consideration payable is shown in the table below:
|
|
|
|
|
|
|
all figures in £ millions
|
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
At
beginning of period
|
|
(57)
|
(79)
|
(79)
|
|
Exchange
differences
|
|
(1)
|
4
|
3
|
|
Fair
value movements - Income Statement
|
|
(1)
|
(2)
|
(4)
|
|
Repayments
|
|
38
|
21
|
23
|
|
At end of period
|
|
(21)
|
(56)
|
(57)
|
The
market value of the Group's bonds is £570m (30 June 2023:
£540m; 31 December 2023: £579m) compared to their
carrying value of £597m (30 June 2023: £596m; 31 December
2023: £611m). For all other financial assets and liabilities,
fair value is not materially different to carrying
value.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
14. Cash flows
|
|
|
|
|
|
Operating
cash flow and free cash flow are non-GAAP measures and have been
disclosed as they are part of the Group's corporate and operating
measures. These measures are presented in order to align the cash
flows with corresponding adjusted profit measures. The table below
reconciles the statutory profit and cash flow measures to the
corresponding adjusted measures. The table on the next page
reconciles operating cash flow to free cash flow to net
debt.
|
all figures in £ millions
|
Statutory
measure
|
Cost of
major
reorganisation
|
Property
charges
|
Other
net
gains
and
losses
|
UK
pension
discretionary
increases
|
Intangible
charges
|
Purchase/
disposal
of
PPE
and
software
|
Net
addition
of
right
of
use
assets
|
Dividends
from
joint
ventures
and
associates
|
Adjusted
measure
|
|
|
|||
|
|
|
|
|
|
2024 half year
|
||||||||||
|
Operating
profit
|
219
|
-
|
-
|
6
|
5
|
20
|
-
|
-
|
-
|
250
|
Adjusted operating profit
|
||||
|
Net
cash generated from operations
|
185
|
5
|
-
|
3
|
-
|
-
|
(52)
|
(12)
|
-
|
129
|
Operating cash flow
|
||||
|
|
|
|
|
|
2023 half year
|
||||||||||
|
Operating
profit
|
219
|
-
|
-
|
7
|
-
|
24
|
-
|
-
|
-
|
250
|
Adjusted operating profit
|
||||
|
Net
cash generated from operations
|
106
|
46
|
-
|
-
|
-
|
-
|
(62)
|
(11)
|
-
|
79
|
Operating cash flow
|
||||
|
|
|
|
|
|
2023 full year
|
||||||||||
|
Operating
profit
|
498
|
-
|
11
|
16
|
-
|
48
|
-
|
-
|
-
|
573
|
Adjusted operating profit
|
||||
|
Net
cash generated from operations
|
682
|
63
|
-
|
4
|
-
|
-
|
(121)
|
(41)
|
-
|
587
|
Operating cash flow
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
14.
Cash flows continued
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
2024
|
2023
|
2023
|
|
|
|
half
year
|
half
year
|
full
year
|
|
|
|
|
|
|
|
Reconciliation
of operating cash flow to closing net debt
|
|
|
|
|
|
|
|
|
|
|
|
Operating
cash flow
|
|
129
|
79
|
587
|
|
Tax
paid
|
|
(69)
|
(59)
|
(97)
|
|
Net
finance costs paid
|
|
(28)
|
(24)
|
(40)
|
|
Cost
paid for major reorganisation
|
|
(5)
|
(46)
|
(63)
|
|
Free
cash flow
|
|
27
|
(50)
|
387
|
|
Dividends paid
(including to non-controlling interest)
|
|
(107)
|
(106)
|
(154)
|
|
Net
movement of funds from operations
|
|
(80)
|
(156)
|
233
|
|
Acquisitions and
disposals
|
|
(54)
|
(200)
|
(219)
|
|
Net
equity transactions
|
|
(313)
|
(23)
|
(212)
|
|
Other
movements on financial instruments
|
|
14
|
25
|
11
|
|
Movement
in net debt
|
|
(433)
|
(354)
|
(187)
|
|
Opening
net debt
|
|
(744)
|
(557)
|
(557)
|
|
Closing
net debt
|
12
|
(1,177)
|
(911)
|
(744)
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the period ended 30 June 2024
15. Contingencies, tax uncertainties and
other liabilities
There are Group contingent liabilities that arise in the normal
course of business in respect of indemnities, warranties and
guarantees in relation to former subsidiaries and in respect of
guarantees in relation to subsidiaries, joint ventures and
associates. In addition, there are contingent liabilities of the
Group in respect of unsettled or disputed tax liabilities, legal
claims, contract disputes, royalties, copyright fees, permissions
and other rights. None of these claims are expected to result in a
material gain or loss to the Group.
On 25 April 2019, the European Commission published the full
decision that the United Kingdom controlled foreign company group
financing partial exemption ('FCPE') partially constitutes State
Aid. An appeal by the UK Government and other parties was dismissed
by the EU General Court on 8 June 2022. Following a further appeal
heard in January 2024, on 11 April 2024 the Advocate General
released their (non-binding) expert opinion finding in favour of
the UK Government and other parties. We now await the final binding
judgement. The total exposure is calculated to be £105m
(excluding interest) with a provision of £63m held in relation
to this issue. The
remaining tax receivable is disclosed as a non-current asset on the
balance sheet. The provision is calculated considering a range of
possible outcomes and applying a probability to each, resulting in
a weighted average outcome. The possible outcomes considered range
from no liability through to the full exposure (£105m). This
issue is specific to periods up to 2018 and is not a continuing
exposure.
The Group is under assessment from the tax authorities in Brazil
challenging the deduction for tax purposes of goodwill amortisation
for the years 2012 to 2020. Similar assessments may be raised for
other years. Potential total exposure (including possible interest
and penalties) could be up to BRL 1,345m (£192m) for periods
up to 30 June 2024, with additional potential exposure of BRL 24m
(£3m) in relation to deductions expected to be taken in
future periods. Such assessments are common in Brazil. The Group
believes that the likelihood that the tax authorities will
ultimately prevail is low and that the Group's position is strong.
At present, the Group believes no provision is
required.
The Group is also under assessment from the UK tax authorities for
the years 2019 to 2021. The maximum exposure is calculated to be
£43m with a provision of £21m currently held. The
provision is calculated considering a range of possible outcomes
and applying a probability to each, resulting in a weighted average
outcome. The possible outcomes considered range from no liability
through to the full exposure (£43m). The points being assessed
are specific to 2019 to 2021 and do not represent continuing
exposures.
16. Related parties
Related
party transactions in the six months ended 30 June 2024 were
substantially the same in nature to
those
disclosed in note 36 of the Annual Report and Accounts for the year
ended 31 December 2023. All related party transactions are on an
arm's length basis. There were no other material related party
transactions in the period that have materially affected the
financial position or performance of the Group and no guarantees
have been provided to related parties in the year.
17. Events after the balance sheet
date
There
have been no post balance sheet events.
STATEMENT
OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed consolidated financial
statements have been prepared in accordance with UK-adopted
International Accounting Standard 34 'Interim Financial Reporting'
and that the interim management report includes a fair review of
the information required by DTR 4.2.7 and DTR 4.2.8
namely:
●
An indication of important events that
have occurred during the first six months and their impact on the
condensed consolidated financial statements, and a description of
the principal risks and uncertainties for the remaining six months
of the financial year; and
●
Material related party transactions in
the first six months and any material changes in related party
transactions described in the 2023 Annual
Report.
The directors of Pearson plc are listed in the 2023 Annual Report.
There have been the following changes to the Board since the
publication of the Annual Report.
Tim Score - resigned 26 April 2024
A
list of current directors is maintained on the Pearson plc website:
www.pearsonplc.com.
By order of the Board
Omar Abbosh
Chief
Executive
28
July 2024
Sally Johnson
Chief
Financial Officer
28
July 2024
INDEPENDENT
REVIEW REPORT TO PEARSON PLC
Independent Review Report on the condensed consolidated interim
financial statements
Conclusion
We
have been engaged by Pearson plc (the Company) to review the
condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 2024 which comprises the
condensed consolidated income statement, the condensed consolidated
statement of comprehensive income, the condensed consolidated
balance sheet, the condensed consolidated statement of changes in
equity, the condensed consolidate cash flow statement and the
explanatory notes. We have read the other information contained in
the half yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial
statements.
Based
on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2024
is not prepared, in all material respects, in accordance with UK
adopted International Accounting Standard 34 and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Basis for Conclusion
We
conducted our review in accordance with International Standard on
Review Engagements 2410 (UK) "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity"
(ISRE) issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit
opinion.
As
disclosed in note 1, the annual financial statements of the Group
are prepared in accordance with UK adopted international accounting
standards. The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance
with UK adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusions Relating to Going Concern
Based
on our review procedures, which are less extensive than those
performed in an audit as described in the Basis for Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This
conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going
concern.
Responsibilities of the directors
The
directors are responsible for preparing the half-yearly financial
report in accordance with the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct
Authority.
In
preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do
so.
Auditor's Responsibilities for the review of the financial
information
In
reviewing the half-yearly report, we are responsible for expressing
to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our conclusion,
including our Conclusions Relating to Going Concern, are based on
procedures that are less extensive than audit procedures, as
described in the Basis for Conclusion paragraph of this
report.
Use of our report
This
report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK)
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
28 July 2024
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
PEARSON
plc
|
|
|
|
|
Date: 29
July 2024
|
|
|
|
By: /s/
NATALIE WHITE
|
|
|
|
|
|
------------------------------------
|
|
|
Natalie
White
|
|
|
Deputy
Company Secretary
|