Pearson plc

Hello and welcome to Pearson's 2024 nine-month trading update call with Omar Bosch and Sally Johnson. To ask a question on the video bridge, please use the raise hand button in the react menu, which you can find at the bottom of your screen. If you're dialing in from a phone, please press star nine on your telephone keypad. Should you at any point have technical issues, please message one of the operators directly who will then speak with you in one of the breakout rooms. If you are joining via the virtual event, please type your questions into the questions tab at the top right of the screen. I would now like to hand over to Omar for opening remarks.

Ladies and gentlemen, thank you for joining us today for our nine-month trading update. I'm Omar Abosh and I'm here with our CFO, Sally Johnson. Many of you will already have seen our results announcement this morning, so I'm just going to pick out a few key points, and then we'll open it up for Q&A. I set out three priorities at the start of the year, and I'm very pleased to report that we're on track with all of them. The first is to deliver on market expectations. Due to our continued focus on operational and financial performance, we've delivered another good quarter with underlying sales growth up 5%, taking us to 3% for the first nine months of the year. Each of our divisions is performing to plan and all contributed to growth for the quarter. ANQ has accelerated in the third quarter as anticipated with all businesses contributing to growth. Virtual schools delivered growth for the nine months with encouraging enrollment trends across our existing and new schools, albeit we still expect a modest revenue decline for the full year given the school losses in prior years. Higher education has indeed returned to growth. in the third quarter and is on track to grow for the full year, with the operational and business changes implemented over the past 18 months starting to bear fruit. English language learning continues to grow at high single digits for the first nine months and is performing well despite the well-known challenges in the wider English assessment market. And workforce skills has delivered a solid performance across both vocational qualifications and workforce solutions. So, with this broad-based performance, we are on track to meet market expectations for the full year. Second, I said we would sharpen our focus on the opportunities in the enterprise space and double down on workforce skills. And, as we told you at Interims, Pearson already has many of the assets that enterprises need to address their problems in talent planning, talent sourcing, and talent development. And we can go after those opportunities by bundling our existing products, unlocking synergies across the company. An example of that, we recently signed a meaningful multi-year deal with ServiceNow. For those of you that don't know ServiceNow, they're a leading AI platform for business transformation and we've just concluded a deal with them covering many of the areas of scope that Pearson brings to market in the enterprise space. I see this as a great blueprint for the sorts of deals that you can expect Vishal and the team to continue working on and a proof point that we're building momentum in our enterprise approach. Third, I said we would increase the intensity by which we infuse our products and services with AI capabilities, and we continue to have examples of this from across Pearson. In our English language learning division, we're developing TeachingPal, an AI-powered tool that leverages our trusted IP to make educators' lives easier by creating customized lesson content and activities. In higher ed, we continue to make good progress with our AI initiatives, rolling out our AI study tools to more than 90 titles for fall back to school. We've seen over 5 million student interactions with these new features this year, and we're starting to see a positive commercial impact too, with double digit year over year Billings growth in products with those AI study tools. And in virtual schools, we've also embedded AI study tools into our content so that when high school students struggle with quizzes and practice tests, they can receive step-by-step help to walk them through tough material. At our interim results in July, I outlined our medium-term strategy. It's early days, but I'm pleased with the progress that the team and that we're making across the board. We're confident that we'll deliver value for our stakeholders going forward. We're moving at pace to transition the strategy into execution with teams working to deliver high priority projects for Pearson. As you'd expect, these teams are focused on material opportunities which can generate strong returns and are being led with clear lines of accountability. We continue to remain focused on driving performance in the core business, starting to realize synergy benefits and investing in adjacent market expansion. This includes a focus on our medium-term growth vectors of enterprise skilling and early careers, where, for example, we've decided to invest in a sales team dedicated to selling our leading advanced placement, dual enrollment, and career and technical education materials directly into states and school districts. This will expand and strengthen our customer relationships with school administrators in a space where the demand for college and career readiness programs is growing strongly. I look forward to providing a further update on our strategic progress with our full year results next year. With that, let's go to Q&A.

Thank you, Omar. Our first question comes from Nick Dempsey at Barclays Capital. Nick, please go ahead.