Pearson plc

Good morning everyone and welcome to Pearson's 2024 four-year results. Today we will host a presentation followed by a Q&A session. There will be three ways to submit your questions. For those of you who have joined us in person and wish to ask a question, please raise your hand at the end of the presentation. For those of you who've joined us virtually and would like to ask your question personally, please use the numbers that are displayed on screen. These lines will open following the main presentation. Alternatively, please type your questions into the questions tab at the top right of the screen in the event platform, and we will address them in turn at the end. And with that, I'll hand over to Omar.

Thank you, Alex. Good morning and welcome to all of you. Thank you for joining us today. As well as hearing from Sally and me, we're also joined by our colleagues, Art, Tom, Vishal, Tony and Sharon for Q&A. Many of you will recognize Sharon from the Assessments and Qualifications Investor Seminar that we held back in November 2023. Let me formally introduce her to all of you. Sharon has held many leadership roles over her successful Pearson career and is currently MD of our US Student Assessments in UK and International Qualifications businesses. She has a track record of strong results delivery. I'm pleased to announce that Sharon will become our new President of English Language Learning, effective next month. This means that Gio Giovanelli has decided to leave Pearson. Gio has contributed so much to Pearson over the last 12 years. Grazie Gio. And he's been instrumental in driving the strong revenue and profit growth of our English language learning business. I'd like to thank him for his big contribution and wish him all the best for the next endeavor. He'll continue to be available to Sharon and the team over the coming period. Now, I'll kick off with an update on our strategic progress before handing over to Sally. who will run you through our financial results for 24 and our expectations for 2025. You'll remember that we set out three priorities for 2024, and I'm pleased to say that we successfully delivered on all three. First, we delivered a financial performance in line with market expectations. We grew sales by 3% and profits by 10%. I'm particularly happy with the resulting EBIT margin of 16.9% and strong free cash flow generation. Second, as further evidenced by today's announcement of our partnership with AWS, we're building real momentum in the enterprise business. And third, we're scaling the application of AI across a wide range of our products and services. And this is happening across the entire business. And we're starting to see commercial benefits flow through from these initiatives. We will share various examples during the presentation, and for those of you here in the room, we have lots of great demos for you outside that I would love for you to go and experience. I'm now one year in, and I would like to take a moment to step back and reiterate some of my initial observations about the company that I shared at our Interims presentation last year, as they are every bit as applicable today as they were then. Pearson is a financially strong business with good growth options, and it is a trusted business with a respected brand and is viewed as the gold standard by many of our customers. And our core is in assessments and verification. We spoke last year to you about two seismic trends of AI and demographics that are shaping the world of work and education. Last month at Davos, we published a paper, Lost in Transition, quite a nice bit of research on the cost of the gaps in the learning to earning transition, which in the US alone accounts for $1.1 trillion of loss. We spoke to dozens of CEOs on the back of this, and they all shared a common concern. How do they upskill their employees while they are busy driving AI-based transformations in their business? This reinforces our conviction in these trends, and I believe strongly that Pearson is uniquely well-placed to help address these issues. I'd like now to run through our progress on each of the four strategic priorities that you can see on the slide, starting with driving core performance. I'm pleased with our progress on our execution orientation, the evolution of our products and services, and our people initiatives. We achieved many milestones in our two largest business units and delivered what we said we would deliver. Our team in assessments and qualifications, thank you, Art, had a fantastic year of execution. Pearson VUE achieved customer retention of 99%. We successfully renewed key contracts in US student assessments and scaled our qualifications business internationally. We also continued to evolve our products and services, In Pearson VUE, we built out test prep content and sales capabilities. And in clinical assessment, we launched the fifth edition of the Wechsler Scale, the leading measure of adult intelligence in the world. And we extended our digital assessment library for schools. These achievements set us up well for 2025. And this year, Art and the team will focus on maintaining our leading positions through contract renewals and new wins, as well as expanding into faster growing markets. For example, monetizing our test prep capabilities in Pearson VUE and accelerating our efforts in formative assessments in the US Student Assessment. Just as we said we would, we successfully returned higher ed to growth for the first time in a decade and improved our adoption share position in 2024. This was achieved through customer-focused sales execution and rapid innovation in the product. These included the accelerated rollout of our AI-powered instructor tools for teachers and study tools for students. Critically, these tools are delivering results for learners, and our research shows that students are four times as likely to engage in active and efficient studying when using our AI tools. I'd encourage you to check out some great examples of our progress on this in the product demo zone for those of you here. In particular, the new image-powered features for example, around my labs, which further enrich and personalize the learning experience. We also built out a direct sales team to extend our reach directly into the US K-12 channel for advanced placement, dual enrollment, and career and technical offerings. This improves our ability to capture value from this fast-growing segment over the medium term. In addition, we successfully scaled and started to monetize our channels product. Thanks, Tony. These achievements provide a strong basis for 2025 when combined with the execution mindset that Tom and the team have brought to the business unit. They will focus on continuing to win adoption share, further scaling our channel's product, and expanding our target market through our new K12 channel and opportunities in new collar skills. We also successfully delivered on our strategic milestones across our other business units. In virtual learning, we opened three new schools, scaled our career programs, and made numerous operational improvements, including implementing a new portal that halves enrollment times. This progress gives us greater confidence in the growth outlook for virtual schools. We're also continually improving the Connexus product offering, leveraging the technology piloted in higher education. We've extended our AI study tools into the platform to provide high school students with step-by-step assistance. And for teachers, we've launched the AI-generated customer assessment, which halves the time it takes to create an assessment. We're confident in delivering improved performance this year and stronger growth over the long term as we continue to scale our career and college readiness programs, drive improvements in the enrollment performance, and look to expand our school footprint through new school openings. We built new foundations in our workforce skills division in 2024, Vishal and the team are building momentum in their enterprise approach and have landed key wins over the recent months with ServiceNow, Microsoft, and now AWS. This is on top of the partnership with DeGreed that broadens out our capabilities. I'm happy to also report that they turned a profit. I'll speak more about the evolution of workforce skills to enterprise learning and skills later in the presentation. For 2025, the focus is on execution for the new business unit, capitalizing on sales momentum and enterprise solutions, aided by the new go-to-market approach, as well as international expansion and vocational qualifications. And lastly, we turn to English language learning. GEO and the team continue to execute with strong performance in the institutional business, scaling in key international markets. delivering an exceptional performance in PTE, where we grew sales despite a challenging market backdrop. While we expect the immigration market to remain a headwind this year, we remain confident in the medium-term outlook for PTE, given demographic projections and our competitive strength. We continue to release AI-powered product services for English students and teachers globally. I'd now like to give you a taster of our most recent AI-powered product launch, a digital language tutor. You can also take it for a spin in the product zones after the presentation. If we can roll the video, please.

Hi, and thanks for coming along to the performance review. How are you doing today?