Pearson plc

Good morning everyone and welcome to Pearson's 2026 interim results. Today we will host a presentation followed by a Q&A session. There will be two ways to submit your questions. If you'd like to ask your questions 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 and we will address them in turn at the end. And with that I'll hand over to Omar. Thank you, Alex.

Good morning. It's a pleasure to be with you again today. I've really been looking forward to it. I'm pleased to be joined by Simon Robson, our great new CFO. Simon will run you through our financial results for the first half, alongside his initial reflections following early engagement with the Pearson teams and many of you in the investment community as well. And as usual, we'll be joined by our colleagues Art, Tom, Vishal and Sharon for Q&A. Let me start with the key takeaways from today's presentation. First, we have delivered a good H1 financial result, with revenue up 4%, profit up 14%, and EPS up 19%, alongside continued strong cash flow strength. Second, we are on track to deliver our guidance for the year. and third, we continue to be excited about the future for Pearson. Our relationship with a leading AI lab reinforces our conviction that advances in technology are driving major demand for the validation of new skills with Pearson uniquely placed to benefit. Before we go into the results, let me begin with reminding you of Pearson's unique characteristics and enduring strengths that drive resilient profit and cash flow and that help deliver our encouraging financial results in H1. 90% of our profit comes from assessments and verification, virtual schools, and print. These businesses are driven by human-led services where complex, interconnected physical and digital workflows enable large-scale delivery, often within highly regulated markets. Our services act as verification infrastructure for skills globally, spanning companies, industry associations, states, and government agencies. The remaining 10% of Pearson's profit comes from digital courseware, predominantly in US higher ed, where we are deeply embedded in critical workflows of decision makers delivering solutions that enable educators to deliver courses end-to-end. These characteristics, alongside our competitive strengths underpinned by trust, deliver a clear value proposition for our customers, powering our financial performance. Let me come next to our guidance for this year. As we have showed you several times before, this is the framework by which we operate. Execution against this framework is already translating into delivery. We grew revenue by 4% in H1 and remain on track for our full year guidance. Our confidence in driving consistent mid-single digit top line growth and margin expansion over the medium term is underpinned by continued execution against this framework. This includes core business improvements, unlocking execution synergies, and driving our medium term growth vectors. Let me pick out a few highlights across each of those areas. Firstly, we continue to drive performance across our core businesses. In assessments and qualifications, we're delivering continued enterprise growth with our Google Cloud certification program launching in H1 and securing a new contract with a leading AI lab, which I'll talk more about shortly. Our clinical business delivered strong growth, benefiting from international demand and digital expansion. In UK and international qualifications, we delivered the first large-scale testing cycle for UK primary schools, marking approximately 2 million papers. As some of you may have seen, technical issues with the new platform led to a short delay in the delivery of results. We apologise for the disruption and move quickly to support schools and strengthen delivery for future cycles. Moving to virtual learning. This business unit is clearly having a standout year underpinned by a positive market environment, recent share gains, investment and ongoing strong execution. We were successful in all 10 long-term contract renewals this year and are on track to open five new schools for the upcoming academic year. We continue to feel confident about the sustainability of strong growth for this business into the medium term. In higher education, inclusive access continues to be a key priority and we're seeing improved performance here reflecting go-to-market changes implemented in H1, including revised incentives and better market intelligence for our sales teams. Inclusive access growth accelerated to 23% in Q2 and now represents 50% of our US core courseware business. In enterprise learning and skills, enterprise solutions continue to be a key driver of growth through powering enterprise AI upskilling at scale, including delivering a suite of AI learning programs to our strategic partners. For example, we delivered a strategic AI fluency program for Cognizant's global sales and consulting teams, enabling them to become more effective individually while also supporting high-stakes technical sales conversations. In vocational qualifications, we continue to execute strongly, including in international markets, where we extended our contract with the Jordanian Ministry of Education and successfully launched the vocational skilling program for construction in Saudi Arabia. Lastly, in English language learning, institutional performed well with continued enterprise growth, although the backdrop for international mobility has become more difficult since we last spoke, with softer study abroad trends, continued tight migration policies, and the geopolitical disruption weighing on demand. With this backdrop, I'm pleased that our teams are outperforming the market and executing well, showing clear operational resilience. Although we expect market headwinds to persist in the near term, we do remain confident in the long-term attractiveness of this business, given demographic factors. Now, let me touch upon progress in unlocking value through our execution synergies. We continue to identify areas of opportunity to break down silos, fix fragmented approaches, and drive operational effectiveness. First let me pick out a few examples across the implementation of Pearson-wide operational systems. Our work to date on content development processes has identified nearly 150 distinct content tools and over 140 different approaches to describe, tag and structure content assets across Pearson. We're systematically working through to standardize our approach here, moving towards Pearson-wide workflows supported by agentic technologies. We continue to make AI-enabled process improvements, for example, included in customer services, where AI self-service is handling 40% of customer interactions across voice, chat, and email in our initial rollout phases. Our new revenue operations team is driving a more consistent disciplined approach to forecasting and sales incentives. We're consolidating more than 130 individual sales incentive plans across Pearson into about 30 streamlined role-based plans aligned to a common set of principles. Second, we're continuing to drive product innovation and leverage benefits from our modern software approach, combining new technologies alongside our data, quality IP and core assessment capabilities. We have launched new products in ambient assessment like Communication Coach and have been pleased with early feedback from customers. We're also expanding our clinical business with AI-enabled functionality that enhances our platform offering, supporting our continued digital strength. And we're leveraging our data and applying our learning science to drive improved learner outcomes. For example, at Higher Ed, where our latest research shows that by using our AI-adaptive products, students were 90% more likely to reach initial mastery in a topic versus legacy education tools. And lastly, we're leveraging our strategic partners to unlock value and improve operational effectiveness. Our latest strategic partnership announcement is with Adobe, who are supporting our efforts to rebuild and upgrade our digital estate, enabling easier selling and purchasing. To shine a light on where we are today, we manage 4,500 web domains, of which over 300 are product focused. We're simplifying this web estate and redesigning it to fit core customer personas and journeys. In parallel, we're upgrading our e-commerce capabilities to improve performance, ensuring our customer platforms are ready for LLM discoverability and agent-driven experiences. As you can hear, there are a lot of activities ongoing across the group to drive execution synergies. We're investing in these changes because we are very confident that they will continue to deliver cost efficiencies underpinning our 40 basis points medium term guide, as well as increasing our operational agility and supporting an improved and more consistent top line performance. Finally, I want to share an update on our progress with our medium term growth vectors, firstly with enterprise skilling. The first half results demonstrate growing momentum across our key enterprise offerings. Pearson professional assessments grew well, enterprise solutions delivered strong double digit growth, and we're seeing continued enterprise opportunities for our English offerings. We're delivering continued success in strategic account growth, increasing our network to 10 during the first half. These new long-term relationships secure incremental joint go-to-market and monetization opportunities for Pearson. I now want to spend a few moments on AI skills verification. We've spoken before about the widening gap between the pace of AI innovation, people's ability to use it effectively, and the returns enterprises are seeking from AI. Our agreement with a leading AI lab to deliver their global certification program reinforces our leadership in skills verification and our conviction that AI adoption increases demand for trusted, validated new skills. I'm particularly proud of how quickly our team moved from initial discussion to global launch across our Pearson professional assessments network in just a matter of months. This speed reflects both the pace and the technology industry expects and Pearson's agility in delivering at global scale. Overall, this agreement is a clear signal of the demand we expect to see as organizations scale AI adoption and Pearson is uniquely positioned to help meet that need. In early careers, we continue to make progress in unlocking this large adjacent market opportunity. The eDynamic learning integration is progressing well. We're pleased with performance, and we continue to expect this deal to be supportive of our medium-term guidance. We've also successfully brought together our sales teams and capabilities across our early career assets that we first signalled at prelims, including e-dynamic learning, cert support and career and technical education, meaning Pearson now offers a complete explore, learn, practice and certification continuum. This revised go-to-market approach is unlocking near-term cross-sell revenue synergies and initial school district customer feedback has been encouraging, meaning we feel confident in our value prop and our ability to address this large market opportunity. Now, let me hand over to Simon for a deeper look at our first half financials.

Thanks, Omar. Great to be with you all, and good morning. Before I get on to the first half results and full year outlook, let me take a couple of minutes to reflect on my first three months in this role. I've been spending most of my time engaging with Omar and the executive team, going deep on the business and our offerings and connecting with colleagues from across Pearson. I've also met and listened to many of you across the investor and analyst community, which has been an important investment of my time. And everything I've seen so far has reinforced my conviction that Pearson combines leading positions in attractive markets, structural growth opportunities and resilient cash generation. The speed that Omar and the leadership team are moving at to unlock these opportunities is impressive. My role is to work closely with Omar to continue this momentum, deliver sustained growth and consequently drive shareholder value. Three areas I've identified to be my early priorities are continued disciplined investment, operational excellence and simplification and transparency. So just quickly on each of those. Driving sustainable growth requires thoughtful and disciplined investment, making choices about where to back growth, where to improve returns, where to reallocate internally as markets and technology involve. Our capital allocation priorities have served us well and will remain unchanged. My focus will be on improving our processes, reinforcing our investment discipline and ensuring our approach facilitates the optimal return for Pearson as a group. With regard to operational excellence, I see opportunity to get Pearson working more effectively across the business units. And this matters because the growth opportunities in front of us will require us to move quickly, share capabilities and put the end customer at the centre of our efforts. I will take a fresh look at resource allocation and how we develop the capabilities to be more agile whilst keeping decision making close to the business. And lastly, on simplification and transparency, I've heard from many of you that Pearson can still feel complex when looked at from the outside. There is an opportunity to make the business easier to understand, including by continuing to improve how we explain our growth drivers, our investment choices, and the link between operating progress and financial outcomes. Now, on to our financial performance. We have delivered a good financial performance in the first half. Group revenue is up 4% on an underlying basis in line with our expectations. Group adjusted operating profit is up 14% underlying to £276 million with 140 basis points of margin expansion to 15.5%. Profit performance is driven by operating leverage and cost efficiencies, partially offset by investment and inflation. In addition, profit benefited from the one-off impairment of legacy product development assets announced at the full year alongside investment phasing. Adjusted earnings per share increased 19% at constant exchange rates and 18% on a headline basis to 28.9p, reflecting the increase in adjusted operating profit and a reduction in share count due to the share buyback partially offset by increased interest costs. Our balance sheet remains robust, driven by another strong cash performance, enabling further investment in the business and increased shareholder returns, including our accelerated £350 million share buyback. Reflecting our performance and confidence in the outlook, we are proposing a 5% increase in our interim dividend to 8.2p. Walking through the key elements of business unit performance. Assessment and qualifications returned to growth in Q2 as expected, with H1 revenue increasing 2%. This was driven by strong performance in clinical assessment, growth in UK and international qualifications and Pearson professional assessments, partially offset by decline in US student assessment, which was impacted by the previously disclosed loss of the New Jersey contract. Margin declined to 20% as trading performance was more than offset by sales mix and delivery costs. Virtual learning grew 19% reflecting strong enrolment momentum in the 2025-2026 academic year with enrolment growth accelerating to 15% in the spring semester alongside funding and favourable mix. Margin increased to 18% driven by strong revenue growth and operating leverage. Higher education revenue grew 2% driven by a continued solid performance in our core US courseware business and a return to growth in the K-12 channel. This was partially offset by a decline in international, reflecting challenging trading conditions in mature markets, although the business is stabilising as our turnaround plan progresses. Margin increased to 6% due to operational leverage, continued cost efficiencies and lower amortization costs following the 2025 product development impairment. English language learning revenue declined 3% with growth in institutional more than offset by declines in Pearson Test of English. Margin improved slightly with cost efficiencies offsetting trading performance. and Enterprise Learning and Skills revenue grew 7% with another solid performance from vocational qualifications and continued strong growth in enterprise solutions supported by the monetization of our strategic partnerships. Margin increased to 28% with operational leverage from revenue growth partially offset by investment in the business. Free cash flow was again strong, up £103 million from last year to £259 million. Operating cash performance was driven by disciplined working capital management and benefited from payables timing and one-off proceeds from the settlement of a US insurance policy. Cash interest and tax payments returned to more normalised trends following the £114 million one-off benefit received last year due to the state aid refund. Our balance sheet remains robust, enabling further investment in the business and increased shareholder returns. Net debt increased by £0.3 billion to £1.3 billion at June 2026, reflecting strong free cash flow generation more than offset by share buybacks, acquisition spend and dividends. So turning now to the outlook for the remainder of the year. We are where we expected to be at the half year point and we are on track to deliver on the guidance we set out at prelims in February. Specifically, group underlying revenue growth of mid single digit, group adjusted operating profit within the range 640 million to 685 million pounds at FX rates as at the end of last year. And we expect free cash conversion of 90 to 100%. We continue to expect growth to improve in H2 supported by new business, products and pricing in A&Q and continued progress in inclusive access pricing and the K-12 channel in higher education. Virtual learning had a standout H1 and demonstrates continued momentum and we expect this business to grow well in H2 despite the tough comparable supported by strong market trends. We expect group growth to be weighted to Q3 given the shape of last year and known business unit dynamics. Turning now to business unit expectations for the full year. We have updated guidance for English language learning where growth this year is less certain given first half trading and market conditions. However there is clear resilience in the Pearson portfolio as evidenced by our first half results and we remain confident in delivering our guidance for 2026. Let me step through business unit considerations as a reminder. Assessment and qualifications to grow low to mid single digit in 2026 driven by new contracts, products and pricing. Virtual learning to deliver stronger growth in 2025 driven by a full year of enrolment growth. Higher education to grow more than 2025 supported by continued product and platform innovation, pricing and inclusive access in our core US courseware business with improvement in the K-12 channel. English language learning performance to be driven by market share gains and pricing in institutional with Pearson Test of English expected to decline given the challenging market backdrop. and enterprise learning and skills growth to be driven by a solid performance in vocational qualifications and strategic account growth in enterprise solutions. So let me repeat my key takeaway. My first three months have reinforced my confidence in Pearson's position and prospects. We have strong foundations, resilient cash generation and clear opportunities to drive sustained growth and shareholder value. I'm excited for the road ahead and look forward to keeping you all updated. And with that, I'll hand back to Omar.

Thank you, Simon. So as you've heard, we've delivered a good H1 financial result. We are on track to deliver our guidance for the year and we continue to be excited about the future for Pearson. And with that, Simon and I, along with Art, Tom, Vishal and Sharon, will be happy to take your questions. Operator, over to you.

Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. Change your mind, please press star followed by two. Preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Kieran Donnelly from Citi. Kieran, your line is open. Please go ahead.

Yeah, thanks Omar, Simon for the presentation. Couple questions from me. Firstly, just in terms of the divisional guidance for the full year, obviously the only material changes on ELL and I was just wanted to ask incrementally is there any of the other divisions that you're positive on because clearly you know ELL is like negative you've reiterated the guide for the full year so just be good to get any kind of insight into any incremental positivity on any the other divisions vis-a-vis this time at the start of the year and number two, just on ANQ margin, can you just talk us through the recoverability in H2 and just help us think about maybe full year margins versus last year? Thanks.

That's great. Ciaran, good to hear you. So let me sort of make a couple of little comments here. You mentioned ELL. The institutional part of ELL is performing really well. So we feel very good about that. But you're right. We're sending a little message saying that the migration market still remains a tough backdrop. It's still declining relative to last year, but at a slower rate, just to be very clear. So last year, it was down 15% in 2025. This year, it's declining, but at a much slower rate than that. But we just want people to know that it's still a bit of a tough backdrop for that market. As you saw in H1, I'm really delighted with how ELS performed, both in vocational qualifications and in enterprise solutions. Enterprise solutions now has had several quarters of really excellent, strong growth. We feel very good about that looking forward as well. So that's a good one. Simon's mentioned with virtual schools despite the tough comp for H2 virtual schools is going to grow faster than it grew last year so we feel very good about how that business is performing and as and again as you've heard higher ed is also going to is on a stronger track than last year last year higher ed had some switch over in the sales team for the core K-12 assets. That business is back in growth now, so we feel good about higher ed overall for this year as well. So that's just some thoughts there for you. On the ANQ margin, I'm going to bring Simon in to just comment on how we're thinking about that.

Hi Kieran, thanks for the question. I want to note, Kieran, you are the first asker of a question to me as CFO of Pearson, so thank you. Special moment. So on A&Q margins, so a few things to understand that happened in Q1. So I called out sales mix and I should have called out when I mentioned delivery costs, one-time delivery costs. So a couple of things that weighed down the margin in H1. On the sales mix, we obviously ended the New Jersey contract. That was a very, by the point we exit, obviously a very mature contract. The shape of all of our contracts tends to be that they are less, they're lower margin at the start and then they mature and we increase the margin over time. So New Jersey, one, exited at a good margin rate and we started the UK SATs contract. which given it was the first year of the UK SATs contract then that's a lower margin so that weighed down on margin but that will normalize out over time and then the one-time delivery costs that I mentioned were in relation to the SATs contract and obviously we don't expect those to be here this time next year so that's what's weighing down and gives us growth in the margin going into H2 and obviously contributes to my confidence in the full year guidance for the 640 to 685 overall group profit.

Thank you Simon. Who's next?

Thank you.

Our next question comes from James Tate from Goldman Sachs. James, your line is open.

Good morning, thanks. I want to thank Omar, Simon, yes, James Tate from Goldman. I've got three questions, please. I guess, firstly, on the new certification contract with an AI lab, could you provide a bit more detail on this contract? I guess, in particular, could you help us understand how to think about the scale of the contract in terms of volumes and revenues, as well as the timing? Will this contract roll out later this year? And secondly, on ANQ growth, growth accelerated to around 5% in Q2, I think benefiting from a number of new contract launches, Could you help us unpack some of the moving pieces since H2? Is this 5% level of growth sustainable, particularly as you lap the New Jersey contract loss? And thirdly, on capital allocation, the share buyback program completed in May, and given leverage remains below the two times maximum you sort of set out, could you explain the rationale to not expanding the buyback? Does that mean you're looking more actively at M&A? Thank you.

Sure. Thank you very much, James. Good to hear you. I'm going to take the first question, then I'll go to Art for the next one, and then ask Simon to come in on capital allocation. So as you know, James, Pearson is already very strongly established in the technology vertical as a learning content provider, an assessments provider, a credentialing and digital badging partner. And I've been saying for a while, AI is a tailwind for reskilling because companies all around the world know that AI is going to reconfigure the nature of jobs and work over the next 10 years and they want to bring their workforce with them. They want to help figure out how to equip workers to do really well no matter what their tasks and roles are with AI. and so that's essentially what the ask is and so for me the the AI lab signing us up is just great news because this is like one of the world's leading companies that's seen unbelievably explosive growth you know all about it and they're saying that the demand that they're seeing for people wanting to be skilled and qualified in their assets in their tools is is very high and so they've come to us as Pearson as one of the world's unique providers with a large global network that can scale that delivery across the globe and so the work that we're doing with them is essentially assessments and certifications and as I mentioned in the script, normally in that business historically it would have been 18 to 24 months from start to finish to just launch a program. This one is in a handful of single digit months that we've gone from start to launching. It is launched the first tens of thousands of people are coming through the doors but of course their ambition is much much higher than that so it's early days I don't want to overstate it but of course we're excited about that because when some of the world's best companies come to you and say we want to use your assets and your capability to help Verify people and assess people and qualify them in our new technologies. That's a good thing. And so I'm very happy with what Vishal and the team have done in the enterprise business building out those relationships. And yes, we expect that to continue to be a strong focus area for us going forward for a long while to come. On the second question on A and Q and what the dynamics are in terms of growth, we told you that at the end of H1 that we expected to see growth in Q2. That happened. And now you're asking about what happens next. So over to you, please.

Yeah, thanks, Omar. And good to have you with us today, James. We're very happy that we did deliver that return to growth in Q2 and also happy to reaffirm our guidance for the year of low to mid single. And let me talk a little bit about the drivers of that. First off, in our professional assessment business, we're going to see the full year impact of contracts that launched in the second half of last year. And I'll draw particular attention to Salesforce and ServiceNow. In 2026, we've launched a Google Cloud contract and then the one that you were asking about just a moment ago with the AI Lab. And I'm happy to report as we are sitting here speaking right now, there are test takers around the world sitting that exam. We also will show this year the revenue from the first year of the delivery of the SATs contract. And again, the clinical portfolio just continues to perform extremely well. We're injecting AI capabilities into a number of those products throughout the year and expect to see the financial pull through on that. And then lastly, in the second half of the year, the comp effect of PDRI year over year diminishes significantly. So those are the factors that have us feeling very, very good about the ANQ outlook for H2.

Thank you, Art. And then Simon on capital allocation, please.

Sure. Hi, James. Nothing to second question, I'm afraid. So on capital allocation, as you can imagine, I've spent a lot of time looking at that since I arrived here. I've mentioned in my remarks earlier that our approach to capital allocation remains unchanged. We assess it regularly. Our priorities are very clear. And I absolutely do not want an inefficient balance sheet. So let me just touch on the £350 million share buyback that we've done for 2026. So we announced that earlier in the year and then actually Omar and Sally, I can't take any credit for this, responded well to the conditions in the market and the weakness in the price and they started earlier and accelerated that and I think that proved a really good return for shareholders. But as I say, my capital allocation priorities are invest in the business, always looking at where we can invest and drive great returns, looking at M&A opportunities. Again, we'll be very, very disciplined about how we do that. Omar's laid out the criteria before. I won't go through those again, but I'll let you touch on it if you want to. But we'll always be scouring and looking for good opportunities to invest and grow the business. We announced today a 5% increase in the dividend and then we'll also, beyond that, we'll distribute any excess capital. But for the now, our capital allocation policy unchanged.

Thanks, Simon. I mean, James, if I could just sort of emphasise what Simon is saying. I think over the last few years we've demonstrated that we're always going to think about shareholders' interests and protecting them and making sure we run an efficient balance sheet. So you can expect us to continue to do that going forward. Next question, please.

Our next question comes from Nick Dempsey from Barclays. Your line is open Nick. Please go ahead.

Hi there, good morning. I've got three please. So first of all we noticed that ETS bought the ACT qualification recently. I believe that ACT runs on Pearson's platforms and ETS I know has a lot of experience of being a key service provider to test just like this. So can you tell us, first of all, whether the ACT business is a relevant part of your US student assessment subdivision and whether you have a contract that means you keep that business until a particular date? Second question, just maybe update us on your latest thinking on college enrollments for fall 2026. And third question, Simon flagged that the Group Organic Revenue Growth expected to be weighted to Q3. Can you just remind us what the dynamics are that means that waiting will occur?

Sure. I'm going to bring in Art for the first question and then Tom on the second question, and then probably I'll make a comment about the third one. But just one little intro. You asked, was ACT an important customer for us? Every customer is important for us, just to be very clear. That is the mindset that we want to have across the business at all times. But anyway, it's a great question. So Art, over to you regarding ETS's acquisition of ACT.

Absolutely. Hey, Nick, good to have you with us today. And yes, you are right. We are a provider via our U.S. school assessment business of exam paper preparation and delivery services for ACT. We've had that relationship for years and that relationship continues through this year and we expect it to continue beyond that. It's early days post the acquisition and we're in discussions with ACT management

but we we will continue to be providing those services to act and and that is reflected in the guidance that we're sharing today thank you um and then tom any thoughts on college enrollments for 2026 this is a long-term favorite with our sell-side friends so over to you tom hey nick great to hear you again uh so from can you hear me okay

Good. So from a college enrollment perspective, we're seeing slight enrollment headwinds, which is exactly what we said we would we would expect to see at prelims. That said, you know, we still feel very confident in a strong H2 performance. As Omar mentioned, inclusive access has been an increasing area of focus for us. We've also seen significant improvements in the K-12 market and what we're doing there with the sales team. And then lastly, from an international perspective in higher education, we're very much focused on executing the turnaround there and delivering a strong H2 in that space as well. So overall, slight decline in enrollments. I don't think there's any particular surprise there, but very much focused on growing the business despite that. Thank you, Tom.

And then, Nick, on the last question, I don't think there's anything new here for you. So you know that, Pearson, there's always some level of seasonality baked into how the business units perform depending on their customer base. And so traditionally, the main back to school period for higher ed in the US, but also parts of international, tend to be Q3. And so that's a little bit of that little peaky thing that you see there. Q4 has always been a bit of a bigger one, for example, for English courseware, English institutional. But on balance, the back weighting in the year is much less this year than we've seen in past years. And we feel good about that as we drive out our strategy.

Nick, there's also the Q4 last year, Q4 2025 was very strong. So I think I mentioned that that obviously makes growth in this Q4 will be less. A good point. The comparable. The comp, yeah. Thank you.

Anyone else?

Our next question comes from David Nolan from Morgan Stanley. Your line is open, David. Please go ahead.

Hi, guys. Thanks for the presentation. The first one for me is just kind of on the medium-term margin potential. So if we look across the divisions, there kind of appears to be kind of significant tailwinds, especially within higher ed. Kind of medium-term guidance is only for around 40 bits of annual margin expansion. could you maybe just help us reconcile the two and explain how you kind of think between the trade-off between growth and margin more broadly and then my second question is just on the virtual learning momentum so obviously the announcement of the five new school openings is a significant positive but be great to get more colour on same-school momentum and whether you kind of continue to take market share in the space and then also any colour on how the career learning offering kind of is improving your overall competitive advantage in the space as well. Thank you.

Sorry, Dave, I just want to make sure I heard that correctly. So the second question you're asking is about virtual school momentum with the new schools and market share. And the third one was you said career learning. You mean the early careers stuff? Is that what you're asking about?

No, just within virtual learning itself, obviously the career learning. Oh, the career pathways. Yeah.

Okay, career pathways within virtual schools. Okay, so question two and three, I'll come to Tom. Let me take the first one directly. So, I mean, what we've been trying to say for a little while is Pearson, if I go back in history, ran itself a little bit like a holding company with a lot of separate units each doing their own thing. and the separate units were not five business units. It was like the next click down. It was too many, like more than 20 smaller units. And what we've said is, no, we're going to run the company more as a unified operating company. We simply don't need to run it so fragmented. As you defragment, you create productivity and performance opportunities. And it happens at every level. If you look at go to markets, if you look at product, if you look at technology infrastructure, if you look at vendors, there's just an opportunity to do things more effectively and efficiently. And that's what we're doing. So the journey we're on is constantly improving our margin performance. And the reason we're so confident about the 40 bits is, yes, you're right, Dave. I mean, last year, I think Sally said this, is when we dropped 30 bps to the bottom line in 2025, actually the investment capacity we created was about 200 bps because we want to reinvest in the business for future growth. And so that is exactly the formula you should expect us to continue to drive. We will constantly work out to improve our fitness. So even when we're fit, we'll go back to the gym and work out some more. That's the gig. And we'll expand investment capacity. And we'll drop at least 40 bps on average over time, over the medium term. And that's the promise from us to the market. So I hope that makes sense. I'm going to go to Tom now on virtual learning. Tom, you heard there were two bits there in terms of how do we feel about the current growth potential on market share. Excuse me, I'm choking, I'm choking. And then career pathways and how we see our growth opportunity there.

Well, I better make sure you don't shake on the answer. So, look, I mean, great question. And look, I think in this space, we feel very pleased with our first half performance. And if you take a step back, I think the overall market for virtual learning continues to be really, really strong. we don't see any signs of that abating and that's fundamentally being driven by the US school choice movement and parents taking like a more active role in education decisions so that's kind of the market backdrop and we see that market growing high single digits on an enrollment basis in 25-26 and we see that we've been doing better from a share perspective there we're doing that as a result of being really really forensic in our marketing funnel and being really really disciplined in terms of understanding where we can improve funnel conversion where we can see opportunities to improve operationally and continuing to do that that's fantastic and that will continue to be an important driver for us against that market backdrop in the context of thinking about sort of and that applies obviously both to the same schools and then the new schools we're excited about because some of those are in some states where demand has been a little constrained in the past few years so we're super excited about the new schools over the medium term as well as the sort of the same store momentum in terms of the career offering I think the way to think about this is twofold firstly you know parents and kids are increasingly thinking about what their career options are and they're doing that earlier and earlier as low as eighth grade so that then means that you know the worlds of sort of high school higher education and work are blurring and so this is giving kids the opportunities to do fantastic things so for example micro internships with IBM and that then means that we have an opportunity not only to engage students in their career choices earlier but also this helps drive retention because as students in the high school are thinking about what to do the things that we're doing here are really helping then think about what they want to do next in their career and so we're excited about what we're doing with the career education part of pvs we think it's a great part of the value proposition to parents and to students and we're really really pleased with the performance of the business thank you tom any any other questions we currently have no further questions online so i'd like to hand back to the room

Hi Charlie, thank you for your question. I'm afraid I think they've already been answered so we have no further questions from the platform.

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