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.