Good morning, everyone, and welcome to Pearson’s 2021 Full Year Results. Today, we will host a presentation followed by Q&A session. [Operator Instructions] And with that, I will hand over to Andy and will start the presentation. [Video Presentation]

Good morning. Welcome again. And I am very pleased to welcome you here in person today and also all of you online. Thanks very much for joining. I know very, very busy for many of you and welcome to our full year results and strategy presentation. And I am here with my CFO, our CFO, Sally Johnson and the entire executive team that you see here and going to introduce themselves also after the presentation. And you will be hearing from this motley crew of divisional presidents shortly as we layout the strategy. And you will also hear about how our new company purpose, to add a life to a lifetime of learning really sits at the heart of everything we do. And then as I was just saying, you have just seen our own employees proudly sharing what that purpose means to them. What we are really doing is redefining Pearson’s purpose to meet this moment in our world, I think a moment where learning is becoming more fluid and exists inside and outside of formal education. It’s a purpose and a strategy, however, then nothing without the employees who bring those to life. And over the last 12 months, our employees have shown the dedication, the perseverance and commitment to drive Pearson forward. As you see throughout today’s presentation, everyone at Pearson has and will continue to be relentlessly focused on execution. That’s reflected in our strong financial performance in 2021, where we delivered ahead of expectations, with 8% sales growth and a 33% increase in profit to £385 million and with a cash conversion of 101%. Now, Sally will go into more details about future expectations shortly, but the headline is that we will deliver further sustainable revenue and profit growth for this year and beyond. The…

Thanks, Andy, and hello, everybody. As Andy said, we delivered a strong group performance in 2021 with an 8% sales growth and profit of £385 million with a lower interest charge than previously expected of £57 million and a tax charge of 20%, we delivered an EPS of 34.9p, up 22%. Our cash performance was also strong with 101% operating cash conversion, driving an improved net debt position at the end of the year of £0.4 billion. We have a clear and rigorous capital allocation policy and a robust balance sheet with significant headroom. Our strong financial position has enabled us to make bolt-on acquisitions like Faethm and Credly, to help drive our strategy and future growth. Given these solid results and our confidence in the outlook, the Board are proposing a 5% increase in the dividend to 20.5p. We have also announced our intention to commence a share buyback during 2022 of £350 million. We shared our revenue performance with you along with more detailed data in our January trading update. There has been significant growth in the top line at Pearson which is in part due to the restrictions easing post COVID, but also due to the strategic positioning of our business and the growth initiatives that we’re undertaking. By way of a brief reminder, assessments and qualifications grew 18%, with VUE and Clinical revenues now having grown in comparison to 2019, demonstrating that 2021 performance is more than COVID recovery. Virtual Learning grew 11% with 17% growth in virtual schools and 7% underlying enrollment growth in OPM. English grew 17% and with a strong performance in both Pearson Test of English and our institutional courseware businesses, Workforce Skills grew 6%, and higher education declined 5%, less than in 2020. Group profit grew 33% to £385 million with…

Thanks Sally. I am Bob Whelan, and I’m the President of the Assessment & Qualifications business. Nice to see many of you here again today. I have seen some of you in the past and it’s nice to see you come back to see us. As you might already know, this is my last hurrah as President of the business. And I’ve been very excited to do it. I’m proud to have led this great business. We had a great year and I am very confident that we will continue to thrive under the new leadership of Art Valentine, who you meet in just a couple of seconds. I have a few highlights before I hand it over to Art. And it was a realistic year. Our message is simple. We are now the largest business at Pearson. Assessment & Qualifications is the largest business. That’s hard for me to say because for many years, we were not and we are very proud of that. We had an excellent year in 2021, and we’re poised to continue to grow as a source of really strength and stability in the company. Our business provides assessment and qualifications that lead to certifications and licenses that allow people to move on and demonstrate their knowledge for a lifetime of learning. From a youngster in pre-kindergarten all the way to someone advancing their career, assessments work for everybody to help them move along in their career. We also have clinical assessments, which diagnose why someone might have learned and how we can help them get along the way. In 2021, COVID impacted our business, but our teams really maintained the challenge in an environment to have a terrific year. Sales were up 18%, have to pause on that one. Profits were up 59%, which…

I am just going to say, even though Bob is leaving Assessment & Qualifications, I’m not going to let him go too far and he is going to stay with the company and advise the company in a more broader capacity, because while he still wants to go play a bit of golf, it’s really important, he can help me and the rest of the team.

Anyway, Art, pretty easy to follow.

Thanks Bob. In 2022, we expect to continue our strong market position and share capture with low to mid-single-digit growth across the portfolio. We also expect to maintain our profitability and margins with each of the business units through 2025. We will continue to invest across the businesses to ensure we have innovative, best-in-class products and services. In 2022, U.S. student assessment will show high single-digit revenue growth, powered by a return to the normal cadence of in-classroom assessment delivery and the annualization of some of our large contracts that we have won. Our UK International and qualifications business has already started conducting exams this past January, and we expect to resume normal exam volumes later in the summer. We do expect this business to rebound to pre-COVID testing levels and revenue. Clinical Assessment revenues will be slightly down. We are going to show strong growth in our digital and subscription products. That’s going to be offset by a very strong 2021, where we had 2 stellar new product releases and some pent-up demand for clinical services. Our VUE business is going to be generally flat year-over-year. We continue to have very strong core volumes and a fantastic win rate of new contracts, but it’s going to be offset by a reduction in the UK Driver and Vehicle Standards Agency test. That’s the driver’s license here in the UK. We continue to expect to renew 98% or better of our contracts that’s consistent with prior year’s performance. Test volumes in 2021 were up 30% and will be stable to up slightly more in 2022 including mid single-digit growth in our on-view exam deliveries. That’s our remote proctoring offering. As we look into 2025, we expect the Assessment & Qualifications business to deliver low to mid-single-digit revenue and profit growth across…

Good morning. It’s great to be with you here today. I’m Tom Ap Simon, and I lead Virtual Learning, and that comprises of virtual schools and online program management. And the path forward in virtual learning is clear. Our businesses meet today’s learning needs, where online and hybrid learning are becoming a norm and the lines between high school, higher education and workforce are blurring. And because of that, we are well positioned for continued growth. Currently, our virtual schools business supports nearly 50 virtual schools in the U.S. and the UK, around 110,000 students and 5,500 teachers. Our support for these schools includes marketing and enrollment services, the technology and curriculum to deliver individualized learning as well as a wide range of services from substitute teachers to special education. In online program management, we provide marketing and enrollment services, student support and instructional design for 477 programs across 31 academic partners globally. We see plenty of headroom for sustained growth in our Virtual Schools business over the long term, along with growth in the OPM business. And here’s the one. In Virtual Schools, we had a good track record of growth. In the 3 years before the pandemic, they achieved an enrollment CAGR of 9% and a revenue CAGR of 14%. The pandemic naturally drove increased uptake of virtual schooling in 2020. And in that year, we grew enrollments 43%. In 2021, despite a widespread return to bricks and mortar, we grew enrollments of further 2%, which we believe to be ahead of the overall market. And we estimate that the overall virtual schooling population in the U.S. is still only a small fraction of U.S. K-12 students today, around 1.5% of $3.5 billion. So there is significant room to grow. And our primary growth driver centers on increasing…

Thank you, Tom. Hi, everyone, I’m Gio, and I lead our English Language Learning business. Our vision at ELL is to be the world’s leading destination for committed learners to prove – to be able to improve their English proficiency. With 1.5 billion people currently learning English, there is a big opportunity for us to grow in the institutional assessment and direct-to-consumer spaces. And we are well positioned to capitalize on it. We’re focused on those who define as the committed learners, those who dedicate time and money to language learning. English is a gateway to the world. More than 140 countries include English as a mandatory subject in their national curriculum. English is indispensable in the workplace, making it a vital part of closing the skills gap globally. Our ELL division grew its revenues in 2021 by 17% to £238 million. We have well-established businesses with solid market shares, plenty of room to grow and the ability to contribute to the success of other Pearson divisions. We’ve also built a strong brand and developed a unique IP and services like our proprietary international recognized global skill of English against which we map all our content and assessments as well as the Pearson Test of English, which has a growing synergy with Pearson VUE. Our Versant testing product also has crossover potential with Pearson’s new Workforce Skills division, and Mike will address that shortly. Our go-forward strategy focuses on 3 market segments: first, institutional ELL. It’s a growing global market worth £2.2 billion, of which £1.5 billion is courseware. We are one of the three biggest players in courseware with circa 11% market share, and we generated £160 million of revenue in 2021, up 13% on prior year. Our value proposition to academic institutions and to private language schools, is…

Thanks, Gio. Hi, everyone. I’m Mike Howells, and I have the privilege and the pleasure of leading our new Workforce Skills division. Now the headline for this business is straightforward. We are transitioning to a new business model, a new go-to-market strategy for Pearson as a strategic solutions provider for workforce skills. And I want to tell you why we are confident we are going to succeed. We spent the last few months engaging deeply with our partners in Pearson’s fantastic global network to understand the challenges that our customers face. And they are clear and consistent. Existing solutions are fragmented and do not work well together, deliver poor ROI and above all, a poor employee experience. Many businesses are trying to solve these problems, and there are some great offerings out there. But this market, which is valued at $100 billion in the U.S. alone, is still in the rapid early phase of disruption. And we are confident that Pearson can differentiate by exploiting four important competitive advantages: First, the ability to provide our customers with an integrated end-to-end set of solutions from diagnosing the problems they face to providing the learning solutions to meet their specific needs and verifying the outcomes that they have achieved. Second, Pearson’s reach and scale, which allows us to address the needs of individuals, enterprises, governments and institutions through a single ecosystem of products and services. Third, our new status as one of the leading sources of accurate, trusted data on skills and talent, a theme that you’ll hear throughout the conversation today. And fourth, a global brand recognized for the rigor and quality of our learning solutions. So, let me take you through that in a bit more detail. Firstly, our new business model will give enterprises what they want, an integrated…

Now, the Credly team will also be available after the presentation. And as you saw from that video, Credly expands our opportunity in the Workforce Skills space. And with Faethm and Credly, we have a comprehensive, accurate and future-looking dataset on demand and supply in the skills economy today. And by bringing these new capabilities together with Pearson’s learning portfolio, we have created an unmatched end-to-end value proposition for employees. You can envision a scenario where much of this learning also becomes available via Pearson+ and yet another opportunity to expand the scope of that product. Our second competitive advantage is our reach and scale. Pearson has an outstanding ability in this market to cater to the needs of governments and institutions, enterprises and individuals. And it’s the link between the needs of employers and individuals that is particularly crucial. It’s a difficult problem to crack. Very few learning providers have served both successfully, and we are targeting that challenge from the start, combining our deep expertise in building learning experiences for individuals, with our new enterprise focus capabilities in Faethm and Credly who serve over 2,000 enterprises and organizations combined today. We want to help individual learners access the right solutions for them and help employers to attract, retain and develop the right talent. The key to doing so and our third competitive advantage is the ability to provide accurate, verified and trusted data on skills. Skills are the new currency of the labor market. Employers and employees are moving away from traditional learning paths and talent solutions. Accurate, unbiased data on skills will help employers to know what they need and how to get it. The old CV or resume is long past its sell by date. We need to enable a world in which opportunity is based…

Well, thank you, Mike, and hello, everybody. I’m Tim Bozik, and I lead our Higher Education division and I co-lead our direct to consumer division with Lynne Frank. The headline for our Higher Education division is straightforward. We’re moving to a place of stability, and we will drive digital growth in an expanded market. Before I go into detail on that a bit about where the market and business stand today. While we operate our higher education business globally, over 80% of the revenue comes from the U.S., so I want to focus on that today. Our current total addressable market is defined by the number of students and the number of courses they take with required courseware or simply put, student enrollment and course enrollments. Those students spend an estimated £5 billion on those required materials. And while our business model is currently defined by winning course adoptions, we’re also in a market that’s becoming increasingly consumer-led. That means we have the opportunity to expand our addressable market beyond students who are enrolled in university and assigned courseware to anyone who needs to supplement their learning. In just a moment, I’ll walk you through how Pearson+, can help us do that. In 2021, our digital registrations dipped 7%, reflecting lower enrollments and more on-campus instruction. Our Pearson+ registered users were at 2.75 million and text unit volume, which is the combination of stand-alone print, print rentals and e-books stood at 5.4 million units, which was essentially flat to 2020, indicating secondary recapture amid lower enrollments. For 2022, we expect sales to be down, but by less than last year and margins to stabilize as we drive cost optimizations. Now there are some key assumptions underpinning us. We expect student enrollment declines this spring, reflecting last fall’s drop and the…

Alright. I hope you can see why we’re so excited about channels and social. And I’m thrilled to announce today that we signed an agreement to acquire Clutch Prep. They are an online video-based learning service that will rapidly fuel our channels content with quality original video tours. The Clutch prep team has been at this for 10 years, creating a short-form video and practice library with remarkably simple explanations to help students get better grades and save time in the toughest college courses. So just to recap before I hand back to Andy, the higher education business is on the right track for stabilization and growth. And we will deliver that by maintaining the strength of our core products, continuing our aggressive pursuit of the secondary market and by scaling and enhancing Pearson+. I hope that gives you a sense of why we’re confident and excited about this division and the potential it has to contribute to the future growth of Pearson. Thank you. Now, back to Andy.

Thanks, Tim. So in summary, Assessment & Qualifications is a source of strength and stability in the company and we expect that to continue in 2022 as that business maintains its broad, long-standing customer base, fed by the market demand for upskilling and reskilling. Our virtual learning business is poised to benefit from the normalization of online schooling and from our strong foundation in OPM, which provides upside. Our ELL business aims to be the destination for committed English learners and we’re pursuing that with institutional business and high stake assessments as well as a direct-to-consumer strategy. You’ve also seen today the strategy for our Workforce Skills division which we will execute by bringing to market an end-to-end business solution that meets the learning and upskilling needs of both employers and employees. And finally, you just heard from Tim talking about the path to stability and the digital growth for our higher education business, anchored by our trusted core products, the capture of the secondary market and the growth of Pearson+. 12 months ago, I laid out a strategy for this new Pearson, and I truly believe that we’re at a pivotal and important inflection point in our evolution. Now as we move into 2022, my priorities are very clear. Firstly, we’re going to deliver sales and profit growth. Secondly, we’re going to continue the focus on execution, quality and trust. We’re going to further embed customer and consumer insights across the entire company and we’re going to progress and scale Pearson+. As I have shared when we launched Pearson+ last July, I’ve always felt that higher education was just the starting point for a broader consumer offering. It’s now time to start seeing Pearson+ in a new light. Earlier today, I talked about how building a connected consumer and…

Okay. If we – these people probably have the microphones. That’s what I’m guessing. I’d also like to say that our Chairman, Sidney Taurel, is here with us as well.

We will take the first question from Nick Dempsey.

Yes. Good morning, everyone. I’ve got three questions, please. So first one, I’m assuming that your forecast of more than doubling Workforce Skills revenues by ‘25 is all organic. And if so, I’m kind of backing out 20% to 25% organic growth for the 3 years beyond ‘22. So inside that, are you assuming any reduction in the BTEC business in the UK as T levels come on stream or do you have a more optimistic assumption for that slice of the revenues? Second question, can you give us a sense of the scale of the stranded costs that you mentioned will be left behind once you’ve sold the businesses under strategic review? And the third question, in Higher Ed, Cengage sticks their version of MyLabs and Mastering into Cengage Unlimited. Do you think that you’ll have to do that eventually to kind of match the product? And will that represent another leg of revenue reduction per student as you get a kind of bundling effect there?

If you want, I can – I’ll start with the last question and then hand over to Sally for the first two questions. I think the way that certainly we look at our Higher Education business and why we started in the Higher Education business with Pearson+ is we have a defined cohort of users of Pearson product today, about 10 million students. And they are a very low-cost and efficient consumer acquisition tool. So if you think of the cost of acquisition for that 2.75 million students, the majority of whom actually came through Mastering and MyLabs, into the Pearson+ ecosystem, that is a very, very cost-effective way of generating scale within that community. Now as we add channels and other functionality to Pearson+ this year and in the coming years, we create – this is always what I said at the end of last year, why that registered user number is very, very important. I hope now you get – you kind of get a sense that there are really three phases in the evolution of Pearson+ growth. Today, for those students who are using a Pearson textbook or MLM, later this year – actually starting now, any student in the U.S. and then any student globally, and with the increased functionality that I hinted at and the opportunity I hinted at, at the end of my presentation, we can expand that to anyone who kind of wants to learn anything and really utilize the leverage, the assets that we have. So we will build a seamless and have – are building a seamless integration between Mastering and MyLabs into Pearson+. The cost of that to a student and to your – the financial aspect of your question, we do not see a need for us to reduce that. We see you enter through the Mastering and MyLabs funnel. And now rather than go get an eText or get a physical book, you got sent into the world of Pearson+. And when you’re there in the future, you’re able to discover a whole host of other features within higher education and beyond as we expand the product. Sally, would you like to pick up?

I’d love to. Hi, Nick. So on stranded costs, I’ll update guidance at the point that we’ve got anything to say around those businesses at whatever point in the year it is. And I’m sure you understand that presuming it’s a normal disposal, there’ll be TSAs in place for a while because the other side will need those services. And that will give us some time to work through how we eliminate any duplicated costs. We’re talking about a cost of sort of £10 million to £15 million. And then on Workforce, I’ll give you the sort of short financial answer and then I’ll pass over to Mike to give you a little bit more flavor. The 2022, I’ve tried to break it down for you so that you can see the kind of underlying organic growth of the existing business. And then I’ve given you growth rates for the two acquisitions we’ve made. Then from ‘22 to ‘25, of course, they will be in the base of organic going forward. Mike, do you want to add some flavor?

I would just say on the effect of the L3 policy review on BTEC revenue, of course, that’s a factor. But we have a wide portfolio of services. We’re also a T-level provider. So we’ve got enough optionality in the portfolio to cover changes in consumer preference. So as we’ve guided you, we expect to see that part of the business continue to grow in the UK and internationally.

Where next, Jo?

Omar?

Thanks. It’s Omar Sheikh from Morgan Stanley. I’ve got, I suppose, three questions. First one for Andy, it’s a bit of two-parter. Sticking with Workforce, if you look at your target of ‘25, you’re talking about doubling the size of the business with double-digit margins. But really, you’re talking about increasing operating profit by about £30 million to £40 million. So is that really ambitious enough in the context of the opportunity that you talked about in the $100 billion market, for example? So that’s the first question. And related to that, if you just take a step back and look at the strategy over the last year, you’re 1 year into your transformation plan. Do you think you’re going fast enough? And how do you sort of weigh the organic versus inorganic opportunities, particularly in the context of the very strong balance sheet that you still have? And then finally, maybe for Sally on Higher Ed, I’m going to maybe try and pin you down on the revenue decline this year. I mean, it is quite a wide range. I mean, you’re saying decline better than last year. Let’s say, we’re talking about somewhere between minus 1 and minus 4. Can you give us a sense of where you think it might land, bottom end or top end of that range? Thanks.

Great. Thanks, Omar. So for your first part of your question on the opportunity for Workforce Skills, I think there is a phrase about underpromising and overdeliver comes to mind. So we have spent a lot of time in all seriousness and Mike and the team. And actually, it’s a cross-company effort. The Workforce Skills part of the business, the division we set up is part of a longer and I think you’ve got a sense of that across the company. We’ve been doing business with enterprise for a long, long time, whether it’s in PTE or Pearson VUE in terms of the credentialing. So we have a lot of experience in this area and a lot of contacts, as Mike was referring to, over 2,000 corporate clients today. We have worked very deliberately on the strategy that Mike outlined for you. I fully expect that we may be coming back to you in due course as we come to market and maybe realizing some potential upside because it is such a large market, and we believe that we have a unique proposition. We didn’t want to follow, we wanted to innovate. And I believe we’ve really truly created something that is uniquely Pearson, that really plays to our strengths. And we have seen really, really is being welcomed by corporates around the world at scale. So as we get more information, as we get more data that comes in, as we further integrate the Faethm and the Credly acquisitions into the Workforce Skills division and more broadly actually into the company, then we’re going to get a better sense of what we really truly believe that opportunity is. But as mentioned, it is a huge market. As we’re doing all of this and whether – how we use our…

Yes, you are right. I am not going to be specific about Higher Ed on a 1-year basis. But what I am going to emphasize is there is going to be growth out to 2025. I think we have given you the moving parts around enrollments, market share, secondary recapture, that course enrollment piece. And if you want to be specific, I will let you draw your own judgment anyway. Anything you want to add?

No, I think you have got it.

We are going to – can go to Katherine.

Good morning everyone. It’s Katherine Tait from Goldman Sachs. A couple of questions for me. Firstly, you laid out, as you did with Workforce, the great opportunity there is in Assessment and Qualifications and also in Virtual Learning. So, a similar question, really, why is your sort of growth outlook as sort of conservative or maybe you wouldn’t describe it as conservative as it is? Why can’t Assessment grow faster than that sort of low-single digit, particularly VUE and clinical? I understand the other stuff perhaps being slightly lower growth. But why can’t we see faster growth there? And similar for OPM, I think you talked about a 14% growth – market growth levels. So again, why are we talking about only mid-single digit in that market? Second question, on Workforce Skills, curious, the contracts that you have won recently with corporates, I would like to understand like how are you winning those. Like what is it? Are you displacing other competitors? Is it a completely new product that these corporates are bringing in, in addition to other services they have? Are they displacing in-house solutions? Just keen to understand that a little bit better. And then finally, on the buyback, if you – or as and when you are successful in selling the sort of businesses up for sale, could we anticipate further cash returns, or is that already baked into the £350 million?

Thank you very much. Have you met Bob and Art, to your first question, and that earlier response about under-promise and over-deliver? No. In all seriousness, I don’t know. Art?

Yes. Not a bad move to plagiarize the boss in the first session like this, so under-promise and over-deliver is absolutely a good mantra for all of us. We feel great about the Assessment and Qualification business. We are very proud of the track record that we have shown in delivering that steady growth. And we are planning on continuing the formula that has delivered that, the breadth of the portfolio, the coverage of the broad range of professions, things like IT have certainly pulled things upward. Other areas like traditional students admissions maybe reacted specific things like the COVID disruption to traditional admission testing. So, that whole portfolio effect is what contributes to that low to mid-single digit growth. We feel quite good about it when we add in the investments that we will be making in geographic expansion and continuing to broaden the solution set. We are quite happy with being able to stand up here and say that. And if we do, in fact, over-deliver, we will be happier still.

Perfect. Mike, do you want to touch on the…

I am going to follow Art’s example standing actually. I could talk to you about this for hours and I am not going to because we have other things we need to talk about. But just a couple of points about this market that I think are really important to keep in mind. The first one is it is highly fragmented at the moment, and it’s changing very, very rapidly. That’s creating a lot of friction and churn for companies. It also means that no company yet has really, in this new space, achieving single-digit market share. So, there is a lot of demand and expectation from customers, employers for better services and a lot of opportunity for us. So, to your specific question, the services that we are winning these contracts for are new in the market. So, the new services, for example, that Faethm provide, the new services that Credly provide, these are innovations in the market today, and they take us into a much more effective high-value future state in terms of outcomes for customers and returns for Pearson. What the opportunity for us now, having landed so many of these contracts, is to expand the revenue opportunity that we have there by integrating our products and services together and filling out some of the gaps that I mentioned when I spoke. Thanks.

Sally?

I am not going to stand up because I have got a suspicion I am going to lose my mic, if I do. So, in terms of the application of our capital allocation policy, I have looked out and I have incorporated an assumption around what happens around the international courseware local publishing businesses. The Board will always apply our capital allocation policy. Our priority is in investing in the business and driving future growth. But at any point in time, if we see the opportunity to return – make returns to shareholders, we absolutely will. And we have demonstrated that we have now.

Can I take the OPM, please?

Yes. Sorry, Tom.

Yes. So, I mean I think look, the simple answer is Rome wasn’t built in a day. So, we started off with a major reset of that business. We are bringing in a new leadership team. We are putting the foundations in place from a marketing enrollment perspective in terms of getting the funnel right. And then we need to get one with the new business development pipeline. But as you appreciate, when you are ramping up these new courses, they take time to ramp up as an investment cost required. We are doing that. And we want to be really clear. We have got the right partners where we can scale with. So, that doesn’t mean you are going to take one university online with three programs. We are talking about taking university online with the right number of programs, so you can grow scale behind the brand, leverage the brand, the university’s brand to grow in that space. Because we recognize it’s a competitive market. So, we are being very choice-full about where and how we grow. And so we are not starting off by saying, well, on day one, 14%, there we go. So, gradual thoughtful step-up approach to growth. Thank you.

The next question from Citi from Tom just in the back.

Yes. Thank you. It’s Tom here from Citi. So yes, three questions. Let’s go for it. The first one, on the guidance, it’s £417 million, which I think you have taken from consensus. But looking at consensus, it also includes just shy of £30 million for Workforce Skills. So, I mean by definition, there is an extra sort of £30 million of investment, I am just coming in somewhere. I am interested whether that’s fresh money being spent on developing Workforce Skills or whether that’s a sort of run rate of losses for Faethm and Credly that will just be absorbed by the Workforce Skills division. That’s I suppose the first question and maybe the small addendum there is if – where is conservative – where is consensus too low for 2022 as well? And then the second question was on Assessment and Qualification, just around account wins and losses. Obviously, the DVSA contract is coming out. I was just wondering whether you have line of sight on any big contracts that are coming this year just so we can just keep an eye on them. And then a final one for Tom on OPM, do you feel like you are missing out not having any big destination consumer site like edX or Coursera, or is that something that Pearson+ is going to build – sort of fill in over time? Thank you.

So, the £30 million for Workforce Skills increased investment, which we have – which I indicated, that’s a kind of mixture of both, Tom. So there are losses in Faethm and Credly, and we are also putting further, I guess organic investment into Workforce as well. And that broadly comes from capital reallocation across the other divisions, as you know, I am very cost conscious. So, there are some places where we are making savings that enable us to invest in that future growth. So, I think that probably answers the question. Anything you want to add?

Art, do you want to talk – or Bob, do you want to talk about…

The DVSA contract was disaggregated. We didn’t lose it all. In fact, we maintained about a third of what it was. But two-thirds was a hit. And when you are going to grow in mid-single digits and you lost a big contract like that, that means there are obviously some new contracts in the works. And one of them has already been signed, but they have chosen not to go public with it yet because they don’t want to stir up their – make sure they have a nice exit from the current vendor. They think announcing that will create havoc. So, that will be announced soon. And we expect several new fairly significant contracts to be signed in ‘22, which I really can’t talk about because they are in the stages of finalization. But the pipeline for the VUE business is as strong as it’s been in many years.

And also, as you recall, have that stability of the number of contracts, so a win and a loss anywhere over the overall breadth of scale of those contracts, it mitigates some of that. And Tom?

Yes. Look, I think from an OPM perspective, when we speak to university partners, they care about one thing, having high-quality pipeline of students that we can bring in for them. Obviously, to you and others can get access to that from their large base of moot-based clients. We feel good about what we are doing in terms of our marketing and enrollment funnel. We said there is a lot of opportunity there to optimize that to drive efficiency through it to get better conversion, to get the media mix right, to improve the work we are doing with our enrollment teams. So frankly, we are happy with what we have got, and we are going to make sure we deliver with that for our partners. And if we do that, we will continue to build a reputation for consistent delivery for those partners, and we will continue to grow relationships and build an excellent reputation in the marketplace. So, that’s the plan and we are sticking to it.

Susie, can you get to Adam?

Hi. Good morning everyone. It’s Adam Berlin from UBS. I have also got three questions, Two on the Higher Ed and one on Workforce Skills, if we can. So, on Higher Ed, does it make sense to target a stable margin this year? You said you are going to have declining revenue. There is obviously salary inflation in the U.S. And Andy has talked about this huge opportunity in Pearson+ and to invest in that platform. So, how are you going to do it? This is kind of the question. The second thing, following up on that, is you talked about the importance of MyLabs and Mastering, which is actually where most of the revenue in U.S. Higher Ed is today and how important that is as an acquisition funnel for Pearson+ in your strategy. How are you going to stop the decline in Mastering and MyLabs units? What’s the plan? You don’t talk about it. You always talk about inclusive access in Pearson+, which will focus on textbooks. But what are you doing to turn around that big problem that you have in that business? And then the question I wanted to ask on Workforce Skills is, could you just explain how large the enterprise sales team is today? How big does it need to get? How hard is that going to be to recruit those people in the current labor market? And what’s that like, because that’s the real challenge for lots of tech start-ups. And that would be really helpful. Thank you very much.

Thank you. Do you want to start with the Higher Ed margins and then move on to…

Yes. And then I will hand over to Tim to fill in as well. Yes, it does make sense to target those margins. We have got two things happening. We have got the revenue, please, but we have also got ongoing cost savings within the business, which we have seen in 2021. So, it’s a continuation of the things that we are doing there. As you move from print to digital, there is costs that you can naturally take out of the business. And Tim and his team are very expert at doing that. So, I am really confident about Higher Ed margin this year.

And I have just said, before Tim leads up, is about – we take a holistic view about how we spend and how we allocate our expenses across the company and how we utilize any cost savings that we are bringing in so that we are prioritizing and triaging. It’s really important that we put our money to work so that we are going to be driving growth. We are focused relentlessly on growth and delivering that. So, we don’t – no longer look at just a segment by segment by segment. We are really thinking around, okay, this is in totality how much we spend on these different aspects on a day-to-day basis, and these are the areas. You have heard some areas in terms of Pearson+, Workforce, Jio’s World. The real answer, all of these businesses are constantly innovating, constantly investing. But what we do, where we have opportunities to optimize our operations is then how – where is the best way to allocate our funds. I think it’s just very important you understand that’s how we see that. But Tim, do you want…

I forgot to pick up on the Pearson+ funds. I am sorry, Adam. I really will let you have a go, Tim. So, we have got investment in Pearson+ in 2021. We have got it in 2022. It’s just kind of not an incremental piece because we already had it.

We built that in. That was kind of more eloquently said. That’s what I was trying to say. Go ahead, Tim.

Yes. I appreciate the question. So, I mentioned three key drivers for the Higher Education business, the headline level, which is enhancing those core products, which I will come back to, accelerating secondary recapture and scaling Pearson+ in a way that can expand our addressable market. All three of those are not aspirational, they are operational and they are well underway. So, now double-clicking on the enhancement of the core products, MyLab and Mastering, to put a finer point on what we have done and what we are doing. The migration to cloud, as I mentioned, will essentially be complete this year. That’s a very significant undertaking that will support reliability and stability. You can call those table stakes, but it’s a heavy lift from an execution standpoint. So, almost done this year. Point two, about convergence. Again, that is bringing the MyLab and Mastering platforms to a single application, right, so common UX framework, common services that will, in turn, bring a consistent user experience and a much faster innovation cycle. So, our ability to respond and remain or be – gain competitive advantage is supported by that. That convergence will be completed over this period. It is underway. You have to step by step through one application at a time, you deconstruct the services. So, it’s been underway and it will be complete within this period. And point three is we have a roadmap of features that are aimed at improving the learner experience. So, improved adaptivity, improved interactivity, more integrated learning experience. All these things, we are very close contact with both faculty instructors and on the student side of things that will, again, both maintain our competitive position or improve it. So, those are the reasons we believe that, that core product suite will remain competitive. The other issue we have seen in the last couple of years is they were designed – they are very anchored on lower-level undergraduate courses. When we introduced them 20-years-ago, their faculty productivity tools for one, which means people use them in large-scale courses because they bring faculty productivity. Those have been under significant pressure over the last 2 years, where undergraduate moments are down 6%, right, in the U.S. So, I think a lot of the volume pressure we are seeing is a reflection of the enrollment environment, which we don’t control for, but we don’t expect to be as severe on the outlook. And while we can’t predict it, we might see some improvements in there. So, that’s the reason why we believe that, that set of core franchises will remain an essential part and a reliable part of the portfolio and the revenues and profits.

And to be clear, we see no erosion in our share, to just your earlier points. Mike?

Great question. So, three parts of the answer to this. So, I mentioned we have integrated our smaller, faster-growing assets into the Workforce Solutions business, so that’s three of the existing Pearson business units plus the two acquisitions. So, that’s a new single integrated go-to-market structure that we are creating out of that. So today, less than 100 in terms of people working in the sales and marketing function. But we are structuring that and executing that in a different way than Pearson has in the past. The second thing I would say just is partly it’s about the acquisitions. So obviously, with Faethm and Credly, we have brought in some very talented people on the go-to-market side as well as on product development and data, particularly in the B2B SaaS business model space, which is going to be a key driver of revenue for us. Great unit economics, highly scalable, big part of what we are going to do. But then the third part, and this is really interesting, is really the appeal and the offer and the story that Pearson has. So, I think a lot – I am recruiting at the moment. If any of you are interested, see me afterwards. But there is a lot of people from that B2B SaaS world very attracted to the purpose that Andy is bringing and that we have talked about today, but also the opportunity they see as sales professionals in our growth story. So, it’s a hugely competitive labor market out there for sure, but we have got a great offer that we are finding is very appealing to people.

[Indiscernible]

Thank you. It’s Sarah Simon from Berenberg. Maybe just two questions on Pearson+. So, in terms of the 2.75 million users, that’s a December figure, if I am not mistaken. So, now that we are halfway through a new colored semester, how has it trended since and any indication on the number of paid users within there? And maybe one on Credly as well, could you just maybe talk about maybe compared to LinkedIn, you can sort of qualifications on LinkedIn credited and everything. So, just the difference in use cases between Credly and LinkedIn?

I will take your – the first question on Pearson+. As I mentioned in my remarks, we are going to focus on releasing both registered user numbers and subscriber numbers twice a year. We are going to do it at the end of the calendar year, i.e., we report at year-end and at interims. So, the next update you should expect is at our interim presentation. I will say that there has been healthy growth, shall we say, since that number at the end of last year. But we will be getting into more details around both of those numbers and get into that regular cadence so that we are mirroring both the calendar and fiscal year, but also then the academic year, so that we are giving you accurate numbers at the end of each of those periods. Mike, do you want to talk Credly?

Sure. I mean there are great synergies actually between Credly and LinkedIn. And many people will communicate their Credly credentials on LinkedIn. So, that’s one of the application areas. I think the difference to think about here is two. LinkedIn, obviously is fundamentally a social platform for professional work. Think of Credly as the data layer for skills. That’s the first difference. And the really key thing is around verified skills. So, LinkedIn has got some great technology, working very hard to bring an element of verification to what we in the room say about ourselves on LinkedIn. You can query how accurate some of that data is. I am sure we are all completely honest about what we have said, we have done in the past on LinkedIn. Credly is a verified skills deck space. So, if you have a Credly badge, you can take that to the bank. It tells you as an individual that helps you also communicate what you can do. But as a consumer of those skills, as an employer, for your employees within your enterprise and you are thinking about how to make use of them or if you are seeking to recruit new employees, Credly gives you an accurate verified picture on skills. That’s the big differentiator.

I would like to add one quick statement to that. I was on the Credly Board. As you know, Pearson owned 20% of that. And one key differentiator is that Credly badge tells you what you can do, not just what you know. There is a lot of difference between what you know and what you can do, and the Credly badge verifies that you can actually do something, not just know about it.

Good point. Jo?

We have a couple from online. Sally, for you. Matt from Credit Suisse. How much M&A revenue is in the 2025 guidance? And are you looking for stable margins in ‘23 as well as ‘22?

So, we have got both – I think it’s probably the answer to the question I had earlier. So, in 2022, I have given you the breakdown both for the organic or the existing business in 2021. Then I have given you the growth rate for both Faethm and Credly. And then for ‘22 to ‘25 onwards, that’s included – it will be within the base and then for 2023 margins, so the margin for 2021, 11.3%. Could that mean that the margin for 2022 rounds up to 12% rather than 11%? Absolutely, but broadly stable.

Thank you. And another one from Sami from Exane. Mike, I think it’s for you for the first one. What is the annual revenue base of Faethm and Credly from which you are guiding for 4% revenue growth in 2022?

Today, about £25 million.

Perfect. And Tom, one for you, how much of the COVID cohort are you planning on retaining in full ‘22? I think that virtual schools.

It is indeed. So I mean, I think the first thing to say is we have grown 33,000 students over the last couple of years as a result of the COVID cohort and interest in virtual schools increasing. Two things are different this year. One is that in the ‘21, ‘22 school year, we had a lower proportion of new students. So, we have a lower retention rate for new students versus returning students. So, that mix has changed positively. And then secondly, in our new students in 2021, about a third of them said their principal reason for coming was COVID. And in 2020, that was around 50%. So, you have got a proportionately better mix in terms of new versus returning, and you have got a proportionately fewer number of students in terms of COVID being the principal reason they were coming in terms of new students in the first place. So, you put all of that together and then you can back out the difference between our guidance for 2022 and then ‘23 to ‘25 in terms of the difference that that’s having on our year-over-year growth rates.

A question from Nick.

Hi. This is Nick from Artemis. Good morning everyone. Thanks very much for really interesting presentation, helping us build out an understanding of where you are taking this business. When we look at it, we can see the opportunity to go from being, let’s say, a higher education publisher to a global learning media company. And you talked about the jigsaw pieces and then the picture that you are creating. To get there it’s going to take an ability to create compelling content that people really want and value. And that’s an element of magic, which is – we have seen in businesses like Disney that is a bit harder for investors to imagine. So, can you give us some explanation of where your confidence comes from, that you have that content heritage and culture and capability within Pearson that you believe you can execute and create that compelling product and service for your users around the world?

Great question, Nick, and thank you for raising it. I think one of my first presentations, I have said intellectual property, IP, is really at the heart of this company. And as you would imagine, given where I have been in the past, I am a strong believer in the power both of intellectual property and of brand. And whether that’s in the past, our 3,500 authors in the Higher Education business who created intellectual property in the form of a textbook through to what we are doing in English Language Learning, the intellectual property that we create across all of our businesses, the 5,500 teachers that we have in our virtual schools business and the bespoke curriculum that is our intellectual property that we create in Connections Academy, across this entire range of businesses, intellectual property and the people who create it and the people who go search for that talent to create the next generation or next iteration of intellectual property is fundamental to our success across the business, whether that is through an acquisition such as Clutch Prep that Tim mentioned today, all the way through to, constantly, we have teams in each of the divisions whose sole job is essentially talent spotting, finding talent, attracting talent, nurturing talent and then delivering and creating compelling quality trusted product that learners want. That’s how we have won in the past, and that’s how we will win in the future. It’s that marrying of intellectual property with the technology and the developments in technology that are enabling us to create direct relationships with consumers. I hope that helps.

Yes. It’s about the magic of the content, as you say, and as Andy has explained. It’s also about the magic of the algorithm in these global media companies. And we are connecting Pearson through the services that we are developing the acquisitions that we are making. So, Faethm and Credly, as Andy mentioned, the capability they have as diagnoses, as recommenders of pathways of content has applicability across the whole of the portfolio. And what that will allow us to do as well as bringing compelling new content to market to meet the specific needs of our learners in a Pearson+ environment, for example, wherever they are in life, it also allows us to gain much greater value and scale for our existing content because we have got great content – locked up is maybe too strong a word, but in use cases, which we can dramatically expand through that connectivity as well.

And just to build on Mike’s point, we have got a new curriculum that we are building the Virtual Schools space that is aligned to the world economic framework, skills ontology. Guess what, Faethm is very closely aligned to that in terms of its own understanding of Workforce Skills. So, that can all be aligned. We are building that content in a different way. So, it’s modular. It does not – you don’t think about it as a textbook, think about it as a database of content, which gives you a very clear learner feedback so you can understand performance from students in terms of how they are doing. You can then take Clutch Prep, which is an assessment qualification. You can then start thinking about how you provide a broader service to virtual school students because of the range of the things we can offer. And then you can think about the relationship with virtual schools and workforce, for example, as we are thinking about making those linkages up and down in terms of the lifelong learning value. So, I think there is a great content. There is cross synergies. And then there is the aging stages of the organization and how we bring that together.

The amount of data that we are receiving, and we have referenced a bit around the importance we see and the opportunity we see with data across the company, how we manage, how we utilize and how we use data not only to inform us on how to improve our products and our content and our IP, but also to help the learners. One of the things that struck me recently was the use of – our data is a predictive tool. If someone comes in to the beginning of their high school or their college life or university life, and we are able to follow their – what they are studying over a 3-year or 4-year period, we can help students answer that main question they have. So, what the hell can I do with this degree? What jobs are available? And if we know and through Credly, we can also then say, “By the way, if you took this credential or this badging, that’s going to help differentiate you in the market.” And we can – if for example, we thought you were good for a marketing role, and there are enterprises who are looking for 100 marketing graduates, we have data on tens of thousands of potential recruits into that marketing world. So, this is another way to think about Pearson VUE. I went into a High Holborn Pearson VUE Test Center a few weeks ago and there was a bunch of candidates taking a nursing exam. Now, if you think about it, we know there is a bunch of individuals who want to become nurses before anyone else. So, how we leverage those insights across the company and across a consistent data layer and a common identity, I think is something that’s very, very interesting.

Question from Simon from BNP. Andy, for you, does the business have an indication of what good best case scenario looks like for growth and margins?

Does the...

Business have an indication of what good, best scenario case would look like for revenue and margins?

Well, aside from the financial metrics that we have in place and the non-financial KPIs. We have a relentless focus and rigor and transparency around how we are operating. And we share when things are going well. We understand what are the levers that are generating that success. And if there were any challenges, we know then how to address them and become – move with agility. And then you layer that into it. So, it’s almost like an intuitive management. That’s why we meet together for two hours every Monday morning because you can get a certain amount of information from the numbers and a lot of those numbers are generated. We have the forecasting of – accurate forecasting that feeds into various – the models within Sally’s team, very, very important. But there is something about understanding at an early stage what’s working or what not is working or what we need to change and what we need to improve. I am not sure whether I m getting at the essence of the question, per se, or if anyone wants to add. But that’s how I interpret how we are managing the company as a whole above and beyond the pure numbers.

I will just add to that maybe a bit more directly. We have laid out what we feel is a base case of what we expect from ourselves here. We would hope to improve on that. And Pearson+ should give us the vehicle to do so.

Yes.

And I will hand back to Andy, I think.

Okay. Well, thank you very much. If you are watching online, I appreciate the – taking the time out of your day. And particularly for those of you who have made it into 80 Strand this morning, I greatly appreciate your interest in our company. We are all here. There will be product demonstrations for both Faethm. There are some folks here from Credly as well as the Pearson+ team. So, you can – we are doing it in groups and in individuals. So, for those of you who are interested in any of those elements, any other questions that you have that you haven’t had the opportunity to raise now, we are all here and at your service. So, thank you very, very much. And I believe there may be refreshments for those of you here outside. Thank you.

Thank you.