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

Thank you, Alex. Good morning, and welcome to all of you. Thank you for joining us today. As well as hearing from Sally and me, we're also joined by our colleagues, Art, Tom, Vishaal, Tony and Sharon for Q&A. Many of you will recognize Sharon from the Assessments and Qualifications investor seminar that we held back in November 2023. But let me formally introduce it to all of you. Sharon has held many leadership roles over her successful Pearson career and is currently MD of our U.S. Student Assessments and UK and International Qualifications businesses. She has a track record of strong results delivery. I'm pleased to announce that Sharon will become our new President of English Language Learning effective next month. This means that Gio Giovannelli has decided to leave Pearson. Gio has contributed so much to Pearson over the last 12 years. I'm glad to Gio, and he's been instrumental in driving the strong revenue and profit growth of our English Language Learning business. I'd like to thank him for his big contribution and wish him all the best for the next endeavor. He'll continue to be available to Sharon and the team over the coming period. Now I'll kick off with an update on our strategic progress before handing over to Sally, who will run you through our financial results for 2024 and our expectations for 2025. You'll remember that we set out three priorities for 2024, and I'm pleased to say that we successfully delivered on all three. First, we delivered a financial performance in line with market expectations. We grew sales by 3% and profits by 10%. I'm particularly happy with the resulting EBIT margin of 16.9% and strong free cash flow generation. Second, as further evidenced by today's announcement of our partnership with AWS,…

Good morning, everybody. 2024 proved another year of good financial performance. We saw a 10% increase in profit with margin expanding from 15.6% to 16.9%. Adjusted EPS increased 7% to 62.1p, reflecting that trading performance as well as reduced share count due to the buybacks in the year, partially offset by higher interest and tax. Cash performance was excellent with operating cash conversion of 110% and free cash flow conversion of 117%. This strong performance, alongside our balance sheet strength means that we're increasing the dividend by 6% as well as announcing a share buyback of £350 million, which will commence as soon as administratively possible. Before we get into the detail, I think it's worth reflecting on our financial performance over the last five years. This progress shows real momentum across the business, which gives us confidence in delivering another good year in 2025 and in our guidance beyond that. In 2024, we delivered underlying group sales growth of 3%, excluding OPM. By business unit, Assessments and Qualifications delivered a solid performance across each sub-business unit, accelerating growth in H2. Virtual Schools declined 1% due to the known school losses but 2024-2025 enrollments were up 4% on a same school basis, and we also opened three new schools. Virtual Learning declined 4%, given the final portion of OPM ASU in the first half comp. Higher Ed returned to growth given gains in adoption share, enrollments and pricing, partially offset by mix. The H2 U.S. Higher Ed growth of circa 3.5% underpins our confidence going forward. English Language Learning delivered a strong 8% performance, driven by Institutional with PTE performing well against a tough market and Workforce Skills grew 6% with a solid performance from both Vocational Qualifications and Workforce Solutions and momentum given recent partnership contracts with ServiceNow, Microsoft…

Thank you so much, Sally. I'd like to turn to the topic of how we track the progress of the business and the metrics we will use. Now the way we think about this is in three tiers. At the bottom of the pyramid, we have hundreds of analytics that we use to track performance of the business every day. So think of things like user engagement or pipeline aging metrics. Next, we have a small number of metrics, less than 20 that the Pearson executive team used to run the business, for example, new bookings. Now at the top of the pyramid are our power metrics, a small number of KPIs that we plan to share externally to track our progress against our strategic priorities. We believe these will be more helpful to you in understanding the progress that we're making, and they, therefore, will replace our current set of strategic KPIs going forward. You will recognize this slide as the executive summary of our strategy that we shared last July. And you'll remember that assessments forms approximately two thirds of our business and that we're very focused on driving growth in the Enterprise segment. And for this reason, we will share two power metrics linked to these two themes going forward. First is our assessments and verifications renewals and also the level of assessments, new business acquisition. And second is the number of customers in our most commercially and strategically material tiers. We have customers at different levels of scale and scope in terms of their usage of Pearson services and the most important are our advanced and elite tiers that individually contribute millions of dollars per annum. And we will share with you the absolute number of these customers going forward as a second leading indicator of…

Good morning. It's Adam Berlin from UBS. Thanks for taking three questions, if I could.

Hi, Adam.

I'd really like to hear in your own words, Omar, what you have in mind with these partnerships with AWS and Microsoft? Like what are these -- what are people actually be doing? What's going to be the revenue? What are these businesses? It's just very hard for us to imagine what you're thinking will be the way these new products work. If you can explain it in kind of normal English, that would be really helpful. The second question is, I just wanted to get your views on the new -- on how you think the new Trump administration policies could affect your business. I mean the obvious areas in my mind are PDRI and Student Assessment within AMQ. Any updates you can share with us, positive or negative around that? And thirdly, I just wondered if you could unpack the guidance on English for us a little bit. You've talked about a deceleration from the 8% last year. But could you talk through what you're thinking about in terms of volumes, pricing, institutional? Just help us understand the moving parts in English that would be very helpful. Thanks very much.

Absolutely. So you said you want me to answer this, the hyperscaler relationship in plain English. So that's the hardest part of what you just asked there, Adam. But -- so I mean, I'll talk about how I think of the deals in terms of their composition, and then I'll talk about the financial implications. So in terms of the composition, these companies are investing hundreds of billions, hundreds of billions of CapEx in the ground in AI data centers as we speak. And they've got some of the world's best engineers. And so in making these relationships, we are recruiting some of those engineers to work with Pearson on the development of its own product set, making sure we apply AI in the most advanced way possible. So that's one core component. The other core component, of course, is they are an existing customer of ours, and they are now an expanding customer of ours, and that's part of the agreement. And so that's across the suite of Pearson services. And so I can say to you, for example, that Vishaal had Amazon's top six talent people in this building not long ago. And these are people who recruit 2 million employees a year, looking at like all the latest techniques that you can deploy around talent sourcing, talent development, talent planning. And they would like really going deep with us in terms of how does what they have and how does what we have come together in a way to help serve that need for them as a company themselves but also for their customers. And that's the third part, which is these joint go-to-markets. So the joint go-to-market, the way you should think about it is we have software engineers from Tony's team, software engineers from these…

Yes, absolutely. First off, Omar is right. Our products and services support the ultimate goals of many of the objectives of the output that we're seeing from the administration. Specific to the Department of Education, Adam, I'll remind the group here that almost all of our work across all of our business, including A&Q is at the state level. And the thrust of many of the initiatives coming out of the administration are about giving more control to the states from the federal government. We're quite experienced at dealing with different types of states with different viewpoints on these types of things. So we're quite comfortable continuing to navigate that. Now of course, we're watching carefully the announcements that are coming out, and there is volatility happening in all of the departments, and we've got the right relationships to stay plugged into that. On PDRI specifically, I'll remind this group here. PDRI is a relatively small part of the overall Pearson portfolio, less than 2% of our revenue. And while it does do a lot of direct federal government work, the core value proposition of PDRI is around merit-based hiring. The overwhelming bulk of its offerings help hiring agencies identify candidates who have the exact skills and the exact knowledge to fill the jobs that they need. This, again, is absolutely in line with what the objectives of the administration are. The passage of things like the recent Chance to Compete Act really wonderfully support that value proposition. Now again, in the current swirl of things that are happening, we're paying very close attention to specific contracts, although much of our work is with military and public safety functions like TSI, which are viewed differently in the scope of the administration actions. So we're very, very bullish on the long-term match between our value proposition and what's coming out, while at the same time, monitoring each of those specific things.

Thank you, Art. Now on ELL, normally, I would throw this at Sharon, who is not yet officially in position. She's been going through a fantastic transition with Gio, which we strongly appreciate. But you asked really about guidance unpacking. So I'm going to ask Sally to pick up on that.

Anyway to be fair. You used the word decelerate. I used the word moderate. So English is still going to grow really well, just not quite as much as it did last year because PTE is probably going to decline a little bit because of the Australian and Canadian elections caused the market to fluctuate a little bit this year. We're really confident that those demographic points that we've laid out mean that, that's going to be a great market for us in the future. There's just a little bit of volatility in it this year. Our institutional business grew brilliantly last year. It will grow brilliantly this year as well. I pointed out that phasing piece, but the full-year, super confident in the growth in that business. And you saw the video of that English language shooter. I think it's out in the demo area as well and the assessment -- the lesson-building tool within English as well. Those sorts of innovations that we're bringing to that product is really going to drive growth in those markets. And then last but not least, we're also looking at things from a geographical point of view and looking at driving growth in MENA and in Latin America, in particular as well. So, really confident in English for this year.

Thank you, Sally. Okay. Who's next? Yes, sir.

It's Nick Dempsey from Barclays.

Hi, Nick.

I've got three as well, please. So first of all, following the logic of the shape of the year, if low single digit in the first half is somewhere around 2%, then you need about 7% in the second half. It feels like quite a lot. So can you just maybe give us a sense of how much of that you have good visibility on to prevent people worrying about it being difficult to climb up there in the end of the year? The second question, in Higher Education, you're pointing to similar rates of growth all through the year. But I guess the really strong -- surprisingly strong enrollment growth in fall 2024 flows through first half but almost certainly doesn't flow through second half. So what do you have up your sleeve to maintain the rate of growth in the second half against a likely lower enrollment environment? And the third question also on Higher Ed. Cengage and McGraw Hill, I think, have been outperforming peers on the top line for a couple of years now. And as far as I can see, when you listen to them, it's because they have a much higher percentage from inclusive access, which has been growing well for them. So how do they get to that higher level percentage terms? And are you going to be able to catch up so that you can start to match their growth?

Thanks, Nick, for your forensically detailed questions, which is perfect. So Sally, why don't you take the one on H2 visibility, please?

Sure. So we don't have perfect visibility but I've got good visibility. Obviously, internally, I have got a detailed budget, which is why I'm able to share how the quarterly kind of growth dynamics are going to play out. And as we look to H2, all of those things I talked about from a business unit basis is what's building that growth. So Higher Education relatively stable throughout the year. I'll let Tom double down on the Higher Ed bit when he talks. That English piece that I just talked to as well, seeing that growing throughout the year, then the contract wins and the renewals that we've had in both Assessments and Qualifications and in ELS, I know we call it workforce, all of those dynamics we built a detailed bottom-up budget that shows that phasing throughout the year. And pointing to some of the data points that we use. So for example, in English and in PTE, we're using detailed data around trends about students moving and immigration across borders, detailed bottom-up budgets in terms of what we're expecting in market share, what we're expecting to see in terms of enrollments, which we are expecting them to be relatively flat for H2 but what we're seeing in market share, what we've done in product, that data point that we showed you for fall back-to-school last year around double-digit growth in our AI products. We're going to have a lot more of those in next year. So really confident in both that phasing profile, but also that growth dynamics that we've given you for the full-year.

Thanks, Sally. All right, Mr. Tom. The first one on enrollment growth, but H2.

I mean a couple of things to think about. So firstly, as Sally highlighted or we highlighted in the presentation, good growth in the second half of last year. We're confident about good growth in the first half of this year. Obviously, January and February are pretty much out of the way now. They're the third and fourth biggest month of the year, and we're tracking well and in line with that progress. Clearly, your opportunity for the fall is somewhat dependent on how you've done from an adoption share perspective this spring and where we win new adoptions in the spring, that's an additional business that we can retain in the fall. And clearly, some of the things that we've been doing around reorganizing the sales team means that there are segments of the market that we haven't really gone after properly in the past that, we're going after much more aggressively now. We've got a much more focused sales team now. We've got sales teams focused on winning new business, retaining new business. We're thinking about the customer life cycle very carefully. We've got a much stronger approach to sort of sales operations and how we think about the market and segmentation. So we feel very good about the selling side of things. And then on the product side of things, a very close partnership with Tony. I think we're building a much more robust product value proposition. And you saw that last year with some of the wins that we saw in some of the products powered by AI. So with all that in mind, plus some pricing and we feel fairly good about sort of the second half dynamics from a growth perspective. The other thing to say is from an international perspective, international obviously had…

Thank you, Tom. The gentleman over here.

Thanks, Omar.

Yes, good morning. Steve Liechti from Deutsche Numis. Just following on Nick's question about the first half, second half. I don't know if you can give us any sort of idea in terms of exposure to discretionary or project-type spend relative to subscription. Just to remind us there, that would be helpful. And then equally, if you look at your guidance for the full-year in revenue terms, I guess a fair question would be, how much is kind of in the bag and signed sealed backlog type revenue in that and how much is still to be done? So that's kind of first point. Second point, just on the share buyback in -- well, last year, whatever, you kind of said we're running out sort of net debt leverage sort of below where we would think it should be because we want to do M&A. You kind of alluded to that a bit in your commentary. Just the fact that you're doing the £350 million buyback now, does that mean some of the stuff that you thought you might be interested in from an M&A perspective isn't there? Or have you sort of lost interest in doing that and we're focusing more on the organic stuff? Just anything you can give us there, please? Thanks.

Yes. I mean just one thing to remind you, which I know you know and Sally will dig into the guidance is for the services part of our business, so I think of things like school assessments, VUE PVS, those are very long-run contracts. So when you've got a multiyear contract in place, like a lot of the revenue backlog is in place. But just, Sally, over to you for that.

That was how I was going to answer it. So I'm not going to call out anything particular. You were kind of asking about big exposures, but there isn't anything like that in there. And then there's a proportion of our businesses like students I'm pointing behind me because its Art's business, like the Student Assessment business, for example, where it is long-term contracts, we're already delivering against them, that's using your words in the bag. And then something like Higher Education, we will be going -- we're going into full back-to-school with knowledge of that adoption pipeline that we've built but then the sales happen nearer to when the kids are going back to school. So it's a mixture across the piece.

And then have we lost interest in M&A versus share buybacks? That kind of was the heart of the question.

Yes. So I'll -- should I start that and then you can add, yes.

You start and…

So our capital allocation policy is clear, invest in the business, the dividend, the leverage that you talked to. And then -- and we apply the policy in that way, and then the Board makes a decision about whether a further return to shareholders is the right thing to do. We're not the sort of business where a kind of M&A budget for the year makes sense. It's about the opportunity that comes up and a tool that we can use that helps to move our strategy forward. We're really focused on organic growth. But at points in time, the stars will align on a piece of M&A makes sense. But it will be about driving the strategy of the business at the right return as opposed to I've got a budget in the year, and I'm going to fill out the budget. So that's the way we think about it. Do you want to add?

I mean, I totally agree with what Sally said. I mean, our leaders here have got their organic growth baked in their budgets, and that's the plan. If someone's got a brilliant idea of some M&A target, which, by the way, must be part of a pre-agreed deeply debated strategy and based on a pipeline of targets that we've been thoroughly investigating and typically working with testing out that our capabilities jointly make a difference for customers, then we can consider it, but it means that we adjust the plan like. So if you're going to bring an M&A into your organic plan, fine but your plan has just gone up. So that's okay as well. So for us, it's a tool for accelerating organic growth. Anyone else?

[Operator Instructions] Our first question today comes from James Tate at Goldman Sachs. James, please go ahead.

Good morning. Apologies I can't be there, but I've got two questions, please. I think firstly, margin improvement in A&Q was quite strong last year with, I think, operating profit dropped for around 55%. Just wanted to ask if there are any one-offs you'd like to flag for last year? And if not, is this the sort of operating leverage we should expect going forward in the division? And then secondly, just looking at margin for the full-year came in at 16.9% at the group. Given sort of -- you originally guided for 16.5%, how should we think about sort of group margin over the next couple of years? Do you think there's potential for outperformance of the 40 bps?

Thanks, James. I'm sorry, automatically, assumed it's mine.

Yes, go ahead Sally.

Thanks, James. I hear you poorly. I can hear it in your voice. Sorry to hear that. I hope you get better soon. On the margin improvement and any one-offs, there's no one-offs as such that I'd call out but that improvement, well done Art, was driven by sales growth and some cost efficiencies that we had in the year as well. I generally think about the operating leverage in that business, depending on which business, sub-business unit it is being between 40% and around about 60%. So 40% would be a kind of VUE business and 60% would be a Clinical business. And then the margin, I'm not sure I did guide to 16.9%. I think I guided to being happy with expectations. Obviously, we're delighted with the 16.9%. You can tell from guidance for 2025, we're going to see margin improvement in 2025. And then obviously, I've guided to the 40 basis points improvement over time. To kind of break down where that comes from, it's super simple and actually applies across each of the business units as well. It's operating leverage on sales growth and then cost efficiencies that we will find as part of business as usual as new technologies come into place as we do things differently, offset by investment to drive that growth. So those three elements of it, same at each business unit, same for business from an overall perspective.

Yes. I mean I'm going to just pile on, James. I mean, firstly, get well soon. Our philosophy on margin is as follows, which is Pearson is focused on building amazingly good products that help learners and educators. And because they bring value, we will see that in our margins. So healthy margins is a sign of delivering amazing products to our customers, and that's our incredible focus. Now, and as Sally said, we want to apply the use of any kind of technology management innovations in running our business to constantly drive efficiency and productivity. So for me, it's like -- it's not like you're ever done. Like this is a game of continually improving, and that's the push that I think we all feel and you should expect to see that from us in the coming years. Anyone else on the platform?

Got it. Thank you.

There are no further phone questions, and I would now like to pass over to Alex for questions from the platform.

Yes, we've got one question from Sami at BNP Paribas. Sorry, two questions. Firstly, despite improving contract renewal rates at VUE, your A&Q guidance points to low to mid-single-digit growth. Under what scenario would you deliver low single-digit growth, i.e., contract losses in U.S. school, expected volume pressures in VUE or any other scenario? The second question, despite enrollment growth in U.S. Higher Ed, paid users to Pearson+ did not increase. Why was that?

Yes. I mean, Sami, obviously, in any competitive business, if you lose customers, and that's not a good outcome. So obviously, we're very focused on not doing that. But do you want to respond to that what would it take to make sure that A&Q is at the upper end of our guidance rather than at the lower end, Art?

Absolutely. And I think we called out in our statement what the elements of growth are for 2025 within A&Q. And it is the launch of new contracts that we won last year. So we feel very, very good about that. That's an execution task that we have a wonderful track record on. We are continuing to invest in go-to-market resources for our test prep offering, which you'll see we're now referring to as the Pearson Skilling solution, and that will ramp up throughout the year. And we are focusing on formative and interim assessment, as Omar pointed out in his introductory remarks. So those are the growth levers that we're counting on. We wouldn't be committing to this guidance if we didn't feel very, very strongly about delivering on them. But those are the things that we're watching closely.

Thank you, Art. I've got a couple of words on Pearson+, but Tom, I think you should go first around like the subscriptions and then we'll make a comment.

Yes, sure. I mean, I think firstly, Pearson+ has been a great success for us, and we're delighted with it. It's one of our three product lineups, right? We've got the MyLabs. We've got Pearson+ and then we've got channels. So we're excited with that breadth of product portfolio in the Higher Education space. I think secondly, in terms of any growth there, what's really happened is that as we think about distribution, one of the things we need to get right is how we integrate that into Inclusive Access. So that's one of the things that's on our road map and we're working through. But -- so it's part of our broader portfolio strategy. What we need to really get right is great products for each different part of the market in terms of segmentation and understanding. So you've got courseware, you've got Pearson+ and you've got channels. They're all appealing to faculty and students in different ways in terms of driving increased sort of active learning. And so as we're working through some of the integration pieces with the LMS and the integrations, you'll expect to see that Pearson+ number grow over time. So it's nothing I would be particularly concerned about. It's an important part of the strategy, and it's a great part of the portfolio for us to have.

Yes. Thanks, Tom. I mean just my two little -- two pennies on top of it is the reason I'm so happy that Pearson invested in Pearson+ is we learned some very useful new things. One is around a modern full stack cloud-native technology platform and the application of some of the most innovative techniques around AI. And a lot of the thinking that happened there is what we're propagating across the rest of Pearson. And so I think that's super good. The second thing is we learned a lot about engaging directly with end users in a different form and different channels. And again, that's proved very useful, and you'll see us leverage that in clever ways going forward. So Sami, thank you very much for the question. So we're out of questions. Anyone else in the room? Going, going?

Okay. Well, so thank you so much for being with us. I mean, seriously, for those of you here, please do take a few minutes and go and have a look at the products out there. I think you'll find them enjoyable and hopefully productive. So thanks for being with us. We appreciate you.

Thank you.

Thank you