2009 half-year results 27 July 2009 Forward-looking statements - - PowerPoint PPT Presentation

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2009 half year results
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2009 half-year results 27 July 2009 Forward-looking statements - - PowerPoint PPT Presentation

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2009 half-year results 27 July 2009 Forward-looking statements Except for the historical information co Except for the historical information conta ntained herein, the m ned herein, the matters discussed in tters discussed in this

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SLIDE 1

2009 half-year results

27 July 2009

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SLIDE 2

Forward-looking statements

Except for the historical information co Except for the historical information conta ntained herein, the m ned herein, the matters discussed in tters discussed in this presentation include forward-look this presentation include forward-looking statements. In particular, all ing statements. In particular, all statements th statements that express fo at express forecasts, exp recasts, expectatio ions and projectio ns and projections w s with resp th respec ect to t to future matters, including trends in resu future matters, including trends in results of o lts of opera ratio tions, margins, gro s, margins, growth ra wth rates, tes,

  • verall market trends, the
  • verall market trends, the impact of intere

impact of interest or exchange rates, st or exchange rates, the the availability availability

  • f financing, anticipated costs saving
  • f financing, anticipated costs savings a

s and synergies a d synergies and the exec d the executio ution of n of Pearson's strategy, are forward looking Pearson's strategy, are forward looking statements. By their nature, forward

  • statements. By their nature, forward

looking statements involve risks and un looking statements involve risks and uncertainties because they relate to certainties because they relate to events and depend on circumstanc events and depend on circumstances that will occur in future. es that will occur in future. There are a number of factors wh There are a number of factors which co ich could cause ac uld cause actual results and tual results and developments to differ materially from developments to differ materially from those expressed or those expressed or implied by these implied by these forward looking statements, including forward looking statements, including a number of factors outside Pearson's a number of factors outside Pearson's

  • control. These include international,
  • control. These include international, national and local condit

national and local conditio ions, as w , as well as ll as

  • competition. They also include other risk
  • competition. They also include other risks detailed fr

s detailed from time to

  • m time to time in the

time in the company's publicly-filed documents. company's publicly-filed documents. Any for Any forward looking statements speak on ard looking statements speak only as of the date they are made, and ly as of the date they are made, and Pearson gives no undertaking to update Pearson gives no undertaking to update for forward-looking statements to reflect ard-looking statements to reflect any changes in its expectat any changes in its expectations with regard thereto ions with regard thereto or any changes to events,

  • r any changes to events,

conditions or circumstances on conditions or circumstances on which any such statement is based. which any such statement is based.

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SLIDE 3

Agenda

  • How we’re doing

Robin

  • What we’re seeing

CEOs

  • Where we’re heading

Marjorie

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SLIDE 4

First-half financial highlights

  • Sales up 1%*
  • Operating profit up 25%*
  • Adjusted EPS up to 7.9p
  • Dividend up 3.4%

*Growth rates at constant exchange

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SLIDE 5

Highlights

  • Strategy
  • Market share
  • Investment and innovation
  • Durability and growth
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SLIDE 6

How we’re doing

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SLIDE 7

Sales growth

£m H1 2009 H1 2008 Headline Growth CER Growth

North American Education 943 713 32% 1% International Education 446 365 22% 13% Professional 132 105 26% 2% Pearson Education 1,521 1,183 29% 5% FT Publishing 176 188 (6)% (13)% Interactive Data 249 186 34% 9% FT Group 425 374 14% (2)% Penguin 452 408 11% (8)% Total 2,398 1,965 22% 1%

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SLIDE 8

Sales growth, £m

2008 2008 2009 2009

F/X F/X

18 18 413 413 (15) (15) Organic growth Organic growth

Acquisi Acquisitions tions Education Education FT Gro FT Group Penguin Penguin

(23) (23) 40 40 1,965 1,965 1,965 1,965 2,398 2,398 2,398 2,398

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SLIDE 9

Operating profit

£m H1 2009 H1 2008 Headline Growth CER Growth

North American Education 12 (16)

  • International Education

23 20 15% 80% Professional 14 10 40% 10% Pearson Education 49 14

  • FT Publishing

14 30 (53)% (40)% Interactive Data 74 54 37% 7% FT Group 88 84 5% (10)% Penguin 21 26 (19)% (23)% Total 158 124 27% 25%

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SLIDE 10

Profit growth, £m

124 124 124 124

F/X F/X

5 3

Education Education

158 158 158 158 Organic growth Organic growth 43 43 (11) (11) (6) (6)

FT Gro FT Group Penguin Penguin Acquisi Acquisitions tions

2008 2008 2009 2009

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SLIDE 11

Adjusted earnings per share

£m H1 2009 H1 2008 Adjusted operating profit 158 124 Finance costs – Pensions (6) 5 Finance costs – Traditional (41) (45) Adjusted profit before tax 111 84 Taxation (30) (24) Adjusted profit after tax 81 60 Minorities (18) (15) Adjusted earnings 63 45 Adjusted EPS 7.9p 5.6p

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SLIDE 12

P&L – statutory

£m H1 2009 H1 2008 Adjusted operating profit 158 124 Intangible amortisation (49) (29) Statutory operating profit 109 95 Finance costs (47) (40) Profit before tax 62 55 Taxation (18) (16) Profit after tax (continuing) 44 39 Discontinued

  • (88)

Profit/(loss) for the period 44 (49) EPS (statutory) 3.5p (7.8)p

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SLIDE 13

Free cash flow

£m H1 2009 H1 2008 Var Adjusted operating profit 158 124 34 Working capital (332) (316) (16) Fixed asset purchases (63) (46) (17) Depreciation and amortisation 65 54 11 Other movements (34) (7) (27) Operating cash flow (206) (191) (15) Operating tax paid (43) (48) 5 Operating finance charges (35) (35)

  • Free cashflow

(284) (274) (10)

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SLIDE 14

Balance sheet

£m H1 2009 H1 2008 Goodwill & intangible assets 4,935 4,118 Tangible fixed assets 386 349 Operating working capital 1,215 1,062 Other net liabilities (50) (34) Net assets 6,486 5,495 Shareholders’ funds 4,033 3,509 Pension provisions 233 58 Other provisions 98 91 Minorities 261 191 Deferred tax 1 (36) Net debt 1,860 1,682 Capital employed 6,486 5,495

Total business basis

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SLIDE 15

Highlights

  • Trading ahead
  • Business resilient
  • Acquisitions, integrations paying off
  • Strong balance sheet; steady cash

returns

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SLIDE 16

What we’re seeing

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Where we’re heading

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A durable company Pearson revenue analysis

2000 2009

(est)

19% 6%

Technology publishing Advertising New adoptions

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SLIDE 22

A growth company Pearson revenues

04 04 05 05 06 06 07 07 08 08 02 02 03 03 04 04 05 05 06 06 07 07 08 08 1.2 1.2 1.4 1.4 1.8 1.8 2.2 2.2 0.3 0.3 0.5 0.5 0.6 0.6 0.8 0.8 1.0 1.0 1.2 1.2 1.5 1.5 2.5 2.5

Digital, $bn Testing, $bn

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SLIDE 23

2004 2004 2008 2008 2009 2009 2005 2005 2006 2006 2007 2007

eBook sales

Penguin US monthly volumes

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FT.com Registered users

12k 12k 1.4m 1.4m

2007 2007 2009 2009

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Mylab student registrations

2.5m 2.5m

2005 2005 2006 2006 2007 2007 2008 2008 H1 09 H1 09

4.3m 4.3m

1.8m 1.8m

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SLIDE 27

eCollege enrolments

2004 2004 2006 2006 2007 2007 2008 2008 2005 2005 2003 2003 2002 2002 0.2m 0.2m 2.5m 2.5m

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Fronter users

538,000 538,000 2004 2004 2006 2006 2007 2007 2008 2008 2005 2005 2003 2003 2002 2002 31,000 31,000

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SLIDE 35

A growth company Pearson International

04 04 08 08 05 05 06 06 07 07 04 04 08 08 05 05 06 06 07 07 34 34 74 74 110 110 186 186

Revenues, £bn Profits, £m

1.4 1.4 1.8 1.8 1.4 1.4 1.5 1.5 1.7 1.7 252 252

CAGR = 7% CAGR = 7% CAGR = 65% CAGR = 65%

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Our five-year record

  • 10% annual sales growth
  • 20% annual EPS growth
  • 17% annual growth in operating cashflow
  • ROIC from 6.3% to 9.2%
  • 7% annual dividend growth

Headline growth rates

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SLIDE 42

Appendices

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SLIDE 43

Share gains in new school adoptions

2009 estimates

Subject Total

  • pportunity

Market share (where we compete) Position Science $25m 31% #2 Social Studies $50m 24% #3 Reading/literature $175m 33% #2 Maths $175m 46% #1 Other $20m 27% #2 Total competed for $445m 37% #1 Total – all adoptions $520m 32% #2

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Reconciliation: statutory to adjusted earnings

2009

£m Statutory Other net gains / (losses) Amortisation

  • f acquired

intangibles Other net finance costs Tax amortisation benefit Adjusted earnings

Operating profit Operating profit 109 109

  • 49

49

  • 15

158 Net finance costs (47)

  • (47)

Profit before tax Profit before tax 62 62

  • 49

49

  • 111

111 Income tax (18) (14)

  • 2

(30) Profit after tax Profit after tax 44 44

  • 35

35

  • 2

81 81 Discontinued

  • perations
  • Profit for the

Profit for the pe peri riod

  • d

44 44

  • 35

35

  • 2

81 81 Minority Interest (16)

  • (2)
  • (18)

Earnings Earnings 28 28

  • 33

33

  • 2

63 63

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Reconciliation: statutory to adjusted earnings

2008

£m Statutory Other net gains / (losses) Amortisation

  • f acquired

intangibles Other net finance costs Tax amortisation benefit Adjusted earnings

Operating profit Operating profit 95 95

  • 29

29

  • 124

124 Net finance costs (40)

  • (40)

Profit before tax Profit before tax 55 55

  • 29

29

  • 84

84 Income tax (16)

  • (10)
  • 2

(24) Profit after tax Profit after tax 39 39

  • 19

19

  • 2

60 60 Discontinued

  • perations

(88) 88

  • Profit for the

Profit for the pe peri riod

  • d

(49) (49) 88 88 19 19

  • 2

60 60 Minority Interest (13)

  • (2)
  • (15)

Earnings Earnings (62) (62) 88 88 17 17

  • 2

45 45

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SLIDE 46

Reconciliation: pre-publication costs

£m H1 2009 H1 2009 H1 2008 H1 2008 Opening balance 695 695 450 450 Exchange (69) (69) 2 New spend capitalised 15 158 128 128 Acquisitions (net) 3 34 34 Amortisation (11 (113) (87) (87) Closing balance 674 674 527 527 Total education sales 1,521 1,521 1,183 1,183 Amortisation as a % of sales 7.4% 7.4% 7.4% 7.4%

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Reconciliation: half-year net debt

(251 (251) (47) (47) Borrowings (3) (3) (9) (9) Derivative financial instruments £m 2009 2009 2008 2008 Non current assets Derivative financial instruments 121 121 21 21 Current assets Derivative financial instruments

  • 2

Marketable securities 60 60 19 19 Cash and cash equivalents 455 455 448 448 Non current liabilities Borrowings (2,437) (2,437) (1,897) (1,897) Derivative financial instruments (3) (3) (21) (21) Current liabilities Net debt (1 (1,860 ,860) (1 (1,682) ,682)

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Retirement benefit obligations

£m H1 2009 H1 2008 Income statement Income statement Operating charge Defined benefit schemes 10 10 9 Defined contribution schemes 31 31 26 26 Post retirement medical benefit schemes 1 6 42 42 41 41 Interest 6 (5) (5) Total 48 48 36 36 Balance sheet Balance sheet UK pension scheme asset/liabilities (79) (79) 36 36 Other pension scheme liabilities (76) (76) (26) (26) Post retirement medical benefit liability (61) (61) (50 (50) Other pension accruals (1 (17) 7) (18 (18) Total Total (233) 233) (58) (58)

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2009 half-year results