2010 half-year results 2010 half-year results 26 July 2010 26 July - - PowerPoint PPT Presentation

2010 half year results 2010 half year results
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2010 half-year results 2010 half-year results 26 July 2010 26 July - - PowerPoint PPT Presentation

2010 half-year results 2010 half-year results 26 July 2010 26 July 2010 26 July 2010 26 July 2010 Forward-looking statements Except f Except for the h r the historical information co istorical information conta ntained herein, the m ned


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SLIDE 1

2010 half-year results 2010 half-year results

26 July 2010 26 July 2010 26 July 2010 26 July 2010

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SLIDE 2

Forward-looking statements

Except f Except for the h r the historical information co istorical 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 pro ns and projectio ections 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 impac

impact of interest or exchange t of interest or exchange rates, rates, the a the availab lability of ility of financ financing, a ing, antic ticipated costs sa ted costs savings vings and sy d synergies and the exec nergies and 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 uncert looking statements involve risks and uncertainties because they relate to events ainties because they relate to events and and de depend pend on ci

  • n circumstanc

rcumstances th es that will occur in future. at 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

2010 half-year results 2010 half-year results

26 July 2010 26 July 2010 26 July 2010 26 July 2010

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SLIDE 4

Agenda Overview Marjorie Results and outlook Robin Markets and plans CEOs Q&A

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SLIDE 5

Financial highlights

£m £m H1 2010 H1 2009 H1 2009 Headline Headline Growth Growth CER CER Growth Growth Sales * Sales *

2,342

2,149 2,149 9% 9% 9% 9% Operating profit * Operating profit *

178

84 84

  • 7
  • 79%

Adjusted EPS Adjusted EPS

16.6p

7.9p 7.9p

  • Operating cash flow

Operating cash flow

(92)

(206) (206) 55% 55%

  • Dividend

Dividend

13.0p

12.2p 12.2p 7% 7%

  • *Continuing operations
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SLIDE 6

Economic environment uncertain Economic environment uncertain Public funding shrinking Public funding shrinking Demand for learning and information vigorous Demand for learning and information vigorous Commitment to education reform urgent Commitment to education reform urgent Digital innovation and adoption accelerating Digital innovation and adoption accelerating

Our world in 2010

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SLIDE 7

Our investments are producing: 1.

  • 1. Growth

Growth 2.

  • 2. Share gains

Share gains 3.

  • 3. Change

Change 4.

  • 4. Returns

Returns

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SLIDE 8

Strong growth

H1 2010, % H1 2010, %

Underlying @ CER 7 7 7 7 7

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SLIDE 9

Sustained share gains

Education

US K-16 learning materials US K-16 learning materials

Financial Times

Rea Readership ership

Penguin

US US

Share of US re of US Sc School and College learni hool and College learning ng materi material als market (So s market (Sources rces: : Pe Pearson, arson, AAP) AAP) Share of US cons

  • f US consumer books market

umer books market (Sourc (Source: Neilsen) e: Neilsen) Share of business readers ( Share of business readers (Sourc

  • urce: Europea

e: European, , US, US, Asian Business Re Asian Business Readership Surveys) adership Surveys)

31.0% 34.7% 11.2% 11.8% 18.3% 24.7%

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SLIDE 10

Change

2005 2005

2009

Services * Services * $837m 837m

$1,641m

Digital $1,015m Digital $1,015m

$1,964m

Developing markets Developing markets $304m 304m

$648m

Margins Margins 11.6% 11.6%

13.8%

Excludes Interactive Data *Services defined as worldwide school + professional testing businesses

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SLIDE 11

Change

Operating profit Operating profit

2009 £710m

IFRS

(excludes Interactive Data)

1999 £449m

UK GAAP Education 35% FT 25% Penguin 14% TV 15% Lazard 11% Education 83% FT Group 5% Penguin 12%

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SLIDE 12

Investing in bolt-on acquisitions

Year Year Acquisitions Acquisitions Disposals Disposals 2002 RTL, Forum 2003 Edexcel, LessonLab El Mundo 2004 Altona Ed, Dominie Press, KAT Capella, Business.com 2005 AGS, Co-nect Recoletos, MarketWatch 2006 Promissor, NES, PowerSchool, Chancery, PBM, Mergermarket 2007 Harcourt, eCollege, Edustructures Government Solutions, Les Echos 2008 MoneyMedia, MML, Longman Nigeria Data Management, FT Deutschland 2009 Wall Street English, NTC, Fronter 2010 Melorio

$3.4bn $3.6bn

List not comprehensive; figures include all completed transactions

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SLIDE 13
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SLIDE 14

Financial review Financial review

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SLIDE 15

Sales

£m £m H1 2010 H1 H1 2009 2009 Headline Headline Growth Growth CER CER Growth Growth No North America rth America

1,017

943 943 8% 8% 10% 10% International International

504

446 446 13% 13% 11% 11% Professional Professional

136

132 132 3% 3% 5% 5% FT G FT Group

192

176 176 9% 9% 10% 10% Penguin Penguin

493

452 452 9% 9% 7% 7% Total

2,342

2,149 2,149 9% 9% 9% 9% Discontinued* Discontinued*

256

249 249 3% 3% 4% 4%

* Interactive Data

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SLIDE 16

Continuing operations

Sales growth, £m

2009 2010 2,149

F/X

31 (6) 111

Education

2,342

FT Publishing Penguin Acquisitions

44 13

Organic growth

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SLIDE 17

Operating profit

£m £m H1 2010 H1 H1 2009 2009 Headline Headline Growth Growth CER CER Growth Growth No North America rth America

51

12 12

  • International

International

36

23 23 57% 57% 16% 6% Professional Professional

17

14 14 21% 21% 21% 1% FT G FT Group p

30

14 14

  • Penguin

Penguin

44

21 21

  • 56%

56% Total

178

84 84

  • 79%

79% Discontinued* Discontinued*

70

74 74 (5)% (5)% (4)% (4)%

* Interactive Data

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SLIDE 18

Profit growth, £m

Continuing operations

2009 2010 84

F/X

15 17 47

Education

178

FT Publishing Penguin

15

Organic growth

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SLIDE 19

Summary phasing effects

Earlier purchasing in US School Earlier purchasing in US School Earlier marking completion in UK testing Earlier marking completion in UK testing Penguin publishing schedule & restructuring Penguin publishing schedule & restructuring Helpful H1 comparatives, tougher in H2 Helpful H1 comparatives, tougher in H2

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SLIDE 20

Adjusted earnings per share

£m £m H1 2010 H1 2009 H1 2009 Adjusted operating profit – Adjusted operating profit – continuing

  • ntinuing

178

84 84 Adjusted operating profit – Adjusted operating profit – discontinued iscontinued

70

74 74 Finance costs – Finance costs – Pensions Pensions

(6)

(6) (6) Finance costs – Finance costs – Traditional raditional

(39)

(41) (41) Adjusted profit before tax Adjusted profit before tax

203

111 111 Taxation Taxation

(53)

(30) (30) Adjusted profit after Adjusted profit after tax tax

150

81 81 Minorities Minorities

(17)

(18) (18) Adjusted ear Adjusted earnings ings

133

63 63 Adjusted EPS Adjusted EPS

16.6p

7.9p 7.9p

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SLIDE 21

P&L – statutory

£m £m H1 2010 H1 2009 H1 2009 Adjusted operating profit Adjusted operating profit

178

84 84 Intangible amortisation/acquisition costs Intangible amortisation/acquisition costs

(50)

(43) (43) Statutory operating profit Statutory operating profit

128

41 41 Finance costs Finance costs

(34)

(48) (48) Profit/(loss) before tax Profit/(loss) before tax

94

(7) (7) Taxation Taxation

(25)

5 Profit/(loss) after tax Profit/(loss) after tax

69

(2) (2) Discontinued Discontinued

35

46 46 Profit for the period Profit for the period

104

44 44 EPS (statutory) EPS (statutory)

11.5p

3.5p 3.5p

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SLIDE 22

Free cash flow

£m £m H1 2010 H1 2009 H1 2009 Adjusted operating profit Adjusted operating profit

248

158 158 Working capital Working capital

(312)

(332) (332) Fixed asset purchases Fixed asset purchases

(71)

(63) (63) Depreciation Depreciation

65

65 65 Other movements Other movements

(22)

(34) (34) Operating cash flow Operating cash flow

(92)

(206) (206) Operating tax paid Operating tax paid

(46)

(43) (43) Operating finance charges Operating finance charges

(27)

(35) (35) Free cashflow Free cashflow

(165)

(284) (284)

Total business

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SLIDE 23

Balance sheet

Total business

£m £m H1 2010 H1 2009 H1 2009 Goodwill & intangible assets Goodwill & intangible assets

5,533

4,935 4,935 Tangible fixed assets Tangible fixed assets

410

386 386 Operating working capital Operating working capital

1,203

1,215 1,215 Other net liabilities Other net liabilities

(113)

(50) (50) Net assets Net assets

7,033

6,486 6,486 Shareholders’ Shareholders’ funds unds

4,392

4,033 4,033 Pensions Pensions

454

233 233 Other provisions Other provisions

78

98 98 Minorities Minorities

324

261 261 Def Deferred tax rred tax

39

1 Net debt Net debt

1,746

1,860 1,860 Capital employed Capital employed

7,033

6,486 6,486

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SLIDE 24

Outlook Outlook

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SLIDE 25
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SLIDE 26

North American Education 2009 revenues: £5.1bn

Excludes Interactive Data

Assessment & Information 12% US Higher Education 21% US School Curriculum 12% Canada 3% FT Group 7% Penguin 19%

P r

  • f

e s s i

  • n

a l 6 %

International Education 20% North American Education 48%

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SLIDE 27

International Education

Continental Europe 5% UK 7% FT Group 7% Penguin 19%

P r

  • f

e s s i

  • n

a l 6 %

International Education 20% North American Education 48% Middle East & Africa 2% Asia 4% Latin America 2%

2009 revenues: £5.1bn

Excludes Interactive Data

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SLIDE 28

FT Group

FT Group 7% Penguin 19%

P r

  • f

e s s i

  • n

a l 6 %

International Education 20% North American Education 48% Content 4% Advertising 3%

2009 revenues: £5.1bn

Excludes Interactive Data

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SLIDE 29

Professional Education

FT Group 7% Penguin 19%

P r

  • f

e s s i

  • n

a l 6 %

International Education 20% North American Education 48%

2009 revenues: £5.1bn

Excludes Interactive Data

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SLIDE 30

Penguin 2009 revenues: £5.1bn

Excludes Interactive Data

FT Group 7% Penguin 19%

P r

  • f

e s s i

  • n

a l 6 %

International Education 20% North American Education 48%

US 11% UK 4% RoW 4%

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SLIDE 31

Durability and growth

2004 = 100 2004 = 100

£913m £913m 65.4p 65.4p £796m £684m £575m £570m 57.7p 46.7p 43.1p 34.1p Cash flow Cash flow Cash flow Cash flow EPS EPS EPS EPS CAGR: 19% CAGR: 19% CAGR: 19% CAGR: 19% CAGR : 17% CAGR : 17% CAGR : 17% CAGR : 17%

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SLIDE 32

Appendices Appendices

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SLIDE 33

The shape of Pearson 2009 revenues: £5.1bn

Excludes Interactive Data

FT Group 7% Penguin 19%

P r

  • f

e s s i

  • n

a l 6 %

International Education 20% North American Education 48%

US School Curriculum 12% Assessment & Information 12% US Higher Education 21% Canada 3% UK 7% Continental Europe 5% Middle East & Africa 2% Asia 4% Latin America 2% Publishing 2% Testing 4% Content 4% Advertising 3% US 11% UK 4% RoW 4%

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SLIDE 34

North American Education

Markets Markets

  • School curriculum growing

School curriculum growing after tough ‘09 after tough ‘09

  • Funding environment

Funding environment remains weak remains weak

  • Healthy enrolments and

Healthy enrolments and demand in higher education demand in higher education

  • Hunger for innovation

Hunger for innovation and reform and reform

Priorities Priorities

  • Support policy change

Support policy change

  • Develop new business models

Develop new business models

  • Build platform

Build platforms & ser s & services ices

  • Use scale to fuel efficiencies

Use scale to fuel efficiencies and investment and investment

  • Benefit from global r

Benefit from global reach ach

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SLIDE 35

International Education

Markets Markets

  • Healthy demand fro

Healthy demand from m consumers, parents consumers, parents

  • Rapid growth in developing

Rapid growth in developing economies economies

  • Public spending under pressure

Public spending under pressure in developed markets in developed markets

Priorities Priorities

  • Educational effectiveness

Educational effectiveness

  • Services

Services

  • Latin America

Latin America

  • Global English language

Global English language

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SLIDE 36

FT Group & Professional Education

Markets Markets

  • Healthy demand for

Healthy demand for content & services content & services

  • Corpor

Corporate activity increasing ate activity increasing but confidence muted; but confidence muted; advertising volatile advertising volatile

  • Strong demand for work-related

Strong demand for work-related learning, information, learning, information, certification certification

Priorities Priorities

  • Invest organically in content,

Invest organically in content, technology & subscriptions technology & subscriptions

  • Expand internationally

Expand internationally

  • Bolt-on acquisitions

Bolt-on acquisitions

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SLIDE 37

Penguin

Markets Markets

  • Soft markets

Soft markets

  • New devices; new channels

New devices; new channels

  • Accelerating shift to digital

Accelerating shift to digital

Priorities Priorities

  • Publishing depth and breadth

Publishing depth and breadth

  • Digital publis

Digital publishing, innovation hing, innovation

  • Emerging mar

Emerging markets ets

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SLIDE 38

Share gains in new school adoptions

2010 estimates 2010 estimates

Subject Subject Total Total

  • pportunity
  • pportunity

Market share Market share

(where we co (where we compete) mpete)

Position Position Science Science $15m 15m 41% 41% #1 #1 Social Studies Social Studies $5m 5m 61% 61% #1 #1 Reading/literature Reading/literature $490m $490m 24% 24% #3 #3 Maths Maths $255m 255m 37% 37% #1 #1 Other Other $20m 20m 18% 18% #2 #2 Total competed for $785m 29% #2 Total – all adoptions $815m 28% #2/3

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SLIDE 39

Reconciliation: statutory to adjusted earnings

Half year 2010 Half year 2010

£m £m

Stat Statutory utory Discontin Discontinued ed

  • pe
  • peration

rations Acquisition Acquisition and disposal and disposal costs costs Amortisation of Amortisation of acqu cquired intangi intangibles les Ot Other net her net fina finance nce costs/income costs/income Tax Tax amo amortis tisation tion benefi benefit Adju Adjust sted ed earnin earnings gs

Ope Operatin ing p profit – – continuin ing

128 128

  • 3

47 47

  • 178

178

Oper Operati ating pr g profit – it – discontinued iscontinued

  • 53

53 10 10 7

  • 70

70

Operating profit

128 53 13 54

  • 248

Net fi t fina nance costs nce costs

(34) (34)

  • (11)

(11)

  • (45)

(45)

Profit before tax

94 53 13 54 (11)

  • 203

Inco Income me tax tax

(25) (25) (18) (18) (4) (4) (19) (19) 3 10 10 (53) (53)

Profit after tax

69 35 9 35 (8) 10 150

Discontinued oper Discontinued operations ations

35 35 (35) (35)

  • Profit for the period

104

  • 9

35 (8) 10 150

Mi Minori nority Int ty Intere rest st

(12) (12)

  • (2)

(2) (2) (2)

  • (1)

(1) (17) (17)

Earnings

92

  • 7

33 (8) 9 133

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SLIDE 40

Reconciliation: statutory to adjusted earnings

Half year 2009 Half year 2009

£m £m Statutory utory Discontinued Discontinued

  • perations
  • perations

Amortisation of Amortisation of ac acqu quired inta intangibles ngibles Othe Other n net t finan finance costs costs/income come Ta Tax x amortisation amortisation benefit benefit Adjust Adjusted ed earn earnin ings gs Operating profit – continuing

41

  • 43
  • 84

Operating profit – discontinued

  • 68

6

  • 74

Operating profit

41 68 49

  • 158

Net finance costs

(48) 1

  • (47)

Profit before tax

(7) 69 49

  • 111

Income tax

5 (23) (14)

  • 2

(30)

Profit after tax

(2) 46 35

  • 2

81

Discontinued operations

46 (46)

  • Profit for the period

44

  • 35
  • 2

81

Minority Interest

(16)

  • (2)
  • (18)

Earnings

28

  • 33
  • 2

63

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SLIDE 41

Reconciliation: pre-publication costs

£m £m H1 2010 H1 2009 H1 2009 Opening balance Opening balance 650 695 695 Exchange Exchange 40 (69) (69) New spend capitalised New spend capitalised 141 15 158 Acquisi Acquisitions tions 2 3 Amortisation Amortisation (132) (113) 113) Closing balance Closing balance 701 674 674 Total education sales Total education sales 1,657 1,521 1,521 Amortisation as a % of sales Amortisation as a % of sales 8.0% 7.4% 7.4%

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SLIDE 42

Reconciliation: half-year net debt

£m £m 2010 2009 2009

Continuing

  • perations

Discontinued

  • perations

Total business Conti Continui nuing

  • perations
  • perations

Discontinued Discontinued

  • perations
  • perations

Total Total business business

Non current as Non current assets sets Derivative financial ins Derivative financial instruments ruments 156

  • 156

121 121

  • 121

121 Current assets Current assets Derivative financial ins Derivative financial instruments ruments 13

  • 13
  • Marketable securities

Marketable securities 5

  • 5

2 5 2 58 60 Cash and cash e Cash and cash equivalents uivalents 468 232 700 349 349 106 06 455 455 Non curre Non current liabil nt liabilities ities Borrowin Borrowings gs (2,004)

  • (2,004)

(2,437) (2,437)

  • (2,437)

(2,437) Derivative financial ins Derivative financial instruments ruments (2)

  • (2)

(3) (3)

  • (3)

(3) Current liabilities Current liabilities Borrowin Borrowings gs (612)

  • (612)

(4 (47) 7)

  • (47)

Derivative financial ins Derivative financial instruments ruments (2)

  • (2)

(9) (9)

  • (9)

(9) Net debt (1,978) 232 (1,746) (2,024) 164 (1,860)

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SLIDE 43

Retirement benefit obligations

£m £m H1 2010 H1 2009 H1 2009 Income statement Income statement Operating charge Operating charge Defined benefit schemes Defined benefit schemes 12 10 10 Defined contributio Defined contribution schem n schemes 34 31 31 Post retirement medical benefit schemes Post retirement medical benefit schemes 1 1 47 42 42 Interest Interest 6 6 Total Total 53 48 48 Balance sheet Balance sheet UK pension scheme liabilities UK pension scheme liabilities (290) (79) (79) Other pension scheme liabilities Other pension scheme liabilities (61) (67) (67) Post retirement medical benefit liability Post retirement medical benefit liability (67) (61) (61) Other pension accruals Other pension accruals (36) (26) (26) Total (454) (233)

Includes Interactive Data for both periods