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 - - 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
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.
2010 half-year results 2010 half-year results
26 July 2010 26 July 2010 26 July 2010 26 July 2010
Agenda Overview Marjorie Results and outlook Robin Markets and plans CEOs Q&A
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
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
Our investments are producing: 1.
- 1. Growth
Growth 2.
- 2. Share gains
Share gains 3.
- 3. Change
Change 4.
- 4. Returns
Returns
Strong growth
H1 2010, % H1 2010, %
Underlying @ CER 7 7 7 7 7
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%
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
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%
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
Financial review Financial review
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
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
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
Profit growth, £m
Continuing operations
2009 2010 84
F/X
15 17 47
Education
178
FT Publishing Penguin
15
Organic growth
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
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
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
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
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
Outlook Outlook
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%
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
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
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
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%
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%
Appendices Appendices
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%
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
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
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
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
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
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
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
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%
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)
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