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Pearson 2020 results
February 22, 2020, 07:00 , 07:00
Included in this release:
Pearson 2020 Preliminary Results (Unaudited)
Good progress against strategic priorities, adjusted operating profit in the upper half of the guidance range, efficiency programme ahead of plan.
Revenue down 1% in underlying terms
- Total underlying revenue down 1% year on year, with declines in US Higher Education Courseware of 5% and in US K12 Courseware largely offset by the rest of the business growing in aggregate at over 1%.
- Strong performance in our structural growth opportunities with revenue up 10% in Global Online Program Management, 8% in Connections Academy, 4% in Professional Certification (VUE) and Pearson Test of English Academic (PTEA) test volume growth of 30%.
- Revenue in North America declined 1%, Core was flat and Growth up 1%.
Adjusted operating profit up 8% in underlying terms
- Adjusted operating profit of ВЈ546m for 2020, in the in the upper half of the guidance range of ВЈ520m to ВЈ560m.
- Adjusted earnings per share of 70.3p including a c.20p one-off tax benefit and a lower finance charge as indicated in PearsonвЂ™s Q3 trading update.
Strong balance sheet
- Closing net debt at 31 December 2020 of ВЈ143m (2020: ВЈ432m).
- Strong operating cash flow with cash conversion at 94% (2020: 116%).
- The Board proposes a final dividend of 13p (2020: 12p), an increase of 8%, which equates to a full year dividend of 18.5p (2020: 17p).
- Sales decreased by 9%, ВЈ384m, in headline terms primarily due to portfolio changes reducing sales by ВЈ216m and currency movements decreasingВ revenue by ВЈ134m.В
- Statutory operating profit for the year was ВЈ553m (2020: ВЈ451m) with the increase primarily due to profit on disposals of Wall Street English (WSE) and UTEL.
- Statutory EPS of 75.6p (2020: 49.9p) with the increase due to higher profit and one-off tax benefits.
Simplification on track, efficiency programme ahead of plan
- Cost efficiency programme ahead of plan in 2020 with incremental cost savings of ВЈ130m and exceptional restructuring costs 1 of ВЈ102m.
- At 31 December 2020 US K12 Courseware was held for sale. We announced an agreement to sell this business on 18 February 2020.
John Fallon, Chief Executive said:
“We made good progress last year. We increased underlying profits, outperformed our cost savings plan and invested in the digital platforms that are making us a simpler, more efficient and innovative company. We are increasingly well placed to guide our customers through a lifetime of learning and help our partners shape the future of education. We have a lot still to do, but we expect company wide sales to stabilise this year, and grow again in 2020 and beyond.” В
|ВЈm||2020||2020||HEADLINE GROWTH||CER GROWTH||UNDERLYING GROWTH|
|Adjusted operating profit||546||576||(5)%||(2)%||8%|
|Operating cash flow||513||669|
|Adjusted earnings per share||70.3p||54.1p|
|Dividend per share||18.5p||17p|
|Profit for the year||590||408|
|Cash generated from operations||547||462|
|Basic earnings share||75.6p||49.9p|
Throughout this announcement: a) Growth rates are stated on an underlying basis unless otherwise stated. Underlying growth rates exclude both currency movements, portfolio changes and accounting changes, b) CER refers to Constant Exchange Rates, and c) The вЂbusiness performanceвЂ™ measures are non-GAAP measures and reconciliations to the equivalent statutory heading under IFRS are included in notes to the attached condensed consolidated financial statements 2, 3, 4, 5, 7, and 17.В
Progress on our strategic priorities
During 2020 we made good progress on our strategic priorities as we become a leaner, more agile and more sustainable business.
Digital transformation progressing to plan
- We made further progress with PearsonвЂ™s digital transformation in 2020 with revenue split 34% digital (2020: 32%), 28% digitally enabled (2020: 27%) and 38% non-digital (2020: 41%).
- US Higher Education Courseware digital revenue grew by 2% to become 55% of our revenue in this business, although growth was again more than offset by the anticipated continuation of underlying market pressures on print courseware revenue.
- Direct to consumer sales grew 8% to account for 23% of revenue in US Higher Education Courseware.
- We continue to focus on Inclusive Access (Direct Digital Access) solutions, signing 192 new institutions in 2020 taking the total to nearly 700. We delivered over 1.4m course enrolments at non-profit and public institutions in this way, accounting for c.8% of US Higher Education Courseware revenue.
- US Higher Education Courseware eBook revenue grew at more than 20% for the second year. We continue to expand our partner print rental programme and expect to have c.400 titles in the programme in the second half of 2020.
- We have continued to invest in the Global Learning Platform (GLP) and our innovative product and feature pipeline. We have launched pilot versions of new Developmental Math courseware and will launch multiple Revel titles with enhanced assignment options and data analytics on the GLP during 2020.
- US Student Assessment saw testing volume declines, but continues to shift towards digital tests, which now account for 56% of all tests administered and provide a better, more effective customer experience leveraging the efficiency of PearsonвЂ™s digital platform.
Continuing strong performance in structural growth opportunities
- Online Program Management (OPM), Connections Academy virtual schools, Professional Certification (VUE) and English are significant growth opportunities. We continue to invest in these structurally growing markets which drive recurring revenue streams, and account for c.35% of PearsonвЂ™s 2020 revenue (excluding WSE and US K12 Courseware).
- OPM saw 14% growth in global course registrations and global revenue growth of 10%.
- Connections Academy grew revenue 8%.
- In English, Pearson Test of English Academic grew test volumes by 30%.
- In Professional Certification revenue grew 4%, with over 70 new contracts signed during the year.
- Revenue in Global English Courseware grew 3%, with strong growth in China.
Simplification on track, cost savings ahead of plan
- Cost efficiency programme ahead of plan in 2020 with incremental cost savings of ВЈ130m and exceptional restructuring costs1 of ВЈ102m.
- We now expect to deliver increased annualised cost savings1 in excess of ВЈ330m by the end of 2020. One-off restructuring costs will rise with this to c.ВЈ330m. This is ahead of the original plan of ВЈ300m in savings and costs.
- We expect to achieve a further ВЈ130m of incremental cost savings in 2020 taking the cumulative savings to ВЈ275m by the end of 2020 leaving ВЈ55m or more of further savings in 2020 as the annualised benefit of the programme flows through. Restructuring costs in 2020 are expected to be ВЈ150m as the programme is completed.
- We completed the sale of Wall Street English (WSE).
- During 2020 we sold our property at One Southwark Bridge for ВЈ115m. The profits on disposal were offset by a charge for onerous leases relating to PearsonвЂ™s property footprint in London.
- At 31 December 2020 US K12 Courseware was held for sale. We announced the agreement to sell this business on 18 February 2020.
In 2020, Pearson expects to report adjusted operating profit of between ВЈ590m and ВЈ640m and adjusted earnings per share of 56.5p to 62.0p (including our US K12 Courseware business).
This guidance is pre-IFRS 16 2 based on existing portfolio and exchange rates as at 31 December 2020. Expect a net interest charge of c.ВЈ30m and a tax rate of 21%.
Including IFRS 16 Pearson expects to report adjusted operating profit of between ВЈ610m and ВЈ660m, a net interest charge of c.ВЈ60m and adjusted earnings per share of 55.5p to 61.0p for 2020.
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PearsonвЂ™s results presentation for investors and analysts will be webcast live today from 0900 (GMT) via www.pearson.com/corporate.
1 Based on December 2020 exchange rates, a significant part of costs and savings from the restructuring programme are US Dollar denominated and in other non-Sterling currencies and are therefore subject to exchange rate movements over the implementation timeframe.
2 IFRS 16 вЂ“ Leases is the new accounting standard which will replace IAS 17 and is applicable for financial years commencing on or after 1 January 2020, and hence will first apply to the Group for its financial year ending 31 December 2020.
The standard will result in the operating lease expense being replaced by finance costs and depreciation which will reflect the corresponding lease liabilities and right of use assets which will now be recognised on the balance sheet.В
Forward looking statements: Except for the historical information contained herein, the matters discussed in this statement include forward-looking statements. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated cost savings and synergies and the execution of PearsonвЂ™s strategy, are forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in future. They are based on numerous assumptions regarding PearsonвЂ™s present and future business strategies and the environment in which it will operate in the future. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including a number of factors outside PearsonвЂ™s control. These include international, national and local conditions, as well as competition. They also include other risks detailed from time to time in PearsonвЂ™s publicly-filed documents and you are advised to read, in particular, the risk factors set out in PearsonвЂ™s latest annual report and accounts, which can be found on its website (www.pearson.com/corporate/investors.html). Any forward-looking statements speak only as of the date they are made, and Pearson gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on such forward-looking statements.
Profit & loss statement. In 2020, sales decreased by ВЈ384m in headline terms to ВЈ4,129m (2020: ВЈ4,513m) with portfolio changes reducing sales by ВЈ216m and currency movements decreasing revenue by ВЈ134m. Stripping out the impact of portfolio (including the adoption of new accounting standards) and currency movements, revenue was down 1% in underlying terms. Revenue in North America declined 1%, Core was flat and Growth up 1%.
The 2020 adjusted operating profit of ВЈ546m (2020: ВЈ576m) reflects a ВЈ130m year on year benefit from restructuring, offset by ВЈ50m of cost inflation, ВЈ22m of other operational factors, ВЈ15m negative contribution from trading and a ВЈ73m negative impact from FX and portfolio changes. Excluding the impact of FX and portfolio changes, underlying adjusted operating profit grew 8%.
Net interest payable was ВЈ24m, compared to ВЈ79m in 2020. The decrease was primarily due to a reduction in gross debt achieved through the early redemption of bonds in 2020. Charges relating to early redemptions increased finance charges in 2020 but were not as significant in 2020. Additionally, there was a reduction in interest on tax provisions following reassessment of those provisions in 2020.
The effective tax rate on adjusted earnings in 2020 was a credit of 5.2% compared to an effective rate charge of 11.1% in 2020. The decrease in tax rate reflects several one-off benefits in 2020 including provision releases due to the expiry of relevant statutes of limitation and due to the reassessment of historical positions, as well as a one-off benefit from a reassessment of the tax treatment of certain items of income and expenditure.
Adjusted earnings per share of 70.3p (2020: 54.1p) (including a c.20p one-off tax benefit and a lower finance charge as indicated in PearsonвЂ™s Q3 trading update).
Cash generation. Operating cashflow declined by ВЈ156m from ВЈ669m in 2020 to ВЈ513m in 2020 in headline terms. The decrease reflects lower dividends from Penguin Random House, following our divestment of a 22% stake in the business in 2020, higher incentive payments in 2020 relating to 2020 performance and movements in working capital. The equivalent statutory measure, net cash generated from operations, was ВЈ547m in 2020 compared to ВЈ462m in 2020. The main reason for the improvement in cash generated from operations was the absence of special pension contributions in 2020 which were ВЈ227m in 2020.
Return on invested capital. On a gross basis ROIC increased from 4.3% in 2020 to 4.7% in 2020 and from 6.2% in 2020 to 6.7% in 2020 on a net basis. The movement largely reflects lower invested capital following disposals and decreased tax payments which were more than enough to offset the effect of lower reported profits primarily due to the disposal of a 22% stake in Penguin Random House and currency movements.В
Statutory results. Our statutory profit was ВЈ553m in 2020 compared to a profit of ВЈ451m in 2020. The increase in 2020 is largely due to the increase in gains on disposal and reduced intangible charges which more than offset increased restructuring, the lost contribution from businesses disposed of and the impact of currency movements.
Capital allocation. Our capital allocation policy remains unchanged: to maintain a strong balance sheet and a solid investment grade rating, to continue to invest in the business, to have a sustainable and progressive dividend policy, and to return surplus cash to our shareholders.
Balance sheet. Net debt to EBITDA was 0.2x (or c.1.1x on an IFRS 16 lease adjusted basis). Net debt decreased to ВЈ143m (2020: ВЈ432m) reflecting disposal proceeds and operating cash flow, partially offset by the strengthening of the US Dollar relative to Sterling, dividend payments and the share buyback.
In January 2020, the Group repurchased в‚¬250m of its в‚¬500m Euro 1.875% notes due May 2021 and в‚¬200m of its в‚¬500m Euro 1.375% notes due May 2025. Borrowings at 31 December 2020 include drawings on the GroupвЂ™s revolving credit facility (RCF) of ВЈnil (2020: ВЈnil).
Pension plan.В In 2020 our UK Pension Plan completed a new triennial valuation as at 1 January 2020 and re-confirmed the Plan as being well funded. The Plan hasВ recently used this funding position to purchase a further insurance buy-in policy with Legal & General, amounting to approximately ВЈ500m. Together with the two policies purchased in 2020, around 50% of the Plan’s total liabilities are now insured. This has put the Plan in an even stronger position and furtherВ reduced Pearson’s future pension funding risk, at no additional cost to Pearson.
Dividend. In line with our policy, the Board is proposing a final dividend of 13p (2020: 12p), an increase of 8%, which results in an overall dividend of 18.5p (2020: 17p) subject to shareholder approval.
Share buyback. We launched a ВЈ300m share buyback, beginning on 18 October 2020 utilising part of the proceeds from the disposal of a 22% stake in Penguin Random House. We completed the programme on 16 February 2020.
Businesses held for sale. Following the decision to sell our US K12 Courseware business, the assets and liabilities of that business were classified as held for sale on the balance sheet at 31 December 2020. We announced the agreement to sell this business on 18 February 2020.
2020 has been a year of progress for Pearson, delivering adjusted operating profit within our guidance range and continuing to invest in the digital transformation and simplification of the company. We expect to make further progress in 2020, with underlying adjusted operating profit between ВЈ590m2 and ВЈ640m and adjusted earnings per share of 56.5p to 62.0p. This reflects our portfolio and exchange rates as at 31 December 2020 and the following factors:
Currency movement and portfolio changes. Adjusting for currency movement improves profit by ВЈ26m. We completed the sale of WSE in March 2020. WSE contributed ВЈ42m to 2020 revenue and ВЈ4m to 2020 adjusted operating profit. US K12 Courseware contributed ВЈ364m to 2020 sales and around ВЈ20m to 2020 operating profit.
Inflation and other operational factors. Our 2020 guidance incorporates cost inflation of c.ВЈ50m together with other operational factors of ВЈ33m due to increased investment in our strategic growth areas and the expectation of a lower contribution from Penguin Random House.
Restructuring benefits. We expect incremental in-year benefits from the 2020 restructuring programme of ВЈ130m in 2020. Exceptional restructuring costs of ВЈ150m will continue to be excluded from adjusted operating profit.
Interest & tax. We expect a 2020 net interest charge of c.ВЈ30m and a tax rate of 21%.
Currency.В In 2020, Pearson generated approximately 64% of its sales in the US, 3% in Greater China, 5% in the Eurozone, 3% in Brazil, 3% in Canada, 3% in Australia, 2% in South Africa and 1% in India and our guidance is based on exchange rates at 31 December 2020.В
We calculate that a 5c move in the US Dollar exchange rate to Sterling would impact adjusted EPS by around 2p to 2.5p.
Including IFRS 16 we expect to report adjusted operating profit of between ВЈ610m and ВЈ660m, a net interest charge of c.ВЈ60m and adjusted earnings per share of 55.5p to 61.0p for 2020.
Operational review вЂ“ Geography
|ВЈ millions||2020||2020||HEADLINE GROWTH||CER GROWTH||UNDERLYING GROWTH|
|ADJUSTED OPERATING PROFIT|
|Penguin Random House||68||94||(28)%||(29)%||10%|
|Total adjusted operating profit||546||576||(5)%||(2)%||8%|
See note 2 in the condensed consolidated financial statements for the reconciliation to the equivalent statutory measures.
North America (67% of revenue)
Revenue declined 1% in underlying terms, primarily due to North American Higher Education Courseware declining 5%, School Courseware which was down mid-single digit %, impacted by weak Open Territory sales in the second half of the year, the continued decline in Learning Studio as we move towards the retirement of the product in 2020 and Student Assessment which declined moderately. Offsetting that, we saw good growth in Virtual Schools, Online Program Management (OPM) and Professional Certification revenue.
Adjusted operating profit rose 1% in underlying terms, as restructuring savings offset the impact of lower sales, inflation and other operating factors.
In School Courseware, revenue declined mid-single digit % primarily due to declines in Open Territory states. This was partially offset by growth in Adoption state revenue on strong performance in Science in Florida, South Carolina and Tennessee, Elementary Math in Oklahoma and Elementary Social Studies in California and South Carolina.
Our new adoption participation rate rose to 80% from 61% in 2020. We won an estimated 33% share of adoptions competed for (38% in 2020) and 26% of total new adoption expenditure of $509m (29% of $365m in 2020).
In Higher Education Courseware, total US college enrolments, as reported by the National Student Clearinghouse, fell 1.4%, with combined two-year public and four-year for-profit enrolments declining 4.8%. Enrolment weakness was particularly focused on part-time students where enrolment declined 2.9% compared to full-time enrolment which declined 1.1%.
Net revenue in our US Higher Education Courseware business declined 5% during the year. We estimate around 2% of this decline was driven by lower enrolment; around 1.5% from the adoption of Open Educational Resources (OER); around 2.5% from the combined impact of shifts in the secondary market, more cautious buying by the channel and lower returns; offset by c.1% benefit from the shift to digital.
In 2020, PearsonвЂ™s US Higher Education Courseware market share, as reported by MPI, was within the c.40-41.5% range seen over the last five years.
Digital revenue grew 2% benefiting from continued growth in direct sales and favourable mix. Global digital registrations of MyLab and related products were flat. In North America, digital registrations fell 3% with good growth in Science, Business & Economics and Revel offset by lower overall enrolment and continued softness in Developmental Mathematics. Revel registrations grew more than 40%. Including stand-alone eBook registrations, total North American digital registrations rose 1% and global registrations rose 3%.
The actions announced in early 2020 to promote access over ownership met with continued success. Stand-alone eBook volumes grew 34% in the US with revenue up 25% and our partner print rental programme has had a successful start with 130 titles in the programme in 2020. We plan to increase the number of titles in the programme to around 400 by fall 2020.
We continue to make good progress with our Inclusive Access (Direct Digital Access) solutions signing 192 new institutions in 2020, taking the total of not-for-profit and public institutions served to 617. Including 80 longer-standing contracts with for-profit colleges, we now have direct courseware relationships with nearly 700 institutions.
Inclusive Access ensures that students have affordable access to the courseware that they need on day one of the course, whilst further shifting our business model in this segment away from ownership and towards subscription. During the year, we delivered over 1.4m course enrolments with inclusive access revenues from non-profit and public institutions rising to c.8% of our higher education courseware revenue as more colleges and faculties see the benefit of this model.
In Student Assessment, revenue declined moderately in 2020 due to the faster than expected contraction in revenue associated with our PARCC and ACT-Aspire multi-state volume-based contracts and our disciplined competitive approach. These factors will extend into 2020, where we expect a modest decline in revenue in this segment. Beyond 2020, we expect the business to benefit from continued good momentum in subcontractor contract wins leveraging our digital leadership and a strong pipeline of opportunities in key states.
During 2020, Pearson successfully renewed contracts in Arizona and Kentucky through competitive procurements and secured business with the District of Columbia, New Jersey, New Mexico, and Maryland under new contracts with these PARCC states.В We also won new contracts for UtahвЂ™s High School Assessments and with the University of Iowa for the delivery of IowaвЂ™s new assessment system.
We delivered 24m standardised online tests to K12 students, down 5% from 2020. TestNav 8, PearsonвЂ™s next-generation online test platform, supported a peak load of 825,000 tests in a single day and provided 99.99% up time. Our AI scoring systems scored 36m responses to open-ended test items, around 33% of the total. Paper based standardised test volumes fell 9% to 18.5m.
In Professional Certification, VUE global test volume rose 4% to over 15m. Revenue in North America was up mid-single digit %, due to growth in medical college admissions testing and certification for professional bodies, offset by continued declines in volumes in the GED High School Equivalency Test and higher-level IT certifications in an environment of low unemployment.
We signed over 70 new contracts in 2020 and our renewal rate on existing contracts continues to be over 95%. During the year we renewed over 80 contracts including the National Council of State Boards of Nursing (NCLEX exam), Microsoft and Adobe.
Clinical Assessment sales declined slightly on an absence of new major product introductions impacting 2020. Late in Q4 we launched a refresh of the Peabody Picture Vocabulary Test and Expressive Vocabulary Test (PPVT/EVT). Q-interactive, Pearson’s digital solution for Clinical Assessment administration, saw continued strong growth in license sales with sub-test administrations up more than 37% over the same period last year.
Connections Academy, our K12 online school business grew revenue 8%. Connections Academy served 73,000 Full Time Equivalent (FTE) students through 37 continuing full-time virtual partner schools in 28 states, up 11% on last year. Total FTE virtual school students declined 3% to 75,400 as expected due to contract exits at Commonwealth Charter Academy in Pennsylvania and Florida Virtual School.
Three new full-time online, state-wide partner schools opened in the 2020-19 school year in Florida, Michigan, and Ohio. We anticipate the opening of between two and five new partner schools in the 2020-20 school year.
The 2020 Connections Academy Parent Satisfaction Survey continues to show solid endorsement for the schools with 93% of families with enrolled students stating they would recommend our virtual schools to others and 95% agreeing that the curriculum is of high quality.
In Pearson Online Services, revenue grew 3%, primarily due to growth in OPM, partially offset by a decline in Learning Studio revenue as we retire the product and as we restructured smaller non-OPM contracts.В
In OPM, we grew revenue 9% as course registration grew strongly, up 14% to more than 388,000 on strong growth in programs at key partners including Arizona State University Online, Maryville University, Regis College, Bradley University, Ohio University and the University of Southern California.
Our overall active program count grew by 33 to 325. The launch of 46 new programs were offset by 13 discontinued programs. During 2020 we signed 27 multi-year programs, including programs at new partners the University of North Dakota and Rider University. We closed nine out of 15 renewal opportunities and as part of broader efforts around portfolio optimisation agreed with our partners to terminateВ 23 programs that were not mutually viable.
In US Higher Education Courseware, we expect revenue to be flat to down 5% on the continuation of the pressures we saw on end demand in 2020 with ongoing declines in enrolment and modest growth in OER adoptions. For print revenue in this segment, we see scope for further declines in gross sales and improvements in returns.В Print continues to be impacted by the ongoing rise of secondary channels, such as rental, but channel inventory has now returned to more normalised levels following the 2020 inventory correction and its after effects.В The channel is now optimising the stock it holds, both through reducing purchases and returns, and we expect that to continue in 2020. Growth in digital and direct sales provides some offset to the continuing pressures on print.
In Assessment, we expect good growth in Professional Certification and stable revenue in our Clinical Assessment business in the US. We expect a modest decline in revenue in North America Student Assessment on continued contraction in revenue associated with our PARCC and ACT Aspire contracts.
We expect good growth in revenue and enrolment at Connections Academy and in North America Online Program Management.
Core (20% of revenue)
Revenue was flat in underlying terms with growth in Pearson Test of English Academic, OPM in the UK and Australia and Professional Certification offset by declines in Higher Education and Student Assessment and Qualifications.
Adjusted operating profit increased 10% in underlying terms, due to restructuring savings partially offset by inflation.
Courseware revenue declined moderately. Slight growth in School Courseware was offset by declines in Higher Education Courseware. In Higher Education Courseware, revenue was down due to market declines in Europe and Asia, partially offset by growth in digital sales to institutional partners in the UK and Australia.
In Student Assessment and Qualifications, revenue fell as modest growth in BTEC Firsts and GCE A-Level was more than offset by declines in AS levels, international GCSEs in the UK and UKВ Apprenticeships due to policy changes in the schools qualifications and the apprenticeships market. We successfully delivered the National Curriculum Test (NCT) for 2020, marking 3.6m scripts, up slightly from 2020. We will deliver the NCT again in 2020 before the test transitions to another provider in 2020.
Clinical Assessment sales declined primarily in Australia due to an absence of new major product introductions. Q-Interactive, Pearson’s digital solution for Clinical Assessment administration, saw continued strong growth.
Pearson Test of English Academic saw continued strong growth in test volumes and we successfully extended our agreement with Department of Home Affairs in Australia for another two years.
In Professional Certification, revenue was up modestly due to the launch of additional computer-based exams for an existing customer in the UK and the MOI, the French Driving Test.
In Higher Education Services, revenue grew strongly. Our OPM revenue was up 34%. In Australia, we saw good growth due to our successful partnership with Monash University, and continued success of the Graduate Diploma in Psychology. We have a total of c.10,200 course registrations across the seven programs in Australia up from c.9,300 in 2020. In the UK, we launched 11 new programs and course registrations grew, reaching c.3,000 compared to c.1,400 in 2020. During the year, we also announced new partnerships with the University of Northumbria in the UK, and ESSEC Business School in France.
We expect stable revenue across Core, including student qualifications and assessment, with further revenue growth in OPM and PTEA, offset by continued declines in our courseware businesses. В
Growth (13% of revenue)
Revenue grew 1% in underlying terms due to strong growth in China and modest growth in Brazil and Hispano America partially offset by declines in South Africa.
Adjusted operating profit increased 97%, ВЈ30m, in underlying terms, reflecting higher revenue in China and Brazil, together with the benefits of restructuring, partially offset by lower revenue in South Africa.
Courseware revenue grew slightly, with strong growth in English Language Courseware in China, partially offset by declines in School Courseware in South Africa following a large one-off order in 2020.
Professional Certification grew well due to a new ICT infrastructure certification contract. Pearson Test of English Academic saw strong growth in revenue with over 10% growth in the volume of tests taken in India, China and Middle East and moderate price increases.
In English Services, revenue grew slightly in our English language school franchise, Wizard, due to new product launches.
In School Services, revenue was flat, with declines in student enrolment in our public sistemas business in Brazil offset by price increases, improved products and better student retention across our private sistemas. In India, Pearson MyPedia, an inside service вЂsistemaвЂ™ solution for schools, expanded to over 700 schools with over 200,000 learners.
In Higher Education services revenue declined slightly due to business exits in India and slight revenue decline at Pearson Institute of Higher Education (formerly CTI), our university in South Africa, due to a change in mix with total enrolment broadly flat and new student enrolment up 18%.
In our Growth segment, we expect revenue to continue to increase in 2020 benefiting from new products and services across all divisions.
Penguin Random House
Pearson owns 25% of Penguin Random House, the first truly global consumer book publishing company.
Penguin Random House performed solidly with underlying revenue growth on increased audio sales and stable print sales, whilst the business benefitted from international bestseller вЂњBecomingвЂќ by Michelle Obama, the yearвЂ™s top-selling U.S. title, and bestsellers from Bill Clinton & James Patterson, Jordan Peterson, Jamie Oliver, Dr.Seuss, John Grisham, and Lee Child.
In Penguin Random House, we anticipate a normalised publishing performance and expect an annual after-tax contribution of around ВЈ60-65m to our adjusted operating profit.
Sales decreased on a headline basis by ВЈ384m or 9% from ВЈ4,513m in 2020 to ВЈ4,129m in 2020 and adjusted operating profit decreased by ВЈ30m or 5% from ВЈ576m in 2020 to ВЈ546m in 2020 (for a reconciliation of this measure see note 2 to the condensed consolidated financial statements).
The headline basis simply compares the reported results for 2020 with the reported results for 2020. We also present sales and profits on an underlying basis which excludes the effects of exchange, the effect of portfolio changes arising from acquisitions and disposals and the impact of adopting new accounting standards that are not retrospectively applied. Our portfolio change is calculated by taking account of the contribution from acquisitions and by excluding sales and profits made by businesses disposed in either 2020 or 2020. In 2020, portfolio changes mainly relate to the sale of our test preparation business in China and reduction in our equity interest in PRH. This reduction in equity interest is reflected in the reduction in share of results of joint ventures and associates. In 2020 portfolio changes mainly relate to the sale of our Wall Street English language teaching business. Acquisitions were not significant in either 2020 or 2020.
In 2020, our underlying basis excludes the impact of IFRS 15 вЂRevenue from Contracts with CustomersвЂ™. This new standard was adopted on 1 January 2020 but the comparative figures for 2020 have not been restated. On 1 January 2020 we also adopted IFRS 9 вЂFinancial InstrumentsвЂ™ but this did not have a material impact on profit in 2020. The impact of adopting these standards is discussed further below and in note 1 to the condensed consolidated financial statements.
On an underlying basis, sales decreased by 1% in 2020 compared to 2020 and adjusted operating profit increased by 8%. Currency movements decreased sales by ВЈ134m and adjusted operating profit by ВЈ21m. Portfolio changes decreased sales by ВЈ225m and adjusted operating profit by ВЈ61m. The impact of adopting IFRS 15 on the results for 2020 was to increase sales by ВЈ9m and adjusted operating profit by ВЈ9m.
Adjusted operating profit includes the results from discontinued operations when relevant but excludes intangible charges for amortisation and impairment, acquisition related costs, gains and losses arising from acquisitions and disposals and the cost of major restructuring. In 2020, we have also excluded the impact of adjustments arising from clarification of guaranteed minimum pension (GMP) equalisation legislation in the UK as outlined in the section on post-retirement benefits. In 2020, we excluded the impact of US tax reform on our associate operating profit as outlined in the section on taxation. A summary of these adjustments is included below and in more detail in note 2 to the condensed consolidated financial statements. В
|all figures in ВЈ millions||2020||2020|
|Add back: Cost of major restructuring||102||79|
|Add back: Intangible charges||113||166|
|Add back: Other net gains and losses||(230)||(128)|
|Add back: UK pension GMP equalisation||8||–|
|Add back: Impact of US tax reform||–||8|
|Adjusted operating profit||546||576|
In May 2020, we announced a restructuring programme, to run between 2020 and 2020, to drive significant cost savings. This programme began in the second half of 2020 and costs incurred were ВЈ79m in 2020 and ВЈ102m in 2020 and relate to delivery of cost efficiencies in our US higher education courseware business and enabling functions together with further rationalisation of the property and supplier portfolio. The restructuring costs in 2020 relate predominantly to staff redundancies and the net cost of property rationalisation. Included in the property rationalisation in 2020 is the impact of the consolidation of our property footprint in London which resulted in a charge for onerous leases of ВЈ91m partially offset by profit from the sale of property of ВЈ81m. The onerous lease provisions are the main driver for the overall increase in provisions on the balance sheet at 31 December 2020.
Intangible amortisation charges in 2020 were ВЈ113m compared to a charge of ВЈ166m in 2020. Other net gains (before tax) of ВЈ230m in 2020 relate to the sale of the Wall Street English language teaching business (WSE), realising a gain of ВЈ207m, the disposal of our equity interest in UTEL, the online University partnership in Mexico, realising a gain of ВЈ19m, and various other smaller disposal items for a net gain of ВЈ4m. Gains of ВЈ128m in 2020 largely relate to the sale of our test preparation business in China which resulted in a profit on sale of ВЈ44m and the part sale of our share in PRH which resulted in a profit of ВЈ96m.
The statutory operating profit from continuing operations of ВЈ553m in 2020 compares to a profit of ВЈ451m in 2020. The increase in 2020 is largely due to the increase in gains on disposal and reduced intangible charges which more than offset increased restructuring, the lost contribution from businesses disposed and the impact of currency movements.
Net finance costs
Net interest payable was ВЈ24m, compared to ВЈ79m in 2020. The decrease was primarily due to a reduction in gross debt achieved through the early redemption of bonds in 2020 and in early 2020. Charges relating to early redemptions increased finance charges in 2020 but were not as significant in 2020. Additionally there was a reduction in interest on tax provisions following reassessment of those provisions in 2020.
Finance income relating to retirement benefits has been excluded from our adjusted earnings as we believe the income statement presentation does not reflect the economic substance of the underlying assets and liabilities. Also included in the statutory definition of net finance costs (but not in our adjusted measure) are interest costs relating to acquisition consideration, foreign exchange and other gains and losses on derivatives. Interest relating to acquisition consideration is excluded from adjusted earnings as it is considered to be part of the acquisition cost rather than being reflective of the underlying financing costs of the Group. Foreign exchange and other gains and losses are excluded from adjusted earnings as they represent short-term fluctuations in market value and are subject to significant volatility. Other gains and losses may not be realised in due course as it is normally the intention to hold the related instruments to maturity (for more information see note 3 to the condensed consolidated financial statements).
In 2020, the total of these items excluded from adjusted earnings was a loss of ВЈ31m compared to a gain of ВЈ49m in 2020. Finance income relating to retirement benefits increased from ВЈ3m in 2020 to ВЈ11m in 2020 reflecting the comparative funding position of the plans at the beginning of each year. This increase was more than offset by foreign exchange losses on unhedged cash and cash equivalents and other financial instruments that generated profits in 2020. For a reconciliation of the adjusted measure see note 3 to the condensed consolidated financial statements.
The effective tax rate on adjusted earnings in 2020 was a credit of 5.2% compared to an effective rate charge of 11.1% inВ 2020. The decrease in tax rate reflects several one-off benefits in 2020 including provision releases due to the expiry of relevant statutes of limitation and due to the reassessment of historical positions (ВЈ86m), as well as a one off benefit from a reassessment of the tax treatment of certain items of income and expenditure (ВЈ25m).
The reported tax credit on a statutory basis in 2020 was ВЈ92m (18.5%) compared to a charge of ВЈ13m (3.1%)В in 2020. The statutory tax credit in 2020 was primarily due to the items above, provision releases and credits related to previous business disposals (ВЈ31m) and tax credits on restructuring charges.
Operating tax paid in 2020 was ВЈ43m compared to ВЈ75m paid in 2020 mainly due to refunds received in the US. Tax provision releases were the primary reason for the reduction in current tax liabilities on the balance sheet whilst net deferred tax remained consistent year on year.
Other comprehensive income
Included in other comprehensive income are the net exchange differences on translation of foreign operations. The gain on translation of ВЈ90m in 2020 compares to a loss in 2020 of ВЈ262m. The gain in 2020 mainly arises from the strength of the US dollar. A significant proportion of the GroupвЂ™s operations are based in the US and the US dollar strengthened in 2020 from an opening rate of ВЈ1:$1.35 to a closing rate at the end of 2020 of ВЈ1:$1.27. At the end of 2020 the US dollar had weakened from an opening rate of ВЈ1:$1.23 to a closing rate of ВЈ1:$1.35 and this movement was the main reason for the loss in 2020.
Also included in other comprehensive income in 2020 is an actuarial gain of ВЈ25m in relation to the retirement benefit obligations of the Group and our share of the retirement benefit obligations of PRH. The gain arises from the favourable impact of changes in the assumptions used to value the net assets in the plans and in particular movements in the discount rate. The gain in 2020 compares to an actuarial gain in 2020 of ВЈ182m.
Our operating cash flow measure is used to align cash flows with our adjusted profit measures (see note 17 to the condensed consolidated financial statements). Operating cash flow decreased on a headline basis by ВЈ156m from ВЈ669m in 2020 to ВЈ513m in 2020. The decrease reflects lower dividends from PRH, higher incentive payments in 2020 relating to 2020 performance and revenue related movements in working capital.
The equivalent statutory measure, net cash generated from operations, was ВЈ547m in 2020 compared to ВЈ462m in 2020. Compared to operating cash flow, this measure includes restructuring costs and special pension contributions but does not include regular dividends from associates or net capital expenditure on property, plant, equipment and software. The main reason for the improvement in cash generated from operations was the absence in 2020 of special pension contributions which in 2020 were ВЈ227m and related to the FT Group disposal (ВЈ25m) and to agreements relating to the PRH merger in 2020 (ВЈ202m).
The GroupвЂ™s net debt decreased from ВЈ432m at the end of 2020 to ВЈ143m at the end of 2020 principally due to cash generated from operations and the proceeds from disposal of businesses and property in the year which more than offset interest, tax, share buy-back and dividend payments.
Pearson operates a variety of pension and post-retirement plans. Our UK Group pension plan has by far the largest defined benefit section. We have some smaller defined benefit sections in the US and Canada but, outside the UK, most of our companies operate defined contribution plans.
The charge to profit in respect of worldwide pensions and retirement benefits amounted to ВЈ56m in 2020 (2020: ВЈ72m) of which a charge of ВЈ67m (2020: ВЈ75m) was reported in statutory operating profit and income of ВЈ11m (2020: ВЈ3m) was reported against other net finance costs. The decrease in the operating charge in 2020 is partly explained by a past service credit of ВЈ11m relating to changes made to the US post-retirement medical plan in the year and reduced administration costs. This credit was partially offset by a past service charge of ВЈ8m relating to guaranteed minimum pension (GMP) equalisation.
The GMP equalisation charge arises from the ruling in the Lloyds Bank High Court case in October 2020 that provided clarity on how pension plans should equalise GMP between males and females. The case ruling results in an income statement charge, an additional liability and the potential requirement to make back-payments to pensioners who may have been retired for some years. We have excluded this charge from our adjusted earnings as this relates to historic circumstances. The charge is an estimate based on available data and revisions to these estimates in future years will be treated as assumption changes and recorded in other comprehensive income rather than the income statement.
The overall surplus on UK pension plans of ВЈ545m at the end of 2020 has increased to a surplus of ВЈ571m at the end of 2020. The increase has arisen principally due to favourable movements in assumptions used to value the liabilities offsetting some decline in asset values.
In total, our worldwide net position in respect of pensions and other post-retirement benefits increased from a net asset of ВЈ441m at the end of 2020 to a net asset of ВЈ471m at the end of 2020.
Adoption of new accounting standards in 2020
The adoption of IFRS 15 and IFRS 9 has impacted both the income statement as described above and has had an impact on certain lines in the balance sheet. Although the impact of IFRS 9 was not significant, the restatements in relation to IFRS 15 are the main reason for increases in 2020 in balances for inventories, trade and other receivables, trade and other liabilities and held for sale assets and liabilities. The full impact of the adoption of both standards is outlined in note 1 to the condensed consolidated financial statements.
The dividend accounted for in our 2020 financial statements totalling ВЈ136m represents the final dividend in respect of 2020 (12.0p) and the interim dividend for 2020 (5.5p). We are proposing a final dividend for 2020 of 13.0p bringing the total paid and payable in respect of 2020 to 18.5p. This final 2020 dividend which was approved by the Board in February 2020, is subject to approval at the forthcoming AGM and will be charged against 2020 profits. For 2020, the dividend is covered 3.8 times by adjusted earnings.
The share buyback programme announced in October 2020 was completed on 16 February 2020. In 2020, our brokers purchased 21m shares and in 2020 purchased a further 22m shares. Cash payments for these purchases and related costs were ВЈ149m in 2020 and ВЈ153m in 2020. The shares bought back were cancelled and the nominal value of these shares were transferred to a capital redemption reserve. The nominal value of shares cancelled under the programme was ВЈ11m. A liability for the share buy-back payments due in 2020 was recorded in trade and other liabilities on the 2020 balance sheet.
Return on invested capital (ROIC)
Our ROIC is calculated as adjusted operating profit less cash tax paid, expressed as a percentage of average gross invested capital. We also present an additional ROIC measure showing ROIC on a net basis which removes impaired goodwill from the invested capital balance. The net approach assumes that goodwill which has been impaired is treated in a similar fashion to goodwill disposed as it is no longer being used to generate returns.
On a gross basis, ROIC increased from 4.3% in 2020 to 4.7% in 2020 and from 6.2% in 2020 to 6.7% in 2020 on a net basis. The movement largely reflects lower invested capital following disposals and decreased tax payments which were more than enough to offset the effect of lower reported profits (see note 18 to the condensed consolidated financial statements).
Businesses held for sale
Following the decision in 2020 to sell both our Wall Street English language teaching business and the K12 school courseware business in the US, the assets and liabilities of those businesses were classified as held for sale on the balance sheet at 31 December 2020. During 2020 the Wall Street business was sold and the K12 business remains on the balance sheet as a held for sale asset prior to the disposal announced in February 2020 (see also note 10 to the condensed consolidated financial statements). В
Pearson Profits Reviews – Legit or Scam?
Pearson Profits Software, found online at PearsonProfits.com, is a new type of trading software available internationally which promises people the ability to earn investment profits each day, even when their software is on “autopilot” mode.
This software has been designed specifically for beginning investors or people who are too busy to spend the majority of their time researching and figuring out the best investments for their needs, as it promises to do almost all of the work necessary for successful investing.
Because Pearson Profits Software promises their users huge returns with very little effort, the creator of the software says that all he asks is for a very small fee from each successful transaction, which he doesn’t believe will be a problem.
According to their website, once you submit your email address, you will automatically have access to all benefits and resources that can be used by the Pearson Elite Club, including the ability to turn your software onto “autopilot” mode and have the software begin making trades and decisions on your behalf.
The website goes on to say that the average Pearson member will be able to generate more than $50,000 in profits each and every month, for a total profits expectation of $600,000 per year.
Pearson Profits is a Duplicated Scam! Exposing Review!
The Pearson Profits app is nothing more than a duplicated Scam software for binary trading promising traders immense wealth with little effort. The website under investigation, PearsonProfits.com is very misleading by attracting newcomers into believing they’ve been specially invited to use a breakthrough trading software capable of banking thousands per day completely automatically. Many questionable scamming traits were found and I’ve documented them in the following review proving everything within this binary system is Fake. Probably the most vital factor everyone should understand is Pearson Profits Scam is a relaunch from a previously damaging application called Pearson Method (Review) from last year. Although the name has been minorly altered, the platform layout is exactly identical. Its imperative for potential traders considering to register first read our Pearson Profits review before regrettably funding an account with a proven money-making scheme.
Deceptive measure to force traders into trusting this system are attempted when visitors are randomly warned to avoid an unknown brokerage firm named “USA Life Options”, whom have been reported to “TradeGuardian Worldwide” Blacklistings. Apparently they’re guilty for raking in thousands from unexpected traders by using technical glitches for manipulating winning trades into losers. No verifiable evidence supports the existence for USA Life Options broker & Trade Guardian Worldwide establishments ever existing. From the beginning upon entering PearsonProfits.com we’re already being lied to.
Pearson Profits Scam Review – Full Exposure!
The developer’s identity behind PearsonProfits.com is never disclosed which adds suspicions, especially when your trying to verify the authenticity for detailed review. Normally we’re given a fabricated alias posing as an alleged CEO but in this case, the real creators of Pearson Profits app seem hidden. Evidently whoever is truly responsible for developing this crooked trading scam wish to remain anonymous. Truth be told, Pearson Profits (aka Pearson Method) is a push-button millionaire scamming program directed towards rookie investors searching for assistance in maximizing profits. Lets review some misconstrued & irrelevant lies you’ll find while watching their introductory videos.
- Supposedly watching their introductions indicate you’re “first in line before 3,000 spectators waiting to join the ‘only profit machine available’ utilizing astonishing mathematical formulas. A powerful ‘point-click’ automated income app graphing the same statistical method responsible for generating millions”.
- PearsonProfits.com “operates by a “pearson method’ algorithm of statistics & analysis typically applied to large sets of scientific data for determining pharmaceutical drugs usage and vaccinations. Dictates similar equations can be applied to precise trading signals throughout the semantic web combined with social data & Google for acquiring profits”. (MAKES NO SENSE!)
Note: Notice the binary system from “live” trading demonstrations by Chris Green is label “Pearson Method”. Further proving we’re dealing with a copied failed app where day-traders received zero profits and lost total investments.
Fake Profits Reviews Alert
A couple recorded testimonials from supposed members claiming they’ve successfully profited are known actors hired by binary scams for promoting useless softwares. Programs like the Pearson Profits Scam aren’t able to supply verifiable proof supporting their advertised allegations for making millions within few short months. In order to mislead novice investors, paid acting services from Fiverr.com are purchase to make their busted systems seem legitimate. This particular individual was spotted endorsing older failing ‘million-dollar’ scams like MillionaireShield. Don’t be fooled by his scripted performances!
60 Second Traps!
Sixty second trades are commonly used by fraudulent apps to give off the essence where interested traders will potential become rich rather quickly. Short term trading features are offered within all binary brokers under their ‘Turbo sections’. The demo revealed for the Pearson Profits Scam shows a successful 60sec transaction, however investing with such shorter expiry times are far too risky. Because their expiration times rapidly expire, properly predicting their future outcomes are difficult to pinpoint in comparison to a 15, 30 minute or one hour trade. Dangerous softwares like PearsonProfits.com will result in wiping out your entire account fast.
Pearson Profits Review – Conclusion
By now I hope readers understand the severity and dangers should you decide to deposit with this worthless fraud. Enough evidence within today’s review fully concludes a creation from binary scammers who profit from trader losses by offering empty promises of lucrative returns. Through understanding what’s been discussed, hopefully you’ve avoided unnecessary troubles and saved your money.
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