Pearson 2019 Interim Results Friday 26 July 2019 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 costs savings a ...

Financial Data and Key Metrics Changes - Operating cash flow reached £530 million with a cash conversion rate of 94% [3] - Year-end net debt decreased to £143 million, better than the guided £200 million [3][7] - Full year dividend increased by 9% to £0.185 [3] - Adjusted operating profit was £546 million, slightly above the preliminary range of £540 million to £545 million [13] Business Line Data and Key Metrics Changes - In North America, underlying sales declined by 1%, with significant growth in Online Program Management (up 9%), Virtual Schools (up 8%), and Professional Certification (up 5%) [8] - Core revenues were flat, with strong growth in Pearson Test of English and OPM Services, offset by weaker performance in UK student assessment [11] - Growth segment sales increased by 1%, driven by strong growth in China and modest growth in Brazil [11][12] Market Data and Key Metrics Changes - Digital and digitally-enabled revenues accounted for 62% of total sales in 2018, up from 59% in 2017 [12] - U.S. Higher Education Courseware business declined by 5% due to ongoing pressures [9][27] - Modest declines were observed in K12 courseware and school assessment [10] Company Strategy and Development Direction - The company is focused on leading the digital transformation of its courseware and assessment businesses, which represent 65% of sales [40] - Investment in structurally growing markets is prioritized, with these businesses accounting for 35% of revenues and growing by 7% [41] - The simplification program aims to create a more efficient company, reallocating costs to faster-growing areas [62] Management's Comments on Operating Environment and Future Outlook - Management expects revenue stabilization in 2019, with sustainable growth anticipated in 2020 and beyond [6][37] - The company is confident in its strategic growth opportunities, which are expected to contribute significantly to future revenues [24] - Management acknowledges ongoing challenges in U.S. Higher Education Courseware but sees potential for growth in other areas [25][27] Other Important Information - The restructuring program is expected to generate an additional £130 million in savings in 2019 [21] - The adoption of IFRS 16 will impact the presentation of net debt, bringing lease liabilities onto the balance sheet [32][33] - The company maintains a disciplined capital allocation policy, prioritizing a strong balance sheet and sustainable dividends [35] Q&A Session All Questions and Answers Question: Outlook for U.S. Higher Ed Courseware division - Management acknowledges challenges but sees strong contributions from digital investments and growth in other markets [70][72] Question: Impact of consignment model on guidance - The shift to a consignment model will have a small drag on guidance, but it is accounted for in the overall projections [83] Question: Revenue contribution from OPM within online degree services - OPM generated 6% of revenues in North American Higher Education services, with strong growth expected [77][82] Question: North America margin deterioration - Margin pressure is attributed to investments in growth opportunities like OPM, which typically require upfront investment [88][90] Question: Competitive pricing strategies - The company is focusing on a comprehensive approach to pricing that addresses the needs of students, instructors, and institutions [110] Question: Enrollment trends in relation to economic conditions - Management expects a 2% drag on enrollments but acknowledges that economic downturns may increase demand for education [112]

| --- | --- | --- | |-------|-------|-------| | | | | | | | | 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 co ...