Pearson 2025 Preliminary Results (Unaudited)

Core Insights - Pearson reported a sales increase of 4% to £3,577 million in 2025, with adjusted operating profit rising 6% to £614 million, reflecting strong performance across various segments [1][4][5] - The company is confident in achieving mid-single digit sales growth for 2026 and beyond, supported by strategic partnerships and advancements in AI technology [1][2][3] Financial Performance - Statutory operating profit decreased by 6% to £507 million due to adverse currency movements and a one-off impairment of legacy product development assets [1][4] - Adjusted earnings per share increased by 4% to 64.5p, with free cash flow rising by 8% to £527 million, resulting in a free cash flow conversion of 125% [1][4][5] - The company completed a £350 million share buyback in 2025, reducing the share count by 5%, and announced a further £350 million buyback in January 2026 [1][2][3] Segment Performance - Assessment & Qualifications segment saw a 4% increase in underlying sales, driven by new contracts and pricing strategies, with adjusted operating profit increasing by 1% [4][5] - Virtual Learning sales grew by 8% on an underlying basis, with a strong performance in the second half of the year, supported by a 13% increase in enrolments for the 2025/26 academic year [4][5] - Higher Education sales increased by 2%, with US Higher Education up 3% due to enrolment growth and pricing in core Courseware [4][5] Strategic Initiatives - Pearson advanced its enterprise strategy by securing eight partnerships with industry-leading firms, including a new partnership with Salesforce [1][2] - The company is focusing on the application of innovative technologies, particularly AI, to enhance learning outcomes and operational efficiencies [1][2][3] - Significant progress was made in expanding into the Early Careers space and enhancing career-readiness solutions for learners transitioning from education to the workforce [2][3] Outlook - For 2026, Pearson expects underlying sales growth to be mid-single digit, with adjusted operating profit projected between £640 million and £685 million [3][4] - The company anticipates stronger growth in Virtual Learning and Higher Education segments, driven by continued product innovation and market expansion [3][4][5] - The effective tax rate on adjusted profit before tax is expected to be around 25% for 2026 [3][4]