Pearson deliver a strong full year performance, with sales growth and profit exceeding original guidance

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Pearson plc (LON:PSON) has announced its January trading update.

Andy Bird, Chief Executive said:
“We made great progress in Q4 and are delivering a strong full year performance, with sales growth and profit exceeding our original guidance. Led by a strong management team, we are repositioning the business, driving digital innovation and an increased focus on the consumer through the launch of Pearson+. We are well placed to build on this momentum in the year ahead and look to the future with confidence.”

Full year Group sales up 8% and adjusted operating profit expected of c.£385m up c.33% compared to last year and ahead of expectations*, at an average USD:GBP exchange rate of 1.38.

Strong performance in Assessment & Qualifications

Sales in Assessment & Qualifications, our largest business, were up 18% driven by the strength of Professional Certification (VUE), Clinical Assessment and US Student Assessment, following a recovery from COVID-19.
VUE test volumes grew 30% to 16.8m due to this recovery, new client launches and growth in existing programs. Volumes in OnVUE**, Pearson’s online proctoring service, grew 46% reflecting continuing demand for remote testing.
In Q4, sales were up 2% as growth in US Student Assessment was partially offset by expected declines in VUE, due to strong comparators from a COVID-19 catch up in Q4 2020.

Further momentum in Virtual Learning

Sales in Virtual Learning grew 11% for the full year with sales growth of 17% in Virtual Schools due to strong enrolment growth in the prior academic year (2020-21). Online Program Management (OPM) grew with good underlying enrolment growth of 7%.
Maryville University extended its OPM partnership for online degrees in the high-demand field of Nursing to 2033 and Northeastern University added new online master’s degree and certificate programs in Nursing and Healthcare. Virtual Schools announced its first Connections Academy in the state of Virginia, which begins enrolment in 2022.
Q4 sales in Virtual Schools, which relate to the current academic year (2021-22) were down 4% reflecting modest enrolment growth offset by pricing mix. OPM sales grew 8% in the quarter with the impact of discontinued programs in OPM having now come to an end.

Stronger end to the year in Higher Education

Sales in Higher Education were down 5% for the full year. Growth in Canadian and UK Courseware was more than offset by a 6% decline in US Higher Education Courseware.
Continued momentum in Inclusive Access where sales to not-for-profit institutions grew 18% representing 16% of total US Higher Education Courseware revenue versus 13% last year.
In Q4, lower international sales were partially offset by growth in the US, meaning H2 sales (which are representative of the current academic year) for US Higher Education Courseware decreased 9%. This performance in H2 was driven by a 6% decline in enrolments and courses per enrolment combined, as well as price pressure due to the mix shift from print and bundles to etext and platform, and lower monetisation.

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Positive performance in Workforce Skills

Sales in Workforce Skills grew 6% with strong growth in GED and TalentLens as well as growth in BTEC and Apprenticeships.
In Q4, revenue grew 13% due to a phasing benefit in BTECs.

Good progress in English Language Learning

Sales in English Language Learning grew 17% for the full year due to a COVID-19 recovery in both International courseware and Pearson Test of English (PTE) where volumes grew 25% compared to 2020.
Q4 sales grew 21% driven by a strong performance in PTE as local restrictions in Australia and India were lifted. English courseware also rebounded strongly with growth across most international markets including a strong recovery in Latin America.

Sales in businesses under strategic review were up 1% for the full year.

Strategic progress – 2021 highlights

Launched direct to consumer strategy led by new digital learning service, Pearson+, which continues to make good progress with 2.75m registered users, reflecting a strong uptake from MyLab and Mastering users, 133k paid subscriptions, and an app store rating of 4.7.
Pearson’s flagship Higher Education product, Revel, completed the move to incorporate the Pearson Learning Platform’s capabilities, providing enhanced features, and a new visual design for mobile.
Acquired Faethm, the workforce AI and predictive analytics company, enhancing Pearson’s Workforce Skills capabilities.
The disposal of Pearson’s Brazilian K12 Sistemas business completed on 1st October 2021. Marketing is progressing well in businesses under strategic review.

Board appointments

Appointed Omid Kordestani as Non-Executive Chair Designate and Tim Score as Deputy Chair Designate, providing exceptional leadership with highly relevant skills to drive Pearson’s digital, consumer strategy.
Pearson has today also announced the appointment of experienced business leader Esther Lee as Independent Non-Executive Director. Esther brings significant experience to the Board through her prior executive leadership roles developing customer strategies to drive digital transformation and growth. She has served in a variety of senior roles at global brands including MetLife Inc., AT&T, Euro RSCG Worldwide, and The Coca-Cola Company. Esther is a Board member at The Clorox Company (NYSE: CLX.) She will join the Board on 1st February 2022.

Strong cashflow

Strong balance sheet, net debt of less than £400m and a strong cash performance.

Financial summary

Underlying sales growth for 2021	Q4	Full Year
Sales
Assessment & Qualifications	2%	18%
Virtual Learning	0%	11%
Higher Education	(2%)	(5%)
Workforce Skills	13%	6%
English Language Learning	21%	17%
Sub total	2%	8%
Strategic review	(18%)	1%
Total	1%	8%

For an accompanying data table providing 2021 metrics relating to revenue across select key businesses, please follow this link.

Pearson full year results will be announced on 25^th February 2022 when we will provide a strategic update and 2022 guidance.

Notes

Throughout this announcement: growth rates are stated on an underlying basis unless otherwise stated. Underlying growth rates exclude both currency movements and portfolio changes. Unless otherwise stated, growth rates relate to the twelve-month period.

* Consensus adjusted operating profit as at 12^th November 2021 was £375m at average USD:GBP of 1.38.

** OnVUE test volumes include GED test but revenues for GED are reflected in the Workforce Skills division under Pearson’s new divisional structure.