2008 half-year results. 28 July 2008

Transcription

1 2008 half-year results 28 July 2008

2 Forward-looking statements Except for the historical information contained herein, the matters discussed in this presentation 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 and synergies and the execution of Pearson'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. 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 Pearson's control. These include international, national and local conditions, as well as competition. They also include other risks detailed from time to time in the company's publicly-filed documents. 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. 2

3 First half highlights Sales up 14%* Operating profit up 38%* Adjusted EPS up to 5.6p Dividend up 6.3% Five-year record 5% annual sales growth* 15% annual profit growth* 14% annual EPS growth 7% annual dividend growth Margin from 10.8% to 15.0% ROIC from 6.0% to 8.2% *Growth rates at constant exchange 3

4 Durability and Growth

5 Financial performance

6 Sales growth m H H CER Growth Underlying Growth North American Education % 5% International Education % 4% Professional* % 0% Pearson Education 1, % 4% FT Publishing % 8% Interactive Data % 7% FT Group % 8% Penguin % 9% Total 1,965 1,694 14% 6% *Excludes Data Management (Scanners) 6

7 Sales growth, m 1, Organic growth FT Group Int l North education American education 37 F/X 1,965 Acquisitions

8 Profit growth m H H CER Growth Underlying Growth North American Education (16) (14) (14)% (57)% International Education 20 3 Ø Ø Professional* (9)% (9)% Pearson Education FT Publishing % 13% Interactive Data % 16% FT Group % 15% Penguin % 28% Total % 20% *Excludes Data Management (Scanners) 8

9 Profit growth, m Other F/X 86 Education Organic growth Acquisitions Excludes Data Management (Scanners) 9

10 Adjusted earnings per share m H H Adjusted operating profit Finance costs Pensions 5 5 Finance costs Traditional (45) (44) Adjusted profit before tax Taxation (24) (16) Adjusted profit after tax Minorities (15) (13) Adjusted earnings Adjusted EPS 5.6p 3.1p Total business basis 10

11 P&L statutory m H H Adjusted operating profit Intangible amortisation (29) (16) Discontinued operations - (7) Statutory operating profit Finance costs (40) (35) Profit before tax Taxation (16) (9) Profit after tax (continuing) Discontinued (88) (119) Loss for the period (49) (93) EPS (statutory) (7.8)p (13.0)p 11

12 Free cash flow m H H Var Adjusted operating profit Working capital (316) (262) (54) Fixed asset purchase (46) (45) (1) Depreciation and amortisation Other movements (7) (13) 6 Operating cash flow (191) (181) (10) Operating tax paid (48) (39) (9) Operating finance charges (35) (45) 10 Operating free cashflow (274) (265) (9) Special pension contribution -- (50) 50 Non operating -- (9) 9 Total free cashflow (274) (324) 50 Total business basis 12

13 Balance sheet m H H Goodwill & intangible assets 4,118 3,641 Tangible fixed assets Operating working capital 1, Other net assets/(liabilities) (34) 32 Net assets 5,495 4,963 Shareholders funds 3,509 3,364 Pension provisions Other provisions Minorities Deferred tax (36) (101) Net debt 1,682 1,432 Capital employed 5,495 4,963 Total business basis 13

14 The shape of Pearson Penguin 20% FT Group 16% Professional 5% International Education 18% North American Education 41% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 14

15 The shape of Pearson North American Education US School Curriculum 14% Penguin 20% FT Group 16% Professional 5% International Education 18% North American Education 41% Assessment & Information 10% US Higher Education 14% Canada 3% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 15

16 The shape of Pearson International education Penguin 20% FT Group 16% Professional 5% International Education 18% North American Education 41% Asia 3% Europe 12% Americas 2% Middle East & Africa 1% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 16

17 The shape of Pearson Professional education Testing 3% Penguin 20% Publishing 2% FT Group 16% Professional 5% International Education 18% North American Education 41% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 17

18 The shape of Pearson Penguin RoW6% UK 4% US 10% Penguin 20% FT Group 16% Professional 5% International Education 18% North American Education 41% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 18

19 The shape of Pearson FT Group Advertising 5% Content 11% Penguin 20% FT Group 16% Professional 5% International Education 18% North American Education 41% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 19

20 The shape of Pearson Content 11% Advertising 5% US School Curriculum 14% RoW 6% UK 4% US 10% Testing 3% Penguin 20% Publishing 2% Asia 3% Professional 5% Americas 2% FT Group 16% International Education 18% North American Education 41% Europe 12% Middle East & Africa 1% Canada 3% Assessment & Information 10% US Higher Education 14% 2007 pro forma revenues: 4.3bn Year ended 31 Dec 2007 (excludes Data Management, includes Harcourt and ecollege) 20

21 Outlook maintained Education NorthAmerica International Professional FT Publishing Sales up 2-4%; stable margins Sales up in the low single digits; stable margins Sales up in the low single digits; margins improving Profit improvement even without ad growth Interactive Data Sales +8-10%, profit % Penguin Double digit margins 21

22 Highlights Sustained growth and investment Increasing margins Strong balance sheet Cash and capital discipline 22

23 Durability and Growth

24 Changing Pearson Content + Technology and services International expansion Efficiency Durability and Growth 24

25 Penguin 1,438 1,457 Sales ($m) 1,563 1,694 Operating profit ($m) /$ Margin 6.6% 7.5% 7.8% 8.7% 25

26 Penguin m H H Strong publishing in all markets Investment in emerging markets and digital On track for double digit margins CER growth Underlying growth Sales % 9% Operating profit % 28% 26

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28 28

29 FT Group 504 Sales ( m) Operating profit ( m) Margin 12.9% 17.8% 19.0% 22.2% Continuing operations 29

30 Interactive Data Sales ($m) Operating profit ($m) Margin 24.9% 26.9% 26.8% 28.2% Continuing operations 30

31 FT Publishing 235 Sales ( m) Operating profit ( m) Margin (0.9)% 6.8% 9.6% 16.3% Continuing operations 31

32 32

33 Professional Sales ($m) Operating profit ($m) /$ Margin (3.0)% 1.2% 8.0% 11.9% Continuing operations 33

34 Professional Education m H H Focus on testing and publishing Connections across Pearson Content + assessment + technology CER growth Underlying growth Sales Operating profit (9)% (9)% 34

35 North American Education 2,654 Sales ($m) Operating profit ($m) CAGR: 9% CAGR: 12% 3, ,855 3, /$ Margin 15.4% 16.5% 16.7% 16.4% 35

36 North American Education m H H CER growth Underlying growth Sales % 5% Operating profit (16) (14) (14)% (57)% Healthy market conditions Rapid growth in digital services Strong performance in assessment K-16-Professional 36

37 North American Education 2007 acquisitions Integrations on track Businesses performing well 41% enrollmentgrowth at ecollege New opportunities in: Test development Balanced & formative assessment Clinical assessment Assessment technologies Solutions & services School + Higher Ed K-16 boundaries are blurring Content + technology is transferable Operations are integrating 37

38 International Education Sales ( m) Operating profit 484 CAGR: 15% 735 CAGR: 51% Margin 5.6% 9.1% 11.4% 12.5% 38

39 International Education m H H Taking breakthoughproducts internationally Launching new growth businesses Leading the global ELT market Continuing scale and efficiency gains CER growth Underlying growth Sales % 4% Operating profit

40 Durability and Growth

41 Appendices

42 Another strong year in school adoptions 2008 estimated share of new adoptions Subject Total opportunity Market share (where we compete) Position Science $120m 31% #12 Social Studies $95m 23% #2 Reading/literature $270m 25% #3 Maths $270m 38% #1 Other $44m 40% #2 Total competed for $799m 31% #2 Total all adoptions $880m 30% #2 Pearson estimates 42

43 Reconciliation: statutory to adjusted earnings H m Statutory Discontinued Other gains/ losses Amortisation of acquired intangibles Other net finance costs Tax Amortisation benefit Adjusted earnings Operating profit Net finance costs (40) (40) Profit before tax Income tax (16) - - (10) - 2 (24) Profit after tax Discontinued operations (88) Profit for the period (49) Minority Interest (13) - - (2) - - (15) Earnings (62)

44 Reconciliation: statutory to adjusted earnings H m Statutory Discontinued Other gains/ losses Amortisation of acquired intangibles Other net finance costs Tax Amortisation benefit Adjusted earnings Operating profit Net finance costs (35) (4) - (39) Profit before tax (4) - 54 Income tax (9) (3) - (6) 1 1 (16) Profit after tax (3) 1 38 Discontinued operations (119) (4) Profit for the period (93) (3) 1 38 Minority Interest (11) - - (2) - - (13) Earnings (104) (3)

45 Reconciliation: half year net debt m Non current assets Derivative financial instruments Current assets Derivative financial instruments 2 19 Marketable securitites Cash and cash equivalents Non current liabilities Borrowings (1,897) (1,471) Derivative financial instruments (21) (28) Current liabilities Borrowings (251) (392) Derivative financial instruments (3) - Net debt continuing operations (1,682) (1,445) Net cash classified as held for sale - 13 Total net debt (1,682) (1,432) 45

46 Reconciliation: pre-publication costs m H H Opening balance Exchange 2 (7) New spend capitalised Acquisitions (net) Amortisation (87) (74) Closing balance Total education sales 1, Amortisation as a % of sales 7.4% 7.4% 46

47 Retirement benefit obligations m H H Balance sheet UK pension scheme asset/(liability) Other pension scheme liabilities (26) (24) Post retirement medical benefit liability (50) (46) Other pension accruals (18) (11) Total (58) (41) UK discount rate Return on Assets Longevity 6.4% 6.5% MC +1% floor 5.8% 6.4% MC MC = medium cohort 47

48 Working capital 1,062m 30 June 948m 901m Average 892m Pre-pubs / authors advances 42 (20) Traditional working capital Total business basis 48

49 Average working capital/sales Average to June 33.0% 31.0% 30.7% 28.7% 27.3% 26.1% 25.6% Includes capitalised pre-publication costs and author advances 49

50 Balance sheet Net debt/ebitda Interest cover 7.4x 3.9x 3.1x 1.3x 50