UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the
month of March 2021
PEARSON plc
(Exact
name of registrant as specified in its charter)
N/A
(Translation
of registrant's name into English)
80 Strand
London, England WC2R 0RL
44-20-7010-2000
(Address
of principal executive office)
Indicate
by check mark whether the Registrant files or will file annual
reports
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cover of Form 20-F or Form 40-F:
Form
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Form 40-F
Indicate
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in this Form is also thereby furnishing the information to
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pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934
Yes
No X
Pearson 2020 Preliminary Results and strategy update
(Unaudited)
|
Resilience despite COVID-19 challenges. Repositioning Pearson
for sustainable growth.
|
Highlights
|
Resilient sales despite COVID-19 related challenges and
restrictions
● Underlying
revenue declined 10%.
● Global
Online Learning up 18% reflecting increased demand for virtual
learning.
● Global
Assessment 14% lower, and International down 19%.
● North
American Courseware down 13%, with US Higher Education Courseware
in line with pre-COVID expectations.
Performance in line with revised expectations post
COVID-19; with adjusted operating profit of £313m (2019:
£581m)
● Adjusted
earnings per share of 28.7p (2019: 57.8p) after an effective tax
rate charge of 13.7% (2019: 16.5%).
Strong balance sheet and cash performance
● Operating cash flow
of £315m (2019: £418m) with a conversion rate of 101%
reflects lower profit partially offset by good working capital
management.
● Year-end net debt
reduced to £463m (2019: £1,016m) with leverage at 0.8x
(2019: 1.3x).
Dividend maintained
● Proposed final
dividend of 13.5p (2019: 13.5p), which equates to a full year
dividend of 19.5p (2019: 19.5p).
Statutory results
● Sales decreased 12%
to £3,397m (2019: £3,869m), reflecting underlying
performance, portfolio changes and currency movements.
● Statutory operating
profit was £411m (2019: £275m). The increase is due to
the gain on sale of our stake in Penguin Random House (PRH) and
lower restructuring costs which more than offset
the impact of
COVID-19 and portfolio changes on adjusted operating
profit.
● Net cash generated
from operations of £450m (2019: £480m).
● Statutory earnings
per share of 41.0p (2019: 34.0p).
Strategy update highlights
● Repositioning
Pearson for sustainable growth with a strong direct to consumer
focus.
● Three key
demand-led global market opportunities identified: rise in digital
learning tools; workforce skills gap; and demand for accreditation
and certification.
● Creation of five
new divisions - Virtual Learning, Higher Education, English
Language Learning, Workforce Skills and Assessment &
Qualifications.
● Each division
carries full responsibility for its overheads, product development
and operations. They will be supported by the Direct to Consumer
group.
● Launching strategic
review of international courseware local publishing
businesses.
● Simplifying
property portfolio to occupy a significantly smaller square
footage.
|
|
2021 outlook
● Expect year on year
revenue growth, with adjusted operating profit to be in line with
current market expectations.
● Good growth in
Virtual Learning, driven by the Virtual Schools 20/21 academic year
enrolment growth. Enrolments for the 21/22 academic year expected
to be broadly flat, with the 'covid
cohort' partially
returning to bricks and mortar schools, offset by underlying
growth, and waiting lists. Online Program Management (OPM) is also
expected to grow.
● Assessment &
Qualifications revenue growth as lockdowns and social distancing
ease. Expect impacted test centres to reopen - with social
distancing - in April, and normal operations to
resume
progressively in H2
2021. US school assessments expected to resume, and clinical tests
to be taken as schools reopen. UK exams cancelled with modest
profit impact as teacher assessment to
replace
exams.
● English Language
Learning revenue expected to improve as mobility, migration and
school purchasing recover slowly amidst continuing COVID-19
restrictions.
● Higher Education
revenue to decline, but by less than seen in recent years, as the
print base becomes smaller, and as the pricing pressure from the
change in mix from print and bundles, to
platform and
eTexts, is offset by recapture of the secondary market driven by
eText growth and the digital first strategy, and enrolment
recovery.
● Workforce Skills
revenue expected to grow, given the strong business fundamentals
and investments made into digital and direct to consumer
opportunities.
● Revenue phasing
will be impacted by current conditions, with Q1 sales behind a
challenging 2020 comparative, with growth expected in Q2 and Q3
assuming further pandemic recovery, with the
delivery of pent up
testing demand in H2 2020 providing a tougher
comparative.
● Net interest charge
of c.£65m and a tax rate of 18% to 22%.
● As previously
announced, cost efficiencies expected of c.£50m in
2021.
|
Andy Bird, Pearson's Chief Executive, said:
'Despite
the significant challenges of 2020, it is thanks to the tenacity
and commitment of colleagues around the world that Pearson has
delivered a solid financial performance. This year, as we
recover from the impact of the pandemic, we are focused on
delivering revenue and profit growth.
'Our
purpose has never been so relevant: we exist to help everyone
achieve their potential through learning. I have witnessed this
first-hand every day since joining Pearson, having spent time with
customers, employees and other key stakeholders. I have enormous
optimism in the future and our ability to unlock our potential and
drive sustainable growth.
'Pearson's
strategy is now geared around three key demand-led global market
opportunities which play to all our strengths: the rise in
online and digital learning; addressing the workforce skills gap;
and meeting the growing demand for dependable accreditation and
certification. Our existing assets, strong balance sheet, new
organisational structure and priorities will enable us to seize
these opportunities. As the global leader in learning, nobody else
has the breadth and depth of experience, scale, expertise and
relationships across the entire lifelong learning
spectrum.
'Following
significant investments in technology and comprehensive
restructuring, Pearson is moving at pace and ready to enter a new
era as a digital-first company, focused on delivering sustainable
revenue and profit growth for the benefit of all company
stakeholders.'
|
Strategy update
Since Andy Bird was appointed Chief Executive in October 2020,
Pearson has undertaken a thorough review of its portfolio,
organisational structure, competitive advantages, growth market
opportunities and digital capabilities.
The resulting strategy, based on a simpler, more agile operating
model, is focused on three global market opportunities - the rise
in online and digital learning tools, the workforce skills gap and
the growing demand for accreditation and certification. These
represent a balance between profitable markets where Pearson has a
leading position, and new high growth markets where we believe we
have the capabilities to grow market share rapidly.
This new focus will enable us to reposition Pearson for sustainable
and profitable growth and create long-term shareholder
value.
Opportunities in a changing market
Pearson operates in the £5 trillion global learning market
which has strong growth characteristics with over a billion more
learners expected to move through formal education by 2030. A
growing global middle class and longer careers are also driving
lifelong and informal learning, particularly for reskilling
and upskilling, a trend that has accelerated over the past few
years.
We are in a strong position to seize these opportunities through
the depth and breadth of our experience and expertise across the
entire lifelong learning spectrum, the investments we have made in
technology to deliver the Pearson Learning Platform and through the
integration of our intellectual property, content, products and
assessment tools. All of this positions Pearson as one of the few
companies who can offer customers an end-to-end
solution.
Five businesses to release untapped potential
We are reorganising our business and operations to focus on five
business divisions, with each division having full responsibility
for its overheads, product development, and operations to enable a
more agile and transparent operating model. Our five new divisions,
all supported by our Direct to Consumer group and each linked to
the others through our shared IP and capabilities, are outlined in
the below table with additional detail underneath:
Business divisions
|
Business units
|
Direct to Consumer
|
Virtual Learning
|
Virtual
Schools, OPM
|
Higher Education
|
US
Higher Education Courseware, Canadian Higher Education Courseware,
International Higher Education Courseware
|
English Language Learning
|
Pearson
Test of English, Institutional Courseware, English Online
Solutions
|
Workforce Skills
|
BTEC,
Pearson College, Apprenticeships
|
Assessment & Qualifications
|
Pearson
VUE, US School Assessment, Clinical Assessment, UK GCSE and A
level, International academic qualifications
|
Virtual Learning
Virtual schooling is a £1.5bn market in the United States
alone with market growth of high single digits pre-COVID. In 2019,
the total US virtual school enrollment was around 400,000 students,
which represented only 1% of the entire K12 population. We believe
the total addressable market will continue to show good growth as
more school districts retain online schooling post-COVID and as
more parents opt for virtual schooling permanently, growing that
market size beyond the 1% that it is today. We have a 17% share of
the market today and are present in 29 of the 34 states that
currently allow virtual public schools. In 2020 our virtual schools
revenue was £413m following significant growth of 29%, driven
by COVID-19.
In OPM we continue to expand our relationships with institutions to
be broader in scope; we will leverage our in-house digital
marketing agency across other parts of the business; and, we will
accelerate our Pearson Pathways strategy to grow our presence in
lifelong learning. The global OPM market, at £2.8bn today, is
expected to grow to over £7bn as consumers increasingly turn
to online course solutions and in 2020 our revenue in OPM was
£0.3bn.
Higher Education
The US higher education courseware market is between £4bn and
£5bn and we are the leading player with revenue of £0.8bn
in 2020. We partner with thousands of leading authors, across
multiple subjects, with a very strong focus on STEM. We're
accelerating our move to digital and we have an opportunity to
recapture the secondary market in Pearson textbooks. The Pearson
Learning Platform and the products we are developing on it will
drive digital growth. To accelerate recapture from the secondary
market and build direct relationships with consumers, we are going
to launch a new college study app in the Autumn of this year which
will be competitively priced, flexible, and a tiered service which
will enable us to shift consumer purchasing preference to our own
platform.
English Language Learning
We aspire to become the world's leading brand for people who need
to learn or improve their English. There are over 1.5bn adults
learning English today in a market we estimate is sized at
c.£5.0bn and set to grow to £7.3bn by 2025. Our revenue
was modest in 2020 but we own assets which we are confident we can
quickly scale. The Global Scale of English, a leading global
measurement standard, enables people to gauge and track their
progress in English. The Pearson Test of English, a digital test
with AI scoring that provides fast, accurate, secure and unbiased
results, leverages the global footprint of our VUE test centres and
is a trusted brand for entry into higher education and a gateway to
immigration recognised by regulators in the main receiving
countries.
Workforce Skills
Currently Pearson has a nascent presence in this sector with
revenue of just over £0.1bn but our ambition is to become a
leader in high quality learning and assessment that supports career
progression, helps people unlock their talent and drives growth for
our customers' businesses. We are forging new partnerships
with corporations and other learning providers that apply our deep
expertise in learning design and assessment to create learning
solutions that truly meet employers' and
employees' needs.
Assessment & Qualifications
Our Assessment & Qualifications business delivered revenue of
£1.1bn in 2020 and operates in a global market of £25bn
growing at 5% per year. Everything that we do across the company
has the potential to lead to some form of assessment, qualification
or certification, and this continues to be a significant
opportunity for Pearson. Our US School Assessment business
continues to win new contracts and maintains a strong market
position. Pearson VUE develops, manages and delivers computer-based
testing programs for nearly every industry. Our investment in
remote and online proctoring services enabled 10 fold growth in
2020 to 2.1m assessments. We provide technology certification exams
in the academic, career and technical education space. We are also
the market leader in clinical assessment.
Furthermore, we develop and award highly sought-after UK academic
and vocational qualifications, with leading brands such as Pearson
Edexcel.
Direct to Consumer
Our new Direct to Consumer group will act as Pearson's in-house
centre of excellence for the delivery of our consumer strategy. It
will sit across all five divisions so that initiatives can be
aligned into one consumer roadmap with the Direct to Consumer group
overseeing the standards required with regards to the consumer
experience, design, brand and marketing.
Portfolio
In addition to the pending sale of our K12 Sistemas - COC and Dom
Bosco - in Brazil, we will also be strategically reviewing the
rest of our international courseware local publishing
businesses, including Canada. We will report back on this later in
the year.
Furthermore, as we change the way we work, we will simplify our
property portfolio and occupy a significantly smaller square
footage which will be fully technology enabled supporting
collaboration and creativity.
The reorganisation into five global business divisions will incur
one-time cash and P&L costs between £40-70m in 2021,
the benefits of which we intend to reinvest in strengthening
our capabilities to support future growth. The restructuring
of our corporate offices into a smaller footprint will incur a
P&L charge of c.£130m and a cash cost of
c.£10m in 2021 with a recurring benefit of £10m in
2022 rising to £20m per annum in later years.
Long term outlook
Segment
|
Market 5-year CAGR*
|
Long term growth
|
Long term margin**
|
Virtual Learning
|
High
single digit
|
Strong
|
Increase
|
Higher Education
|
Stabilisation
|
Recapture of secondary market, International growth
|
Increase
|
English Language Learning
|
Mid to high-single digit
|
At least in line with market growth
|
Maintain
|
Workforce Skills
|
Mid to high-single digit
|
Strong
|
Maintain
|
Assessment & Qualifications
|
Professional Certification low to mid-single digit
US School Assessment and Clinical Assessment flat
|
Low to moderate
|
Maintain
|
* Pearson estimates
** vs 2019 margin
Key Performance Indicators
Our financial KPIs will remain the same, to maintain focus on
growth, profitability and cash generation. Today we have announced
that our key business and non-financial KPIs will change to reflect
the pivot to the new growth strategy, and will focus
on:
●
Investing
in our talent
●
Building
an inclusive culture and improving diverse
representation
●
Accelerating
our sustainability strategy
We also will report leading indicators against our five divisions
going forward.
Executive changes
With the major restructuring programme now complete, we are
evolving the management team for the next phase in the company's
transformation.
Rod Bristow, President of Global Online Learning and our UK
business, will be moving on from Pearson after 35 years. He has
made a significant contribution to Pearson over this time, leaving
our UK and online learning businesses in good shape and well placed
for future growth.
Tom ap Simon, currently head of Pearson's Virtual Schools business,
will lead the newly created Virtual Learning division, joining the
executive team and reporting to Andy Bird.
Mike Howells, our Chief Strategy Officer, will be Interim President
of Workforce Skills.
Albert Hitchcock is stepping down as Chief Technology &
Operations Officer as the company's digital transformation is
largely complete. He will continue to be part of the executive team
and will work with Mike Howells on Pearson's business development
strategy with large global technology companies.
Contacts
|
|
|
Investor Relations
|
Jo
Russell
Anjali
Kotak
Teddy
Symington
|
+44 (0)
7785 451 266
+44 (0)
7802 890 724
+44 (0)
7443 354 088
|
Media
|
Tom
Steiner
Gemma
Terry
|
+44 (0)
7787 415 891
+44 (0)
7841 363 216
|
Teneo
|
Charles
Armitstead
|
+44 (0)
7703 330 269
|
Virtual event
|
Pearson's full year results and strategy update virtual
presentation today 0830 (GMT). Register to receive log in
details: https://pearson.connectid.cloud/register
|
|
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 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. They
are based on numerous assumptions regarding Pearson'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 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 Pearson's publicly-filed documents and you are advised to
read, in particular, the risk factors set out in Pearson's latest
annual report and accounts, which can be found on this website
(www.pearsonplc.com). 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
Financial
Overview
£m
|
2020
|
2019
|
Headline
growth
|
CER
growth
|
Underlying
growth
|
Business performance
|
|
|
|
|
|
Sales
|
3,397
|
3,869
|
(12)%
|
(11)%
|
(10)%
|
Adjusted
operating profit
|
313
|
581
|
(46)%
|
(46)%
|
(40)%
|
Operating
cash flow
|
315
|
418
|
|
|
|
Adjusted
earnings per share
|
28.7p
|
57.8p
|
|
|
|
Statutory results
|
|
|
|
|
|
Sales
|
3,397
|
3,869
|
|
|
|
Operating
profit
|
411
|
275
|
|
|
|
Profit
for the year
|
310
|
266
|
|
|
|
Net
cash generated from operations
|
450
|
480
|
|
|
|
Basic
earnings per share
|
41.0p
|
34.0p
|
|
|
|
Dividend
per share
|
19.5p
|
19.5p
|
|
|
|
Net
debt
|
(463)
|
(1,016)
|
|
|
|
Throughout this
announcement: a) Growth rates are stated on an underlying basis
unless otherwise stated. Underlying growth rates exclude currency
movements, and portfolio changes. b) The 'business
performance' 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.
Profit & loss statement. In 2020, sales decreased by
£472m in headline terms to £3,397m (2019: £3,869m)
with underlying performance reducing sales by £386m, portfolio
changes reducing sales by £55m and currency movements
decreasing revenue by £31m. Stripping out the impact of
portfolio and currency movements, revenue was down 10% in
underlying terms.
2020
adjusted operating profit was £313m (2019: £581m) with
portfolio changes, inflation, and the trading impact of COVID-19
partially offset by restructuring savings. Excluding the impact of
FX and portfolio changes, underlying adjusted operating profit was
down 40%.
Net
interest payable was £61m, compared to £41m in 2019. The
increase is mainly due to interest on tax, with one-off credits
recorded in 2019 not repeated in 2020, and interest charges on the
bond raised in June 2020.
The
effective tax rate on adjusted earnings in 2020 was a charge of
13.7% compared to a charge of 16.5% in 2019. The decrease in the
effective tax rate is mainly due to a benefit from the release of
tax provisions due to the expiry of the relevant statute of
limitation.
Adjusted
earnings per share of 28.7p (2019: 57.8p) reflects all the elements
above.
Cash generation. Operating cash inflow decreased on a
headline basis from £418m in 2019 to £315m in 2020 with
cash conversion of 101% versus 72% in 2019. The decrease is largely
explained by the drop-through of reduced profit offset by good
working capital management. The equivalent statutory measure,
net cash generated from operations, was £450m in 2020 compared
to £480m in 2019. Compared to operating cashflow, this measure
includes restructuring costs but does not include regular dividends
from associates or capital expenditure on property, plant,
equipment, right of use assets and software. In 2020 restructuring
cash outflow was £38m (2019: £111m).
Statutory results. Our statutory operating profit was
£411m in 2020 compared to a profit of £275m in 2019. The
increase in 2020 is largely due to the gain on sale of PRH and the
reduction in restructuring costs, which were more than enough to
offset the impact of COVID-19 and portfolio changes on trading
profits.
Capital allocation. Our capital allocation policy is to
maintain a strong balance sheet and a solid investment grade credit
rating, to continue to invest in the business both organically and
inorganically, to have a sustainable and progressive dividend
policy, and to return surplus cash to our
shareholders.
Balance sheet. Net debt to adjusted EBITDA was 0.8x (2019:
1.3x). Net debt reduced from £1,016m in 2019 to £463m at
the end of 2020. Excluding leases, net debt reduced from £374m
in 2019 to net cash of £159m in 2020. The decrease is largely
due to the receipt of proceeds from the PRH sale, the receipt of
deferred proceeds from the US K12 sale, the repayment of the loan
to PRH and positive operating cash flow offset by interest and
dividend payments and the cash outflow from the Group's share
buyback programme. As a result of the COVID-19 pandemic
the Group took action to increase its liquidity including pausing
the share buyback programme with £176m of the share buyback
completed. The Board considers that maintaining a very strong
balance sheet is appropriate, and as such there are no plans to
reinitiate the buyback. On 4 June 2020 the Group also completed the
issuance of £350m guaranteed notes maturing on 4 June
2030.
The
Group continues to work to protect its cash flow and pro-actively
manage working capital and at the end of 2020, the Group had
approximately £1.9bn (2019: c.£1.1bn) in total liquidity
immediately available from cash and its Revolving Credit
Facility.
Pension plan. The overall surplus on UK pension plans
of £429m at the end of 2019 has decreased to a surplus of
£410m at the end of 2020. The decrease has arisen principally
due to an actuarial loss in relation to retirement benefit
obligations of the Group.
Dividend. In line with our policy, the Board is proposing a
final dividend of 13.5p (2019: 13.5p), flat year on year, which
results in an overall dividend of 19.5p (2019: 19.5p) subject to
shareholder approval. This will be payable on 7 May
2021.
Businesses held for sale. In November 2020, the Group announced the sale of
its interests in Pearson Institute of Higher Education (PIHE) in
South Africa. At the end of December 2020 the assets and
liabilities of PIHE have been classified as held for sale on the
balance sheet. The sale completed on 5 February
2021.
Businesses disposed of. In April 2020, the Group completed the sale of
the remaining 25% interest in Penguin Random House to Bertelsmann
SE & Co KGaA, generating net proceeds of £531m and
resulting in a pre-tax profit of £180m.
Following the decision to sell the US K12 courseware business, the
assets and liabilities of that business were classified as held for
sale on the balance sheet at the end of 2018. In March 2019, the
Group completed the sale of its K12 business with total gross
proceeds of £200m including £180m of deferred proceeds
which included the fair value of an unconditional vendor note for
$225m and an entitlement to 20% of future cash flows to equity
holders and 20% of net proceeds in the event of a subsequent sale.
In 2020, the Group received ($143m) (£105m) as a partial
repayment of the vendor note and a payment in respect of the full
purchase equity interest such that the Group is no longer entitled
to any future cash flows to equity holders or net proceeds in the
event of a subsequent sale.
On 5 March 2021, we agreed the sale of our K12 Sistemas - COC and
Dom Bosco - in Brazil to Arco, subject to securing regulatory
approval and closing.
Operational review
£ millions
|
2020
|
2019
|
Headline
growth
|
CER
growth
|
Underlying
growth
|
Sales
|
|
|
|
|
|
Global
Online Learning
|
697
|
586
|
19%
|
19%
|
18%
|
Global
Assessment
|
892
|
1,031
|
(13)%
|
(14)%
|
(14)%
|
North
America Courseware
|
894
|
1,091
|
(18)%
|
(18)%
|
(13)%
|
International
|
914
|
1,161
|
(21)%
|
(18)%
|
(19)%
|
Total sales
|
3,397
|
3,869
|
(12)%
|
(11)%
|
(10)%
|
|
|
|
|
|
|
Adjusted operating profit
|
|
|
|
|
|
Global
Online Learning
|
99
|
84
|
18%
|
19%
|
23%
|
Global
Assessment
|
245
|
351
|
(30)%
|
(30)%
|
(30)%
|
North
America Courseware
|
190
|
231
|
(18)%
|
(18)%
|
(20)%
|
International
|
182
|
299
|
(39)%
|
(38)%
|
(39)%
|
Enabling
Functions
|
(404)
|
(449)
|
10%
|
9%
|
9%
|
Penguin
Random House
|
1
|
65
|
(98)%
|
(98)%
|
-
|
Total adjusted operating profit
|
313
|
581
|
(46)%
|
(46)%
|
(40)%
|
See note 2 in the condensed consolidated financial statements for
the reconciliation to the equivalent statutory
measures.
Global Online Learning
Revenue grew 18% on an underlying basis and 19% on a headline basis
reflecting strong enrolment growth in Virtual Schools and good
growth in OPM.
Adjusted operating profit grew 23% in underlying terms, due to
margin on sales growth more than offsetting the investment in our
virtual schools platform and customer care support and margin
impact in OPM due to discontinued programs. Headline profit grew
18% with good growth in adjusted operating profit partially offset
by FX and portfolio changes.
Virtual Schools performed strongly driven by 43% enrolment growth
in new and existing schools for the 2020/2021 academic year. We
opened three new full-time, state-wide partner schools, and
combined with two contract exits this takes the total partner
schools to 43 in 29 states. We are launching two new partner
schools in Florida and Oregon for the 2021/2022 academic
year.
In OPM, we saw good sales growth with a strong performance in
undergraduate and international, partially offset by discontinued
programs. We also saw the benefits of the operational changes made
earlier this year, with increased efficiencies in our student
recruitment process and student acquisition costs. Underlying
course enrolments (excluding discontinued programs) grew 20% and
total course enrolments declined 7%. We are delivering 470 programs
across 34 partners globally. We launched Pearson Pathways, a
digital marketplace that provides learners with tailored
recommendations for courses and credentials to help them achieve
the skills they require.
Global Assessment
In Global Assessment, sales declined 14% on an underlying basis
and 13% on a headline basis.
Adjusted operating profit declined 30% in underlying and headline
terms due to the COVID-19 impact on trading, partially offset by
mitigating actions.
Sales declined 10% at Pearson VUE reflecting the impact of the test
centre closures in the first half of the year, with pent up demand
in the second half partially moderated by further lockdowns in Q4.
Online Proctoring saw strong growth in the year with volumes up
from 0.2m at the end of 2019 to 2.1m at the end of 2020
predominantly driven by demand from the IT sector. Overall testing
volumes were down 22% to 12.9m due to test centre
closures.
In School and Clinical Assessment, cancellation of Spring testing
and school closures impacted both businesses respectively in H1
with a further modest impact due to COVID-19 in H2.
North American Courseware
In North American Courseware, sales declined 13% for the full year on an
underlying basis and 18% on a headline basis reflecting the sale of
US K12 Courseware.
Adjusted operating profit declined 20% in underlying terms, due to
the impact of trading partially offset by restructuring and
discretionary savings. Headline profit was down 18% on last year
due to the underlying profit reduction partially offset by the
disposal of our US K12 courseware business in 2019.
In US Higher Education Courseware sales declined 12% with total
unit sales increasing slightly and digital registrations including
eBooks growing 9%. In Canada, courseware sales were down
significantly due to school and bookstore closures.
We continued to see unbundling of premium priced print and digital
products for digital only formats. In 2020 2.2m textbooks were sold
into US Higher Education colleges, compared with 3.7m in 2019.
Sales of standalone eBook units into colleges grew 33% to 3.7m
units, showing signs of secondary market recapture.
There has also been continued momentum in Inclusive Access with
sales to not-for-profit institutions up 29% on last year
representing 13% of US Higher Education Courseware
revenue.
International
In International, sales were down 19% on an underlying basis due to
the interruption of Australian immigration and test centre closures
impacting PTE, as well as budgetary pressures caused by the impact
of COVID-19 on courseware purchasing. Revenue declined 21% on a
headline basis due to foreign exchange and underlying
performance.
Adjusted operating profit declined 39% in underlying and headline
terms due to the impact of trading partially offset by mitigating
actions.
For School & HE Courseware, budget constraints and school
closures have led to fewer purchases. In the UK, qualifications
revenue was impacted, as expected, by the cancellation of exams in
2020, as well as the end of the NCT contract. In our franchise
business in Brazil and across courseware, we have seen market
contraction as a result of the pandemic.
PTE volumes were down 36% with declines in all key markets except
China where we saw 17% growth due to an improved competitive
performance.
Enabling Functions
Enabling Functions costs were 10% lower in headline terms and 9% in
underlying terms due to restructuring and discretionary
savings.
|
FINANCIAL REVIEW
Operating
result
Sales decreased on a headline basis by £472m or 12% from
£3,869m in 2019 to £3,397m in 2020 and adjusted operating
profit decreased by £268m or 46% from £581m in 2019 to
£313m 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
those for 2019. We also present sales and profits on an underlying
basis which exclude 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
2019 or 2020. Portfolio changes mainly relate to the sale of our US
K12 courseware business in 2019 and the sale of our remaining
interest in PRH in the first half of 2020. Acquisitions, including
Lumerit in 2019, had only a small impact on reported sales and
profits.
On an underlying basis, sales decreased by 10% in 2020 compared to
2019 and adjusted operating profit decreased by 40%. Currency
movements decreased sales by £31m and increased adjusted
operating profit by £1m. Portfolio changes decreased sales by
£55m and decreased adjusted operating profit by £59m.
There were no new accounting standards adopted in 2020 that
impacted sales or profits.
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. A summary of these adjustments is included below and
in more detail in note 2 to the condensed consolidated financial
statements.
|
|
|
|
All figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
411
|
275
|
Add
back: Cost of major restructuring
|
|
-
|
159
|
Add
back: Intangible charges
|
|
80
|
163
|
Add
back: Other net gains and losses
|
|
(178)
|
(16)
|
Adjusted
operating profit
|
|
313
|
581
|
In
May 2017, we announced a restructuring programme, to run between
2017 and 2019, to drive significant cost savings. This programme
began in the second half of 2017 and costs incurred relate to
delivery of cost efficiencies in our enabling functions and US
higher education courseware business together with further
rationalisation of the property and supplier portfolio. The
restructuring costs in 2019 relate predominantly to staff
redundancies. The restructuring programme was largely completed at
the end of 2019.
Intangible
amortisation charges in 2020 were £80m compared to a charge of
£163m in 2019. Although there has been a reduction in
acquisition activity in recent years and the disposal of PRH in
2020 has eliminated the Group's share of associate intangible
amortisation, this has been partly offset by accelerated
amortisation profiles and impairments recorded mainly relating to
content and contract intangibles in the Global Assessment and
International businesses. In 2019, there was an additional
£65m impairment charge relating to acquired intangibles in the
Brazil business following a reassessment of the relative risk in
that market.
Other
net gains in 2020 largely relate to the sale of the remaining
interest in PRH (£180m gain) and impairments of assets and
other costs relating to the disposal of Pearson Institute of Higher
Education (£8m loss). In 2019, other net gains largely relate
to the sale of the US K12 business.
The
statutory operating profit of £411m in 2020 compares to a
profit of £275m in 2019. The increase in 2020 is mainly due to
the gain on sale of PRH and the reduction in restructuring costs,
which were more than enough to offset the impact of COVID-19 on
trading profits.
Net finance costs
Net interest payable reflected in adjusted earnings in 2020 was
£61m, compared to £41m in 2019. The increase is mainly
due to interest on tax with credits recorded in 2019 not being
repeated in 2020, and interest charges on the bond raised in June
2020.
Net 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 or disposal
transactions, foreign exchange and other gains and losses on
derivatives. Interest relating to acquisition or disposal
transactions is excluded from adjusted earnings as it is considered
part of the acquisition cost or disposal proceeds 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 income of £4m compared to a charge of £2m in 2019.
Net finance income relating to retirement benefits decreased from
£13m in 2019 to £6m in 2020 reflecting the comparative
funding position of the plans at the beginning of each year and
lower prevailing discount rates. In 2020, finance income of
£26m relating to the revaluation of the US K12 disposal
proceeds was recorded and there were increases in losses on
long-term interest rate hedges and increases in foreign exchange
losses on unhedged inter-company loans and cash and cash
equivalents in 2020 compared to 2019. For a reconciliation of the
adjusted measure see note 3 to the condensed consolidated financial
statements.
Taxation
The effective tax rate on adjusted earnings in 2020 was a charge of
13.7% compared to an effective tax rate charge of 16.5%
in 2019. The decrease in the effective rate is mainly due to a
benefit from the release of tax provisions due to the expiry of the
relevant statute of limitation.
The reported tax charge on a statutory basis in 2020 was a charge
of £44m (12.5%) compared to a credit of £34m
(14.7%) in 2019. The statutory tax credit in 2019 was
primarily due to US tax losses generated on the disposal of the US
K12 business.
Operating tax paid in 2020 was £10m (2019:
£9m). This was impacted by refunds received in the US and UK
relating to historical periods. Non-operating tax was a refund of
£12m in 2020 (2019: paid £21m) relating to settlement of
a historical tax audit and the impact of the disposal of our US K12
business.
A net deferred tax liability of £30m is recognised in 2020
compared to a net £11m deferred tax asset in 2019, the
movement is mainly due to utilisation of tax losses in our US
business and the amortisation of tax deductible goodwill in Brazil
which reduces the related deferred tax asset. The current tax
creditor principally consists of provisions for tax uncertainties.
There are contingent liabilities in relation to tax as outlined in
note 18 to the condensed consolidated financial
statements.
Other
comprehensive income
Included
in other comprehensive income are the net exchange differences on
translation of foreign operations. The loss on translation of
£109m in 2020 compares to a loss in 2019 of £115m. The
loss in 2020 mainly arises from the weakening of the US dollar
compared to sterling. A significant proportion of the Group's
operations are based in the US and the US dollar weakened in 2020
from an opening rate of £1:$1.32 to a closing rate at the end
of 2020 of £1:$1.37. At the end of 2019 the US dollar had
weakened from an opening rate of £1:$1.27 to a closing rate of
£1:$1.32 and this movement was the main reason for the loss in
2019.
Also
included in other comprehensive income in 2020 is an actuarial loss
of £23m in relation to retirement benefit obligations of the
Group. The loss arises from the unfavourable impact of changes in
the assumptions used to value the liabilities in the plans and in
particular movements in the discount rate. The actuarial loss in
2020 of £23m compares to an actuarial loss in 2019 of
£145m.
In
2020, £70m was recycled from the currency translation reserve
to the income statement in relation to the disposal of
PRH.
Cash
flow and working capital
Our operating cash flow measure
is an adjusted measure used to align cash flows with our adjusted
profit measures (see note 17 to the condensed consolidated
financial statements). Operating cash inflow decreased on a
headline basis by £103m from £418m in 2019 to £315m
in 2020. The decrease is largely explained by the drop-through of
reduced profit offset by improved working
capital.
The
equivalent statutory measure, net cash generated from operations,
was £450m in 2020 compared to £480m in 2019. Compared to
operating cash flow, this measure includes restructuring costs but
does not include regular dividends from associates. It also
excludes capital expenditure on property, plant, equipment and
software, and additions to right of use assets as well as disposal
proceeds from the sale of property, plant, equipment and right of
use assets (including the impacts of transfers to/from investment
in finance lease receivable). In 2020 restructuring cash outflow
was £38m (2019: £111m) and there is an equivalent
reduction in provisions held on the balance sheet.
In
2020, there was an overall £679m increase in cash and cash
equivalents compared to a decrease of £91m in 2019. The
increase in 2020 was primarily driven by the receipt of
proceeds of £531m from the PRH sale, the receipt of deferred
proceeds of £105m from the US K12 sale, the £48m
repayment of the loan to PRH, the £57m reduction in spending
on software assets and the receipt of proceeds of £346m from
the bond issue. These were offset by the cash outflow of £176m
from the Group's share buyback programme and the £230m
repayment of the Revolving Credit Facility which was drawn at 31
December 2019.
Working
capital provisions were reviewed in the light of the impact of
COVID-19 on trading with the main areas of focus being adequacy of
provisions for inventory and bad debt. For inventory, the impact of
sales reductions has been applied in inventory obsolescence
calculations and has resulted in increases in provisions around the
Group. Bad debts have been assessed in the light of additional
credit risk. The Group has no significant concentrations of credit
risk. However, the use of the expected credit loss model has
resulted in revised credit risks for customers in our distributor
and retail businesses with a consequent proportionate increase in
bad debt provision.
Liquidity
and capital resources
The
Group's net debt reduced from £1,016m at the end of 2019 to
£463m at the end of 2020. The decrease is largely due to the
receipt of proceeds of £531m from the PRH sale, the receipt of
deferred proceeds of £105m from the US K12 sale, the £48m
repayment of the loan to PRH and positive operating cash flow
offset by interest and dividend payments and the cash outflow of
£176m from the Group's share buyback programme.
As
a result of the COVID-19 pandemic the Group took action to increase
its liquidity including pausing the share buyback programme as
outlined below and on 4 June 2020, the Group completed the issuance
of £350m guaranteed notes maturing 4 June 2030.
The
notes bear a coupon of 3.75% and have been issued in accordance
with the ICMA Social Bond Principles 2018. The proceeds will be
primarily used to finance and re-finance delivery of education in
our Connections Academy, BTEC and GED businesses to help achieve
the United Nations' 4th Sustainable Development Goal (SDG) for a
Quality Education. The social bond framework is a natural
progression of Pearson's long-standing commitment to integrating
social and environmental sustainability into the
business.
In
assessing the Group's liquidity, the impact of the COVID-19
pandemic has been modelled under several scenarios to ensure that
the likelihood of a prolonged period of disruption has been
appropriately considered in assessing the availability of funding
to the Group and the ability of the Group to comply with its
banking covenants. The Group's base case forecasts include
assumptions relating to the COVID-19 pandemic. It is assumed that
restrictions ease in Q2 2021 with a phased return to normality in
H2 2021 as the vaccine roll-out progresses. The downside case
scenario modelling includes a severe reduction in revenue, profit
and operating cash flow compared to the base case assumptions that
extends through the full three-year period to ensure that the Group
has adequate resources to manage for a prolonged period of
disruption.
In
assessing the Group's viability for the three years to December
2023, the board analysed a variety of downside scenarios
including a severe but plausible scenario where the Group is
impacted by all principal risks from 2021 (weighted for probability
of occurrence) as well as reverse stress testing to identify what
would be required to either breach covenants or run out of
liquidity. The severe but plausible scenario modelled an
impact from COVID-19 and other risks which in aggregate were
significantly greater than seen in 2020 continuing throughout 2021
to 2022.
At 31 December 2020, the Group had available liquidity of
c£1.9bn, comprising central cash balances and its undrawn
$1.19bn Revolving Credit Facility (RCF) maturing February
2024. Even under a severe downside case where further declines
in profitability compared to 2020 are modelled in 2021 and 2022,
the Group would maintain liquidity headroom in excess of £600m
and sufficient headroom against covenant requirements during the
period under assessment even before modelling the mitigating effect
of actions that management would take in the event that these
downside risks were to crystallise.
At 31 December 2020 the Group was rated BBB- (stable outlook) with
Standard and Poor's and Baa3 (stable outlook) with
Moody's.
The Group's financial instrument portfolio was reviewed in light of
the COVID-19 pandemic with a particular focus on counterparty risk
and hedging relationships. No material impacts were identified. In
addition, the Group's property related assets were assessed for
impairments and credit losses in light of the COVID-19 pandemic, no
material impacts were identified.
Post-retirement
benefits
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
post-retirement benefits amounted to £54m in 2020 (2019:
£56m) of which a charge of £60m (2019: £69m) was
reported in adjusted operating profit and income of £6m (2019:
£13m) was reported in other net finance costs. The decrease in
the operating charge in 2020 is largely explained by savings in
defined contribution plans as a result of recent disposals and
restructuring activities.
The
overall surplus on UK Group pension plans of £429m at the end
of 2019 has decreased to a surplus of £410m at the end of
2020. The decrease has arisen principally due to the actuarial loss
noted above in the other comprehensive income section. In total,
our worldwide net position in respect of pensions and other
post-retirement benefits decreased from a net asset of £337m
at the end of 2019 to a net asset of £325m at the end of
2020.
Dividends
The
dividend accounted for in our 2020 financial statements totalling
£146m represents the final dividend in respect of 2019 (13.5p)
and the interim dividend for 2020 (6.0p). We are proposing a
final dividend for 2020 of 13.5p bringing the total paid and
payable in respect of 2020 to 19.5p. This final 2020 dividend which
was approved by the Board in March 2021, is subject to approval at
the forthcoming AGM and will be charged against 2021 profits. For
2020, the dividend is covered 1.5 times by adjusted
earnings.
Share buyback
The
share buyback programme, announced in December 2019, commenced on
16 January 2020 and was paused on 23 March 2020 in order to protect
liquidity from the impact of COVID-19. The original intention was
to buyback approximately £350m of shares and at the date of
pausing the programme approximately 30m shares had been bought back
and cancelled at a cost of £176m. There are currently no plans
to resume the share buyback programme. The nominal value of these
shares, £7m was transferred to the capital redemption
reserve.
Businesses
held for sale and businesses disposed
In
November 2020, the Group announced the sale of its interests in
Pearson Institute of Higher Education (PIHE) in South Africa. At
the end of December 2020 the assets of PIHE have been classified as
held for sale on the balance sheet. The sale completed on 5
February 2021.
In
December 2019, the Group announced the sale of its remaining 25%
interest in PRH. At the end of December 2019, our share of the
assets of PRH were classified as held for sale on the balance
sheet. The business was sold at the beginning of April 2020 for
$675m realising a profit of £180m.
In
March 2019, the Group completed the sale of its US K12 business.
Total gross proceeds were £200m including £180m of
deferred proceeds which included the fair value of an unconditional
vendor note for $225m and an entitlement to 20% of future cash
flows to equity holders and 20% of net proceeds in the event of a
subsequent sale. In 2020, the Group received $143m (£105m) as
a partial early repayment of the vendor note and a payment in
respect of the full purchase of the equity interest such that the
Group is no longer entitled to any future cash flows to equity
holders or net proceeds in the event of a subsequent
sale.
The
cash inflow in 2020 relating to the disposal of businesses was
£631m mainly relating to PRH and the deferred proceeds from US
K12. In 2019, the cash outflow from disposals of £101m mainly
reflected the deferral of proceeds for US K12 and the level of
working capital held in this business at the disposal
date.
Further
details relating to these transactions can be found in notes 10 and
15 to the condensed consolidated financial statements.
CONDENSED
CONSOLIDATED INCOME STATEMENT
for
the year ended 31 December 2020
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
Sales
|
2
|
3,397
|
3,869
|
Cost of
goods sold
|
|
(1,767)
|
(1,858)
|
Gross
profit
|
|
1,630
|
2,011
|
|
|
|
|
Operating
expenses
|
|
(1,402)
|
(1,806)
|
Other
net gains and losses
|
2
|
178
|
16
|
Share
of results of joint ventures and associates
|
|
5
|
54
|
Operating
profit
|
2
|
411
|
275
|
|
|
|
|
Finance
costs
|
3
|
(107)
|
(84)
|
Finance
income
|
3
|
50
|
41
|
Profit
before tax
|
4
|
354
|
232
|
Income
tax
|
5
|
(44)
|
34
|
Profit
for the year
|
|
310
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
Equity
holders of the company
|
|
310
|
264
|
Non-controlling
interest
|
|
-
|
2
|
|
|
|
|
|
|
|
|
Earnings per share (in pence per
share)
|
|
|
|
Basic
|
6
|
41.0p
|
34.0p
|
Diluted
|
6
|
41.0p
|
34.0p
|
The
accompanying notes to the condensed consolidated financial
statements form an integral part of the financial
information.
CONDENSED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for
the year ended 31 December 2020
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Profit
for the year
|
|
310
|
266
|
|
|
|
|
Items
that may be reclassified to the income statement
|
|
|
|
Net
exchange differences on translation of foreign operations -
Group
|
|
(109)
|
(113)
|
Net
exchange differences on translation of foreign operations -
associates
|
-
|
(2)
|
Currency
translation adjustment disposed
|
|
(70)
|
4
|
Attributable
tax
|
|
(13)
|
5
|
|
|
|
|
Items
that are not reclassified to the income statement
|
|
|
|
Fair
value gain on other financial assets
|
|
14
|
20
|
Attributable
tax
|
|
(6)
|
(4)
|
Remeasurement of
retirement benefit obligations - Group
|
|
(23)
|
(145)
|
Remeasurement of
retirement benefit obligations - associates
|
|
-
|
(4)
|
Attributable
tax
|
|
2
|
22
|
Other
comprehensive expense for the year
|
|
(205)
|
(217)
|
|
|
|
|
Total
comprehensive income for the year
|
|
105
|
49
|
|
|
|
|
Attributable
to:
|
|
|
|
Equity
holders of the company
|
|
105
|
47
|
Non-controlling
interest
|
|
-
|
2
|
CONDENSED
CONSOLIDATED BALANCE SHEET
as
at 31 December 2020
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
515
|
618
|
Intangible
assets
|
11
|
2,742
|
2,900
|
Investments
in joint ventures and associates
|
|
6
|
7
|
Deferred
income tax assets
|
|
32
|
59
|
Financial
assets - derivative financial instruments
|
|
45
|
29
|
Retirement
benefit assets
|
|
410
|
429
|
Other
financial assets
|
|
138
|
122
|
Trade
and other receivables
|
12
|
223
|
313
|
Non-current assets
|
|
4,111
|
4,477
|
|
|
|
|
Intangible
assets - pre-publication
|
|
905
|
870
|
Inventories
|
14
|
129
|
169
|
Trade
and other receivables
|
12
|
1,118
|
1,275
|
Financial
assets - derivative financial instruments
|
|
18
|
25
|
Cash
and cash equivalents (excluding overdrafts)
|
|
1,097
|
437
|
Current assets
|
|
3,267
|
2,776
|
|
|
|
|
Assets
classified as held for sale
|
10
|
73
|
397
|
Total assets
|
|
7,451
|
7,650
|
|
|
|
|
Financial
liabilities - borrowings
|
|
(1,397)
|
(1,572)
|
Financial
liabilities - derivative financial instruments
|
|
(40)
|
(24)
|
Deferred
income tax liabilities
|
|
(62)
|
(48)
|
Retirement
benefit obligations
|
|
(85)
|
(92)
|
Provisions
for other liabilities and charges
|
|
(8)
|
(13)
|
Other
liabilities
|
13
|
(80)
|
(86)
|
|
|
|
|
Non-current liabilities
|
|
(1,672)
|
(1,835)
|
|
|
|
|
Trade
and other liabilities
|
13
|
(1,196)
|
(1,278)
|
Financial
liabilities - borrowings
|
|
(254)
|
(92)
|
Financial
liabilities - derivative financial instruments
|
|
(12)
|
(15)
|
Current
income tax liabilities
|
|
(84)
|
(55)
|
Provisions
for other liabilities and charges
|
|
(25)
|
(52)
|
Current liabilities
|
|
(1,571)
|
(1,492)
|
|
|
|
|
Liabilities
classified as held for sale
|
10
|
(74)
|
-
|
Total liabilities
|
|
(3,317)
|
(3,327)
|
|
|
|
|
Net assets
|
|
4,134
|
4,323
|
|
|
|
|
Share
capital
|
|
188
|
195
|
Share
premium
|
|
2,620
|
2,614
|
Treasury
shares
|
|
(7)
|
(24)
|
Reserves
|
|
1,324
|
1,528
|
Total
equity attributable to equity holders of the company
|
|
4,125
|
4,313
|
Non-controlling
interest
|
|
9
|
10
|
Total equity
|
|
4,134
|
4,323
|
The
condensed consolidated financial statements were approved by the
Board on 7 March 2021.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for
the year ended 31 December 2020
|
|
|
|
|
Equity
attributable to equity holders of the company
|
|
|
all figures in £ millions
|
Share
capital
|
Share
premium
|
Treasury
shares
|
Capital
redemption reserve
|
Fair
value reserve
|
Translation
reserve
|
Retained
earnings
|
Total
|
Non-controlling
interest
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
At
1 January 2020
|
195
|
2,614
|
(24)
|
11
|
39
|
567
|
911
|
4,313
|
10
|
4,323
|
Profit
for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
310
|
310
|
-
|
310
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
14
|
(179)
|
(40)
|
(205)
|
-
|
(205)
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
14
|
(179)
|
270
|
105
|
-
|
105
|
Equity-settled
transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
29
|
29
|
-
|
29
|
Tax on
equity-settled transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Issue
of ordinary shares under share option schemes
|
-
|
6
|
-
|
-
|
-
|
-
|
-
|
6
|
-
|
6
|
Buyback
of equity
|
(7)
|
-
|
-
|
7
|
-
|
-
|
(176)
|
(176)
|
-
|
(176)
|
Purchase of
treasury shares
|
-
|
-
|
(6)
|
-
|
-
|
-
|
-
|
(6)
|
-
|
(6)
|
Release
of treasury shares
|
-
|
-
|
23
|
-
|
-
|
-
|
(23)
|
-
|
-
|
-
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(146)
|
(146)
|
(1)
|
(147)
|
At
31 December 2020
|
188
|
2,620
|
(7)
|
18
|
53
|
388
|
865
|
4,125
|
9
|
4,134
|
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for
the year ended 31 December 2020
|
|
|
|
|
Equity
attributable to equity holders of the company
|
|
|
all figures in £ millions
|
Share
capital
|
Share
premium
|
Treasury
shares
|
Capital
redemption reserve
|
Fair
value reserve
|
Translation
reserve
|
Retained
earnings
|
Total
|
Non-controlling
interest
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
At 1
January 2019
|
195
|
2,607
|
(33)
|
11
|
19
|
678
|
961
|
4,438
|
9
|
4,447
|
Profit
for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
264
|
264
|
2
|
266
|
Other
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
20
|
(111)
|
(126)
|
(217)
|
-
|
(217)
|
Total
comprehensive income / (expense)
|
-
|
-
|
-
|
-
|
20
|
(111)
|
138
|
47
|
2
|
49
|
Equity-settled
transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
25
|
25
|
-
|
25
|
Tax on
equity-settled transactions
|
-
|
-
|
-
|
-
|
-
|
-
|
(5)
|
(5)
|
-
|
(5)
|
Issue
of ordinary shares under share option schemes
|
-
|
7
|
-
|
-
|
-
|
-
|
-
|
7
|
-
|
7
|
Buyback
of equity
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Purchase of
treasury shares
|
-
|
-
|
(52)
|
-
|
-
|
-
|
-
|
(52)
|
-
|
(52)
|
Release
of treasury shares
|
-
|
-
|
61
|
-
|
-
|
-
|
(61)
|
-
|
-
|
-
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(147)
|
(147)
|
(1)
|
(148)
|
At 31
December 2019
|
195
|
2,614
|
(24)
|
11
|
39
|
567
|
911
|
4,313
|
10
|
4,323
|
CONDENSED
CONSOLIDATED CASH FLOW STATEMENT
for
the year ended 31 December 2020
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
Net
cash generated from operations
|
17
|
450
|
480
|
Interest
paid
|
|
(63)
|
(81)
|
Tax
received / (paid)
|
|
2
|
(30)
|
Net
cash generated from operating activities
|
|
389
|
369
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
|
(6)
|
(45)
|
Additional capital
invested in associates
|
|
-
|
(40)
|
Purchase of
investments
|
|
(6)
|
(12)
|
Purchase of
property, plant and equipment
|
|
(53)
|
(55)
|
Purchase of
intangible assets
|
|
(81)
|
(138)
|
Disposal of
subsidiaries, net of cash disposed
|
15
|
100
|
(101)
|
Proceeds from sale
of joint ventures and associates
|
15
|
531
|
-
|
Proceeds from sale
of investments
|
|
-
|
5
|
Proceeds from sale
of property, plant and equipment
|
|
-
|
1
|
Lease
receivables repaid including disposals
|
|
41
|
26
|
Loans
repaid by / (advanced to) related parties
|
|
48
|
(49)
|
Interest
received
|
|
13
|
17
|
Investment
income
|
|
-
|
2
|
Dividends from
joint ventures and associates
|
|
4
|
64
|
Net
cash generated from / (used in) investing activities
|
|
591
|
(325)
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
Proceeds from issue
of ordinary shares
|
|
6
|
7
|
Buyback
of equity
|
|
(176)
|
-
|
Purchase of
treasury shares
|
|
(6)
|
(52)
|
Proceeds from
borrowings
|
|
346
|
230
|
Repayment of
borrowings
|
|
(230)
|
(48)
|
Repayment of lease
liabilities
|
|
(92)
|
(91)
|
Dividends paid to
company's shareholders
|
|
(146)
|
(147)
|
Dividends paid to
non-controlling interest
|
|
(1)
|
(1)
|
Net
cash used in financing activities
|
|
(299)
|
(102)
|
|
|
|
|
Effects
of exchange rate changes on cash and cash equivalents
|
|
(2)
|
(33)
|
Net
increase / (decrease) in cash and cash equivalents
|
|
679
|
(91)
|
|
|
|
|
Cash
and cash equivalents at beginning of year
|
|
434
|
525
|
Cash
and cash equivalents at end of year
|
|
1,113
|
434
|
For
the purposes of the cash flow statement, cash and cash equivalents
are presented net of overdrafts repayable on demand. These
overdrafts are excluded from cash and cash equivalents disclosed on
the balance sheet.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
1. Basis of preparation
The condensed consolidated financial statements have been prepared
in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006. In addition, the condensed
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS)
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union ('EU-adopted IFRS'). The condensed consolidated
financial statements have also been prepared in accordance with the
International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB). There is no
difference between IFRS in conformity with the Companies Act 2006,
the EU-adopted IFRS and IASB issued IFRS insofar as their impact on
the Group.
The condensed consolidated financial statements have also been
prepared in accordance with the accounting policies set out in the
2019 Annual Report and have been prepared under the historical cost
convention as modified by the revaluation of certain financial
assets and liabilities (including derivative financial instruments)
at fair value.
The 2019 Annual Report refers to new standards that the Group will
adopt in future years but that are not yet effective in 2020. The
Group does not expect these to have a material impact.
In
assessing the Group's liquidity, the impact of the COVID-19
pandemic has been modelled under several scenarios to ensure that
the likelihood of a prolonged period of disruption has been
appropriately considered in assessing the availability of funding
to the Group and the ability of the Group to comply with its
banking covenants. The modelling includes a severe reduction in
revenue, profit and operating cash flow that extends through the
full three-year period to ensure that the Group has adequate
resources to manage for a prolonged period of
disruption.
In assessing the Group's ability to continue as a going concern for
the period to 30 June 2022, the board analysed a variety of
downside scenarios including a severe but plausible scenario where
the Group is impacted by all principal risks from 2021 (weighted
for probability of occurrence) as well as reverse stress testing to
identify what would be required to either breach covenants or run
out of liquidity. The severe but plausible scenario modelled an
impact from COVID-19 and other risks which in aggregate were
significantly greater than seen in 2020 continuing throughout 2021
to 2022.
At 31 December 2020, the Group had available liquidity of
c£1.9bn, comprising central cash balances and its undrawn
$1.19bn Revolving Credit Facility (RCF) maturing February
2024. Even under a severe downside case where further declines
in profitability compared to 2020 are modelled in 2021 and 2022,
the Group would maintain liquidity headroom in excess of £800m
and sufficient headroom against covenant requirements during the
period under assessment even before modelling the mitigating effect
of actions that management would take in the event that these
downside risks were to crystallise.
The directors have confirmed that they have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for a minimum of the next 12 months. The
condensed consolidated financial statements have therefore been
prepared on a going concern basis.
The preparation of condensed consolidated financial statements
requires the use of certain critical accounting assumptions. It
also requires management to exercise its judgement in the process
of applying the Group's accounting policies. The areas requiring a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the condensed
consolidated financial statements, have been set out in the 2019
Annual Report. In 2020, the impact of the COVID-19 pandemic has
caused the Group to reassess some of the areas requiring a higher
degree of judgement or complexity or areas where assumptions and
estimates are significant to the financial statements. These areas
include the assessment of goodwill for impairment, where the Group
has noted, in its 2019 Annual Report, that several of its cash
generating units (CGUs) are sensitive to reasonably possible
changes in key assumptions. The assessment for goodwill impairment
has been reperformed as at 31 December 2020 and no impairment has
been recorded. However, certain of the Group's CGUs remain
sensitive to reasonably possible changes in key assumptions. The
goodwill impairment sensitivity analysis is set out in note 11. A
relatively small reduction in contribution, that could arise from
longer-term disruption caused by the COVID-19 pandemic, may result
in an impairment charge in any of these CGUs.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
1. Basis of
preparation continued
As set out in the 2019 Annual Report, other areas where assumptions
and estimates are significant include the valuation of
pre-publication assets, the valuation of tax balances, provisions
for returns and the valuation of retirement benefit obligations and
assets. The Group has assessed the impact of the uncertainty
presented by the COVID-19 pandemic on the Financial Statements,
specifically considering the impact on key judgements and
significant estimates along with other areas of increased risk
including provisions for bad debt, provisions for inventory
obsolescence, valuation of property related assets and financial
instruments. No material accounting impacts relating to the areas
assessed were recognised in the year. The Group will continue to
monitor these areas of increased judgement, estimation and risk for
material changes.
The valuation of the other receivable which arose on the disposal
of the US K12 business in 2019 is no longer considered to be an
area of key judgement and estimation due to the partial early
repayment of the vendor note and the payment in respect of the full
purchase of the equity interest.
The financial information for the year ended 31 December 2019 does
not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that
year has been delivered to the Registrar of Companies. The
independent auditors' report on the full financial statements for
the year ended 31 December 2019 was unqualified and did not contain
an emphasis of matter paragraph or any statement under section 498
of the Companies Act 2006.
This preliminary announcement does not constitute the Group's full
financial statements for the year ended 31 December 2020. The
Group's full financial statements will be approved by the Board of
Directors and reported on by the auditors in March
2021. Accordingly, the financial information for 2020 is
presented unaudited in the preliminary
announcement.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS for the year ended 31 December
2020
2. Segment information
From 1 January 2020, the Group has reorganised and is reporting for
the first time new segmental analyses to reflect the new management
structure and operating model. The primary segments for management
and reporting purposes are Global Online Learning (consisting of
Virtual Schools and Online Program Management), Global Assessment
(consisting of Pearson VUE, US Student Assessment and Clinical
Assessment), North American Courseware (consisting of courseware
and services businesses in the US and Canada) and International
(consisting of the courseware and other businesses outside North
America and including UK Qualifications and English). The Group
separately reports the costs of Enabling Functions such as
enterprise technology, finance, human resources and other corporate
functions. In addition, the Group has separately disclosed the
results from the Penguin Random House associate (PRH) to the point
of disposal in April 2020. Comparative figures for 2019 have been
restated to reflect the new segments.
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
Global
Online Learning
|
|
697
|
586
|
Global
Assessment
|
|
892
|
1,031
|
North
American Courseware
|
|
894
|
1,091
|
International
|
|
914
|
1,161
|
Total
sales
|
|
3,397
|
3,869
|
|
|
|
|
Adjusted
operating profit
|
|
|
|
Global
Online Learning
|
|
99
|
84
|
Global
Assessment
|
|
245
|
351
|
North
American Courseware
|
|
190
|
231
|
International
|
|
182
|
299
|
Enabling
Functions
|
|
(404)
|
(449)
|
PRH
|
|
1
|
65
|
Total
adjusted operating profit
|
|
313
|
581
|
There were no material inter-segment sales.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
2. Segment
information continued
The Group derived revenue from the transfer of goods and services
over time and at a point in time in the following major product
lines:
all figures in £ millions
|
Global
Online Learning
|
Global
Assessment
|
North
American Courseware
|
International
|
Total
|
|
|
|
|
|
|
2020
|
Courseware¹
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
261
|
409
|
670
|
Products and
services transferred over time
|
-
|
-
|
621
|
75
|
696
|
|
-
|
-
|
882
|
484
|
1,366
|
Assessments
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
96
|
-
|
52
|
148
|
Products and
services transferred over time
|
-
|
796
|
-
|
275
|
1,071
|
|
-
|
892
|
-
|
327
|
1,219
|
Services
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
-
|
44
|
44
|
Products and
services transferred over time
|
697
|
-
|
12
|
59
|
768
|
|
697
|
-
|
12
|
103
|
812
|
|
|
|
|
|
|
Total
sales
|
697
|
892
|
894
|
914
|
3,397
|
2019
|
Courseware¹
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
448
|
506
|
954
|
Products and
services transferred over time
|
-
|
-
|
627
|
69
|
696
|
|
-
|
-
|
1,075
|
575
|
1,650
|
Assessments
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
113
|
-
|
61
|
174
|
Products and
services transferred over time
|
-
|
918
|
-
|
372
|
1,290
|
|
-
|
1,031
|
-
|
433
|
1,464
|
Services²
|
|
|
|
|
|
Products
transferred at a point in time
|
-
|
-
|
-
|
86
|
86
|
Products and
services transferred over time
|
586
|
-
|
16
|
67
|
669
|
|
586
|
-
|
16
|
153
|
755
|
|
|
|
|
|
|
Total
sales
|
586
|
1,031
|
1,091
|
1,161
|
3,869
|
¹ Previous
classifications within Courseware of 'Point in time (sale or
return)' and 'Point in time (other)' have been combined in both
2020 and 2019 as these two categories contained similar types of
customers, risks and obligations.
² 2019 International
revenue split between 'Services over time' to 'Services at a point
in time' restated by £60m primarily due to a change in
classification of certain revenues within the Brazilian Sistemas
Franchise business.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
2. Segment information
continued
Adjusted
operating profit is one of the Group's key business performance
measures. The measure includes the operating profit from the total
business including the results of discontinued operations when
relevant and 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
May 2017, a major restructuring programme was announced, to run
between 2017 and 2019, to drive significant cost savings. This
programme began in the second half of 2017 and the restructuring
costs in 2019 relate predominantly to staff redundancies. The
restructuring programme was largely completed at the end of
2019.
Intangible amortisation charges in 2020 were £80m compared to
a charge of £163m in 2019. Although there has been a reduction
in acquisition activity in recent years and the disposal of PRH has
eliminated the Group's share of associate intangible amortisation,
this has been partly offset by adjustments to amortisation profiles
and impairments recorded mainly relating to content and contract
intangibles in the Global Assessment and International businesses.
In 2019, there was an additional £65m impairment charge
relating to acquired intangibles in the Brazil business following a
reassessment of the relative risk in that market.
Other
net gains in 2020 largely relate to the sale of the remaining
interest in PRH (£180m gain) and impairments of assets and
other costs relating to the disposal of Pearson Institute of Higher
Education (£8m loss). In 2019, other net gains largely relate
to the sale of the US K12 business. Also see note 15.
The
following table reconciles adjusted operating profit to operating
profit for each of our primary segments.
all figures in £ millions
|
Global
Online Learning
|
Global
Assessment
|
North
American Courseware
|
International
|
Enabling
Functions
|
PRH
|
Total
|
2020
|
Adjusted operating
profit / (loss)
|
99
|
245
|
190
|
182
|
(404)
|
1
|
313
|
Cost of
major restructuring
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Intangible
charges
|
(29)
|
(36)
|
-
|
(15)
|
-
|
-
|
(80)
|
Other
net gains and losses
|
-
|
-
|
3
|
(5)
|
-
|
180
|
178
|
Operating
profit / (loss)
|
70
|
209
|
193
|
162
|
(404)
|
181
|
411
|
|
|
|
|
|
|
|
|
2019
|
Adjusted operating
profit / (loss)
|
84
|
351
|
231
|
299
|
(449)
|
65
|
581
|
Cost of
major restructuring
|
-
|
(7)
|
(51)
|
(24)
|
(75)
|
(2)
|
(159)
|
Intangible
charges
|
(35)
|
(27)
|
-
|
(89)
|
-
|
(12)
|
(163)
|
Other
net gains and losses
|
-
|
-
|
13
|
3
|
-
|
-
|
16
|
Operating
profit / (loss)
|
49
|
317
|
193
|
189
|
(524)
|
51
|
275
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
3. Net finance costs
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Net
interest payable
|
|
(61)
|
(41)
|
Net
finance income in respect of retirement benefits
|
|
6
|
13
|
Fair
value re-measurement of disposal proceeds
|
|
26
|
-
|
Net
foreign exchange losses
|
|
(6)
|
(5)
|
Derivatives not in
a hedge relationship
|
|
(22)
|
(10)
|
Net
finance costs
|
|
(57)
|
(43)
|
|
|
|
|
Analysed
as:
|
|
|
|
Finance
costs
|
|
(107)
|
(84)
|
Finance
income
|
|
50
|
41
|
Net
finance costs
|
|
(57)
|
(43)
|
|
|
|
|
Analysed
as:
|
|
|
|
Net
interest payable reflected in adjusted earnings
|
|
(61)
|
(41)
|
Other
net finance income / (costs)
|
|
4
|
(2)
|
Net
finance costs
|
|
(57)
|
(43)
|
Net interest payable is the finance cost measure used in
calculating adjusted earnings. Net finance costs classified as
other net finance costs are excluded from the calculation of the
Group's adjusted earnings.
Net finance income in respect of retirement benefits is excluded as
it is considered that the presentation does not reflect the
economic substance of the underlying assets and liabilities. The
Group excludes finance costs relating to acquisition and disposal
transactions as these relate to future earn-outs or acquisition
expenses and are not part of the underlying financing. In 2020, the
fair value re-measurement of disposal proceeds relates to the US
K12 disposal in 2019.
Foreign exchange and other gains and losses are also excluded 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. In 2020 and 2019, the foreign
exchange gains and losses largely relate to foreign exchange
differences on unhedged intercompany loans and cash and cash
equivalents. Losses on derivatives not in a hedge relationship
represent the unrealised mark to market of long-term interest rate
hedges used to fix the interest rate of borrowings.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
4. Profit before tax
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Profit
before tax
|
|
354
|
232
|
Cost of
major restructuring
|
2
|
-
|
159
|
Other
net gains and losses
|
2
|
(178)
|
(16)
|
Intangible
charges
|
2
|
80
|
163
|
Other
net finance (income) / costs
|
3
|
(4)
|
2
|
Adjusted
profit before tax
|
|
252
|
540
|
5. Income tax
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Income
tax (charge) / benefit
|
|
(44)
|
34
|
Tax
benefit on cost of major restructuring
|
|
-
|
(35)
|
Tax
charge / (benefit) on other net gains and losses
|
|
3
|
(68)
|
Tax
benefit on intangible charges
|
|
(22)
|
(48)
|
Tax
charge on other net finance costs
|
|
4
|
-
|
Tax
amortisation benefit on goodwill and intangibles
|
|
24
|
28
|
Adjusted
income tax charge
|
|
(35)
|
(89)
|
|
|
|
|
Tax
rate reflected in statutory earnings
|
|
12.5%
|
(14.7)%
|
Tax
rate reflected in adjusted earnings
|
|
13.7%
|
16.5
%
|
The
adjusted income tax charge excludes the tax benefit or charge on
items excluded from the profit before tax (see note
4).
The
tax benefit from tax deductible goodwill and intangibles is added
to the adjusted income tax charge as this benefit more accurately
aligns the adjusted tax charge with the expected rate of cash tax
payments.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
6. Earnings per share
Basic
earnings per share is calculated by dividing the profit or loss
attributable to equity shareholders of the company (earnings) by
the weighted average number of ordinary shares in issue during the
year, excluding ordinary shares purchased by the company and held
as treasury shares. Diluted earnings per share is calculated by
adjusting the weighted average number of ordinary shares to take
account of all dilutive potential ordinary shares and adjusting the
profit attributable, if applicable, to account for any tax
consequences that might arise from conversion of those shares. A
dilution is not calculated for a loss.
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Earnings for the
year
|
|
310
|
266
|
Non-controlling
interest
|
|
-
|
(2)
|
Earnings
attributable to equity holders
|
|
310
|
264
|
|
|
|
|
|
|
|
|
Weighted average
number of shares (millions)
|
|
755.4
|
777.0
|
Effect
of dilutive share options (millions)
|
|
0.0
|
0.5
|
Weighted average
number of shares (millions) for diluted earnings
|
|
755.4
|
777.5
|
|
|
|
|
|
|
|
|
Earnings per share (in pence per
share)
|
|
|
|
Basic
|
|
41.0p
|
34.0p
|
Diluted
|
|
41.0p
|
34.0p
|
7. Adjusted earnings per share
In order to show results from operating activities on a consistent
basis, an adjusted earnings per share is presented which excludes
certain items as set out below.
Adjusted earnings is a non-GAAP financial measure and is included
as it is a key financial measure used by management to evaluate
performance and allocate resources to business segments. The
measure also enables our investors to more easily, and
consistently, track the underlying operational performance of the
Group and its business segments over time by separating out those
items of income and expenditure relating to acquisition and
disposal transactions, major restructuring programmes and certain
other items that are also not representative of underlying
performance (see notes 2, 3, 4 and 5 for further information and
reconciliation to equivalent statutory measures).
The adjusted earnings per share includes both continuing and
discontinued businesses on an undiluted basis when relevant. The
Group's definition of adjusted earnings per share may not be
comparable to other similarly titled measures reported by other
companies. A reconciliation of the adjusted measures to their
corresponding statutory measures is shown in the tables below and
in notes 2, 3, 4 and 5.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
7.
Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
Statutory
income statement
|
Cost
of
major
restructuring
|
Other
net
gains and losses
|
Intangible
charges
|
Other
net finance costs
|
Tax
amortisation benefit
|
Adjusted
income
statement
|
|
|
|
|
|
|
|
|
|
2020
|
Operating
profit
|
2
|
411
|
-
|
(178)
|
80
|
-
|
-
|
313
|
Net
finance costs
|
3
|
(57)
|
-
|
-
|
-
|
(4)
|
-
|
(61)
|
Profit
before tax
|
4
|
354
|
-
|
(178)
|
80
|
(4)
|
-
|
252
|
Income
tax
|
5
|
(44)
|
-
|
3
|
(22)
|
4
|
24
|
(35)
|
Profit
for the year
|
|
310
|
-
|
(175)
|
58
|
-
|
24
|
217
|
Non-controlling
interest
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Earnings
|
|
310
|
-
|
(175)
|
58
|
-
|
24
|
217
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares (millions)
|
|
|
755.4
|
Weighted
average number of shares (millions) for diluted
earnings
|
|
|
755.4
|
|
|
|
|
Adjusted
earnings per share (basic)
|
|
|
28.7p
|
Adjusted
earnings per share (diluted)
|
|
|
28.7p
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
7.
Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
all figures in £ millions
|
note
|
Statutory
income statement
|
Cost
of
major
restructuring
|
Other
net
gains and losses
|
Intangible
charges
|
Other
net finance costs
|
Tax
amortisation benefit
|
Adjusted
income
statement
|
|
|
|
|
|
|
|
|
|
2019
|
Operating
profit
|
2
|
275
|
159
|
(16)
|
163
|
-
|
-
|
581
|
Net
finance costs
|
3
|
(43)
|
-
|
-
|
-
|
2
|
-
|
(41)
|
Profit
before tax
|
4
|
232
|
159
|
(16)
|
163
|
2
|
-
|
540
|
Income
tax
|
5
|
34
|
(35)
|
(68)
|
(48)
|
-
|
28
|
(89)
|
Profit
for the year
|
|
266
|
124
|
(84)
|
115
|
2
|
28
|
451
|
Non-controlling
interest
|
|
(2)
|
-
|
-
|
-
|
-
|
-
|
(2)
|
Earnings
|
|
264
|
124
|
(84)
|
115
|
2
|
28
|
449
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares (millions)
|
|
|
777.0
|
Weighted
average number of shares (millions) for diluted
earnings
|
|
|
777.5
|
|
|
|
|
Adjusted
earnings per share (basic)
|
|
|
57.8p
|
Adjusted
earnings per share (diluted)
|
|
|
57.7p
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
8. Dividends
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Amounts
recognised as distributions to equity shareholders in the
year
|
|
146
|
147
|
The
directors are proposing a final dividend of 13.5p per equity share,
payable on 7 May 2021 to shareholders on the register at the close
of business on 26 March 2021. This final dividend, which will
absorb an estimated £102m of shareholders' funds, has not been
included as a liability as at 31 December 2020.
9. Exchange rates
Pearson
earns a significant proportion of its sales and profits in overseas
currencies, the most important being the US dollar. The
relevant rates are as follows:
|
|
|
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Average
rate for profits
|
|
1.28
|
1.28
|
Year
end rate
|
|
1.37
|
1.32
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
10. Assets and liabilities classified as
held for sale
The
held for sale assets and liabilities in 2020 are the Group's
interests in Pearson Institute of Higher Education (PIHE) in South
Africa following announcement of the sale in November 2020. The
sale of PIHE was completed on 5 February 2021 (see note 20). A
charge of £8m has been recognised in other net gains and
losses in relation to the disposal of PIHE. The charge reduces the
carrying value of the assets and liabilities held for sale to their
fair value based on expected disposal proceeds net of costs to
sell. Held for sale assets in 2019 relate to the 25% holding in
PRH prior to its disposal in April 2020. The held for
sale balances are analysed as follows:
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
48
|
-
|
Investments
in joint ventures and associates
|
|
-
|
397
|
Non-current
assets
|
|
48
|
397
|
|
|
|
|
Trade
and other receivables
|
|
6
|
-
|
Cash
and cash equivalents
|
|
19
|
-
|
Current
assets
|
|
25
|
-
|
|
|
|
|
Total
assets
|
|
73
|
397
|
|
|
|
|
Financial
liabilities - borrowings
|
|
(66)
|
-
|
Non-current
liabilities
|
|
(66)
|
-
|
|
|
|
|
Trade
and other liabilities
|
|
(5)
|
-
|
Financial
liabilities - borrowings
|
|
(3)
|
|
Current
liabilities
|
|
(8)
|
-
|
|
|
|
|
Total
liabilities
|
|
(74)
|
-
|
|
|
|
|
Net
(liabilities) / assets
|
|
(1)
|
397
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
11. Non-current intangible
assets
|
|
|
|
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Goodwill
|
|
2,094
|
2,139
|
Other
intangibles
|
|
648
|
761
|
Non-current
intangible assets
|
|
2,742
|
2,900
|
Following
the annual impairment review for 2020, no impairment charges have
been recorded against goodwill and impairments of £12m were
recorded against intangibles. Following the annual impairment
review for 2019, a £65m impairment charge relating to acquired
intangibles in the Brazil business was made following a
reassessment of the relative risk in that market.
In
2020, due to the new structure of the business and the consequent
change in management responsibilities, the Other Growth aggregation
of CGUs has been combined with the Core aggregation to form a
larger aggregation as Other International. The Other Growth
aggregation had no goodwill or intangibles prior to the
combination. All other CGUs remain the same as 2019.
Key
assumptions in the annual impairment review are discount rate,
perpetuity growth rates, forecast sales growth rates and forecast
operating profits. The Group's forecasts include assumptions
relating to the COVID-19 pandemic. It is assumed that restrictions
ease in Q2 2021 with a phased return to normality in H2 2021 as the
vaccine roll-out progresses.
Sensitivities
Impairment
testing for the year ended 31 December 2020 has identified the
following CGUs, or groups of CGUs, as being sensitive to reasonably
possible changes in key assumptions. The table below shows the
headroom at 31 December 2020 and the changes in the key assumptions
required in order for the recoverable amount to equal the carrying
value.
|
Headroom at 31
December 2020
|
Discount
rate
|
Discount rate for
zero headroom
|
Perpetuity
growth
rate
|
Perpetuity
growth
rate for
zero
headroom
|
Contribution*
reduction p.a. for
zero headroom
|
all figures in £ millions
|
OPM
|
£176m
|
9.5%
|
11.4%
|
2.0%
|
0.3%
|
£13m
|
North
American Courseware
|
£424m
|
9.5%
|
10.7%
|
2.0%
|
1.0%
|
£32m
|
Brazil
|
£42m
|
13.6%
|
16.2%
|
3.5%
|
1.5%
|
£5m
|
Other
International
|
£368m
|
9.3%
|
10.5%
|
2.2%
|
1.3%
|
£27m
|
|
|
|
|
|
|
|
*
CGU contribution is operating profit excluding corporate
overheads
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
12. Trade and other
receivables
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
Trade
receivables
|
|
795
|
903
|
Royalty
advances
|
|
2
|
4
|
Prepayments
|
|
189
|
138
|
Investment in
finance lease receivable
|
|
18
|
25
|
Accrued
income
|
|
12
|
11
|
Other
receivables
|
|
102
|
194
|
|
|
1,118
|
1,275
|
Non-current
|
|
|
|
Trade
receivables
|
|
8
|
15
|
Royalty
advances
|
|
3
|
-
|
Prepayments
|
|
13
|
7
|
Investment in
finance lease receivable
|
|
112
|
171
|
Accrued
income
|
|
1
|
5
|
Other
receivables
|
|
86
|
115
|
|
|
223
|
313
|
The
ageing of the Group's trade receivables is as follows:
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Within
due date
|
|
668
|
654
|
Up to
three months past due date
|
|
70
|
155
|
Three
to six months past due date
|
|
11
|
35
|
Six to
nine months past due date
|
|
23
|
9
|
Nine to
12 months past due date
|
|
7
|
14
|
More
than 12 months past due date
|
|
24
|
51
|
Trade
receivables
|
|
803
|
918
|
The year on year reduction in trade and other receivables is
primarily driven by reduced sales, a proportionate increase in
provisions for bad debts, the receipt of deferred proceeds in
relation to the US K12 disposal and the disposal of a lease held as
an investment in finance lease receivable. This is partially offset
by an increase in prepayments due to timing differences on certain
significant payments.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
13. Trade and other
liabilities
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
(340)
|
(358)
|
Sales
return liability
|
|
(86)
|
(122)
|
Accruals
|
|
(290)
|
(295)
|
Deferred
income
|
|
(356)
|
(360)
|
Other
liabilities
|
|
(204)
|
(229)
|
Trade
and other liabilities
|
|
(1,276)
|
(1,364)
|
|
|
|
|
Analysed
as:
|
|
|
|
Trade
and other liabilities - current
|
|
(1,196)
|
(1,278)
|
Other
liabilities - non-current
|
|
(80)
|
(86)
|
Total
trade and other liabilities
|
|
(1,276)
|
(1,364)
|
The
deferred income balance comprises contract liabilities in respect
of advance payments in assessment, testing and training businesses;
subscription income in school and college businesses; and
obligations to deliver digital content in future
years.
The
decrease in the sales return liability is largely due to the
reduction in sales of physical products. Other reductions in trade
and other liabilities are primarily due to favourable foreign
exchange movements.
14. Inventories
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
5
|
5
|
Working
in progress
|
|
2
|
2
|
Finished
goods
|
|
116
|
155
|
Returns
asset
|
|
6
|
7
|
Inventories
|
|
129
|
169
|
Included within the inventory balance is the estimation of the
right to receive goods from contracts with customers via returns.
The value of the returns asset is measured at the carrying amount
of the assets at the time of sale aligned to the Group's normal
inventory valuation methodology less any expected costs to recover
the asset and any expected reduction in value. Impairment charges
against the inventory returns asset are £nil in 2020 (2019:
£nil). The returns asset all relates to finished
goods.
The year on year reduction in inventories is due to increased
provisions for obsolescence and a reduction in the production of
inventory due to the Group's digital first strategy.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
15. Disposals
In
April 2020, the Group completed the sale of the remaining 25%
interest in Penguin Random House resulting in a pre-tax profit of
£180m. There were no other disposals in 2020 and additional
gains of £4m relate to adjustments to prior year disposal
costs. In 2019, the only material disposal was the sale of the US
K12 business. Deferred proceeds relating to the US K12 sale were
received in 2020.
|
|
|
|
|
all figures in £ millions
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
-
|
(101)
|
Investments
in joint ventures and associates
|
|
|
(418)
|
-
|
Intangible
assets - pre-publication
|
|
|
-
|
(238)
|
Inventories
|
|
|
-
|
(64)
|
Trade
and other receivables
|
|
|
-
|
(70)
|
Cash
and cash equivalents (excluding overdrafts)
|
|
|
-
|
(104)
|
Net
deferred income tax liabilities
|
|
|
-
|
(100)
|
Trade and other liabilities
|
|
|
-
|
520
|
Cumulative translation adjustment
|
|
|
70
|
(4)
|
Net assets disposed
|
|
|
(348)
|
(161)
|
|
|
|
|
|
Cash
proceeds
|
|
|
531
|
20
|
Deferred
proceeds
|
|
|
-
|
180
|
Costs
of disposal
|
|
|
1
|
(23)
|
Gain on disposal
|
|
|
184
|
16
|
|
|
|
|
|
Cash flow from disposals
|
|
|
|
|
Proceeds
- current year disposals
|
|
|
531
|
20
|
Proceeds
- prior year disposals
|
|
|
105
|
-
|
Cash
and cash equivalents disposed
|
|
|
-
|
(104)
|
Costs
and other disposal liabilities paid
|
|
|
(5)
|
(17)
|
Net cash inflow / (outflow) from disposals
|
|
|
631
|
(101)
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
16. Net debt
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
Derivative
financial instruments
|
|
45
|
29
|
Trade
and other receivables - investment in finance lease
|
|
112
|
171
|
Current
assets
|
|
|
|
Derivative
financial instruments
|
|
18
|
25
|
Trade
and other receivables - investment in finance lease
|
|
18
|
25
|
Cash
and cash equivalents (excluding overdrafts)
|
|
1,116
|
437
|
Non-current
liabilities
|
|
|
|
Borrowings
|
|
(1,463)
|
(1,572)
|
Derivative
financial instruments
|
|
(40)
|
(24)
|
Current
liabilities
|
|
|
|
Borrowings
|
|
(257)
|
(92)
|
Derivative
financial instruments
|
|
(12)
|
(15)
|
Net
debt
|
|
(463)
|
(1,016)
|
Net
debt presented above includes borrowings of £69m (2019: nil)
and cash and cash equivalents of £19m (2019: nil) which are
included in assets and liabilities held for sale.
Included
in borrowings at 31 December 2020 are lease liabilities of
£752m (non-current £676m, current £76m) This
compares to lease liabilities of £838m (non-current
£749m, current £89m) at 31 December 2019. The net lease
liability at 31 December 2020 after including the investment in
finance leases noted above was £622m (2019: £642m). Net
cash excluding net lease liabilities was £159m (2019: net debt
£374m).
On
4 June 2020, the Group completed the issuance of £350m
guaranteed notes maturing 4 June 2030. The notes bear a coupon of
3.75% and have been issued in accordance with the ICMA Social Bond
Principles 2018. The proceeds will be primarily used to finance and
re-finance delivery of education in Connections Academy, BTEC and
GED businesses to help achieve the United Nations' 4th Sustainable
Development Goal (SDG) for a Quality Education. The social bond
framework is a natural progression of Pearson's long-standing
commitment to integrating social and environmental sustainability
into the business.
In
March 2019, the Group executed market tenders to repurchase
€55m of its €500m 1.875% notes due 2021. In addition,
the Group also announced the refinancing of its bank facility,
reducing its size to $1.19bn and extending its maturity date to
February 2024.
In
2020, the movement on borrowings reflects the new bond issued and
the repayment of amounts outstanding under the Group's Revolving
Credit Facility at 31 December 2019. In addition, bonds maturing in
the first half of 2021 have been reclassified from non-current to
current borrowings. Movements on derivative liabilities are
primarily due to adverse movements in the mark to market of
long-term interest rate hedges used to fix the interest rate of
borrowings.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
17. Cash flows
|
|
|
|
all figures in £ millions
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Reconciliation
of profit for the year to net cash generated from
operations
|
|
|
|
|
|
|
Profit
for the year
|
|
310
|
266
|
Income
tax
|
|
44
|
(34)
|
Depreciation,
amortisation and impairment charges
|
|
317
|
389
|
Net
profit on disposal of businesses
|
|
(184)
|
(16)
|
Other
net gains and losses
|
|
6
|
-
|
Net
loss on disposal of fixed assets
|
|
2
|
7
|
Net
profit on disposal of right of use assets including transfers to
investment in finance lease receivable
|
|
(6)
|
(4)
|
Net
finance costs
|
|
57
|
43
|
Share
of results of joint ventures and associates
|
|
(5)
|
(54)
|
Net
foreign exchange adjustment
|
|
(34)
|
(21)
|
Investment
income
|
|
-
|
(2)
|
Share-based payment
costs
|
|
29
|
25
|
Pre-publication
|
|
(56)
|
(55)
|
Inventories
|
|
35
|
(20)
|
Trade
and other receivables
|
|
(1)
|
59
|
Trade
and other liabilities
|
|
(26)
|
(157)
|
Retirement benefit
obligations
|
|
(1)
|
5
|
Provisions for
other liabilities and charges
|
|
(37)
|
49
|
Net
cash generated from operations
|
|
450
|
480
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
17. Cash flows continued
|
|
|
|
all figures in £ millions
|
note
|
2020
|
2019
|
|
|
|
|
|
|
|
|
Reconciliation
of net cash generated from operations to closing net
debt
|
|
|
|
|
|
|
Net
cash generated from operations
|
|
450
|
480
|
Dividends from
joint ventures and associates
|
|
4
|
64
|
Purchase of
PPE
|
|
(53)
|
(55)
|
Addition of new
right-of-use lease assets
|
|
(61)
|
(64)
|
Proceeds from sale
of PPE
|
|
-
|
1
|
Net
disposal of right-of-use lease assets including transfers to/from
investment in finance lease receivable
|
|
18
|
17
|
Purchase of
intangible assets
|
|
(81)
|
(138)
|
Investment
income
|
|
-
|
2
|
Add
back: net costs paid for major restructuring
|
|
38
|
111
|
Operating
cash flow
|
|
315
|
418
|
Operating tax
paid
|
|
(10)
|
(9)
|
Net
operating finance costs paid
|
|
(50)
|
(64)
|
Operating
free cash flow
|
|
255
|
345
|
Non-operating tax
received / (paid)
|
|
12
|
(21)
|
Net
costs paid for major restructuring
|
|
(38)
|
(111)
|
Free
cash flow
|
|
229
|
213
|
Dividends paid
(including to non-controlling interest)
|
|
(147)
|
(148)
|
Net
movement of funds from operations
|
|
82
|
65
|
Acquisitions and
disposals
|
|
619
|
(193)
|
Loans
repaid / (advanced)
|
|
48
|
(49)
|
Proceeds from issue
of ordinary shares
|
|
6
|
7
|
Buyback
of equity
|
|
(176)
|
-
|
Purchase of
treasury shares
|
|
(6)
|
(52)
|
Other
movements on financial instruments
|
|
(29)
|
(9)
|
Net
movement of funds
|
|
544
|
(231)
|
Exchange movements
on net debt
|
|
9
|
24
|
Movement
in net debt
|
|
553
|
(207)
|
Opening
net debt
|
|
(1,016)
|
(143)
|
Adjustment on
initial application of IFRS 16
|
|
-
|
(666)
|
Closing
net debt
|
16
|
(463)
|
(1,016)
|
Operating
cash flow and free cash flow are non-GAAP measures and have been
disclosed as they are part of the Group's corporate and operating
measures. These measures are presented in order to align the cash
flows with corresponding adjusted profit measures.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for
the year ended 31 December 2020
18. Contingencies
There are contingent Group liabilities that arise in the normal
course of business in respect of indemnities, warranties and
guarantees in relation to former subsidiaries and in respect of
guarantees in relation to subsidiaries, joint ventures and
associates. In addition, there are contingent liabilities of the
Group in respect of unsettled or disputed tax liabilities, legal
claims, contract disputes, royalties, copyright fees, permissions
and other rights. None of these claims are expected to result in a
material gain or loss to the Group.
On 25 April 2019, the European Commission published the full
decision that the United Kingdom controlled foreign company group
financing partial exemption ('FCPE') partially constitutes State
Aid. The Group has lodged an appeal. The Group has benefited from
the FCPE in 2018 and prior years by approximately £116m (which
does not include additional interest that would be due if this
amount had to be repaid). Post year end Pearson received Charging
Notices requiring a payment on account of materially all of the
alleged State Aid to be made. The Group continues to be of the view
that no provision is required in respect of this
issue.
The Group is under assessment from the tax authorities in Brazil
challenging the deduction for tax purposes of goodwill amortisation
for the years 2012 to 2017. Similar assessments may be raised for
other years. Potential total exposure (including possible interest
and penalties) could be up to BRL 754m (£106m) up to 31
December 2020, with additional potential exposure of BRL 142m
(£20m) in relation to deductions expected to be taken in
future periods. Such assessments are common in Brazil. The Group
believes that the likelihood that the tax authorities will
ultimately prevail is low and that the Group's position is strong.
At present, the Group believes no provision is
required.
Pearson is one of several defendants named in 14 U.S. lawsuits and
one Canadian antitrust lawsuit related to the Group's
Inclusive Access programmes. These lawsuits, purporting to be class
actions, have been brought on behalf of students and off campus
retailers alleging, among other things, that
Pearson's inclusive access programmes violate U.S and
Canadian antitrust laws and state or provincial laws by reducing
competition from the secondary market and off campus
retailers. Motions to dismiss have been filed by all
defendants in the U.S. lawsuits and a ruling is expected later in
2021. At present, the Group believes no provision is required in
relation to these matters.
19. Related parties
In 2020, the Group disposed of its interests in PRH and therefore
PRH is no longer a related party. Prior to the completion of the
sale of PRH, the Group received dividends of £1m (2019:
£64m) from PRH. Loans to PRH of £49m which were
outstanding at 31 December 2019 were repaid at the point of
disposal.
There were no other material related party transactions and no
guarantees have been provided to related parties in the
year.
20. Events after the balance sheet
date
On
5 February 2021 the Group completed the sale of its interests in
Pearson Institute of Higher Education in South Africa.
Consideration received was nominal.
In
February 2021, the Group received charging notices requiring
payment of materially all of the alleged State Aid (see note 18 for
further details). A payment is expected to be made by 12 March
2021. The Group expects to recover the funds in due
course.
In February 2021, the Group renegotiated its revolving credit
facility, extending the maturity of $1bn of the facility by one
year to 2025.
On
8 March 2021, the Group announced a new strategy including a new
divisional structure. Going forward the new structure will impact
segmental reporting and may impact the Group's cash generating
units.
On 5 March 2021, the Group agreed the disposal of its K12 Sistemas
- COC and Dom Bosco - in Brazil, subject to securing regulatory
approval and closing.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
PEARSON
plc
|
|
|
Date: 8
March 2021
|
|
|
By: /s/
NATALIE WHITE
|
|
|
|
------------------------------------
|
|
Natalie
White
|
|
Deputy
Company Secretary
|
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