Pearson (PSON) H1 2024 earnings summary

Executive summary

• Delivered strong H1 2024 performance with underlying sales up 2% and adjusted operating profit up 4% to £250m; EPS flat at 25.6p due to higher net interest costs and reduced share count from buybacks.

• Free cash flow increased by £77m to £27m, and the balance sheet remains robust despite significant share buybacks and dividends.

• Strategic focus on organic growth, AI integration, and capital allocation to higher-growth segments, with a clear path to mid-single-digit sales CAGR and margin expansion.

• AI-driven product innovation and operational efficiency are central to future growth, with new tools for students, instructors, and content creators.

• New CTO and CMO appointments to drive technology and marketing innovation.

Financial highlights

• H1 2024 revenue £1,754m, up 2% underlying; adjusted operating profit £250m, up 4% underlying; adjusted EPS 25.6p, flat year-over-year.

• Free cash flow £27m, up £77m from last year; operating cash flow £129m, up £50m.

• Interim dividend increased 6% to 7.4p; £500m share buyback nearly complete.

• Net debt at £1,177m, up from £744m at 2023 year-end, mainly due to buybacks and dividends.

• Adjusted operating margin improved to 14% (up from 13% in H1 2023).

Outlook and guidance

• 2024 and 2025 guidance reaffirmed; on track to meet group sales, profit, tax, and interest expectations.

• Mid-single-digit underlying sales CAGR targeted for the medium term, with average margin expansion of 40bps per annum beyond 2025.

• Free cash flow conversion expected to remain at 90–100% on average.

• Virtual Schools expected to return to growth in 2025; Higher Ed to return to growth in H2 and full year.

• 2025 adjusted operating profit margin expected at c.24% and 16–17% adjusted operating margin.