Pearson (PSON) H1 2025 earnings summary

Executive summary

• Strategy remains unchanged, focused on leveraging demographic and AI trends, with strong execution and operational improvements across all business units.

• H1 2025 group sales rose 2% to £1,722m, with adjusted operating profit up 2% to £242m, meeting expectations.

• Free cash flow surged by £129m to £156m, aided by a £114m State Aid tax recovery; interim dividend increased 5% and a £350m share buyback is underway.

• Strategic progress included new partnerships with Microsoft, AWS, Google Cloud, and McGraw Hill, plus the acquisition of eDynamic Learning to strengthen Early Careers offerings.

• On track to meet 2025 guidance, with stronger growth anticipated in H2, especially Q4.

Financial highlights

• H1 2025 sales £1,722m, up 2% underlying; adjusted operating profit £242m, up 2% underlying.

• Adjusted EPS down to 24.5p, with positive trading and share buyback offset by FX headwinds.

• Free cash flow £156m, up £129m year-over-year, with net debt reduced to £1.0bn from £1.2bn.

• Interim dividend increased by 5% to 7.8p.

• £350m share buyback programme underway, with £169m of shares repurchased by June 2025.

Outlook and guidance

• 2025 guidance reaffirmed: sales and adjusted operating profit expected in line with market expectations, with stronger H2 and Q4 growth.

• Medium-term outlook targets mid-single digit underlying sales CAGR, average margin improvement of 40bps per annum, and free cash flow conversion of 90–100%.

• eDynamic Learning acquisition not expected to materially impact 2025 guidance due to integration costs.

• Adjusted operating profit guidance updated to c.£611m due to FX impact.

• Free cash flow conversion expected at 90-100%, with £0.1bn State Aid repayment received.