Pearson (PSON) H2 2024 earnings summary

Executive summary

• Achieved 3% underlying sales growth and 10% adjusted operating profit growth, with EBIT margin rising to 16.9% and strong free cash flow generation, in line with market expectations.

• Strategic priorities delivered: momentum in enterprise business, scaling AI across products and services, and commercial benefits emerging.

• Announced new leadership for English Language Learning, with Sharon Hague appointed President.

• Announced and completed significant share buybacks (£500m completed, new £350m announced) and increased dividend by 6%.

• Strong cash performance with operating cash conversion at 110% and free cash flow conversion at 117%.

Financial highlights

• Adjusted EPS increased 7% to 62.1p, supported by trading performance and share buybacks.

• Free cash flow reached £490m, up £103m year-over-year; operating cash flow up £75m to £662m.

• Net debt at £853m, with net debt/EBITDA at 1.1x; £350m education bond issued.

• Dividend increased by 6% to 24.0p, with a 5% CAGR since 2020.

• Statutory sales declined 3% to £3,552m due to FX and portfolio changes; underlying sales up 2–3%.

Outlook and guidance

• 2025 guidance: all business units expected to grow, with group sales, profit, and tax in line with market expectations.

• Free cash flow conversion expected at 90–100%, with £0.1bn state aid repayment assumed.

• Medium-term: mid-single digit sales CAGR, average 40bps annual margin improvement, and strong cash conversion.

• Growth weighted to H2 due to business unit dynamics; Q1 expected to be muted.

• Tax rate expected at 24–25%; interest costs around £65m.