Pearson Interim Results for the Six Months to 30th June 2024 (Unaudited)
Solid H1 financial performance; No change to 2024 and 2025 guidance; Beyond 2025, expect to grow at mid-single digits with expanding adjusted operating margins
Financial Highlights
£m |
H1 2024 |
H1 2023 |
|
£m |
H1 2024 |
H1 2023 |
Business performance |
|
|
|
Statutory results |
|
|
Sales |
1,754 |
1,879 |
|
Sales |
1,754 |
1,879 |
Adjusted operating profit |
250 |
250 |
|
Operating profit |
219 |
219 |
Operating cash flow |
129 |
79 |
|
Profit for the period |
158 |
187 |
Free cash flow |
27 |
(50) |
|
Net cash generated from operations |
185 |
106 |
Adjusted earnings per share |
25.6p |
25.6p |
|
Basic earnings per share |
23.1p |
26.1p |
Highlights
-
Underlying Group sales growth1 of 2%, excluding OPM2 and the Strategic Review3 businesses with each segment performing broadly in line with our expectations. - Underlying adjusted operating profit growth1 of 4% to £250m.
- Strong free cash flow performance up £77m to £27m.
- £500m share buyback substantially complete and raised interim dividend by 6%, while balance sheet remains robust.
- Remain on track to deliver on FY24 expectations and reiterate guidance out to 2025.
-
Beyond 2025,
Pearson is positioned to deliver mid-single digit underlying sales CAGR and sustained margin improvement that will equate to an average increase of 40 basis points per annum by continuing to drive performance in the core business, executing synergies and expanding into adjacent markets.
“Since joining
We are implementing plans across all of our businesses that will see us deliver better products & services with greater efficiency. We’re also focusing on opportunities to progressively build our presence in materially larger and higher growth markets in which we are well positioned to succeed, with a particular focus on early careers and enterprise skilling.
“Our good strategic and financial performance in the first half of the year sets us up to achieve our guidance for the current year and for 2025, and we expect thereafter to continue to deliver attractive growth with progressive improvements in our margins alongside consistently strong cash generation.”
Underlying sales growth1 of 2%, excluding OPM2 and Strategic Review3 businesses; 1% in aggregate
-
Assessment & Qualifications sales grew 2%, with growth across Pearson VUE, Clinical, and
UK & International Qualifications partially offset by an expected, small decline in US Student Assessments. - Virtual Schools sales declined 1%, reflecting the previously announced contract losses for the current academic year. Virtual Learning sales declined 8% mostly attributable to the final portion of the OPM ASU contract in the first half of 2023.
- Higher Education sales were down 2%, in line with our phasing guidance. We are seeing encouraging signs of progress in the business with Spring adoption data indicating small market share gains.
- English Language Learning sales increased 11% due to strong growth in Institutional as well as growth in Mondly, partially offset by a sales decline in PTE given market dynamics. The Argentina FX impact discussed at Q1 has reduced as expected, and will be immaterial in a full year context.
- Workforce Skills sales grew 6%, with strong performances in Vocational Qualifications, GED and Credly.
Adjusted operating profit1 up 4% on an underlying basis to £250m
- Performance driven by trading alongside net cost phasing and savings, partially offset by inflation and restructuring charges in Higher Education, which were weighted to the first half. First half adjusted profit margin grew to 14% (H1 2023: 13%).
- Headline growth was flat reflecting underlying performance, portfolio changes and currency movements.
- Adjusted earnings per share was flat at 25.6p (H1 2023: 25.6p) with higher net interest costs offset by the reduction in issued shares, both due to the share buyback.
Strong free cash flow with robust balance sheet enabling continued investment and driving increased shareholder returns
- Operating cash flow was again strong, up £50m to £129m (H1 2023: £79m) with good underlying fundamentals, as well as some phasing and FX benefits.
- Free cash flow was also strong, up £77m to £27m (H1 2023: (£50)m) given the operating cash performance and no reorganisation costs this year.
- Our balance sheet remains robust with net debt of £1.2bn (H1 2023: £0.9bn), the year on year increase being due to the £500m share buyback and dividends, partially offset by free cash flow.
- Proposed interim dividend of 7.4p (H1 2023: 7.0p) represents an increase of 6%.
-
The previously announced buyback extension to repurchase £200m of shares continued. As at 30th
June 2024 £163m of shares had been repurchased at an average price of 994p per share, representing 81% of the total programme.
Continued operational progress
Operational progress continued across each of our businesses
-
In Assessment & Qualifications, Pearson VUE renewed and won a number of key contracts, which will support future growth. Pearson VUE wins included university entrance tests in the
UK and the teacher licence contract inGeorgia , and it renewed key contracts with theNational Council of State Boards of Nursing , theProject Management Institute , and the American Registry of Radiologic Technologists. PDRI also saw good growth, with strong volumes across both theTSA andUnited States Airforce contracts. - In Virtual Schools, we have already announced the opening of 3 new schools this year and a further 19 career programmes. This brings our total number of schools to 40, with 24 career programmes, across 30 states for the 2024/25 academic year.
-
In Higher Education, recent Spring semester market data indicates a small gain in adoption share, while we also saw 3% growth in core text units, 2% growth in US digital subscriptions and Inclusive Access growth of 25%. Pearson+ continued to perform well with 5.0m cumulative registered users and paid subscriptions for the full academic year increasing 18% to 1.1m. We are seeing good engagement with our AI study tools, and are on track to extend to a further c.80 titles for Fall back to school.
Pearson will also be launching AI tools for instructors for the Fall 2024 semester in 25 of our best-selling titles across business, math, science, and nursing in the US. -
In English Language Learning, PTE continued to gain market share, despite a market which has declined given tightening of policies around international study and migration across
Australia ,Canada and theUK . Given these market dynamics, we expect PTE sales to be flat to down for the year. Our market share gains in PTE, and the ramp up forCanada , mean we are well placed for English high stakes testing market growth, which we expect in the medium term given demographic projections. -
In Workforce Skills,
Vishaal Gupta joinedPearson onApril 15 th to lead the division, and play a critical role in executing our enterprise skills strategy. -
Dave Treat joinedPearson as Chief Technology Officer on 2ndJuly 2024 . Dave will report to CEO,Omar Abbosh , and work in close partnership with Pearson’s Chief Product and Chief Information Officers. He will lead technology innovation and architecture across the company. -
Ginny Cartwright Ziegler joinedPearson , today,29 July 2024 as Chief Marketing Officer. Ginny will report to CEOOmar Abbosh and will lead the next generation of our work in marketing, brand and communications. Ginny is succeedingLynne Frank , who has stepped down from her dual role as Chief Marketing Officer and Co-President, Direct to Consumer.
Positioning
Through an extensive examination of the business and the markets in which we operate, we have identified a targeted market expansion opportunity for
-
Pearson is in a strong position today. We are the world’s lifelong learning company, where we are trusted to help individuals realise the life they imagine through learning. Our five businesses have clear lines of accountability and improving financial performance, with particular strength in assessments and verification. -
We are leaders today in a c.
$15bn subsegment of theU.S. learning market, and are well positioned to play in a larger, and faster growing c.$80bn addressable market. -
The opportunity for
Pearson will be supported by two key secular trends foreseen over the coming years: shifts in demographic trends and the rapid growth in the power of AI. The demographic shift will see the baby boomer generation leave the workforce, resulting in heightened pressure on talent sourcing, and the rapid development of increasingly powerful AI models will significantly change the world of work and skills requirements. Employers will need to find new pools of talent and continuously develop and verify the skills of their workforces to keep pace with and benefit from technology and AI advancements. -
To realise the growth opportunity for
Pearson we will:- Drive further performance from our existing five core businesses to deliver an improved customer proposition, growth and efficiencies. We have identified a number of technology enabled initiatives, which we expect to unlock tens of millions of savings over the medium term. Initially these savings will be offset by restructuring costs, but as these pay back they will enable us to further invest in growth opportunities.
- Unlock execution-based synergies across the business units from product & service bundling, a modern approach to software and product development, and a focus on strategic partnerships.
- We will allocate our investment where we see the best opportunities for growth and returns: firstly assessments and verifications; then enterprise skills and early careers.
- We will maintain net debt to EBITDA of around 2x, on average over time, though in the short term we intend to remain below this level to maintain some investment optionality. Our dividend policy is progressive and sustainable. At present, we do not plan to extend our share buyback programme, but are committed to regularly reviewing this.
Outlook
2024 Outlook reaffirmed4
Group underlying sales growth, adjusted operating profit and tax outlook for 2024 remain in line with market expectations. As guided, interest will be c.£45m and free cash flow conversion 95-100%.
In terms of divisional guidance and phasing:
- Expect improved growth momentum in the second half of 2024 with the growth of Higher Education and normalised comparators for the assessments businesses.
- In Assessment & Qualifications, we continue to expect low to mid-single digit sales growth for the year, with sales growth weighted to H2.
- In Virtual Schools, we continue to expect sales to decline at a similar rate to 2023, given the previously cited loss of a larger partner school for the 2024/25 academic year. We expect Virtual Schools to return to growth in 2025 and beyond.
- In Higher Education, we remain confident we will return to growth in the second half and for the full year. Growth in digital sales will continue to shift revenue recognition from Q3 to Q4.
- In English Language Learning, we continue to expect high single digit sales growth and growth weighted to the second half given the outstanding performance in the first half of 2023. The growth will be driven mainly by Institutional, with PTE being flat to down.
- In Workforce Skills, we expect to achieve high single digit sales growth.
- Every 1c movement in £:$ rate equates to approximately £5m adjusted operating profit impact.
2025 Outlook
We continue to expect the Group to achieve mid-single digit underlying sales 3-year CAGR from 2022 to 2025, excluding OPM and Strategic Review businesses, and remain on track to achieve our 16-17% adjusted operating profit margin guidance.
Medium Term Outlook
Our future growth and investment focus will lead to mid-single digit underlying sales CAGR. Through continued operational improvements, we also expect to deliver sustained margin improvement that will equate to an average increase of 40 basis points per annum beyond 2025. We will maintain free cash flow conversion in the region of 90-100% on average across the period.
Contacts
Investor Relations |
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+44 (0) 7785 451 266 +44 (0) 7720 947 853 |
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+44 (0) 7841 363 216 +1 (332) 238-8785 |
Media Teneo |
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+44 (0) 7492 949 346 |
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+44 (0) 7798 846 805 |
Results event |
Pearson’s Interim Results presentation will be held today at both 09:30 and 14:00 (BST).
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Notes
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 its website (www.pearsonplc.com). Any forward-looking statements speak only as of the date they are made, and
KPIs
KPI |
Objective |
KPI Measure |
H1 2024 |
H1 2023 |
Digital Growth |
Drive digital sales growth |
OnVUE volumes |
1.2m |
1.5m* |
Higher Education US digital subscriptions |
4.5m |
4.4m+ |
||
PTE volume |
546k |
606k |
||
Consumer Engagement |
Create engaging and personalised consumer experiences |
NPS for |
+67 |
+67 |
NPS for PTE |
+57 |
+56 |
||
Pearson+ registered users |
5.0m |
4.7m |
||
Mondly paid subscriptions |
532k |
473k |
||
Workforce Skills registered users |
5.4m |
5.3m |
||
Product Effectiveness |
Improve the effectiveness of our products to deliver better outcomes |
PTE speed of score return |
1.1 days |
1.1 days |
VUE test volumes |
10.9m |
10.8m* |
||
VUE partner retention |
99.7% |
98.0% |
||
Workforce Skills number of enterprise customers |
1,487 |
1,556 |
||
Higher Education product usage – text units |
2.1m |
2.0m |
*H1 2023 figures have been restated for adjustments made in H2 2023. |
+H1 2023 US digital subscriptions restated from 4.5m to 4.4m due to removal of non-paying subscribers. |
The above table is a subset of our full list of strategic KPIs, which will be reported on alongside full year results. |
For a full list of KPI measure definitions, please refer to: https://plc.pearson.com/en-GB/purpose/our-targets-kpis |
Operational review
£m |
H1 2024 |
H1 2023 |
Headline growth |
CER Growth1 |
Underlying growth1 |
Sales |
|
|
|
|
|
Assessment & Qualifications |
811 |
796 |
2% |
4% |
2% |
Virtual Learning |
254 |
373 |
(32%) |
(31%) |
(8%) |
Higher Education |
358 |
379 |
(6%) |
(4%) |
(2%) |
English Language Learning |
188 |
184 |
2% |
11% |
11% |
Workforce Skills |
143 |
140 |
2% |
3% |
6% |
Strategic review3 |
- |
7 |
(100%) |
(100%) |
(100%) |
Total |
1,754 |
1,879 |
(7%) |
(4%) |
1% |
Total, excluding OPM2 and Strategic Review3 |
|
|
|
|
2% |
|
|
|
|
|
|
Adjusted operating profit/loss |
|
|
|
|
|
Assessment & Qualifications |
187 |
174 |
7% |
10% |
7% |
Virtual Learning |
31 |
47 |
(34%) |
(32%) |
(32%) |
Higher Education |
(1) |
(1) |
0% |
100% |
100% |
English Language Learning |
4 |
8 |
(50%) |
38% |
38% |
Workforce Skills |
29 |
21 |
38% |
33% |
27% |
Strategic review3 |
- |
1 |
(100%) |
(100%) |
(100%) |
Total |
250 |
250 |
0% |
5% |
4% |
1 |
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, 6, 7 and 14. c) Constant exchange rates are calculated by assuming the average FX in the prior period prevailed through the current period. |
2 |
In 2023, we completed the sale of the POLS business and as such have removed from underlying measures throughout. Within this specific measure we exclude our entire OPM business (POLS and ASU) to aid comparison to guidance. As expected, there are no sales in the OPM business in 2024. |
3 |
Strategic Review is sales in international courseware local publishing businesses which have been wound down. As expected, there are no sales in these businesses in 2024. |
4 |
2024 consensus on the |
Assessment & Qualifications
In Assessment & Qualifications, sales increased 2% on an underlying basis and 2% on a headline basis. Adjusted operating profit increased 7% in underlying terms due to operating leverage on sales growth, and cost phasing and savings partially offset by inflation and 7% in headline terms due to this, PDRI profit and currency movements.
Pearson VUE sales were up 4% in underlying terms driven by favorable mix and value-added services. Test volumes increased versus the same period last year to 10.9m. PDRI also saw good growth with strong volumes.
In US Student Assessment, sales decreased 3% in underlying terms due to reduced scope and phasing of some contracts which will normalise in the second half.
In Clinical Assessment, sales increased 1% in underlying terms supported by pricing, digital product growth and a new product release.
In
Virtual Learning
Virtual Schools sales were down 1% on an underlying basis, given the previously cited loss of a larger partner school in the 2023/24 academic year. In Virtual Learning, sales decreased 8% on an underlying basis mostly attributable to the final portion of the OPM ASU contract in the first half of 2023 and 32% on a headline basis due to currency movements and the disposal of the OPM business. Adjusted operating profit declined 32% in underlying terms, as the prior year comparator benefited from the ASU contract, and decreased 34% in headline terms due to this and currency movements.
Higher Education
In Higher Education, sales declined 2% on an underlying basis, in line with our phasing guidance, and decreased 6% on a headline basis due to this, currency movements and portfolio changes. Adjusted operating profit increased in underlying terms driven by cost savings partially offset by restructuring costs and trading and was flat in headline terms due to this offset by currency movements and portfolio changes.
We also saw a strong performance in K-12 with sales growth of 12%, given strong adoption cycle fundamentals in this market this year.
English Language Learning
In English Language Learning, sales were up 11% on an underlying basis due to strong growth in Institutional (including hyperinflationary pricing in
PTE volumes were down 10%, due to declines in the English High Stakes testing market due to tightening of policies around international study and migration. PTE has continued to see market share gains, particularly in
Within Institutional, performance was strong, with particularly good growth in
Our Online Self-Study business, Mondly, performed well with paid subscriptions increasing 12% versus the prior period driven by new enterprise contracts and DTC users.
Workforce Skills
In Workforce Skills, sales were up 6% on an underlying basis and 2% on a headline basis. Adjusted operating profit increased by 27% in underlying terms due to trading and cost savings and increased 38% in headline terms due to this, currency movements and portfolio changes.
Both the Vocational Qualifications and the Workforce Solutions businesses grew by 6% in underlying terms.
FINANCIAL REVIEW
Operating result
Sales for the six months to
The headline basis simply compares the reported results for the six months to
On an underlying basis, sales increased by 1% in the first six months of 2024 compared to the equivalent period in 2023 and adjusted operating profit increased by 4%. Currency movements decreased sales by £45m and adjusted operating profit by £12m, and portfolio changes decreased sales by £93m and increased adjusted operating profit by £1m. There were no new accounting standards adopted in the first half of 2024 that impacted sales or profits.
Adjusted operating profit includes the results from discontinued operations when relevant but excludes charges for acquired intangible amortisation and impairment, acquisition related costs, gains and losses arising from disposals, the cost of major reorganisation, when relevant, property charges and one off-costs related to the
|
|
|
|
|
all figures in £ millions |
|
2024 |
2023 |
2023 |
|
|
half year |
half year |
full year |
|
|
|
|
|
Operating profit |
|
219 |
219 |
498 |
Add back: Intangible charges |
|
20 |
24 |
48 |
Add back: |
|
5 |
- |
- |
Add back: Other net gains and losses |
|
6 |
7 |
16 |
Add back: Property charges |
|
- |
- |
11 |
Adjusted operating profit |
|
250 |
250 |
573 |
Intangible amortisation charges to the end of
Other net gains and losses in 2024 relate to costs related to prior year acquisitions and disposals, partially offset by a gain on the partial disposal of our investment in an associate. Other net gains and losses in 2023 relate largely to the gain on disposal of the POLS business and a gain resulting from the release of a provision related to a previous disposal, offset by losses on the disposal of
Property charges of £11m in the second half of 2023 relate to impairments of property assets arising from the impact of updates in 2023 to assumptions initially made during the 2022 and 2021 reorganisation programmes. There are no such charges in the first half of 2024.
The reported operating profit of £219m in the first half of 2024 compares to a profit of £219m in the first half of 2023, with the disposal of POLS and other businesses in 2023 reducing sales but having minimal impact on profit, and unfavourable FX movements and inflation costs being offset by operating leverage on sales and cost phasing and savings.
Due to seasonal bias in some of the Group’s businesses,
Net finance costs
Net finance income decreased on a headline basis from income of £17m in the first half of 2023 to an expense of £7m in the same period in 2024. The decrease is primarily due to losses on investments held at fair value through profit and loss (FVTPL) compared to gains in 2023, a reduction in foreign exchange gains, increased borrowings and a reduction in returns on cash deposits.
Net interest payable reflected in adjusted earnings to
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 net finance costs (but not in our adjusted measure) are interest costs relating to acquisition or disposal transactions, fair value movements on investments classified as FVTPL 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, fair value movements 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. Interest on certain tax provisions is excluded from our adjusted measure in order to mirror the treatment of the underlying tax item.
In the period to
Taxation
The reported tax on statutory earnings for the six months to
The total adjusted tax charge for the period was £54m (2023: £54m), corresponding to an effective tax rate on adjusted profit before tax of 23.6% (2023: 22.7%). For a reconciliation of the adjusted measure see note 4 to the condensed consolidated financial statements.
In the first half of 2024, there was a net tax payment of £69m (2023: £59m), principally relating to the US and the
Other comprehensive income
Included in other comprehensive income are the net exchange differences on translation of foreign operations. The loss on translation of £9m at
Also included in other comprehensive income at
Fair value losses of £4m (2023: gains of £2m) have been recognised in other comprehensive income and relate to movements in the value of investments in unlisted securities held at fair value through other comprehensive income (FVOCI).
In 2023, a gain of £122m was recycled from the currency translation reserve to the income statement in relation to the disposal of the POLS business.
Cash flow and working capital
Our operating cash flow measure is used to align cash flows with our adjusted profit measures (see note 14 to the condensed consolidated financial statements). Operating cash flow increased on a headline basis by £50m from an inflow of £79m in the first half of 2023 to an inflow of £129m in the first half of 2024. The increase is largely explained by reduced capital expenditure on product development, property, plant, equipment and software and FX as well as favourable working capital movements, some of which arise from portfolio changes.
The equivalent statutory measure, net cash generated from operations, was an inflow of £185m in 2024 compared to an inflow of £106m in 2023. Compared to operating cash flow, this measure includes reorganisation 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 the first half of 2024, reorganisation cash outflow was £5m compared to £46m in the same period in 2023.
In the first half of 2024, there was an overall increase of £23m in cash and cash equivalents from £309m at the end of 2023 to £332m at
The movement on trade and other liabilities is driven by the payment of deferred consideration relating to previous acquisitions, the net movement on the accrual for share buyback programmes as well as movements in working capital balances.
Liquidity and capital resources
The Group’s net debt increased from £744m at the end of 2023 to £1,177m at the end of
At
At
Post-retirement benefits
The charge to profit in respect of worldwide pensions and retirement benefits amounted to £30m in the period to
The overall surplus on
Businesses acquired
The Group made no acquisitions of subsidiaries in H1 2024. The cash outflow in H1 2024 relating to acquisitions of subsidiaries was £38m, arising from the payment of deferred consideration in respect of prior year acquisitions, mainly Credly and Mondly, which were acquired in 2022. In addition, there was a cash outflow relating to investments of £7m.
The cash outflow in the first half of 2023 relating to acquisitions of subsidiaries was £173m arising primarily from the acquisition of PDRI. In addition, there was a cash outflow relating to the acquisition of associates of £5m and investments of £6m.
Businesses disposed
The Group made no disposals of subsidiaries in H1 2024. In 2024, the cash outflow relating to costs paid in relation to the disposal of businesses in prior years was £6m. The cash outflow in the first half of 2023 relating to the disposal of businesses was £19m mainly relating to the disposal of
In addition, the Group sold part of its investment in its associate,
Dividends
The dividend accounted for in the six months to
The interim dividend will be paid on
Share buyback
On
Principal risks and uncertainties
In the 2023 Annual Report and Accounts, we set out our assessment of the principal risk issues that face the business under the categories: accreditation risk, artificial intelligence, content and channel risks, capability risk, competitive marketplace, customer expectations, portfolio change, and reputation and responsibility.
We also noted in our 2023 Annual Report and Accounts that the Group continues to closely monitor significant near-term and emerging risks which have been identified as climate transition, inflation and interest rates, recession, supply chain, tax and sanctions and geopolitics.
The principal risks and uncertainties are summarised below. The selection of principal risks will be reviewed in the second half of the year alongside the Group’s long-term strategic planning process. However, these risks have not changed materially from those detailed in the 2023 Annual Report.
Accreditation Risk
Termination or modification of accreditation due to policy changes or failure to maintain the accreditation of our courses and assessments by states, countries, and professional associations, reducing their eligibility for funding or attractiveness to learners.
Artificial Intelligence, Content and Channel Risk
The risk that Pearson’s intellectual property is harder to protect as a result of increased content generation through artificial intelligence and that Pearson’s content and method of delivery (channel) is, or is perceived to be, insufficiently differentiated in terms of outcomes or learner experience.
Capability Risk
Inability to meet our contractual obligations or to transform as required by our strategy due to infrastructure, system or organisational challenges.
Significant changes in our target markets could make those markets less attractive. This could be due to significant changes in demand or in supply which impact the addressable market, market share and margins (e.g. changes in enrolments, in-sourcing of learning and assessment by customers, open educational resources, a shift from in person to virtual or vice versa or innovations in areas such as generative AI).
Customer Expectations
Rising end-user expectations increase the need to offer differentiated value propositions, risking margin pressure to meet these expectations and potential loss of sales if not successful.
Portfolio Change
Failure to effectively execute desired or required portfolio changes to promote scale or capability and increase focus on key divisional and geographic markets, due to either execution failures or inability to secure transactions at appropriate valuations.
Reputation and Responsibility
The risk of serious reputational harm through failure to meet obligations to key stakeholders. These include legal and regulatory requirements, the possibility of serious unethical behaviour and serious breaches of customer trust.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the period ended
|
|
|
|
|
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all figures in £ millions |
note |
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Continuing operations |
|
|
|
|
|||
|
|
|
|
|
|||
Sales |
2 |
1,754 |
|
1,879 |
|
3,674 |
|
Cost of goods sold |
|
(875 |
) |
(960 |
) |
(1,839 |
) |
Gross profit |
|
879 |
|
919 |
|
1,835 |
|
|
|
|
|
|
|||
Operating expenses |
|
(654 |
) |
(688 |
) |
(1,322 |
) |
Other net gains and losses |
2 |
(6 |
) |
(7 |
) |
(16 |
) |
Share of results of joint ventures and associates |
|
- |
|
(5 |
) |
1 |
|
Operating profit |
2 |
219 |
|
219 |
|
498 |
|
|
|
|
|
|
|||
Finance costs |
3 |
(57 |
) |
(36 |
) |
(81 |
) |
Finance income |
3 |
50 |
|
53 |
|
76 |
|
Profit before tax |
|
212 |
|
236 |
|
493 |
|
Income tax |
4 |
(54 |
) |
(49 |
) |
(113 |
) |
Profit for the period |
|
158 |
|
187 |
|
380 |
|
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
Attributable to: |
|
|
|
|
|||
Equity holders of the company |
|
157 |
|
186 |
|
378 |
|
Non-controlling interest |
|
1 |
|
1 |
|
2 |
|
|
|
|
|
|
|||
|
|
|
|
|
|||
Earnings per share from continuing operations (in pence per share) |
|
|
|
|
|||
Basic |
5 |
23.1 |
p |
26.1 |
p |
53.1 |
p |
Diluted |
5 |
22.8 |
p |
25.9 |
p |
52.7 |
p |
|
|
|
|
|
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 period ended
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Profit for the period |
|
158 |
|
187 |
|
380 |
|
|
|
|
|
|
|||
Items that may be reclassified to the income statement |
|
|
|
|
|||
Net exchange differences on translation of foreign operations |
|
(9 |
) |
(166 |
) |
(177 |
) |
Currency translation adjustment on disposals |
|
- |
|
(122 |
) |
(122 |
) |
Attributable tax |
|
- |
|
1 |
|
- |
|
|
|
|
|
|
|||
Items that are not reclassified to the income statement |
|
|
|
|
|||
Fair value gain on other financial assets |
|
(4 |
) |
2 |
|
1 |
|
Attributable tax |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|||
Remeasurement of retirement benefit obligations |
|
1 |
|
(27 |
) |
(85 |
) |
Attributable tax |
|
- |
|
7 |
|
20 |
|
Other comprehensive expense |
|
(12 |
) |
(305 |
) |
(363 |
) |
Total comprehensive income / (expense) |
|
146 |
|
(118 |
) |
17 |
|
|
|
|
|
|
|||
|
|
|
|
|
|||
Attributable to: |
|
|
|
|
|||
Equity holders of the company |
|
145 |
|
(118 |
) |
16 |
|
Non-controlling interest |
|
1 |
|
- |
|
1 |
|
CONDENSED CONSOLIDATED BALANCE SHEET
as at
|
|
|
|
|
|||
all figures in £ millions |
note |
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Property, plant and equipment |
|
207 |
|
226 |
|
217 |
|
Investment property |
|
75 |
|
60 |
|
79 |
|
Intangible assets |
9 |
3,050 |
|
3,126 |
|
3,091 |
|
Investments in joint ventures and associates |
|
11 |
|
17 |
|
22 |
|
Deferred income tax assets |
|
34 |
|
27 |
|
35 |
|
Financial assets – derivative financial instruments |
|
4 |
|
41 |
|
32 |
|
Retirement benefit assets |
|
491 |
|
554 |
|
499 |
|
Other financial assets |
|
141 |
|
138 |
|
143 |
|
Income tax assets |
|
41 |
|
41 |
|
41 |
|
Trade and other receivables |
|
134 |
|
138 |
|
135 |
|
Non-current assets |
|
4,188 |
|
4,368 |
|
4,294 |
|
|
|
|
|
|
|||
Intangible assets – product development |
|
941 |
|
947 |
|
947 |
|
Inventories |
|
89 |
|
110 |
|
91 |
|
Trade and other receivables |
|
1,081 |
|
1,060 |
|
1,050 |
|
Financial assets – derivative financial instruments |
|
55 |
|
17 |
|
16 |
|
Current income tax assets |
|
23 |
|
10 |
|
15 |
|
Cash and cash equivalents (excluding overdrafts) |
|
332 |
|
355 |
|
312 |
|
Current assets |
|
2,521 |
|
2,499 |
|
2,431 |
|
|
|
|
|
|
|||
Assets classified as held for sale |
|
- |
|
15 |
|
2 |
|
Total assets |
|
6,709 |
|
6,882 |
|
6,727 |
|
|
|
|
|
|
|||
Financial liabilities – borrowings |
|
(1,300 |
) |
(1,308 |
) |
(1,094 |
) |
Financial liabilities – derivative financial instruments |
|
(3 |
) |
(43 |
) |
(38 |
) |
Deferred income tax liabilities |
|
(56 |
) |
(31 |
) |
(46 |
) |
Retirement benefit obligations |
|
(42 |
) |
(54 |
) |
(44 |
) |
Provisions for other liabilities and charges |
|
(14 |
) |
(14 |
) |
(15 |
) |
Other liabilities |
|
(65 |
) |
(80 |
) |
(98 |
) |
Non-current liabilities |
|
(1,480 |
) |
(1,530 |
) |
(1,335 |
) |
|
|
|
|
|
|||
Trade and other liabilities |
|
(1,036 |
) |
(1,020 |
) |
(1,275 |
) |
Financial liabilities – borrowings |
|
(313 |
) |
(75 |
) |
(67 |
) |
Financial liabilities – derivative financial instruments |
|
(44 |
) |
(5 |
) |
(5 |
) |
Current income tax liabilities |
|
(15 |
) |
(27 |
) |
(32 |
) |
Provisions for other liabilities and charges |
|
(10 |
) |
(37 |
) |
(25 |
) |
Current liabilities |
|
(1,418 |
) |
(1,164 |
) |
(1,404 |
) |
|
|
|
|
|
|||
Liabilities classified as held for sale |
|
- |
|
- |
|
- |
|
Total liabilities |
|
(2,898 |
) |
(2,694 |
) |
(2,739 |
) |
|
|
|
|
|
|||
Net assets |
|
3,811 |
|
4,188 |
|
3,988 |
|
|
|
|
|
|
|||
Share capital |
|
167 |
|
179 |
|
174 |
|
Share premium |
|
2,644 |
|
2,635 |
|
2,642 |
|
|
|
(15 |
) |
(20 |
) |
(19 |
) |
Reserves |
|
1,000 |
|
1,381 |
|
1,177 |
|
Total equity attributable to equity holders of the company |
|
3,796 |
|
4,175 |
|
3,974 |
|
Non-controlling interest |
|
15 |
|
13 |
|
14 |
|
Total equity |
|
3,811 |
|
4,188 |
|
3,988 |
|
The condensed consolidated financial statements were approved by the Board on
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended
|
|
|
|
||||||||||||||
|
Equity attributable to equity holders of the company |
|
|
||||||||||||||
all figures in £ millions |
Share capital |
Share premium |
|
Capital redemption reserve |
Fair value reserve |
Translation reserve |
Retained earnings |
Total |
Non-controlling interest |
Total equity |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
2024 half year |
|||||||||||||||||
At |
174 |
|
2,642 |
(19 |
) |
33 |
(12 |
) |
411 |
|
745 |
|
3,974 |
|
14 |
3,988 |
|
Profit for the period |
- |
|
- |
- |
|
- |
- |
|
- |
|
157 |
|
157 |
|
1 |
158 |
|
Other comprehensive income / (expense) |
- |
|
- |
- |
|
- |
(4 |
) |
(9 |
) |
1 |
|
(12 |
) |
- |
(12 |
) |
Total comprehensive income / (expense) |
- |
|
- |
- |
|
- |
(4 |
) |
(9 |
) |
158 |
|
145 |
|
1 |
146 |
|
Equity-settled transactions1 |
- |
|
- |
- |
|
- |
- |
|
- |
|
16 |
|
16 |
|
- |
16 |
|
Issue of ordinary shares |
- |
|
2 |
- |
|
- |
- |
|
- |
|
- |
|
2 |
|
- |
2 |
|
Buyback of equity |
(7 |
) |
- |
- |
|
7 |
- |
|
- |
|
(204 |
) |
(204 |
) |
- |
(204 |
) |
Purchase of treasury shares |
- |
|
- |
(30 |
) |
- |
- |
|
- |
|
- |
|
(30 |
) |
- |
(30 |
) |
Release of treasury shares |
- |
|
- |
34 |
|
- |
- |
|
- |
|
(34 |
) |
- |
|
- |
- |
|
Dividends |
- |
|
- |
- |
|
- |
- |
|
- |
|
(107 |
) |
(107 |
) |
- |
(107 |
) |
At |
167 |
|
2,644 |
(15 |
) |
40 |
(16 |
) |
402 |
|
574 |
|
3,796 |
|
15 |
3,811 |
1. |
Equity-settled transactions are presented net of withholding taxes that the Group is obligated to pay on behalf of employees. The payments to the tax authorities are accounted for as a deduction from equity for the shares withheld. |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended
|
|
|
|
||||||||||||||
|
Equity attributable to equity holders of the company |
|
|
||||||||||||||
all figures in £ millions |
Share capital |
Share premium |
|
Capital redemption reserve |
Fair value reserve |
Translation reserve |
Retained earnings |
Total |
Non-controlling interest |
Total equity |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
2023 half year |
|||||||||||||||||
At |
179 |
2,633 |
(15 |
) |
28 |
(13 |
) |
709 |
|
881 |
|
4,402 |
|
13 |
|
4,415 |
|
Profit for the period |
- |
- |
- |
|
- |
- |
|
- |
|
186 |
|
186 |
|
1 |
|
187 |
|
Other comprehensive income / (expense) |
- |
- |
- |
|
- |
2 |
|
(287 |
) |
(19 |
) |
(304 |
) |
(1 |
) |
(305 |
) |
Total comprehensive income / (expense) |
- |
- |
- |
|
- |
2 |
|
(287 |
) |
167 |
|
(118 |
) |
- |
|
(118 |
) |
Equity-settled transactions |
- |
- |
- |
|
- |
- |
|
- |
|
20 |
|
20 |
|
- |
|
20 |
|
Issue of ordinary shares |
- |
2 |
- |
|
- |
- |
|
- |
|
- |
|
2 |
|
- |
|
2 |
|
Buyback of equity |
- |
- |
- |
|
- |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Purchase of treasury shares |
- |
- |
(25 |
) |
- |
- |
|
- |
|
- |
|
(25 |
) |
- |
|
(25 |
) |
Release of treasury shares |
- |
- |
20 |
|
- |
- |
|
- |
|
(20 |
) |
- |
|
- |
|
- |
|
Dividends |
- |
- |
- |
|
- |
- |
|
- |
|
(106 |
) |
(106 |
) |
- |
|
(106 |
) |
At |
179 |
2,635 |
(20 |
) |
28 |
(11 |
) |
422 |
|
942 |
|
4,175 |
|
13 |
|
4,188 |
|
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended
|
|
|
|
|||||||||||||||
|
Equity attributable to equity holders of the company |
|
|
|||||||||||||||
all figures in £ millions |
Share capital |
Share premium |
|
Capital redemption reserve |
Fair value reserve |
Translation reserve |
Retained earnings |
Total |
Non-controlling interest |
Total equity |
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
2023 full year |
||||||||||||||||||
At |
179 |
|
2,633 |
(15 |
) |
28 |
(13 |
) |
709 |
|
881 |
|
4,402 |
|
13 |
|
4,415 |
|
Profit for the period |
- |
|
- |
- |
|
- |
- |
|
- |
|
378 |
|
378 |
|
2 |
|
380 |
|
Other comprehensive income / (expense) |
- |
|
- |
- |
|
- |
1 |
|
(298 |
) |
(65 |
) |
(362 |
) |
(1 |
) |
(363 |
) |
Total comprehensive income / (expense) |
- |
|
- |
- |
|
- |
1 |
|
(298 |
) |
313 |
|
16 |
|
1 |
|
17 |
|
Equity-settled transactions |
- |
|
- |
- |
|
- |
- |
|
- |
|
40 |
|
40 |
|
- |
|
40 |
|
Tax on equity-settled transactions |
- |
|
- |
- |
|
- |
- |
|
- |
|
1 |
|
1 |
|
- |
|
1 |
|
Issue of ordinary shares |
- |
|
9 |
- |
|
- |
- |
|
- |
|
- |
|
9 |
|
- |
|
9 |
|
Buyback of equity |
(5 |
) |
- |
- |
|
5 |
- |
|
- |
|
(304 |
) |
(304 |
) |
- |
|
(304 |
) |
Purchase of treasury shares |
- |
|
- |
(35 |
) |
- |
- |
|
- |
|
- |
|
(35 |
) |
- |
|
(35 |
) |
Release of treasury shares |
- |
|
- |
31 |
|
- |
- |
|
- |
|
(31 |
) |
- |
|
- |
|
- |
|
Dividends |
- |
|
- |
- |
|
- |
- |
|
- |
|
(155 |
) |
(155 |
) |
- |
|
(155 |
) |
At |
174 |
|
2,642 |
(19 |
) |
33 |
(12 |
) |
411 |
|
745 |
|
3,974 |
|
14 |
|
3,988 |
|
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the period ended
|
|
|
|
|
|||
all figures in £ millions |
note |
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Cash flows from operating activities |
|
|
|
|
|||
Profit before tax |
|
212 |
|
236 |
|
493 |
|
Net finance costs / (income) |
|
7 |
|
(17 |
) |
5 |
|
Depreciation and impairment – PPE, investment property and assets held for sale |
|
40 |
|
38 |
|
90 |
|
Amortisation and impairment – software |
|
61 |
|
64 |
|
123 |
|
Amortisation and impairment – acquired intangible assets |
|
20 |
|
24 |
|
46 |
|
Other net gains and losses |
|
5 |
|
7 |
|
13 |
|
Product development capital expenditure |
|
(130 |
) |
(144 |
) |
(300 |
) |
Product development amortisation |
|
144 |
|
137 |
|
284 |
|
Share-based payment costs |
|
23 |
|
19 |
|
40 |
|
Change in inventories |
|
1 |
|
(9 |
) |
9 |
|
Change in trade and other receivables |
|
(34 |
) |
(20 |
) |
(24 |
) |
Change in trade and other liabilities |
|
(164 |
) |
(187 |
) |
(20 |
) |
Change in provisions for other liabilities and charges |
|
(12 |
) |
(45 |
) |
(61 |
) |
Other movements |
|
12 |
|
3 |
|
(16 |
) |
Net cash generated from operations |
|
185 |
|
106 |
|
682 |
|
Interest paid |
|
(41 |
) |
(34 |
) |
(60 |
) |
Tax paid |
|
(69 |
) |
(59 |
) |
(97 |
) |
Net cash generated from operating activities |
|
75 |
|
13 |
|
525 |
|
Cash flows from investing activities |
|
|
|
|
|||
Acquisition of subsidiaries, net of cash acquired |
10 |
(38 |
) |
(173 |
) |
(171 |
) |
Acquisition of joint ventures and associates |
|
- |
|
(5 |
) |
(5 |
) |
Purchase of investments |
|
(7 |
) |
(6 |
) |
(8 |
) |
Purchase of property, plant and equipment |
|
(18 |
) |
(16 |
) |
(30 |
) |
Purchase of intangible assets |
|
(40 |
) |
(47 |
) |
(96 |
) |
Disposal of subsidiaries, net of cash disposed |
11 |
(6 |
) |
(19 |
) |
(38 |
) |
Proceeds from sale of investments |
|
- |
|
3 |
|
7 |
|
Proceeds from sale of property, plant and equipment |
|
6 |
|
1 |
|
5 |
|
Lease receivables repaid including disposals |
|
9 |
|
8 |
|
15 |
|
Interest received |
|
13 |
|
10 |
|
20 |
|
Net cash used in investing activities |
|
(81 |
) |
(244 |
) |
(301 |
) |
Cash flows from financing activities |
|
|
|
|
|||
Proceeds from issue of ordinary shares |
|
2 |
|
2 |
|
9 |
|
Buyback of equity |
|
(278 |
) |
- |
|
(186 |
) |
Settlement of share based payments |
|
(37 |
) |
(25 |
) |
(35 |
) |
Repayment of borrowings |
|
- |
|
- |
|
(285 |
) |
Proceeds from borrowings |
|
495 |
|
220 |
|
285 |
|
Repayment of lease liabilities |
|
(39 |
) |
(42 |
) |
(84 |
) |
Dividends paid to company’s shareholders |
|
(107 |
) |
(106 |
) |
(154 |
) |
Net cash generated from / (used in) financing activities |
|
36 |
|
49 |
|
(450 |
) |
Effects of exchange rate changes on cash and cash equivalents |
|
(7 |
) |
(13 |
) |
(8 |
) |
Net increase / (decrease) in cash and cash equivalents |
|
23 |
|
(195 |
) |
(234 |
) |
Cash and cash equivalents at beginning of period |
|
309 |
|
543 |
|
543 |
|
Cash and cash equivalents at end of period |
|
332 |
|
348 |
|
309 |
|
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
1. Basis of preparation
The condensed consolidated financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the UK’s
The condensed consolidated financial statements have also been prepared in accordance with the accounting policies set out in the 2023 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.
No new standards and interpretations that apply to annual reporting periods beginning on or after
In assessing the Group’s ability to continue as a going concern for the period until
The directors have confirmed that they have a reasonable expectation that the Group has adequate resources to continue in operational existence and to meet its liabilities as they fall due for the assessment period to
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 2023 Annual Report.
The financial information for the year ended
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
2. Segment information
The Group has five main global business divisions, which are each considered separate operating segments for management and reporting purposes. These five divisions are Assessment & Qualifications, Virtual Learning, English Language Learning, Higher Education and Workforce Skills. In addition, the International Courseware local publishing businesses, most of which were disposed in 2022 with the remainder being wound down in 2023, were being managed as a separate division, known as Strategic Review. There are no longer any reported results for the Strategic Review division.
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Sales |
|
|
|
|
|||
Assessment & Qualifications |
|
811 |
|
796 |
|
1,559 |
|
Virtual Learning |
|
254 |
|
373 |
|
616 |
|
English Language Learning |
|
188 |
|
184 |
|
415 |
|
Workforce Skills |
|
143 |
|
140 |
|
220 |
|
Higher Education |
|
358 |
|
379 |
|
855 |
|
Strategic Review |
|
- |
|
7 |
|
9 |
|
Total sales |
|
1,754 |
|
1,879 |
|
3,674 |
|
|
|
|
|
|
|||
Adjusted operating profit |
|
|
|
|
|||
Assessment & Qualifications |
|
187 |
|
174 |
|
350 |
|
Virtual Learning |
|
31 |
|
47 |
|
76 |
|
English Language Learning |
|
4 |
|
8 |
|
47 |
|
Workforce Skills |
|
29 |
|
21 |
|
(8 |
) |
Higher Education |
|
(1 |
) |
(1 |
) |
110 |
|
Strategic Review |
|
- |
|
1 |
|
(2 |
) |
Total adjusted operating profit |
250 |
|
250 |
|
573 |
|
There were no material inter-segment sales.
The following table reconciles the Group’s measure of segmental performance, adjusted operating profit, to statutory operating profit:
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Adjusted operating profit |
|
250 |
|
250 |
|
573 |
|
Intangible charges |
|
(20 |
) |
(24 |
) |
(48 |
) |
|
|
(5 |
) |
- |
|
- |
|
Other net gains and losses |
|
(6 |
) |
(7 |
) |
(16 |
) |
Property charges |
|
- |
|
- |
|
(11 |
) |
Operating profit |
219 |
|
219 |
|
498 |
|
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
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 |
Assessment & Qualifications |
Virtual Learning |
English Language Learning |
Workforce Skills |
Higher Education |
Strategic Review |
Total |
|
|
||||||
2024 half year |
|||||||
Courseware |
|
|
|
|
|
|
|
Products transferred at a point in time |
28 |
- |
60 |
- |
91 |
- |
179 |
Products and services transferred over time |
9 |
- |
6 |
- |
267 |
- |
282 |
|
37 |
- |
66 |
- |
358 |
- |
461 |
Assessments |
|
|
|
|
|
|
|
Products transferred at a point in time |
93 |
- |
3 |
3 |
- |
- |
99 |
Products and services transferred over time |
681 |
- |
97 |
120 |
- |
- |
898 |
|
774 |
- |
100 |
123 |
- |
- |
997 |
Services |
|
|
|
|
|
|
|
Products transferred at a point in time |
- |
- |
12 |
- |
- |
- |
12 |
Products and services transferred over time |
- |
254 |
10 |
20 |
- |
- |
284 |
|
- |
254 |
22 |
20 |
- |
- |
296 |
|
|
|
|
|
|
|
|
Total sales |
811 |
254 |
188 |
143 |
358 |
- |
1,754 |
|
|
||||||
2023 half year |
|||||||
Courseware |
|
||||||
Products transferred at a point in time |
30 |
- |
51 |
1 |
108 |
7 |
197 |
Products and services transferred over time |
10 |
- |
5 |
- |
268 |
- |
283 |
|
40 |
- |
56 |
1 |
376 |
7 |
480 |
Assessments |
|
|
|
|
|
|
|
Products transferred at a point in time |
96 |
- |
3 |
11 |
- |
- |
110 |
Products and services transferred over time |
660 |
- |
103 |
105 |
- |
- |
868 |
|
756 |
- |
106 |
116 |
- |
- |
978 |
Services |
|
|
|
|
|
|
|
Products transferred at a point in time |
- |
- |
11 |
- |
- |
- |
11 |
Products and services transferred over time |
- |
373 |
11 |
23 |
3 |
- |
410 |
|
- |
373 |
22 |
23 |
3 |
- |
421 |
|
|
|
|
|
|
|
|
Total sales |
796 |
373 |
184 |
140 |
379 |
7 |
1,879 |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
2. Segment information continued
all figures in £ millions |
Assessment & Qualifications |
Virtual Learning |
English Language Learning |
Workforce Skills |
Higher Education |
Strategic Review |
Total |
|
|
|
|
|
|
|
|
2023 full year |
|||||||
Courseware |
|
|
|
|
|
|
|
Products transferred at a point in time |
57 |
- |
135 |
2 |
254 |
9 |
457 |
Products and services transferred over time |
20 |
- |
15 |
- |
595 |
- |
630 |
|
77 |
- |
150 |
2 |
849 |
9 |
1,087 |
Assessments |
|
|
|
|
|
|
|
Products transferred at a point in time |
198 |
- |
5 |
5 |
- |
- |
208 |
Products and services transferred over time |
1,284 |
- |
204 |
170 |
- |
- |
1,658 |
|
1,482 |
- |
209 |
175 |
- |
- |
1,866 |
Services |
|
|
|
|
|
|
|
Products transferred at a point in time |
- |
- |
35 |
- |
- |
- |
35 |
Products and services transferred over time |
- |
616 |
21 |
43 |
6 |
- |
686 |
|
- |
616 |
56 |
43 |
6 |
- |
721 |
|
|
|
|
|
|
|
|
Total sales |
1,559 |
616 |
415 |
220 |
855 |
9 |
3,674 |
Adjusted operating profit is one of the Group’s key business performance measures. The measure includes the operating profit from the total business but excludes charges for acquired intangibles amortisation and impairment, acquisition related costs, gains and losses arising from disposals, the cost of major reorganisation where relevant, property charges and one-off costs related to the
Intangible charges – These represent charges relating to intangibles acquired through business combinations. These charges are excluded as they reflect past acquisition activity and do not necessarily reflect the current year performance of the Group. Intangible amortisation charges in the first half of 2024 were £20m compared to a charge of £24m in the equivalent period in 2023.
Other net gains and losses – These represent profits and losses on the sale of subsidiaries, joint ventures, associates and other financial assets and are excluded from adjusted operating profit in order to show the performance of the Group on a more comparable basis year on year. Other net gains and losses also includes costs related to business closures and acquisitions. Other net gains and losses in 2024 relate to costs related to prior year acquisitions and disposals, partially offset by a gain on the partial disposal of our investment in an associate. Other net gains and losses in the first half of 2023 relate largely to the gain on disposal of the POLS business and a gain related to the release of a provision related to a historical acquisition, offset by losses on the disposal of
Property charges – In the second half of 2023, charges of £11m relate to impairments of property assets arising from the impact of updates in 2023 to assumptions initially made during the 2022 and 2021 reorganisation programmes. There are no such charges in the first half of 2024.
Adjusted operating profit should not be regarded as a complete picture of the Group’s financial performance. For example, adjusted operating profit includes the benefits of major reorganisation programmes but excludes the significant associated costs, and adjusted operating profit excludes costs related to acquisitions, and the amortisation of intangibles acquired in business combinations, but does not exclude the associated revenues. The Group’s definition of adjusted operating profit may not be comparable to other similarly titled measures reported by other companies.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
3. Net finance income / costs
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Net finance (costs) / income |
|
(7 |
) |
17 |
|
(5 |
) |
Net finance income in respect of retirement benefits |
|
(11 |
) |
(13 |
) |
(26 |
) |
Interest on deferred and contingent consideration |
|
1 |
|
2 |
|
4 |
|
Fair value movements on investments held at FVTPL |
|
8 |
|
(5 |
) |
(13 |
) |
Net foreign exchange gains |
|
- |
|
(4 |
) |
(3 |
) |
Fair value movements on derivatives |
|
(12 |
) |
(9 |
) |
10 |
|
Net interest payable reflected in adjusted earnings |
|
(21 |
) |
(12 |
) |
(33 |
) |
|
|
|
|
|
|||
Analysed as: |
|
|
|
|
|||
Finance costs |
|
(57 |
) |
(36 |
) |
(81 |
) |
Finance income |
|
50 |
|
53 |
|
76 |
|
Net finance (costs) / income |
|
(7 |
) |
17 |
|
(5 |
) |
Net interest payable is the finance cost measure used in calculating adjusted earnings. Net interest payable primarily consists of interest costs related to bonds, the RCF and lease liabilities, partially offset by interest income on cash deposits and lease receivables. Net interest payable at
The above table reconciles net finance income to net interest payable.
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 excluded are interest costs relating to acquisition or disposal transactions, fair value movements on investments classified as FVTPL, 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, fair value movements 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. Interest on certain tax provisions is excluded from our adjusted measure in order to mirror the treatment of the underlying tax item.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
4. Income tax
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Income tax charge |
|
(54 |
) |
(49 |
) |
(113 |
) |
Tax on property charges |
|
- |
|
- |
|
(3 |
) |
Tax on other net gains and losses |
|
- |
|
(8 |
) |
(10 |
) |
Tax on intangible charges |
|
(5 |
) |
(6 |
) |
(11 |
) |
Tax on |
|
(1 |
) |
- |
|
- |
|
Tax on other net finance income |
|
4 |
|
7 |
|
7 |
|
Tax amortisation benefit on goodwill and intangibles |
|
2 |
|
2 |
|
4 |
|
Tax benefit on |
|
- |
|
- |
|
1 |
|
Other tax items |
|
- |
|
- |
|
1 |
|
Adjusted income tax charge |
|
(54 |
) |
(54 |
) |
(124 |
) |
|
|
|
|
|
|||
Adjusted profit before tax |
|
229 |
|
238 |
|
540 |
|
|
|
|
|
|
|||
Tax rate reflected in statutory earnings |
|
25.5 |
% |
20.8 |
% |
24.5 |
% |
Tax rate reflected in adjusted earnings |
|
23.6 |
% |
22.7 |
% |
23.0 |
% |
The adjusted income tax charge excludes the tax benefit or charge on items that are excluded from the profit or loss before tax (see note 2). The adjusted tax charged in the period ended
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.
The statutory tax charge in the period ended
The Group is within the scope of the
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
5. 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 period, 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.
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Earnings for the period |
|
158 |
|
187 |
|
380 |
|
Non-controlling interest |
|
(1 |
) |
(1 |
) |
(2 |
) |
Earnings attributable to equity shareholders |
|
157 |
|
186 |
|
378 |
|
|
|
|
|
|
|||
|
|
|
|
|
|||
Weighted average number of shares (millions) |
|
680.5 |
|
714.0 |
|
711.5 |
|
Effect of dilutive share options (millions) |
|
6.9 |
|
5.0 |
|
5.8 |
|
Weighted average number of shares (millions) for diluted earnings |
|
687.4 |
|
719.0 |
|
717.3 |
|
|
|
|
|
|
|||
|
|
|
|
|
|||
Earnings per share |
|
|
|
|
|||
Basic |
|
23.1 |
p |
26.1 |
p |
53.1 |
p |
Diluted |
|
22.8 |
p |
25.9 |
p |
52.7 |
p |
6. 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 users of the accounts 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 reorganisation programmes and certain other items that are also not representative of underlying performance (see notes 2, 3 and 4 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 company’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 and 4.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
6. Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
|
|
||||||
all figures in £ millions |
note |
Statutory income statement |
Property charges |
|
Other net gains and losses |
Intangible charges |
Other net finance costs |
Other tax items |
Adjusted income statement |
|||||||
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
2024 half year |
||||||||||||||
Operating profit |
|
2 |
219 |
|
- |
5 |
|
6 |
20 |
|
- |
|
- |
250 |
|
|
Net finance income / (costs) |
|
3 |
(7 |
) |
- |
- |
|
- |
- |
|
(14 |
) |
- |
(21 |
) |
|
Profit / (loss) before tax |
|
|
212 |
|
- |
5 |
|
6 |
20 |
|
(14 |
) |
- |
229 |
|
|
Income tax |
|
4 |
(54 |
) |
- |
(1 |
) |
- |
(5 |
) |
4 |
|
2 |
(54 |
) |
|
Profit / (loss) for the year |
|
|
158 |
|
- |
4 |
|
6 |
15 |
|
(10 |
) |
2 |
175 |
|
|
Non-controlling interest |
|
|
(1 |
) |
- |
- |
|
- |
- |
|
- |
|
- |
(1 |
) |
|
Earnings / (loss) |
|
|
157 |
|
- |
4 |
|
6 |
15 |
|
(10 |
) |
2 |
174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average number of shares (millions) |
|
|
|
|
680.5 |
|
||||||||||
Weighted average number of shares (millions) for diluted earnings |
|
|
|
|
687.4 |
|
||||||||||
|
|
|
|
|
|
|||||||||||
Adjusted earnings per share (basic) |
|
|
|
|
25.6 |
p |
||||||||||
Adjusted earnings per share (diluted) |
|
|
|
|
25.3 |
p |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
6. Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
|
|||||||
all figures in £ millions |
note |
Statutory income statement |
Property charges |
|
Other net gains and losses |
Intangible charges |
Other net finance costs |
Other tax items |
Adjusted income statement |
|||||||
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
2023 half year |
||||||||||||||
Operating profit |
|
2 |
219 |
|
- |
- |
7 |
|
24 |
|
- |
|
- |
250 |
|
|
Net finance income / (costs) |
|
3 |
17 |
|
- |
- |
- |
|
- |
|
(29 |
) |
- |
(12 |
) |
|
Profit / (loss) before tax |
|
|
236 |
|
- |
- |
7 |
|
24 |
|
(29 |
) |
- |
238 |
|
|
Income tax |
|
4 |
(49 |
) |
- |
- |
(8 |
) |
(6 |
) |
7 |
|
2 |
(54 |
) |
|
Profit / (loss) for the year |
|
|
187 |
|
- |
- |
(1 |
) |
18 |
|
(22 |
) |
2 |
184 |
|
|
Non-controlling interest |
|
|
(1 |
) |
- |
- |
- |
|
- |
|
- |
|
- |
(1 |
) |
|
Earnings / (loss) |
|
|
186 |
|
- |
- |
(1 |
) |
18 |
|
(22 |
) |
2 |
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Weighted average number of shares (millions) |
|
|
|
714.0 |
|
|||||||||||
Weighted average number of shares (millions) for diluted earnings |
|
|
|
719.0 |
|
|||||||||||
|
|
|
|
|
||||||||||||
Adjusted earnings per share (basic) |
|
|
|
25.6 |
p |
|||||||||||
Adjusted earnings per share (diluted) |
|
|
|
25.5 |
p |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
6. Adjusted earnings per share continued
|
|
|
|
|
|
|
|
|
|
|
|||||||
all figures in £ millions |
note |
Statutory income statement |
Property charges |
|
Other net gains and losses |
Intangible charges |
Other net finance costs |
Other tax items |
Adjusted income statement |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
2023 full year |
|||||||||||||||
Operating profit |
|
2 |
498 |
|
11 |
|
- |
16 |
|
48 |
|
- |
|
- |
573 |
|
|
Net finance income / (costs) |
|
3 |
(5 |
) |
- |
|
- |
- |
|
- |
|
(28 |
) |
- |
(33 |
) |
|
Profit / (loss) before tax |
|
|
493 |
|
11 |
|
- |
16 |
|
48 |
|
(28 |
) |
- |
540 |
|
|
Income tax |
|
4 |
(113 |
) |
(3 |
) |
- |
(10 |
) |
(11 |
) |
7 |
|
6 |
(124 |
) |
|
Profit / (loss) for the year |
|
|
380 |
|
8 |
|
- |
6 |
|
37 |
|
(21 |
) |
6 |
416 |
|
|
Non-controlling interest |
|
|
(2 |
) |
- |
|
- |
- |
|
- |
|
- |
|
- |
(2 |
) |
|
Earnings / (loss) |
|
|
378 |
|
8 |
|
- |
6 |
|
37 |
|
(21 |
) |
6 |
414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Weighted average number of shares (millions) |
|
|
|
711.5 |
|
||||||||||||
Weighted average number of shares (millions) for diluted earnings |
|
|
|
717.3 |
|
||||||||||||
|
|
|
|
|
|
||||||||||||
Adjusted earnings per share (basic) |
|
|
|
58.2 |
p |
||||||||||||
Adjusted earnings per share (diluted) |
|
|
|
57.7 |
p |
7. Dividends
|
|
|
|
|
all figures in £ millions |
|
2024 |
2023 |
2023 |
|
|
half year |
half year |
full year |
|
|
|
|
|
Amounts recognised as distributions to equity shareholders in the period |
|
107 |
106 |
155 |
The directors are declaring an interim dividend of 7.4p per equity share, payable on
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
8. Exchange rates
|
|
|
|
|
|
|
2024 |
2023 |
2023 |
|
|
half year |
half year |
full year |
|
|
|
|
|
Average rate for profits |
|
1.26 |
1.24 |
1.25 |
Period end rate |
|
1.26 |
1.27 |
1.27 |
9. Non-current intangible assets
|
|
|
|
|
all figures in £ millions |
|
2024 |
2023 |
2023 |
|
|
half year |
half year |
full year |
|
|
|
|
|
|
|
2,436 |
2,441 |
2,434 |
Other intangibles |
|
614 |
685 |
657 |
Non-current intangible assets |
|
3,050 |
3,126 |
3,091 |
There were no significant acquisitions or disposals in 2024.
In 2023, business combinations resulted in the recognition of additional goodwill of £61m and intangible assets of £117m (see note 10 for further details).
In 2023, business disposals resulted in the disposal of £53m of intangible assets (see note 11 for further details). A relative value method was used to allocate goodwill to the disposed business in the Virtual Learning CGU aggregation. The result of this was that no goodwill was allocated to the disposed business.
Other movements in the goodwill balance relate to foreign exchange differences. Other movements in the intangibles balance relate to additions, amortisation and foreign exchange differences.
The Group has assessed its remaining goodwill and intangibles for impairment triggers and concluded that a full goodwill impairment review is not required at
The 2023 Annual Report sets out the key assumptions by segment. The discount rate, perpetuity growth rate and other assumptions used in the impairment review, and the sensitivity to changes in those assumptions remain broadly the same as the position outlined in the 2023 Annual Report.
There were no impairments to acquisition related or other intangibles in the first half of 2024 or 2023.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
10. Business combinations
There have been no significant acquisitions of subsidiaries in H1 2024.
On
The net cash outflow relating to acquisitions in the period is shown in the table below and relates to deferred payments for prior year acquisitions, mainly arising from the acquisitions of Credly and Mondly in 2022.
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Cash – current year acquisitions |
|
- |
|
(152 |
) |
(152 |
) |
Cash and cash equivalents acquired |
|
- |
|
4 |
|
4 |
|
Deferred payments for prior year acquisitions and other items |
|
(38 |
) |
(25 |
) |
(23 |
) |
Net cash outflow on acquisitions |
|
(38 |
) |
(173 |
) |
(171 |
) |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
11. Disposals and business closures
There have been no disposals of subsidiaries in H1 2024.
On
The net cash outflow relating to disposals in the period is shown in the table below.
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
||||
Proceeds – current year disposals |
|
- |
|
1 |
|
1 |
|
Cash and cash equivalents disposed |
|
- |
|
(12 |
) |
(12 |
) |
Costs and other disposal liabilities paid |
|
(6 |
) |
(8 |
) |
(27 |
) |
Net cash outflow from disposals |
|
(6 |
) |
(19 |
) |
(38 |
) |
In addition, the Group sold part of its investment in its associate,
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
12. Net debt
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Non-current assets |
|
|
|
|
|||
Derivative financial instruments |
|
4 |
|
41 |
|
32 |
|
Trade and other receivables – investment in finance lease |
|
73 |
|
90 |
|
82 |
|
Current assets |
|
|
|
|
|||
Derivative financial instruments |
|
55 |
|
17 |
|
16 |
|
Trade and other receivables – investment in finance lease |
|
19 |
|
17 |
|
18 |
|
Cash and cash equivalents (excluding overdrafts) |
|
332 |
|
355 |
|
312 |
|
Non-current liabilities |
|
|
|
|
|||
Borrowings |
|
(1,300 |
) |
(1,308 |
) |
(1,094 |
) |
Derivative financial instruments |
|
(3 |
) |
(43 |
) |
(38 |
) |
Current liabilities |
|
|
|
|
|||
Borrowings |
|
(313 |
) |
(75 |
) |
(67 |
) |
Derivative financial instruments |
|
(44 |
) |
(5 |
) |
(5 |
) |
Net debt |
|
(1,177 |
) |
(911 |
) |
(744 |
) |
Included in borrowings at
In 2024, the increase in borrowings primarily reflects the additional drawdown on the revolving credit facility of £495m, partially offset by the repayment of lease liabilities of £39m. In 2023, the movement on borrowings primarily reflects the drawdown on the revolving credit facility of £220m and the repayment of lease liabilities of £42m.
For the purposes of the cash flow statement, cash and cash equivalents are presented net of overdrafts of £nil (at
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
13. Classification of assets and liabilities measured at fair value
|
Level 1 |
Level 2 |
---Level 3--- |
Total fair value |
||||
all figures in £ millions |
FVTPL – Cash and cash equivalents |
Derivatives |
FVOCI Investments |
FVTPL – Investments and Other
|
||||
|
|
|
|
|
|
|||
2024 half year |
||||||||
|
|
|
|
|
|
|||
Investments in unlisted securities |
- |
- |
|
26 |
115 |
|
141 |
|
Cash and cash equivalents |
42 |
- |
|
- |
- |
|
42 |
|
Derivative financial instruments |
- |
59 |
|
- |
- |
|
59 |
|
Deferred and contingent consideration |
- |
- |
|
- |
12 |
|
12 |
|
Total financial assets held at fair value |
42 |
59 |
|
26 |
127 |
|
254 |
|
|
|
|
|
|
|
|||
Derivative financial instruments |
- |
(47 |
) |
- |
- |
|
(47 |
) |
Deferred and contingent consideration |
- |
- |
|
- |
(21 |
) |
(21 |
) |
Total financial liabilities held at fair value |
- |
(47 |
) |
- |
(21 |
) |
(68 |
) |
|
|
|
|
|
|
|||
2023 half year |
||||||||
|
|
|
|
|
|
|||
Investments in unlisted securities |
- |
- |
|
24 |
114 |
|
138 |
|
Cash and cash equivalents |
39 |
- |
|
- |
- |
|
39 |
|
Derivative financial instruments |
- |
58 |
|
- |
- |
|
58 |
|
Deferred and contingent consideration |
- |
- |
|
- |
12 |
|
12 |
|
Total financial assets held at fair value |
39 |
58 |
|
24 |
126 |
|
247 |
|
|
|
|
|
|
|
|||
Derivative financial instruments |
- |
(48 |
) |
- |
- |
|
(48 |
) |
Deferred and contingent consideration |
- |
- |
|
- |
(56 |
) |
(56 |
) |
Total financial liabilities held at fair value |
- |
(48 |
) |
- |
(56 |
) |
(104 |
) |
|
|
|
|
|
|
|||
2023 full year |
||||||||
|
|
|
|
|
|
|||
Investments in unlisted securities |
- |
- |
|
23 |
120 |
|
143 |
|
Cash and cash equivalents |
31 |
- |
|
- |
- |
|
31 |
|
Derivative financial instruments |
- |
48 |
|
- |
- |
|
48 |
|
Deferred and contingent consideration |
- |
- |
|
- |
12 |
|
12 |
|
Total financial assets held at fair value |
31 |
48 |
|
23 |
132 |
|
234 |
|
|
|
|
|
|
|
|||
Derivative financial instruments |
- |
(43 |
) |
- |
- |
|
(43 |
) |
Deferred and contingent consideration |
- |
- |
|
- |
(57 |
) |
(57 |
) |
Total financial liabilities held at fair value |
- |
(43 |
) |
- |
(57 |
) |
(100 |
) |
There have been no transfers in classification during the year.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
13. Classification of assets and liabilities measured at fair value continued
Level 1 valuations are based on unadjusted quoted prices in active markets for identical financial instruments. Cash and cash equivalents include money market funds which are treated as FVTPL under IFRS 9 with the fair value movements recognised as finance income or cost.
The fair values of level 2 assets and liabilities are determined by reference to market data and established estimation techniques such as discounted cash flow and option valuation models. Within level 3 assets, the fair value of our investments in unlisted securities are determined by reference to the financial performance of the underlying asset and amounts realised on the sale of similar assets. Individually these assets are immaterial and therefore no sensitivities have been disclosed.
Level 3 assets also include the contingent consideration receivable in respect of the sale of the POLS business, which comprises a 27.5% share of positive adjusted EBITDA in each calendar year for 6 years from the disposal date and 27.5% of the proceeds received by the purchaser in relation to any future monetisation event. The valuation of the deferred consideration has been determined on the basis of a discounted cash flow model, and valued by a third-party specialist. The key inputs into the discounted cash flow model are the estimates of adjusted EBITDA for the 6 year period and the estimate of the valuation of the business thereafter. Reasonably possible changes in assumptions for the inputs into the model would not have a material impact on the carrying value of the contingent consideration, and therefore sensitivities have not been disclosed. The deferred and contingent consideration payable in respect of prior year acquisitions is measured as the net present value of the expected cashflows.
The movements in fair values of level 3 financial assets measured at fair value, being principally the investments in unlisted securities and contingent consideration receivable, are shown in the table below:
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
At beginning of period |
|
155 |
|
136 |
|
136 |
|
Exchange differences – OCI |
|
1 |
|
(5 |
) |
(5 |
) |
Additions |
|
9 |
|
18 |
|
20 |
|
Disposals and repayments |
|
- |
|
(6 |
) |
(10 |
) |
Fair value movements – Income Statement |
|
(8 |
) |
5 |
|
13 |
|
Fair value movements – OCI |
|
(4 |
) |
2 |
|
1 |
|
At end of period |
|
153 |
|
150 |
|
155 |
|
The movement in the fair value of the deferred and contingent consideration payable is shown in the table below:
|
|
|
|
|
|||
all figures in £ millions |
|
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
At beginning of period |
|
(57 |
) |
(79 |
) |
(79 |
) |
Exchange differences |
|
(1 |
) |
4 |
|
3 |
|
Fair value movements – Income Statement |
|
(1 |
) |
(2 |
) |
(4 |
) |
Repayments |
|
38 |
|
21 |
|
23 |
|
At end of period |
|
(21 |
) |
(56 |
) |
(57 |
) |
The market value of the Group’s bonds is £570m (
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
14. Cash flows
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. The table below reconciles the statutory profit and cash flow measures to the corresponding adjusted measures. The table on the next page reconciles operating cash flow to free cash flow to net debt.
all figures in £ millions |
Statutory measure |
Cost of major reorganisation |
Property charges |
Other net gains and losses |
|
Intangible charges |
Purchase/disposal of PPE and software |
Net addition of right of use assets |
Dividends from joint ventures and associates |
Adjusted measure |
|
|
|||||
2024 half year |
|||||||||||||||||
Operating profit |
219 |
- |
- |
6 |
5 |
20 |
- |
|
- |
|
- |
250 |
Adjusted operating profit |
||||
Net cash generated from operations |
185 |
5 |
- |
3 |
- |
- |
(52 |
) |
(12 |
) |
- |
129 |
Operating cash flow |
||||
2023 half year |
|||||||||||||||||
Operating profit |
219 |
- |
- |
7 |
- |
24 |
- |
|
- |
|
- |
250 |
Adjusted operating profit |
||||
Net cash generated from operations |
106 |
46 |
- |
- |
- |
- |
(62 |
) |
(11 |
) |
- |
79 |
Operating cash flow |
||||
2023 full year |
|||||||||||||||||
Operating profit |
498 |
- |
11 |
16 |
- |
48 |
- |
|
- |
|
- |
573 |
Adjusted operating profit |
||||
Net cash generated from operations |
682 |
63 |
- |
4 |
- |
- |
(121 |
) |
(41 |
) |
- |
587 |
Operating cash flow |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
14. Cash flows continued
|
|
|
|
|
|||
all figures in £ millions |
note |
2024 |
2023 |
2023 |
|||
|
|
half year |
half year |
full year |
|||
|
|
|
|
|
|||
Reconciliation of operating cash flow to closing net debt |
|
|
|
||||
|
|
|
|
|
|||
Operating cash flow |
|
129 |
|
79 |
|
587 |
|
Tax paid |
|
(69 |
) |
(59 |
) |
(97 |
) |
Net finance costs paid |
|
(28 |
) |
(24 |
) |
(40 |
) |
Cost paid for major reorganisation |
|
(5 |
) |
(46 |
) |
(63 |
) |
Free cash flow |
|
27 |
|
(50 |
) |
387 |
|
Dividends paid (including to non-controlling interest) |
|
(107 |
) |
(106 |
) |
(154 |
) |
Net movement of funds from operations |
|
(80 |
) |
(156 |
) |
233 |
|
Acquisitions and disposals |
|
(54 |
) |
(200 |
) |
(219 |
) |
Net equity transactions |
|
(313 |
) |
(23 |
) |
(212 |
) |
Other movements on financial instruments |
|
14 |
|
25 |
|
11 |
|
Movement in net debt |
|
(433 |
) |
(354 |
) |
(187 |
) |
Opening net debt |
|
(744 |
) |
(557 |
) |
(557 |
) |
Closing net debt |
12 |
(1,177 |
) |
(911 |
) |
(744 |
) |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended
15. Contingencies, tax uncertainties and other liabilities
There are Group contingent 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
The Group is under assessment from the tax authorities in
The Group is also under assessment from the
16. Related parties
Related party transactions in the six months ended
17. Events after the balance sheet date
There have been no post balance sheet events.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors confirm that these condensed consolidated financial statements have been prepared in accordance with
- An indication of important events that have occurred during the first six months and their impact on the condensed consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
- Material related party transactions in the first six months and any material changes in related party transactions described in the 2023 Annual Report.
The directors of
A list of current directors is maintained on the
By order of the Board
Chief Executive
Chief Financial Officer
INDEPENDENT REVIEW REPORT TO
Independent Review Report on the condensed consolidated interim financial statements
Conclusion
We have been engaged by
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended
Basis for Conclusion
We conducted our review in accordance with International Standard on Review Engagements 2410 (
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the
In preparing the half-yearly financial report, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.
Use of our report
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (
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