Annual Report 2016

Pearson is the world’s learning company, providing a range of products and services to help people across different learning stages make measurable progress in their lives.

 

Chairman's introduction

"The board has been fully engaged with the management’s review of the business and our plans to return Pearson back to growth."

Sidney Taurel, Chairman

2016 has been a difficult year for Pearson shareholders. 

The challenges facing the business that we thought would begin to dissipate have become more acute, and as a consequence, we have cut both the short-term outlook for our profits and the future dividends we can return to shareholders. Clearly, this is disappointing for everyone involved in the company.

The management team has a clear view of the issues we face, particularly in our largest division, US higher education courseware. There is a rigorous plan to address the challenges, and to accelerate the transition to a more digital, more sustainable organisation. As we complete this transition, we will create more stable and predictable revenues for Pearson, and ultimately create growth opportunities.

MEASURING PERFORMANCE

INDICATOR PERFORMANCE
Total adjusted earnings per share 58.8p
Return on invested capital 5.0%
Total share return* -15.6
Dividend per share 52p

*Five year % change

Chief executive’s strategic overview

"The long-term opportunity in education remains hugely significant."

John Fallon, Chief executive

2016 was a challenging year for Pearson. 

We have been hit hard by pressures in US higher education, which will continue into 2017 and 2018. We are acting quickly to build a more sustainable, digital business less exposed to volatility.

This is challenging, but exciting work. Pearson will continue to focus on fewer, larger opportunities, to manage our cost base tightly and to make Pearson a simpler, more efficient company. Over time, we will deliver a more sustainable, more profitable business, delivering better educational outcomes for learners.

Thank you for your support of Pearson.

MEASURING PERFORMANCE

Maintain long-term growth

INDICATOR PERFORMANCE
Sales £4,552m
Total adjusted operating profit £635m

Manage our cash position

Transform the business

Talent & employee engagement

Strengthen brand & reputation

Our Strategy

Our goal is to improve access and outcomes in education​ through our world-class capabilities in educational content and assessment, powered by services and technology.

Our strategy in action

Over time, our strategy will provide us with a larger market opportunity, a sharper focus on faster-growing markets, and stronger financial returns. Below we outline how our strategy creates value.

Develop digital & services

Our strategy is to improve access and outcomes in education through our world-class capabilities in educational content and assessment, and services powered by technology. This will be focused on where we see the greatest potential for growth and scalability, and increasingly driven by our expertise in adaptive and personalised learning, enabling educators to be even more effective in reaching their students.

INDICATOR PERFORMANCE
Digital and services revenues (% of sales) 68%

Build market presence

One of our key strategic drivers is to build our market-leading presence in North America, the UK and other key markets. We also aim to build our leading presence in select developing markets to meet the growing global demand for education, while reducing the geographical complexity of Pearson in order to focus on fewer, bigger opportunities in education.

INDICATOR PERFORMANCE
US Higher education courseware market share* 40.4%
Online programme management market share** 26%
UK qualification (GCSE) market share*** 28.7%

*Source: MPI, BMO

**Source: Deutsche Bank Online Higher Education report, Capital IQ, company websites, Eduventures, Pearson

***Source: Ofqual

Deliver measurable outcomes

Our strategy is to improve access and outcomes in education. In other words, we want to help more learners learn more. Efficacy is becoming more deeply embedded into our strategy and is helping drive faster improvement in our content, assessment, services and technology. We are the only education company committed to efficacy with such rigour and at such scale and depth.

INDICATOR PERFORMANCE
Product improvements identified by efficacy reviews are being implemented on track with plans 82%
Product impact evaluations are progressing in line with study plans 94%

Sustainability

Sustainability is critical to achieving our mission to help people make progress in their lives through learning. It is also critical to our long-term competitiveness. Being ethical and embracing sustainability is fundamental to our commercial success. In turn, a stronger and more sustainable Pearson will allow us to help people progress.

The three pillars of our sustainability plan are:

Be a trusted partner

Reach more learners

Shape the future of education

MEASURING PERFORMANCE

INDICATOR PERFORMANCE
Women at Pearson 60%
Total greenhouse gas emissions (CO2e) 126,385
Maintain community investment £6.8m