Pearson lifts half-year profit & reaffirms guidance

Pearson reported higher revenue and profit for the first half and reiterated its full-year guidance, with demand trends supporting growth across several parts of the business.

Revenue for the six months reached GBP £1.779 billion, up 4% on an underlying basis and 3% on a headline basis from GBP £1.722 billion a year earlier. Adjusted operating profit rose 14% on an underlying basis to GBP £276 million, while statutory operating profit increased to GBP £252 million from GBP £240 million.

Adjusted earnings per share rose to 28.9p from 24.5p, while basic earnings per share slipped to 24.0p from 24.8p. Profit for the period fell to GBP £149 million from GBP £166 million.

Cash generation strengthened in the half. Operating cash flow climbed to GBP £337 million from GBP £126 million, free cash flow rose to GBP £259 million from GBP £156 million, and net cash generated from operations increased to GBP £427 million from GBP £188 million.

The improvement reflected working capital movements, including payment timing benefits expected to reverse in the second half, as well as proceeds from the settlement of a US insurance policy.

Business lines

Performance varied across Pearson's divisions. Virtual Learning was the strongest area, with revenue up 19% as enrolment growth accelerated in the spring semester and funding and product mix improved.

Assessment & Qualifications returned to growth in the second quarter, leaving first-half revenue up 2%. Growth in Clinical Assessment, Pearson Professional Assessments and UK & International Qualifications was partly offset by a decline in US Student Assessment after the previously disclosed loss of the New Jersey contract.

Higher Education revenue rose 2%, supported by core US Courseware and a return to growth in K12. International Higher Education declined amid difficult conditions in mature markets.

Inclusive Access revenue growth accelerated to 20% and now accounts for half of the core US Courseware business. Enterprise Learning & Skills revenue grew 7%, helped by vocational qualifications and enterprise solutions linked to strategic partnerships.

English Language Learning was weaker, with revenue down 3%. Growth in Institutional was more than offset by the Pearson Test of English business, where market conditions became more difficult.

Returns and debt

Pearson increased its interim dividend by 5% to 8.2p from 7.8p. It also completed GBP £350 million of share buybacks in the first half at an average purchase price of 998p per share.

Net debt increased to GBP £1.3 billion at the end of the period from GBP £1.0 billion a year earlier, as strong free cash flow was more than offset by share buybacks, acquisition spending and dividends.

The group also issued a GBP £350 million 10-year bond under its Euro Medium Term Note programme. Adjusted net finance costs increased to GBP £35 million from GBP £24 million.

The effective tax rate on adjusted profit before tax rose to 25.8% from 24.5% because of a one-off tax charge tied to the settlement of a US insurance policy. Pearson expects the full-year effective tax rate to normalise because the charge was non-recurring.

Guidance held

Pearson maintained its full-year outlook, continuing to expect mid-single-digit underlying revenue growth, adjusted operating profit of GBP £640 million to GBP £685 million at exchange rates set at the end of 2025, and free cash flow conversion of 90% to 100%.

It also pointed to momentum in its enterprise activities, including a new agreement with a leading AI lab to deliver a global certification programme and a partnership with Adobe.

"We have delivered a good first-half performance and executed well against our strategy, with a focus on driving operational improvements while innovating to build learning and assessment experiences that help our customers progress in their lives. We are reiterating our full year guidance and remain confident in Pearson's long-term growth opportunities. We are excited about the future and believe Pearson is uniquely placed to meet the growing customer demand for reskilling in an AI driven world," Chief Executive Omar Abbosh said.

Pearson's medium-term outlook remains for mid-single-digit underlying revenue growth, average annual margin expansion of 40 basis points and free cash conversion in the region of 90% to 100% across the period.