14/03/2025 - Pearson plc: Earnings Document

Strategic report

At a glance	2
Business unit overviews	3
Accelerating our AI capabilities	6
Capitalising on the enterprise opportunity	7
Chair's note	8
Chief Executive's review	10
Strategic framework	12
Our business model and value drivers	13
Evolving our brand	17
Stakeholder engagement	18
Key performance indicators for 2024	24
Financial review	26
Sustainability	33
Sustainability data	49
Risk	57

Financial statements

Statement of Directors' responsibilities	141
Independent auditor's report to the	142
members of Pearson plc
Consolidated financial statements	150
Company financial statements	208

Other information

Five-year summary	217
Financial key performance indicators	219
Additional information for	225
US listing purposes
Shareholder information	245

The strategic report, up to and including page 67, was approved for issue by the Board on 13 March

2025 and signed on its behalf by:

Sally Johnson

Chief Financial Officer

Governance report

Corporate governance	68
Directors' Remuneration Report	113
Additional disclosures	137

Use this QR code to visit our Pearson plc website where you can find the online version of this report.

https://plc.pearson.com/en- GB/investors/2024-annual- report-accounts

At a glance

Strategic reportGovernance report Financial statements Other information

2024 highlights: Growth through strategic execution

Our purpose

We help people realise the life they imagine through learning.

What we do

Sales

£3,552m

(2023: £3,674m) headline decrease of 3%

Underlying sales growth increase of

3%*

Free cash flow conversion**

117%

increase year-on-year of 26%

Adjusted operating profit

£600m

increase year-on-year of 10% on an underlying basis

• Taking portfolio adjustments and FX into account and excluding the OPM and Strategic Review businesses.
• Free cash flow conversion calculated as free cash flow divided by adjusted earnings.

Strong Group adjusted operating

profit margin of 16.9%

Read more on pages 26-32

Strong cash performance, with free cash flow of £490m, and completed a multiyear £500m share buyback

Read more on pages 26-32

Scaled AI across our products

and services, enhanced and extended the generative AI tools in our Higher Education courseware, and developed new AI tools in English Language Learning and Virtual Learning

Read more on page 6

Signed deals with ServiceNow, Degreed, Microsoft and AWS to help employees and organisations prepare for the future of work

Read more on page 7

1	Create and curate
content

Produce assessments

Author Learning IP

Design courses

Write curriculum standards

2	Distribute content digitally
and physically

Deliver assessments

Distribute lessons

Learning experiences

Facilitate teaching

3	Build and verify
skills

Score assessments

Measure skills

Credential skills

Evaluate talent

Sales

£1,591m

Sales

£489m

Assessments are at the core of what we do and are a thread that runs across Pearson. We're proud of the global

Assessment & Qualifications

We deliver world-class testing and certification solutions through four distinct hubs: Pearson VUE, Clinical Assessment, US Student Assessment, and UK & International Qualifications.

Pearson VUE excels as a global leader in scaled testing services, serving a range of industry sectors with an extensive test centre network and flexible delivery options. We meet the critical need for workforce reskilling and professional certification, underpinning professional development.

In Clinical Assessment, we provide high-quality, research-backed assessment products for mental health and learning evaluations, serving the healthcare and education sectors.

Our US Student Assessment business specialises in customised large-scale testing programmes for US K-12 education, focusing on state-specific criteria and providing insights to stakeholders.

Outside the US, we offer globally recognised UK-curriculum-based qualifications, such as GCSEs and A levels, as well as courseware for English-speaking regions throughout the world, supporting foundational student progression worldwide. These qualifications, coupled with our content expertise and scale of delivery, make us a key player in shaping global education standards and students' futures.

In 2024, Assessment & Qualifications continued to demonstrate strong financial performance, growth and overall customer retention. Pearson VUE is expanding its test prep offering and growing its enterprise assessment offering, while US Student Assessment is expanding into the formative assessment space.

In UK & International Qualifications, we are capitalising on the growing demand for international education, and Clinical Assessment is building out its international portfolio, creating new digitally-enabled business subscription models and providing solutions to be used

in pharmaceutical trials.

In 2025, we will focus on maintaining our market-leading positions through contract renewals and new wins, while actioning emerging growth opportunities that include movement up the value chain, growth into adjacent market segments and geographic expansion.

Virtual Learning

We provide high-quality, highly accountable online learning solutions for K-12 students through two main offerings: Partner Schools (c.96% sales) and District Partnerships (c.3% sales).

Partner Schools provides tailored virtual school solutions to public K-12 districts in the US, combining Pearson's courseware, instructional services and support for high-quality, flexible online learning.

District Partnerships offers customisable virtual education solutions for K-12 districts, focusing on smaller student cohorts with a more disaggregated approach than Partner Schools, ensuring access

to quality, adaptable remote learning for various needs.

We scaled our career and college readiness programmes and enhanced curriculum in 2024, and will expand the offering portfolio- wide in 2025. We also piloted a new enrolment portal, cutting the average time to enrol in half and driving underlying enrolment growth. Our 2025 goals include scaling our career and college readiness programmes, and continuing to drive efficiencies in enrolment.

market-leading offer we have developed as a result of our quality products and excellent customer relationships.

Art Valentine

President - Assessment &

Qualifications

Annual report and accounts 2024 Pearson plc 3

Sales

£826m*

Sales

£420m

With demographic shifts and the transformative impact of AI in the jobs market, the importance of language

Higher Education

We are the market leader in providing world-class learning experiences in the post-secondary market. We also compete in select disciplines for students in Secondary School Honours, Advanced Placement, International Baccalaureate, Dual Enrolment and Career and Technical Education (CTE) programmes.

We create teaching and learning experiences that are built on the front end of innovation to deliver positive outcomes at scale.

We bring learning to life for millions of students to help them succeed and create pathways to careers. We also leverage our strong relationships with educators to address their needs.

Our active learning is powered by features including AI study tools, formative assessments, audio and video media and practice modules. Our eText, MyLab and Mastering, and Revel products are created by expert authors, backed by learning science and personalised with interactive features.

In 2024, Higher Education returned to growth and grew adoption share, led by the expansion of AI study tools products in the US.

In 2025, we will focus on continuing to scale AI-enhanced offerings, winning adoption share and expanding our footprint in secondary education (e.g. Honours, Dual Enrolment, CTE), post-secondary and international markets - delivering exceptional value for learners and educators through continuous product innovation.

English Language Learning

We aim to become the world's leading destination for language learners to build and prove their proficiency in English. Our comprehensive language learning and assessment solutions include institutional courseware, Wizard by Pearson and Mondly by Pearson, designed for varied learning environments. For individuals looking to demonstrate their English proficiency, we provide the Pearson Test of English (PTE), Versant by Pearson and institutional proficiency assessments. We blend pedagogical expertise in English language education with advanced technology to deliver personalised, scalable learning and assessment solutions for individuals pursuing personal, academic, or professional objectives. In 2024, we achieved significant milestones, including the launch of PTE Core, our newest test designed to meet Canada's specific migration requirements. Wizard by Pearson in Brazil expanded, driven by its new online business and new government partnerships. During the year, we also developed two new AI products: one assisting teachers in generating lesson plans and another offering digital language tutoring. In 2025, we will continue to leverage AI and technology to enhance learning and assessment, with a focus on growth in key regions.

learning as a differentiating skill will continue

to grow.

Sharon Hague

President - English

Language Learning

Pearson's AI-driven innovation spans all our business units and corporate

Higher Education		English Language Learning

functions, each harnessing AI's transformative power to enhance learning experiences and drive efficiency and growth.

Each of our AI initiatives has the appropriate strategies and infrastructure in place to ensure that AI is being embraced and utilised in a responsible way. By integrating AI thoughtfully across our products and services, we are positioning Pearson to lead the next generation of learning - where every student can achieve their full potential through intelligent, personalised experiences and every teacher can benefit from maximum support and efficiency, allowing them to focus on pedagogy and students.

We have significantly expanded our AI-powered study tools across Pearson+ eTextbooks, Pearson+ Channels, MyLab and Mastering (MLM). This includes growing the number of eTextbooks and MLM titles that use AI tooling capabilities, as well as adding AI instructor tools to assist educators across a number of MLM titles. Select new AI features include automated creation of content based on a professor's curriculum, 'ask the video' capabilities and quiz-me study tools with AI-generated flashcards.

We have rolled out our AI study tools into global editions of leading higher education titles.

Virtual Learning

We have embedded AI study tools into Biology and World History homework questions to provide high school students with step-by-step assistance when they are faced with tricky course material. For teachers, we've launched AI-generated custom assessments for high school English Language Arts. The goal is to expand both the student and teacher AI tools to additional grades, including more subjects, as well as adopt the AI study tools from Pearson eTextbooks.

We piloted Smart Lesson Generator, which leverages Pearson's trusted IP with generative AI to simplify educators' work and saves them time by creating customised lesson content and activities. In the 2024 pilot with selected institutions, 80% of activated users generated activities to support their lessons. In 2025, the focus will be on enabling educators to create personalised activities tailored to students' diverse needs, from those requiring extra support to those ready for advanced challenges.

We have also launched an AI-powered Digital Language Tutor, as part of Mondly by Pearson solution bundles, specifically designed to help businesses improve English proficiency

at scale and unlock employee potential. The AI-tutor offers highly realistic, personalised training underpinned by trusted learning science, and builds on a successful pilot programme conducted with corporate clients.

Group-wide

We are deploying AI-driven code assistance to help the organisation develop and deploy code faster. Transitioning to a unified solution has resulted in consistent, secure coding practices and enhanced AI code generation capabilities. The result is a demonstrable increase in developer productivity and code quality.

Additionally, we are adopting a variety of data and analytical AI solutions to enable better data-driven decision making across our finance functions. Select initiatives include automating intelligent balance sheet reconciliation and adopting AI-enabled propensity to pay models to aid our cash conversion efforts.

Technology is transforming the skills and learning landscape at a faster pace than ever before. Our goal is to be at the cutting-edge of this technology, while ensuring

we deliver on accuracy, safety and compliance.

Dave Treat

Chief Technology Officer

Annual report and accounts 2024 Pearson plc 6

At Pearson, we help enterprises lead by enhancing workforce capability in the age of AI.

Organisations need flexible and connected solutions that can effectively prepare tomorrow's talent and foster resilience. Our enterprise solutions enable people- leaders to plan for, source and develop critical future skills that drive business outcomes and help them remain competitive in today's dynamic economy.

We help organisations unlock employee potential and trapped value, build agile teams and boost productivity. Our collaborations with global companies and industry leaders position Pearson as a trusted partner in enterprise upskilling.

As the skills landscape continues to shift as a result of transformational trends such as AI and demographic change, we will continue to refine and expand our enterprise capabilities to meet the evolving demands of businesses across multiple sectors.

Assessment & Qualifications

In 2024, VUE secured several meaningful new enterprise customer contracts and renewals. One notable new customer is a Global Big Tech leader renowned for its comprehensive set of IT certification programmes in Customer Relationship Management (CRM) and Cloud Computing. The contract extends over five years, showcasing our focus on enterprise market expansion.

VUE's comprehensive suite of services addresses the intricate requirements of multinational organisations, providing end-to-end testing and certification capabilities across diverse technological and geographical landscapes. From establishing sophisticated sponsor systems to creating integrated test administration programmes, we are meeting the rigorous demands of enterprise clients worldwide. Our offerings span both in-person and online testing platforms, proctoring models and web service integrations, enabling us to solve complex challenges for global enterprise customers with precision and technological innovation.

Enterprise Learning and Skills

ServiceNow

Pearson is collaborating with ServiceNow to supercharge workforce development and employee experiences in the age of AI. Pearson's talent intelligence, credentialling and training solutions will allow ServiceNow to enhance learning for its teams and broader communities.

In the first phase of the engagement, ServiceNow will collaborate with Pearson on research and insights that analyse how emerging technologies will impact the workforce and will use Credly

by Pearson to transform internal learning accreditation.

This multi-year deal will reshape how ServiceNow employees and professional communities develop critical skills for the AI era, enhancing workforce productivity, agility and adaptability.

Degreed

Pearson's partnership with Degreed empowers organisations to adapt their workforce skills to rapidly evolving technologies and market dynamics, ensuring long-term business resilience.

Microsoft

In January 2025, Pearson and Microsoft announced a strategic partnership to address one of the most pressing global challenges: preparing the workforce for the AI-driven economy. This collaboration focuses on equipping employers, workers and learners with innovative AI-powered products

and services designed to support skilling and reskilling across industries.

Partnership initiatives centre on personalised learning at scale, expanding existing Microsoft credentials and developing new ones. They include powering Pearson content, assessment, upskilling and certification services with Microsoft Azure Cloud Computing and AI infrastructure, rolling out new AI credentials and certifications, and collaborating on AI-enabled tools to help people develop skills and identify skills gaps while they work.

The partnership also extends Microsoft's relationship with Pearson VUE through 2029, emphasising a shared commitment to advancing skills development globally.

Amazon Web Services (AWS)

In February 2025, Pearson and AWS announced a global partnership to accelerate the delivery of AI-powered learning for millions of people

At Pearson, we have the opportunity and a responsibility to help employers and employees upskill, so they can meet the future needs of a world increasingly shaped by AI.

Vishaal Gupta

President - Enterprise

Learning and Skills

We will leverage Faethm data sets into Degreed's Skills dashboard to offer insights into trending and valuable skills across industries. With this capability, organisations will be able to compare their workforces' skills to industry benchmarks to identify gaps and prioritise upskilling investments.

Further integration between our respective products holds the promise of improved creation of learning pathways for a new level of market responsiveness.

around the world. As a strategic cloud provider to Pearson, AWS provides infrastructure and AI capabilities that enable Pearson to enhance the experience of its products and services and deliver them to learners at scale and speed. Building on a long-standing collaboration, AWS and Pearson are driving innovation in education and skills development to make learning more effective, efficient and accessible.

Chair's note

Pearson has come a long way in the short time that I have had the privilege of serving as its Chair, and I believe its best years lie ahead.

Omid Kordestani

Chair

2024 full year dividend growth

6%

Return on capital in 2024

10.5%

Strategic reportGovernance report Financial statements Other information

Overview

I would like to start by thanking all of Pearson's employees for their great contribution to another successful year under the guidance of Omar Abbosh, Pearson's new Chief Executive. We have witnessed huge and unprecedented change in our external environment such as the rapid development of AI and the need for upskilling employees, as well as significant progress within Pearson. Our company's purpose of helping people realise the life they imagine through learning is more relevant than ever, and the business continues to improve its ability to deliver on it.

A year of strong delivery

Pearson set three priorities for 2024: to deliver on market expectations, to sharpen its focus on the enterprise market and to increase the intensity with which it infuses products and services with a wide range of AI capabilities. I am pleased to say that by focusing on these priorities, Pearson has generated strong operational and financial outcomes across its five business units with a strategy to deliver long-term profitable growth.

This has resulted in a strong performance for shareholders, with distributions of £474m through dividends and the share buyback programme, and a total shareholder return for 2024 of 36%.

I am confident in Pearson's ability to continue to deliver attractive sales growth with improving margins and strong cash flows

to support both investment and shareholder distributions.

Reflecting on Pearson's robust performance in 2024, and the Board's confidence in the outlook for the business, the Board is recommending a 6% increase in the final dividend, for a full-year dividend of 24.0p per share. This will be paid on 9 May 2025 to shareholders on the register on 21 March 2025.

Significant strategic progress

During 2024, the Board oversaw a comprehensive review of Pearson's business and its markets. This process shone a light on the essence of Pearson and three core elements that span every market it serves: creating and curating content; distributing that content digitally and physically; and building and verifying skills.