REG - Pearson PLC - Pearson 2025 Preliminary Results
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RNS Number : 6200U Pearson PLC 27 February 2026
Pearson 2025 Preliminary Results (Unaudited)
27(th) February 2026 Confident in outlook, guiding to mid-single digit sales growth for 2026 and
beyond. Strong financial position, with £350m share buyback well underway.
Financial Highlights
£m 2025 vs 2024 £m 2025 2024
Business performance Sta
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ory
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s
Sales 3,577 +4%(1) Sales 3,577 3,552
Adjusted operating profit 614 +6%(1) Operating profit 507 541
Operating cash flow 571 -14%(2) Profit for the period 336 435
Free cash flow 527 +8%(2) Net cash generated from operations 731 811
Adjusted earnings per share 64.5p +4%(2) Basic earnings per share 51.4p 64.5p
Highlights
· Underlying Group sales growth of 4% for the full year. Group adjusted
operating profit of £614m, up 6% underlying with margin expansion from 16.9%
to 17.2%.
· Operating cash conversion remained strong at 93%, with an increase in working
capital given high Q4 sales growth. Free cash flow up 8%, resulting in free
cash flow conversion(3) of 125%.
· Adjusted earnings per share increased 9% at constant exchange rates(4), and 4%
on a headline basis. Full year dividend per share up 5% to 25.2p. Recently
announced £350m share buyback programme well underway.
· Significant strategic progress in delivering our 2025 priorities:
o Continued to lead with the application of innovative technologies, deepening
and scaling AI across our offering, driving measurable improvements in learner
outcomes and saving educators meaningful time, whilst embedding AI as a
foundational capability within Pearson.
o Advanced our enterprise strategy, securing eight partnerships with
industry-leading firms with continued momentum into 2026, announcing a new
strategic partnership with Salesforce.
· Positive outlook for 2026: mid-single digit underlying sales growth, adjusted
operating profit of £640m-£685m at FX rates as at the end of 2025 (£:$
1.35), including the impact of the 2025 product development impairment, and
free cash flow conversion of 90%-100%. Medium term guidance reiterated.
Omar Abbosh, Pearson's Chief Executive, said:
"We delivered on our goals in 2025, making significant progress in scaling AI
across our products and services and building tangible momentum in our
enterprise offering. The partnerships we secured with leading technology
companies are a recognition of Pearson's unique role at the intersection of
education, skills and workforce development, underpinned by our unrivalled
strength in assessments which positions us to deliver meaningful shareholder
value over the medium term. Through our unique competitive positioning, we
look to the future with confidence as we meet the growing and urgent need
among enterprises and learners to adapt to an AI-enabled world."
Statutory results
· Sales increased 1% on a headline basis to £3,577m (2024: £3,552m) with
currency movements partially offsetting underlying business performance.
· Statutory operating profit decreased 6% to £507m (2024: £541m). Underlying
operating profit growth and the reversal of prior property provisions were
more than offset by adverse currency movements and an £87m non-cash, one-off
impairment of legacy product development assets arising from strategic
platform convergence. This convergence is expected to deliver ongoing
operational improvements and results in a c.£15m per annum adjusted operating
profit improvement, on average, over the next 6 years in Higher Education.
2026 priorities
· Deliver on 2026 guidance for Group underlying sales growth, adjusted operating
profit and free cash flow.
· Lead with the application of innovative technologies, including AI powered
learning and assessment products and services, driving better attainment
outcomes and enhanced experiences.
· Progress core business and enterprise power metrics.
2025 Financial Performance
Underlying Group sales growth of 4% for the full year
· Assessment & Qualifications sales grew 4% with all sub-business units
contributing to growth.
· Virtual Learning delivered a strong performance with 8% sales growth for the
full year, and H2 up 18% driven by a 13% increase in 2025/26 Fall semester
enrolments, as well as favourable mix and funding.
· Higher Education sales grew 2%, with US Higher Education up 3% driven by
enrolments and pricing in core Courseware with adoption share maintained.
· English Language Learning sales increased 1%, driven by Institutional, with
Pearson Test of English (PTE) performing well against a tough market backdrop.
· Enterprise Learning & Skills sales grew 6% with a solid performance in
Vocational Qualifications and continued quarter-on-quarter improvement in
Enterprise Solutions.
Adjusted operating profit up 6% on an underlying basis to £614m
· Underlying performance up 6% driven by sales growth and continued cost
savings, partially offset by investment and inflation. Adjusted operating
profit margin rose to 17.2% (2024: 16.9%).
· Headline adjusted operating profit growth was 2% reflecting business
performance and portfolio changes partially offset by currency movements.
· Adjusted net finance costs increased to £57m (2024: £45m). The effective tax
rate on adjusted profit before tax held broadly flat at 24.5% (2024: 24.4%).
· Adjusted earnings per share increased 4% to 64.5p (2024: 62.1p) reflecting
adjusted operating profit growth and the reduction in issued shares due to the
2025 share buyback, partially offset by increased interest costs. Adjusted
earnings per share increased 9% at constant exchange rates.
Strong cash performance
· Operating cash conversion remained strong at 93%, with an increase in working
capital given high Q4 sales growth and increased investment spend. Operating
cash inflow decreased on a headline basis from £662m in 2024 to £571m in
2025 given these factors as well as currency movements.
· Free cash flow increased 8%, resulting in free cash flow conversion of 125%,
driven by the £0.1bn recovery of State Aid taxes. Free cash flow conversion
excluding the recovery of State Aid taxes was 98%, at the top end of guidance.
Strong balance sheet supporting continued investment and shareholder returns
· Year-end net debt of £1.1bn (2024: £0.9bn), with free cash flow more than
offset by the share buyback, acquisition of eDynamic Learning and dividends.
Net debt / adjusted EBITDA ratio of 1.3x (2024: 1.1x).
· Proposed final dividend of 17.4p (2024: 16.6p) which equates to a full year
dividend of 25.2p (2024: 24.0p) an increase of 5% compared to 2024.
· In 2025 we completed a £350m share buyback, reducing our share count by 5%.
In line with our capital allocation framework and supported by strong free
cash flow, we commenced a further £350m share buyback in January 2026.
· Secured new three-year, $800m revolving credit facility, enhancing our
liquidity and strategic flexibility.
· Return on capital was 11.3% (2024: 10.5%).
Continued operational and strategic progress, strengthening our core business
while expanding into faster growth adjacent markets
· Assessment & Qualifications:
o Pearson Professional Assessments continued to lead the global market in
large-scale testing services, securing several new contracts and maintaining
strong customer retention supporting future growth.
o US Student Assessment announced an integrated partnership with McGraw Hill
embedding formative assessments into core K12 curricula, and although we lost
the contract with New Jersey we subsequently renewed and extended several key
contracts, including Maryland and others at a late stage of contract
completion.
o In UK & International Qualifications, we commenced the delivery of the
new UK Government Test Operations Services contract and we expanded our
digital offerings, including increased adoption of onscreen assessment and
ActiveHub, our flagship teaching and learning platform.
o In Clinical Assessment we have implemented the first statewide adoption of our
digital platform in Tennessee and expanded our pharmaceutical business.
o Key innovations included the launch in Clinical Assessment of Revibe, a
wearable device designed to support individuals experiencing challenges with
focus and attention such as those with ADHD, alongside the integration of AI
by Pearson Professional Assessment to drive efficiencies in assessment
generation.
· Virtual Learning:
o We completed the launch of a new enrolment portal across our school network,
helping to remove friction in the enrolment process.
o During the year, we made targeted marketing investments to capitalise on
strong market demand for virtual schooling.
o We continue to enhance our career offering through new and extended
partnerships and also embedded our career programmes across the school
network, supporting students in their transition to the workforce.
o We deepened the integration of AI into our study tools, contributing to higher
course scores and end-of-semester pass rates, and expanded our teacher AI
custom assessment tool network-wide, driving increased adoption and usage
allowing teachers to focus on meaningful student interactions by halving the
time it takes to create custom student assessments.
· Higher Education:
o We expanded the successful monetisation of our Study Prep tool, extending
reach into International markets.
o Our AI powered study tools continue to deliver measurable improvements in
learning outcomes, with our latest research showing repeat usage of our AI
study tools increases the likelihood of a student becoming an active reader by
24 times.
o We also saw sustained momentum in our Inclusive Access offerings, achieving
another year of strong double digit sales growth.
o We made significant strategic progress in expanding into the fast growing
Early Careers space, broadening capabilities in career-readiness solutions
which support learners as they transition from formal education into the
workforce. We established a dedicated direct sales force to deepen and expand
our relationships with US school administrators and completed the acquisition
of eDynamic Learning - North America's largest provider of digital Career and
Technical Education.
· English Language Learning:
o We launched the PTE Express test, addressing growing demand for trusted online
testing among US-bound learners, and renewed our agreement with Australia's
Department of Home Affairs.
o Within Institutional, we continued to expand internationally, securing
customer wins in key markets including Latin America and Asia.
o We also continued to make progress on the application of innovative
technologies with the launch of Communications Coach - an AI-powered learning
solution integrated into Microsoft 365, enabling professionals to enhance
communication skills seamlessly within the flow of work, marking our first
go-to-market collaboration with Microsoft.
· Enterprise Learning & Skills:
o Vocational Qualifications secured several new contract wins including
apprenticeship courses with the UK Ministry of Defence, the Uzbekistan
Ministry of Education, and the Kingdom of Saudi Arabia, alongside
International BTEC expansion.
o Within Enterprise Solutions, we launched a global go to market approach,
establishing a dedicated enterprise sales team supported by marketing and
delivery.
o We also signed strategic partnerships with eight industry-leading firms,
securing sales opportunities and collaborating on joint go-to market
initiatives across a broad range of learning experiences.
Confident in future thanks to AI trends driving major multi-year demand for
upskilling and the validation of skills
· The advancement of AI drives large scale reconfiguration of
industries, occupations, roles and educational approaches. This is proving a
major demand driver for skilling and the validation of skills. Pearson's core
capability is assessment and verification and we already see resultant demand
from enterprises.
· Approximately 90% of 2025 adjusted operating profit was generated
from assessments, virtual schools and print. These are operationally complex,
large-scale services with very high quality requirements. These services
often need high levels of security, statistical evidence bases while meeting
regulatory outcomes, where trust in delivery standards is critical. We use AI
and other technologies to enhance the productivity of our operations and
improve services to customers.
· The remaining approximately 10% of 2025 adjusted operating profit
was generated primarily from digital courseware, where AI technologies play an
important role in personalisation. We have made significant progress in
advancing the application of AI to improve learning outcomes, and this
continues to be a company priority. We benefit from our deep integration
into the learning ecosystem, significant proprietary data, and demand for
trusted pedagogy.
Outlook
2026 guidance
Underlying Sales Growth Group Mid-single digit growth.
Assessment & Qualifications Low to mid-single digit growth, driven by new contracts, products and pricing.
Q1 to decline due to the loss of the New Jersey contract and PDRI headwinds,
returning to growth in subsequent quarters supported by new business and
recently awarded contracts.
Virtual Learning Stronger growth than 2025, particularly in H1, driven by a full year of
enrolment growth.
Higher Education Will grow more than 2025, supported by continued product and platform
innovation, pricing and Inclusive Access in our core US courseware business,
with improvement in the K12 channel.
English Language Learning Higher growth than 2025 driven by market share gains and pricing, with PTE
returning to growth. Growth will again be Q4 weighted given the seasonality of
the business.
Enterprise Learning & Skills Growth to be driven by a solid performance in Vocational Qualifications and
strategic account growth in Enterprise Solutions.
Group Profit Adjusted Operating Profit £640m-£685m at FX rates as at the end of 2025 (£:$ 1.35), which includes
lower amortisation in 2026 following the 2025 product development impairment.
Interest Adjusted net finance costs of c.£80m - includes associated costs of funding
the recently announced £350m share buyback.
Tax rate We expect the effective tax rate on adjusted profit before tax to be c.25%.
Cash flow We expect a free cash flow conversion of 90%-100%.
FX Every 1c movement in £:$ rate equates to approximately £5m adjusted
operating profit impact.
Exchange rates FY 2025 FY 2024
£:$
Average rate for profits 1.32 1.28
Period end rate 1.35 1.25
Medium term outlook
· Over the medium term, Pearson is well positioned to deliver a mid-single digit
underlying sales growth CAGR, sustained margin improvement that will equate to
an average increase of 40 basis points per annum and strong free cash
conversion, in the region of 90% to 100%, on average, across the period.
Financial Calendar
· 2026 Q1 Trading Update will be announced on 1 May 2026.
Executive change
Sally Johnson, Group Chief Financial Officer (CFO), has informed the Board of
her decision to leave the company later this year to take up the role of CFO
at a large privately owned business. The Board would like to thank Sally for
her contribution and leadership during her tenure as Group CFO.
Following a carefully managed succession process, Simon Robson, currently CFO
at Sky, will succeed Sally as Group CFO. Simon will join Pearson on 30 March
2026 and assume the role of Group CFO and Executive Director on 8 May 2026,
ensuring a smooth and orderly transition.
Simon brings extensive financial leadership from Sky, one of Europe's largest
media, technology and connectivity businesses. Having joined Sky in 1997, he
has held a number of senior finance and strategy roles, including CFO of Sky
Deutschland from 2015 to 2018, followed by Deputy Group CFO, before being
appointed Group CFO in June 2020. A chartered certified accountant, Simon
brings a strong track record of delivering high‑impact financial strategy
and operational excellence.
There is no further information to be declared in accordance with LR 6.4.8.
Contacts
Investor Relations Alex Shore +44 (0) 7720 947 853
Steph Crinnegan +44 (0) 7780 555 351
Gemma Terry +44 (0) 7841 363 216
Brennan Matthews +1 (332) 238-8785
ir@pearson.com (mailto:ir@pearson.com) https://plc.pearson.com/en-GB/investors
(https://plc.pearson.com/en-GB/investors)
Media
Edelman Smithfield Latika Shah +44 (0)7950 671 948
Pearson Laura Ewart +44 (0) 7798 846 805
Results event Pearson's prelim results presentation today at 09:30 (GMT). If you would like
to attend the in-person session, please email: amy.plavecky@pearson.com
(mailto:amy.plavecky@pearson.com)
Register to join the session virtually here:
https://pearson.connectid.cloud/register
(https://pearson.connectid.cloud/register)
About Pearson
At Pearson, our purpose is simple: to help people realise the life they
imagine through learning. We believe that every learning opportunity is a
chance for a personal breakthrough. That's why our Pearson employees are
committed to creating vibrant and enriching learning experiences designed for
real-life impact. We are the world's lifelong learning company, serving
customers with digital content, assessments, qualifications, and data. For us,
learning isn't just what we do. It's who we are. Visit us at pearsonplc.com.
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 Pearson gives no undertaking to update forward-looking
statements to reflect any changes in its expectations with regard thereto or
any changes to events, conditions or circumstances on which any such statement
is based. Readers are cautioned not to place undue reliance on such
forward-looking statements.
Operational review
Headline Underlying
£m 2025 2024(5) growth(2) growth(1)
Sales
Assessment & Qualifications 1,604 1,591 1% 4%
Virtual Learning 511 489 4% 8%
Higher Education 775 781 (1)% 2%
English Language Learning 405 420 (4)% 1%
Enterprise Learning & Skills 282 271 4% 6%
Total 3,577 3,552 1% 4%
Adjusted operating profit
Assessment & Qualifications 361 368 (2)% 1%
Virtual Learning 81 66 23% 29%
Higher Education 93 96 (3)% 0%
English Language Learning 50 50 0% 16%
Enterprise Learning & Skills 29 20 45% 40%
Total 614 600 2% 6%
(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 and 12.
(2) Headline growth rates include currency movements, and portfolio changes.
(3) Free cash flow conversion calculated as free cash flow divided by adjusted
earnings.
(4) Calculated using adjusted operating profit at constant exchange rates.
Constant exchange rates are calculated by assuming the average FX in the prior
year prevailed through the current year.
(5) In January 2025, the Group announced that Workforce Skills would evolve to
become Enterprise Learning & Skills, incorporating our IT Pro business
which was previously in Higher Education. Comparative figures have been
restated to reflect the move between segments, resulting in £45m of sales and
£12m of adjusted operating profit being transferred from Higher Education to
Enterprise Learning & Skills in full year 2024.
Assessment & Qualifications
In Assessment & Qualifications, sales increased 4% on an underlying basis
and 1% on a headline basis with currency movements partially offsetting
trading. Adjusted operating profit increased 1% in underlying terms due to
operating leverage on sales growth partially offset by investment and
inflation, and decreased 2% in headline terms due to currency movements
offsetting trading.
Pearson Professional Assessments sales increased 1% on an underlying basis
driven by new contract launches partially offset by the pause in a contract
delivered in 2024, which resumed in Q3, and headwinds in PDRI, which has been
impacted by US federal government hiring and spend reductions.
In US Student Assessment, sales increased 2% on an underlying basis supported
by scope increases with existing customers.
In Clinical Assessment, sales increased 8% on an underlying basis due to the
continued traction of our products in the market, pricing and digital product
growth.
In UK & International Qualifications, sales increased 9% on an underlying
basis driven by volume, pricing and strong International growth.
For Assessment & Qualifications, we expect low to mid-single digit
underlying sales growth in 2026. This will be driven by new contracts,
products and pricing. 2026 priorities include expansion into adjacent markets,
including high stakes test prep and formative assessments, along with key
contract renewals and new wins. We will also continue to expand
internationally, enhance operational excellence, and accelerate innovation,
particularly through AI.
Virtual Learning
Virtual Learning sales grew 8% on an underlying basis, with strong performance
in H2 driven by enrolment performance, favourable mix and funding. On a
headline basis sales were up 4% with currency movements partially offsetting
trading. Adjusted operating profit increased 29% in underlying terms, due to
operating leverage on sales growth, and 23% in headline terms due to this
partially offset by currency movements.
Enrolments for the 2025/26 academic year increased by 13% in the Fall
semester, benefiting from targeted marketing investments to capture demand. We
also successfully opened two new schools for the 2025/26 academic year
bringing our total number of schools to 41 across 31 states and renewed all
six of our long term school contracts.
For Virtual Learning, we expect even stronger underlying sales growth in 2026
than 2025, driven by a full year of enrolment growth. 2026 priorities include
continuing to capture growing demand for US virtual schooling, further
strengthening of our marketing and enrolment capabilities, targeted school
expansion and the ongoing application of AI to personalise teaching and
learning.
Higher Education
In Higher Education, sales increased 2% on an underlying basis and decreased
1% on a headline basis due to currency movements more than offsetting trading
and portfolio changes. Adjusted operating profit was flat in underlying terms
driven by operating leverage on sales growth offset by investment in the
business and inflation, and decreased 3% in headline terms due to currency
movements more than offsetting trading and portfolio changes.
In US Higher Education, underlying sales grew 3%, driven by enrolment growth
and pricing in our core Courseware business, partly offset by expected
declines in the K12 channel due to the transitionary period, with adoption
share maintained. We delivered strong growth in Inclusive Access, up 19%, and
achieved 2% growth in US digital subscriptions. In addition, we continued to
see strong monetisation of our Study Prep tool and sustained engagement with
our AI-powered study tools. International Higher Education faced ongoing
challenging trading conditions in mature markets, declining 7% for the full
year.
For Higher Education, we expect underlying sales to grow more in 2026 than
2025, supported by continued product and platform innovation, pricing and
Inclusive Access in our core US courseware business as well as improvement in
the K12 channel. 2026 priorities include building on our Early Careers
offerings, continuing to enhance access and integration across our Inclusive
Access offerings in the US, while focusing internationally on emerging
markets, digital expansion and content localisation.
English Language Learning
In English Language Learning, sales grew 1% on an underlying basis, driven by
Institutional, and decreased 4% on a headline basis due to currency movements
more than offsetting trading. Adjusted operating profit increased by 16% in
underlying terms due to cost savings partially offset by inflation and was
flat in headline terms due to currency movements offsetting trading.
PTE continued to perform well against a challenging market backdrop of
tightening migration policies. While volumes declined 5%, sales remained flat
and we continued to gain market share. Our Institutional business delivered a
solid performance, with strength in key Latin American markets and Asia.
For English Language Learning, we expect higher underlying sales growth in
2026 than 2025, driven by market share gains and pricing, with PTE returning
to growth. 2026 priorities include continued strong operational performance,
refreshing our Institutional product suite developing next‑generation
solutions for institutional and government partners, and supporting enterprise
customers with advanced upskilling capabilities.
Enterprise Learning & Skills
In Enterprise Learning & Skills, sales were up 6% on an underlying basis
and 4% on a headline basis due to currency movements more than offsetting
trading. Adjusted operating profit increased by 40% in underlying terms due to
operating leverage on sales and increased 45% in headline terms due to trading
performance and favourable currency movements.
Vocational Qualifications delivered a solid performance while Enterprise
Solutions growth improved quarter-on-quarter as we build momentum in our
enterprise approach and related sales capability, driven by the recently
announced partnerships.
For Enterprise Learning & Skills in 2026, we expect underlying sales
growth to be driven by a solid performance in Vocational Qualifications and
strategic account growth in Enterprise Solutions. 2026 priorities include
addressing growing demand for trusted talent solutions that help employees
work more effectively with AI, deepening value from our strategic partners and
broadening our validated skills data to support workforce mobility at scale.
Financial Review
Operating result
Sales increased on a headline basis by £25m or 1% from £3,552m in 2024 to
£3,577m in 2025 and adjusted operating profit increased by 2% on a headline
basis to £614m in 2025 compared to £600m in 2024 (for a reconciliation of
this measure see note 2 to the condensed consolidated financial statements).
The headline basis simply compares the reported results for 2025 with those
for 2024. We also present sales and profits on an underlying basis which
excludes the effects of exchange, the effect of portfolio changes arising from
acquisitions and disposals and the impact of adopting new accounting standards
that are not retrospectively applied, when relevant. Our portfolio change is
calculated by excluding sales and profits made by businesses disposed in 2024
or 2025 and by ensuring the contribution from acquisitions is comparable year
on year. For prior year acquisitions, the corresponding pre-acquisition period
is excluded from the current year, and for current year acquisitions, the
results for the current year are excluded. Portfolio changes mainly relate to
the acquisition of eDynamic Learning and disposal of Copp Clark in 2025.
On an underlying basis, sales increased by 4% in 2025 compared to 2024 and
adjusted operating profit increased by 6%. Currency movements decreased sales
by £112m and adjusted operating profit by £26m, and portfolio changes
increased sales by £7m and adjusted operating profit by £2m. There were no
new accounting standards adopted in 2025 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 and associated property charges,
one off-costs related to the UK pension scheme and certain other one-off
material items. A summary of these adjustments is included below and in note 2
to the condensed consolidated financial statements.
all figures in £ millions 2025 2024
Operating profit 507 541
Add back: Cost of major reorganisation - (2)
Add back: Product development impairment 87 -
Add back: Intangible charges 42 41
Add back: UK pension discretionary increase - 13
Add back: Other net gains and losses 3 7
Add back: Property charges (25) -
Adjusted operating profit 614 600
Costs of major reorganisation - In 2025, there are no costs of major
reorganisation. In 2024, there was a release of £2m relating to amounts
previously accrued.
Product development impairment charges in 2025 relate to the impairment of
product development assets as a result of courseware platform convergence.
There were no such amounts in 2024.
Intangible amortisation charges in 2025 were £42m compared to a charge of
£41m in 2024. This is due to increased amortisation from recent acquisitions
partially offset by decreased amortisation from assets reaching the end of
their useful economic lives.
UK pension discretionary increases in 2024 related to one-off pension
increases awarded to certain cohorts of pensioners in response to the cost of
living crisis. There were no such amounts in 2025.
Other net gains and losses in 2025 relate to the gain on disposal of Copp
Clark, a business in our Higher Education division, a fair value gain relating
to a previous disposal and costs relating to current and prior year
acquisitions and disposals. Other net gains and losses in 2024 related to
costs related to prior year acquisitions and disposals, partially offset by a
gain on the partial disposal of our investment in an associate.
Property charges in 2025 are a gain of £25m relating to reversals of
impairments of property assets that were previously impaired through property
charges. Impairment reversals have arisen from new sublets on previously
vacant space in corporate properties. There were no such amounts in 2024.
The reported operating profit of £507m in 2025 compares to a profit of £541m
in 2024. The decrease has been driven by unfavourable foreign exchange
movements, the product development impairment, investment and inflation,
partially offset by operating leverage on sales growth and cost savings, as
well as a reduction in one-off pension charges and property related impairment
reversals.
Net finance costs
Net finance costs increased on a headline basis from a net cost of £31m in
2024 to a net cost of £50m in 2025. The increase is primarily due to
increased net borrowing costs given increased average net debt following
last year's share buy back and movements on derivatives.
Adjusted net finance costs reflected in adjusted earnings in 2025 was £57m,
compared to a net cost of £45m in 2024. The increase is primarily due to
increased net borrowing costs given increased average net debt following last
year's share buy back and movements on derivatives.
In 2025, the total of items excluded from adjusted earnings was net income of
£7m compared to net income of £14m in 2024. For a reconciliation of the
adjusted measure see note 3 to the condensed consolidated financial
statements.
Taxation
The reported tax on statutory earnings in 2025 was a charge of £121m compared
to a charge of £75m in 2024. This equates to an effective tax rate of 26.5%
(2024: 14.7%), with the increase from prior year principally due to the
release of the State Aid uncertain tax provision in the prior year.
The total adjusted tax charge in 2025 was £136m (2024: £136m), corresponding
to an effective tax rate on adjusted profit before tax of 24.5% (2024: 24.4%).
For a reconciliation of the adjusted measure see note 4 to the condensed
consolidated financial statements.
In 2025, there was a net tax payment of £2m (2024: £119m net tax payment).
This includes a £97m receipt from HMRC in respect of the State Aid matter,
with an additional £17m of associated interest also received in the period.
The interest element is classified within interest received in the cash flow
statement. This repayment is a result of the Court of Justice of the European
Union handing down its decision on 19 September 2024 determining that the
United Kingdom controlled foreign company group financing partial exemption
did not constitute State Aid, thereby resulting in a refund of the £97m of
tax paid (plus £17m of interest) under the Charging Notices issued by HMRC in
2021. The balance excluding the State Aid repayment, principally relates to
tax payments in the US and the UK, and decreased due to lower tax liabilities
and installment payments for 2025.
A net deferred tax liability of £31m is recognised in 2025 compared to a net
deferred tax liability of £11m in 2024. The overall amount increased mainly
due to the ongoing utilisation of tax losses and other tax attributes. The
current tax creditor principally consists of provisions for tax uncertainties.
Other comprehensive income
Included in other comprehensive income are the net exchange differences on
translation of foreign operations. The loss on translation of £193m in 2025
compares to a loss in 2024 of £35m. The loss in 2025 arises from an overall
weakening of the majority of currencies to which the Group is exposed, in
particular the US dollar. A significant proportion of the Group's operations
are based in the US and the US dollar closing rate at 31 December 2025 was
£1:$1.35 compared to the opening rate of £1:$1.25. At the end of 2024, the
US dollar rate was £1:$1.25 compared to the opening rate of £1:$1.27.
Also included in other comprehensive income at 31 December 2025 is an
actuarial gain of £10m in relation to retirement benefit obligations. The
gain arises largely from a decrease in liabilities driven by lower long-term
inflation assumptions and updates to commutation factors. The gain in 2025
compares to an actuarial gain in 2024 of £5m.
Fair value losses of £7m (2024: losses 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).
Cash flow and working capital
Our operating cash flow measure is used to align cash flows with our adjusted
profit measures (see note 12 to the condensed consolidated financial
statements). Operating cash flow decreased on a headline basis by £91m from
an inflow of £662m in 2024 to an inflow of £571m in 2025 due to an increase
in working capital given high Q4 sales growth.
The equivalent statutory measure, net cash generated from operations, was an
inflow of £731m in 2025 compared to an inflow of £811m in 2024. 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 2025, reorganisation cash outflow
was £nil compared to £8m in 2024.
Free cash flow increased on a headline basis by £37m from £490m in 2024 to
£527m in 2025. When compared to operating cash flow, free cash flow includes
tax paid/received, net finance costs paid and net costs paid for major
reorganisation. The increase year on year is mainly due to the receipt of
monies in respect of the State Aid tax matter offset by the reduction in
operating cash flow.
In 2025, there was an overall decrease of £210m in cash and cash equivalents
from £543m at the end of 2024 to £333m at 31 December 2025. The decrease in
2025 is primarily due to the net cash generated from operations of £731m
being more than offset by dividends paid of £160m, share buyback programme
payments of £352m, own share purchases of £72m, capital expenditure on
property, plant, equipment and software of £134m, payments for the
acquisition of subsidiaries of £167m, and payments of lease liabilities of
£77m.
Liquidity and capital resources
The Group's net debt increased from £853m at the end of 2024 to £1,069m at
the end of 2025. The increase is largely due to free cash flow of £527m being
more than offset by the share buyback programme, dividend payments and cash
outflows related to acquisitions. In May 2025, the Group repaid its €300m
bond and closed out various related derivatives. In June 2025, the Group
secured a new three-year, $800 million revolving credit facility (RCF). This
facility can be utilised for general corporate purposes, enhancing our
liquidity, and is in addition to the Group's existing RCF. At 31 December
2025, the Group had drawn £0.3bn on its Revolving Credit Facilities.
At 31 December 2025, the Group had approximately £1.3bn in total liquidity
immediately available from cash and its RCFs maturing June 2028 and February
2029. In assessing the Group's ability to continue as a going concern for the
period until 30 June 2027, the Board analysed a variety of downside scenarios,
including a severe but plausible scenario, where the Group is impacted by a
combination of all principal risks from H1 2026, as well as reverse stress
testing to identify what would be required to either breach covenants or run
out of liquidity. The severe but plausible scenario modelled a severe
reduction in revenue, profit and operating cash flow from risks continuing
throughout 2026 and 2027. In all scenarios, the Group would maintain
comfortable liquidity headroom and sufficient headroom against covenant
requirements during the period under assessment even before modelling the
mitigating effect of actions that management would take in the event that
these downside risks were to crystallise. The directors concluded that the
likelihood of the reverse stress test scenario was remote.
Post-retirement benefits
Pearson operates a variety of pension and post-retirement plans. The UK Group
pension plan has by far the largest defined benefit section. This plan has a
strong funding position and a surplus with a very substantially de-risked
investment portfolio including approximately 50% of the assets in buy-in
contracts. We have some smaller defined benefit sections in the US and Canada
but, outside the UK, most of the companies operate defined contribution plans.
The charge to profit in respect of worldwide pensions and retirement benefits
amounted to £43m in 2025 (2024: £60m) of which a charge of £68m (2024:
£81m) was reported in operating profit and income of £25m (2024: £21m) was
reported against other net finance costs. In 2024, a charge of £13m related
to one-off discretionary pension increases was excluded from adjusted
operating profit, with no such amounts in 2025.
The overall surplus on UK Group pension plans of £484m at the end of 2024 has
increased to a surplus of £514m at the end of 2025. The increase has arisen
principally due to asset returns being higher than expected and inflation
over the period being slightly lower than was expected at the beginning of the
year. In total, our worldwide net position in respect of pensions and other
post-retirement benefits increased from a net asset of £450m at the end of
2024 to a net asset of £482m at the end of 2025.
Businesses acquired and disposed
On 24 July 2025, the Group completed the acquisition of 100% of eDynamic
Holdings LP ('eDynamic Learning'), a leading Career and Technical Education
(CTE) curriculum solutions provider for cash consideration of £168m. For
further details, see note 10 to the condensed consolidated financial
statements.
The cash outflow in 2025 relating to the acquisition of subsidiaries of £167m
includes £4m arising from the payment of deferred consideration in respect of
the prior year. The cash outflow in 2024 relating to acquisitions of
subsidiaries was £39m, 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 £5m (2024: £7m).
The Group disposed of Copp Clark in 2025 for consideration of £9m, resulting
in a gain on disposal of £8m, which has been recorded within other net gains
and losses. There were no disposals of subsidiaries in 2024 with cash outflows
relating primarily to prior year disposals. In 2025, the cash inflow relating
to the disposal of businesses was £8m (2024: outflow of £7m).
Dividends
The dividend accounted for in the 2025 financial statements totalling £160m
represents the final dividend in respect of 2024 of 16.6p and the interim
dividend for 2025 of 7.8p. We are proposing a final dividend for 2025 of
17.4p bringing the total paid and payable in respect of 2025 to 25.2p.This
final 2025 dividend, which was approved by the Board in February 2026, is
subject to approval at the forthcoming AGM. For 2025, the dividend is covered
2.6 times by adjusted earnings.
The final dividend will be paid on 8 May 2026 to shareholders who are on the
register of members at close of business on 20 March 2026 (the Record Date).
Shareholders may elect to reinvest their dividend in the Dividend Reinvestment
Plan (DRIP). The last date for receipt of DRIP elections and revocations will
be 16 April 2026. A Dividend Reinvestment Plan (DRIP) is provided by our
Registrar, Computershare Investor Services. The DRIP enables the Company's
shareholders to elect to have their cash dividend payments used to purchase
the Company's shares. More information can be found at
www.computershare.com/Investor.
Share buyback
On 27 February 2025, the Board approved a £350m share buyback programme in
order to return capital to shareholders. The programme completed in 2025.
During 2025, c32m shares have been bought back at a cash cost of £352m. The
nominal value of the cancelled shares of £8m has been transferred to the
capital redemption reserve.
On 21 January 2026, a further £350m share buyback programme was announced.
The programme commenced on 21 January 2026. In the period from 21 January to
25 February 2026, an additional c7m of shares have been repurchased.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2025
all figures in £ millions note 2025 2024
Continuing operations
Sales 2 3,577 3,552
Cost of goods sold (1,717) (1,741)
Gross profit 1,860 1,811
Operating expenses (1,351) (1,265)
Other net gains and losses 2 (3) (7)
Share of results of joint ventures and associates 1 2
Operating profit 2 507 541
Finance costs 3 (98) (112)
Finance income 3 48 81
Profit before tax 457 510
Income tax 4 (121) (75)
Profit for the period 336 435
Attributable to:
Equity holders of the company 335 434
Non-controlling interest 1 1
Earnings per share from continuing operations (in pence per share)
Basic 5 51.4p 64.5p
Diluted 5 50.7p 63.5p
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 year ended 31 December 2025
all figures in £ millions 2025 2024
Profit for the period 336 435
Items that may be reclassified to the income statement
Net exchange differences on translation of foreign operations (193) (35)
Attributable tax - 2
Items that are not reclassified to the income statement
Fair value loss on other financial assets (7) (2)
Attributable tax - -
Remeasurement of retirement benefit obligations 10 5
Attributable tax (3) (2)
Other comprehensive expense (193) (32)
Total comprehensive income 143 403
Attributable to:
Equity holders of the company 143 402
Non-controlling interest - 1
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 December 2025
all figures in £ millions note 2025 2024
Property, plant and equipment 210 216
Investment property 91 77
Intangible assets 9 3,009 3,026
Investments in joint ventures and associates 8 12
Deferred income tax assets 58 52
Financial assets - derivative financial instruments 14 20
Retirement benefit assets 518 491
Other financial assets 125 141
Income tax assets - 4
Trade and other receivables 105 125
Non-current assets 4,138 4,164
Intangible assets - product development 9 822 947
Inventories 66 74
Trade and other receivables 1,082 1,030
Financial assets - derivative financial instruments 2 31
Current income tax assets 15 103
Cash and cash equivalents (excluding overdrafts) 333 543
Current assets 2,320 2,728
Assets classified as held for sale - -
Total assets 6,458 6,892
Financial liabilities - borrowings (1,419) (1,157)
Financial liabilities - derivative financial instruments (2) (4)
Deferred income tax liabilities (89) (63)
Retirement benefit obligations (36) (41)
Provisions for other liabilities and charges (12) (13)
Other liabilities (76) (83)
Non-current liabilities (1,634) (1,361)
Trade and other liabilities (1,043) (1,054)
Financial liabilities - borrowings (62) (315)
Financial liabilities - derivative financial instruments (1) (54)
Current income tax liabilities (47) (32)
Provisions for other liabilities and charges (8) (23)
Current liabilities (1,161) (1,478)
Liabilities classified as held for sale - -
Total liabilities (2,795) (2,839)
Net assets 3,663 4,053
Share capital 158 166
Share premium 2,658 2,649
Treasury shares (9) (7)
Reserves 841 1,230
Total equity attributable to equity holders of the company 3,648 4,038
Non-controlling interest 15 15
Total equity 3,663 4,053
The condensed consolidated financial statements were approved by the Board on
26 February 2026.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2025
Equity attributable to equity holders of the company
all figures in £ millions Share capital Share premium Treasury shares Capital redemption reserve Fair value reserve Translation reserve Retained earnings Total Non-controlling interest Total equity
2025
At 1 January 2025 166 2,649 (7) 41 (14) 376 827 4,038 15 4,053
Profit for the period - - - - - - 335 335 1 336
Other comprehensive income / (expense) - - - - (7) (192) 7 (192) (1) (193)
Total comprehensive income / (expense) - - - - (7) (192) 342 143 - 143
Equity-settled transactions(1) - - - - - - 29 29 - 29
Taxation on equity-settled transactions - - - - - - (1) (1) - (1)
Issue of ordinary shares - 9 - - - - - 9 - 9
Buyback of equity (8) - - 8 - - (347) (347) - (347)
Purchase of treasury shares - - (63) - - - - (63) - (63)
Release of treasury shares - - 61 - - - (61) - - -
Dividends - - - - - - (160) (160) - (160)
At 31 December 2025 158 2,658 (9) 49 (21) 184 629 3,648 15 3,663
2024
At 1 January 2024 174 2,642 (19) 33 (12) 411 745 3,974 14 3,988
Profit for the period - - - - - - 434 434 1 435
Other comprehensive income / (expense) - - - - (2) (35) 5 (32) - (32)
Total comprehensive income / (expense) - - - - (2) (35) 439 402 1 403
Equity-settled transactions(1) - - - - - - 37 37 - 37
Taxation on equity-settled transactions - - - - - - 11 11 - 11
Issue of ordinary shares - 7 - - - - - 7 - 7
Buyback of equity (8) - - 8 - - (204) (204) - (204)
Purchase of treasury shares - - (33) - - - - (33) - (33)
Release of treasury shares - - 45 - - - (45) - - -
Dividends - - - - - - (156) (156) - (156)
At 31 December 2024 166 2,649 (7) 41 (14) 376 827 4,038 15 4,053
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 CASH FLOW STATEMENT
for the year ended 31 December 2025
all figures in £ millions 2025 2024
Cash flows from operating activities
Profit before tax 457 510
Net finance costs 50 31
Depreciation and impairment - PPE, investment property and assets held for 54 77
sale
Amortisation and impairment - software 112 117
Amortisation and impairment - acquired intangible assets 41 41
Other net gains and losses 3 5
Product development capital expenditure (285) (284)
Product development amortisation and impairment 364 291
Share-based payment costs 39 44
Change in inventories 5 15
Change in trade and other receivables (104) 32
Change in trade and other liabilities 35 (99)
Change in provisions for other liabilities and charges (19) (1)
Other movements (21) 32
Net cash generated from operations 731 811
Interest paid (73) (65)
Tax paid (2) (119)
Net cash generated from operating activities 656 627
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (167) (39)
Purchase of investments (5) (7)
Purchase of property, plant and equipment (29) (33)
Purchase of intangible assets (105) (91)
Disposal of subsidiaries, net of cash disposed 8 (7)
Proceeds from sale of property, plant and equipment 3 6
Lease receivables repaid including disposals 18 18
Interest received 33 20
Dividends received 1 2
Net cash used in investing activities (243) (131)
Cash flows from financing activities
Proceeds from issue of ordinary shares 9 7
Buyback of equity (352) (318)
Settlement of share based payments (72) (40)
Repayment of borrowings (974) (921)
Proceeds from borrowings 1,017 1,265
Repayment of lease liabilities (77) (78)
Dividends paid to company's shareholders (160) (156)
Net cash used in financing activities (609) (241)
Effects of exchange rate changes on cash and cash equivalents (14) (21)
Net (decrease) / increase in cash and cash equivalents (210) 234
Cash and cash equivalents at beginning of period 543 309
Cash and cash equivalents at end of period 333 543
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
1. Basis of preparation
The condensed consolidated financial statements have been prepared in
accordance with the accounting policies set out in the 2024 Annual Report,
which has been prepared in accordance with UK-adopted International Accounting
Standards and have also been prepared in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board (IASB).
There are no changes to accounting standards that have a material impact on
the condensed consolidated financial statements for the year ended 31 December
2025. The condensed consolidated financial statements 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.
In assessing the Group's ability to continue as a going concern for the period
to 30 June 2027, the Board analysed a variety of downside scenarios, including
a severe but plausible scenario, where the Group is impacted by a combination
of all principal risks from by all principal risks in both 2026 and 2027,
adjusted for probability weighting, as well as reverse stress testing to
identify what would be required to either breach covenants or run out of
liquidity. The net impact of the risks modelled in the severe but plausible
scenario was to reduce free cashflow during the period under assessment by
c41%.
At 31 December 2025, the Group had available liquidity of c£1.3bn, comprising
central cash balances and the undrawn element of its $1.8bn Revolving Credit
Facilities maturing June 2028 and February 2029, but which have options to
extend the maturities until 2030. Even under a severe downside case, the Group
would maintain comfortable liquidity headroom and sufficient headroom against
covenant requirements during the period under assessment. That is, even before
modelling the mitigating effect of actions that management would take in the
event that these downside risks were to crystallise. The directors concluded
that the likelihood of the reverse stress test scenario was remote.
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 30 June 2027.
The condensed consolidated financial statements have therefore been prepared
on a going concern basis.
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 2024 Annual
Report. In 2025, the valuation of acquired intangible assets recognised on the
acquisition of a business is also determined to be a key area of estimation.
The Group has also assessed the impact of the uncertainty presented by the
volatile macro-economic and geo-political environment on the condensed
consolidated financial statements, specifically considering the impact on key
judgements and significant estimates along with other areas of increased risk
including financial instruments, hedge accounting and translation
methodologies. No material accounting impacts relating to the areas assessed
were recognised in 2025. The Group has assessed the impacts of climate change
on the condensed consolidated financial statements. The assessment did not
identify any material impact on the Group's significant judgements or
estimates, the recoverability of the Group's assets at 31 December 2025 or the
assessment of going concern for the period to 30 June 2027. The Group will
continue to monitor these areas of increased judgement, estimation and risk
for material changes.
The financial information for the year ended 31 December 2024 does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The independent auditors' report on the full
consolidated financial statements for the year ended 31 December 2024 was
unqualified and did not contain an emphasis of matter paragraph or any
statement under section 498 of the Companies Act 2006.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
1. Basis of preparation continued
This preliminary announcement does not constitute the Group's full
consolidated financial statements for the year ended 31 December 2025. The
Group's full consolidated financial statements will be approved by the Board
of Directors and reported on by the auditors in March 2026. Accordingly, the
financial information for 2025 is presented unaudited in the preliminary
announcement.
Operating segments - In January 2025, the Group announced that Workforce
Skills would evolve to become Enterprise Learning and Skills, incorporating
our IT Pro business which was previously within Higher Education. Comparative
figures for 2024 segment information have been restated to reflect this move
between segments (see note 2).
2. Segment information
The Group has five main global business units, which are each considered
separate operating segments for management and reporting purposes. These five
business units are Assessment & Qualifications, Virtual Learning, English
Language Learning, Higher Education and Enterprise Learning and Skills. In
January 2025, the Group announced that Workforce Skills would evolve to become
Enterprise Learning and Skills, incorporating our IT Pro business which was
previously within Higher Education. Comparative figures have been restated to
reflect the move between segments, resulting in £45m of sales and £12m of
adjusted operating profit being transferred from Higher Education to
Enterprise Learning and Skills for the year ended 31 December 2024.
all figures in £ millions 2025 2024(1)
Sales
Assessment & Qualifications 1,604 1,591
Virtual Learning 511 489
English Language Learning 405 420
Enterprise Learning and Skills 282 271
Higher Education 775 781
Total sales 3,577 3,552
Adjusted operating profit
Assessment & Qualifications 361 368
Virtual Learning 81 66
English Language Learning 50 50
Enterprise Learning and Skills 29 20
Higher Education 93 96
Total adjusted operating profit 614 600
(1) Comparative amounts have been restated to reflect the move between
operating segments.
There were no material inter-segment sales.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
2. Segment information continued
The following table reconciles the Group's measure of segmental performance,
adjusted operating profit, to statutory operating profit:
all figures in £ millions 2025 2024
Adjusted operating profit 614 600
Cost of major reorganisation - 2
Product development impairment (87) -
Intangible charges (42) (41)
UK pension discretionary increases - (13)
Other net gains and losses (3) (7)
Property charges 25 -
Operating profit 507 541
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 and associated property charges, one off-costs related
to the UK pension scheme and certain other one-off material items.
Costs of major reorganisation - In 2025, there are no costs of major
reorganisation. In 2024, there was a release of £2m relating to amounts
previously accrued.
Product development impairment charges in 2025 relate to the impairment of
product development assets as a result of courseware platform convergence.
There were no such amounts in 2024.
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.
UK pension discretionary increases - Charges in 2024 related to one-off
pension increases awarded to certain cohorts of pensioners in response to the
cost of living crisis. There were no such amounts in 2025.
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 2025 relate to the gain on disposal of Copp Clark, a
business in our Higher Education division, a fair value gain relating to a
previous disposal and costs relating to current and prior year acquisitions
and disposals. Other net gains and losses in 2024 related to costs related to
prior year acquisitions and disposals, partially offset by a gain on the
partial disposal of our investment in an associate.
Property charges - In 2025, a gain of £25m relates to reversals of
impairments of property assets that were previously impaired through property
charges. Impairment reversals have arisen from new sublets on previously
vacant space in corporate properties. There are no such charges in 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 year ended 31 December 2025
3. Net finance income / costs
all figures in £ millions 2025 2024
Interest payable on financial liabilities at amortised cost and associated (51) (48)
derivatives
Interest on lease liabilities (20) (22)
Interest on deferred and contingent consideration (1) (2)
Fair value movements on investments held at FVTPL (7) (11)
Net foreign exchange losses (7) (3)
Fair value movements on derivatives (9) (19)
Interest on provisions for uncertain tax positions (3) (7)
Finance costs (98) (112)
Interest receivable on financial assets at amortised cost 14 25
Interest on lease receivables 3 4
Net finance income in respect of retirement benefits 25 21
Fair value movements on derivatives 6 26
Interest on provisions for uncertain tax positions - 5
Finance income 48 81
Analysed as:
Net interest payable reflected in adjusted earnings (57) (45)
Other net finance income 7 14
Net finance costs (50) (31)
Net interest payable is the finance cost measure used in calculating adjusted
earnings. The table below reconciles statutory net finance costs to net
interest payable .
all figures in £ millions 2025 2024
Net finance costs (50) (31)
Net finance income in respect of retirement benefits (25) (21)
Interest on deferred and contingent consideration 1 2
Fair value movements on investments held at FVTPL 7 11
Net foreign exchange losses 7 3
Fair value movements on derivatives 3 (7)
Interest on provisions for uncertain tax positions - (2)
Adjusted net finance costs (57) (45)
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
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 on investments classified as FVTPL and other
gains and losses on derivatives 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 year ended 31 December 2025
4. Income tax
all figures in £ millions 2025 2024
Profit before tax 457 510
Tax calculated at UK rate of 25% (2024: 25%) (114) (127)
Effect of overseas tax rate (3) (1)
Non-deductible expenses (5) 3
State Aid provision release - 63
Other tax items 1 (13)
Income tax charge (121) (75)
Tax rate reflected in statutory earnings 26.5% 14.7%
The increase in the statutory rate of tax in 2025 is principally due to the
release of the State Aid uncertain tax provision in the prior year.
In 2025, other tax items of £1m consists primarily of movements in provisions
for tax uncertainties and the recognition of previously unrecognised tax
losses. In 2024, other tax items of £13m consists primarily of movements in
provisions for tax uncertainties.
Adjusted income tax is the tax measure used in calculating adjusted earnings.
The table below reconciles the statutory income tax charge to the adjusted
income tax charge.
all figures in £ millions note 2025 2024
Income tax charge (121) (75)
Tax on cost of major reorganisation - 1
Tax on product development impairment (22) -
Tax on intangible charges (10) (10)
Tax on UK pension discretionary increases - (3)
Tax on other net gains and losses (1) -
Tax on property charges 7 -
Tax on other net finance income 2 5
Tax amortisation benefit on goodwill and intangibles 4 4
State Aid provision release - (63)
Movement in provision for tax uncertainties 3 6
Other tax items 2 (1)
Adjusted income tax charge (136) (136)
Adjusted profit before tax 6 557 555
Tax rate reflected in statutory earnings 26.5% 14.7%
Tax rate reflected in adjusted earnings 24.5% 24.4%
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
4. Income tax continued
The adjusted income tax charge excludes the tax benefit or charge on items
that are excluded from the profit or loss before tax (see notes 2 and 3).
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 Group is within the scope of the UK legislation in relation to Pillar Two
which was effective from 1 January 2024. Based on the most recent financial
information available for the constituent entities in the Group, the Pillar
Two effective tax rates in most of the jurisdictions in which the Group
operates are above 15%. There are a limited number of jurisdictions where the
transitional safe harbour relief does not apply, including jurisdictions that
may not meet the 16% effective tax rate threshold required to qualify for the
effective tax rate safe harbour test in FY25. However, the Group does not
expect a material exposure to Pillar Two income taxes in those jurisdictions.
In 2025, a repayment of £97m was received from HMRC in respect of State Aid.
This repayment is a result of the Court of Justice of the European Union
handing down its decision on 19 September 2024 determining that the United
Kingdom controlled foreign company group financing partial exemption did not
constitute State Aid, thereby resulting in a refund of the £97m of tax paid
(plus interest) under the Charging Notices issued by HMRC in 2021.
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 2025 2024
Earnings for the period 336 435
Non-controlling interest (1) (1)
Earnings attributable to equity shareholders 335 434
Weighted average number of shares (millions) 651.3 673.0
Effect of dilutive share options (millions) 9.0 11.0
Weighted average number of shares (millions) for diluted earnings 660.3 684.0
Earnings per share (in pence per share)
Basic 51.4p 64.5p
Diluted 50.7p 63.5p
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
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.
all figures in £ millions note 2025 2024
Adjusted operating profit 2 614 600
Adjusted net finance costs 3 (57) (45)
Adjusted profit before tax 557 555
Adjusted income tax 4 (136) (136)
Non-controlling interest (1) (1)
Adjusted earnings 420 418
Weighted average number of shares (millions) 651.3 673.0
Weighted average number of shares (millions) for diluted earnings 660.3 684.0
Adjusted earnings per share (in pence per share)
Basic 64.5p 62.1p
Diluted 63.6p 61.1p
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
7. Dividends
all figures in £ millions 2025 2024
Amounts recognised as distributions to equity shareholders in the period 160 156
The directors are declaring a final dividend of 17.4p per equity share,
payable on 8 May 2026 to shareholders on the register at the close of business
on 20 March 2026. This final dividend, which will absorb an estimated £109m
of shareholders' funds, has not been included as a liability as at 31 December
2025.
8. Exchange rates
Pearson earns a significant proportion of its sales and profits in overseas
currencies, the most important being the US dollar. The relevant rates are as
follows:
2025 2024
Average rate for profits 1.32 1.28
Year end rate 1.35 1.25
9. Intangible assets
all figures in £ millions 2025 2024
Goodwill 2,425 2,437
Other intangibles 584 589
Non-current intangible assets 3,009 3,026
Intangible assets - product development 822 947
Current intangible assets 822 947
Acquisitions resulted in the recognition of additional goodwill of £102m
(2024: £1m) and intangible assets of £71m (2024: £1m) (see note 10 for
further details).
There were no significant impairments to acquisition related or other
non-current intangibles in 2025 or 2024.
In 2025, impairment charges of £87m were recorded (2024: £nil) related to
the impairment of product development assets as a result of courseware
platform convergence.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
10. Acquisitions
On 24 July 2025, the Group completed the acquisition of 100% of eDynamic
Holdings LP ('eDynamic Learning'), a leading Career and Technical Education
curriculum solutions provider, for cash consideration of £168m, with a
further £3m paid into an escrow account in relation to a provision provided
for on the opening balance sheet. The acquired business will form part of the
Higher Education division. Net assets acquired of £66m were recognised on the
Group's balance sheet including £71m of intangible assets, comprising
customer relationships, technology, content and the brand, that will be
amortised over periods up to 16 years.
This transaction has resulted in the recognition of £102m of goodwill, which
represents the expected growth of the business, the workforce and know-how
acquired and the anticipated synergies, none of which can be recognised as
separate intangible assets. The goodwill is not deductible for tax purposes.
Details of the fair values of the assets and liabilities recognised at the
acquisition date and the related consideration is shown in the table below.
all figures in £ millions 2025 2024
Intangible assets 71 1
Trade and other receivables 7 -
Cash and cash equivalents 8 -
Trade and other liabilities (4) -
Deferred revenue (10) -
Provisions for other liabilities and charges (5) -
Deferred tax (1) -
Net assets acquired 66 1
Goodwill 102 1
Total 168 2
Satisfied by:
Cash consideration 168 1
Contingent or deferred consideration - 1
Total consideration 168 2
Cash flow from acquisitions
Cash - current year acquisitions (168) (1)
Cash paid into escrow account (3) -
Cash and cash equivalents acquired 8 -
Deferred payments for prior year acquisitions (4) (38)
Net cash outflow (167) (39)
eDynamic Learning generated revenues of £10m and a loss after tax of £1m for
the period from acquisition date to 31 December 2025. If the acquisition of
eDynamic Learning had occurred on 1 January 2025, the Group's revenue and
profit after tax would have been £18m higher and £1m higher, respectively.
The quoted profit numbers include the impact of purchase price adjustments
made on acquisition, including the amortisation of acquired intangibles and
reduced revenue and profit following fair value adjustments to the acquired
deferred revenue balance.
Total acquisition-related costs of £7m (2024: £5m; 2023: £12m) were
recognised within other net gains and losses.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
11. Net debt
all figures in £ millions 2025 2024
Non-current assets
Derivative financial instruments 14 20
Trade and other receivables - investment in finance lease 45 64
Current assets
Derivative financial instruments 2 31
Trade and other receivables - investment in finance lease 21 19
Cash and cash equivalents (excluding overdrafts) 333 543
Non-current liabilities
Borrowings (1,419) (1,157)
Derivative financial instruments (2) (4)
Current liabilities
Borrowings (62) (315)
Derivative financial instruments (1) (54)
Net debt (1,069) (853)
Included in borrowings at 31 December 2025 are lease liabilities of £478m
(non-current £416m, current £62m). This compares to lease liabilities of
£517m (non-current £452m, current £65m) at 31 December 2024. The net lease
liability at 31 December 2025 after including the investment in finance leases
noted above was £412m (2024: £434m). Net debt excluding net lease
liabilities is £657m (2024: £419m).
In 2025, the movement on borrowings from 31 December 2024 primarily reflects
the repayment of the €300m bond offset by the drawdown of £0.3bn on the
RCF.
For the purposes of the cash flow statement, cash and cash equivalents are
presented net of overdrafts of £nil (2024: £nil) which are repayable on
demand. When relevant, these overdrafts are excluded from cash and cash
equivalents disclosed on the balance sheet.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
12. 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 reorg-anisation Product develop-ment impairment Property charges Other net gains and losses Pensions Intangible charges Purchase/ disposal of PPE and software Net addition of right of use assets Dividends from joint ventures and associates Adjusted measure
2025
Operating profit 507 - 87 (25) 3 - 42 - - - 614 Adjusted operating profit
Net cash generated from operations 731 - - - 13 2 - (131) (45) 1 571 Operating cash flow
2024
Operating profit 541 (2) - - 7 13 41 - - - 600 Adjusted operating profit
Net cash generated from operations 811 8 - - 5 - - (118) (46) 2 662 Operating cash flow
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2025
12. Cash flows continued
all figures in £ millions note 2025 2024
Operating cash flow 571 662
Tax paid (2) (119)
Net finance costs paid (40) (45)
Special pension contributions (2) -
Cost paid for major reorganisation - (8)
Free cash flow 527 490
Dividends paid (including to non-controlling interest) (160) (156)
Net movement of funds from operations 367 334
Acquisitions and disposals (177) (58)
Net equity transactions (415) (351)
Other movements on financial instruments 9 (34)
Movement in net debt (216) (109)
Opening net debt (853) (744)
Closing net debt (1,069) (853)
13. 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.
The Group is under assessment from the tax authorities in Brazil challenging
the deduction for tax purposes of goodwill amortisation for the years 2012 to
2020. Similar assessments may be raised for other years. Potential total
exposure (including possible interest and penalties) could be up to BRL 1,423m
(£193m) for periods up to 31 December 2025, with additional potential
exposure of BRL 92m (£12m) in relation to deductions expected to be taken in
future periods. Such assessments are common in Brazil. The Group believes that
the likelihood that the tax authorities will ultimately prevail is low and
that the Group's position is strong. At present, the Group believes no
provision is required.
14. Related parties
There were no material related party transactions in the period that have
materially affected the financial position or performance of the Group and no
guarantees have been provided to related parties in the year.
15. Events after the balance sheet date
On 21 January 2026, a £350m share buyback programme in order to return
capital to shareholders was announced. The programme commenced on 21 January
2026.
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