Pearson reports ‘strong’ first half with adjusted operating profit up 44%

Pearson has reported a "strong" financial performance for the first half of 2023, with underlying sales growth of 6% to £1.9bn (2022: £1.8bn) and adjusted operating profit up 44% to £250m (2022: £160m). Chief executive Andy Bird described the results as “the highest we’ve seen for at least the last 10 years".

The business also reported a “strong operating cash flow performance” of £79m, compared to £9m at the half-year mark in 2022, reflecting “strong trading” and the benefits of its £120m cost-efficiency programme for 2023.

Underlying group sales growth in the first six months to 30th June 2023 was attributed to particularly strong performances in English Language Learning and in Assessment & Qualifications, which was up 7%. English Language Learning sales increased 44% due to increased Pearson Test of English (PTE) volumes, which were up 76%.

The report states that the strength of English Language Learning growth was “heightened by comparison to a prior period in which global mobility had not fully resumed and supported by favourable migration policy in Australia [and] market share gains in India". The online self-study business, Mondly, also performed well, with paid subscriptions increasing 41%.

Workforce Skills sales grew 9%, with “good” growth in both Vocational Qualifications (up 7%) and Workforce Solutions (up 14%), however Virtual Learning sales decreased 15% and Virtual Schools declined 2%. Higher education sales were down 2%, in line with expectations, driven by a decline in enrolments and loss of adoptions to non-mainstream publishers.

Cumulative paid subscriptions to Pearson+ increased 200% to 938,000 for the full academic year, compared to 329,000 year-on-year. Overall, net cash generated from operations stood at £106m for the first half of 2023, compared to £53m this time last year.

The report also noted the organisation’s continued implementation of Artificial Intelligence (AI) across the business, announcing that additional generative AI study tools will launch in Pearson+ and Mastering in autumn 2023.

It says “these study tools combine Pearson’s trusted content and structured pedagogy with conversational AI capabilities to provide personalised real-time support for students in a secure Pearson product environment, which is free from the noise and corruption of web-based AI models".

Bird said that the enhancements would enable students to automatically summarise the content and generate additional study questions in Pearson+ e-text and channels, and that Mastering would also have AI assisted study tools that generate practice problems to help students work through difficult topics. “All of this is possible, because the value of our proprietary intellectual property and datasets, which we believe will only increase over time,” he said. “I very much see generative AI as being a net positive for Pearson.”

Of the results overall, Bird said: “Our excellent performance in the first half of 2023 means we are confident of achieving our full year expectations. We have continued to execute well operationally and maintained a sharp focus on delivering efficiencies while positioning our portfolio for long-term growth.

"The progress we are making to accelerate our digital journey, increase interconnectivity and leverage our long-standing AI capabilities will enable us to serve an ever-greater number of individuals and enterprises with our trusted, proprietary learning content.”