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Pearson 2020 Full Year

Results and Strategy Update

Monday, 8th March 2021

Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 www.global-lingo.com 2

Introduction

Andy Bird

Chief Executive, Pearson plc

We are Pearson plc

Hi, everyone. I am Andy Bird, Pearsons Chief Executive. Thank you for joining us today. As we have all experienced, the world has changed and the world of learning has changed. We are witnessing a significant shift in what, how and where we learn. And today, I am going to lay out our strategy for Pearson to embrace this change and grow our business. A number of us have met already, and I am looking forward to speaking with, and hopefully, even meeting more of you in the coming weeks and months. Pearson has long understood the value that learning brings to peoples lives. How critical it is in helping them progress and achieve their goals. Learning is one of the most powerful forces

for change in the world. We believe that everyone should have the opportunity to learn

because learning transforms lives and societies. Our purpose of Pearson is to help everyone achieve their potential through learning. We believe that Pearsons talent and content should reflect the diversity of the markets we serve, ensuring we create the best products with the greatest impact for the greatest number of people in the world. We believe that Pearson must have a positive impact on our customers lives, on the communities that we serve, and on the world of learning globally. Simply put, we intend Pearson to be the worlds pre-eminent learning company, delivering the worlds most valuable learning products to more people than ever before. This is simultaneously good for our business and good for the world, because when we demonstrate the power of learning, we grow our business and transform lives. Since joining Pearson, I have immersed myself in all conceivable aspects of the business. No stone has been left unturned. These insights have shaped the strategy that I am announcing today. I have also discovered how much progress has been made over the last five years. Our transition to a digitally-enabled company is mostly complete and we have strong foundations from which we can now grow. The most important thing I would like you to take away from today are the five reasons that Pearson is going to prosper. Our market has never been bigger. The learning market is vast and growing. And 2020 was the catalyst for individuals and organisations to change how they see the need to learn and how to learn. We can grow our existing businesses. Pearson has great assets and the investments we have made in our technology will enable us to grow our existing businesses. We can also reach more people than ever. We will build direct relationships with the existing and new consumers and support them through their entire lifetime of learning. The business sector is a huge new growth opportunity. We will help companies address the persistent skills gaps and massive shifts in the workforce that they face, opening up a huge new market for us. And finally, we have a unique competitive advantage. We have unrivalled expertise in learning. No one else can offer the combination of the highest quality content, the best digital products and delivery and the world-leading assessment capability that the market and our consumers demand. So that is an amazing position to be in. Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 www.global-lingo.com 3

A huge and growing market;

Growth in our core businesses;

Expansion to new customers for their entire lifetime; and The vast global business sector to go after with a competitive advantage no one else has. So let me explain our vision for how we will unlock all of that potential and return to growth, and why I am so optimistic about our future. I am going to outline my guiding principles for

leading this company into that future. I will also talk about our focus and our strategic

priorities, our culture, our portfolio and our new organisational structure.

Global learning opportunity

The global learning market is vast at around £5 trillion today, growing to over £7 trillion by

2030. Formal primary, secondary and tertiary education is 75% of that market, and we will

remain the significant majority. We expect over a billion more learners to have moved through formula education by 2030, a growing global middle class and longer careers are also driving lifelong and non-academic learning, particularly re- and upskilling, a trend that has been accelerated over the past year. This all adds up to a huge momentum in our industry and a great opportunity for Pearson to innovate and scale to meet the growing and changing demands of learners globally. The most interesting thing about that extraordinary £5 trillion learning market, it is currently only 3% digital and that is a huge opportunity for us to grow our business and with a highly attractive digital business model. What learners demand is evolving? COVID-19 has accelerated the trend to digital first in every part of our lives. There has been massive disruption to the worlds workforce and to education. Governments and businesses need their people to learn new skills and adapt. Learning is the key to that change and to the new opportunities it creates. How we learn is also changing driven by technology and new consumer habits. Consumers now focus on quality, accessibility and the return on their time. They want to track and prove what they have learned and to realise its value in their careers and their lives. We only need to look how consumer habits have changed in other industries. We no longer buy CDs. We listen to Spotify. We no longer buy DVDs. We watch Netflix. And we no longer go to a fitness studio. We take a peloton class. The fundamental growth drivers of the learning market are robust So the business of learning is changing, more direct-to-consumer, less formal, and more skill- based. And technology enhanced and accelerated by the rollout of 5G will enable more accessible, affordable, engaging and effective learning experiences everywhere. As a result, the market for learning is changing rapidly. Parents, learners, students, employers, institutions and educators are all now our customers. The gap between employment and learning is narrowing. Employers are becoming the universities of the future. This does not mean that we will be abandoning our traditional markets in education or our deep relationships with institutions. Those markets and institutions themselves are changing Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 www.global-lingo.com 4 to meet the needs of their consumers and they are doing so in partnership with us. We believe in the power of education, of measuring efficacy and outcomes to deliver real learning and we will work closely with faculty and institutions to ensure that Pearson always provides the most relevant and dynamic learning experiences to students.

Three market opportunities

But to grow, we must also go where our consumers want to go. We must partner with them as they embark on a lifetime of learning that prepares for a rapidly changing world. In this changing world of learning, I see three big global opportunities for Pearson: The rise in online and digital tools for schools and education;

The workforce skills gap; and

The growing need for accreditation and certification. As you will hear, these represent a balance between profitable markets, where Pearson has a leading position, and new markets, where we believe we have the capabilities to grow rapidly. We are in a strong position to seize those opportunities. And here is why I believe we will be successful.

Guiding principles to benchmark success

First, the value of our recent investments can now be realised. We have spent the last

several years in a challenging transition, developing our technology, particularly the Pearson Learning Platform and re-imagining our businesses. The Pearson Learning Platform is cloud-native, thanks to our partnership with AWS and others, and is built on the latest cutting-edge technology. It allows us to deliver personalised engaging learning experiences on a global scale. We have fantastic feedback from our learners and faculty on PLP-based products. In short, students learn better with our new platform and products. I believe that developing the PLP was the right decision for Pearson, and I am confident that we can now say we are truly a digitally-enabled company, but I am also clear that we need to move much faster and to capitalise on our technologys potential to drive growth across the company. Second, we are the global experts in learning. Nobody else has the breadth and depth of experience, expertise and relationships across the entire lifelong learning spectrum. We enabled tens of millions of learners per year across the world from schools to the universities, to the workplace. They consume our content. They follow our courses, sit our assessments, and are awarded our qualifications. Third, with the home for the best talent from our amazing passionate and dedicated employees to our brilliant authors. We will ensure that our talent reflects the diversity of our customers and we will provide the best environment, tools and support for our people to learn and thrive. Fourth, we are the only company who can offer end-to-end solutions at global scale from identifying a persons learning needs and helping them to achieve them to assessing their performance and granting credentials. Our customers can benefit from this virtuous circle multiple times throughout their life, as their learning and their career paths evolve. Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 www.global-lingo.com 5 Fifth, we have a competitive advantage in the integration of our intellectual property, content, products and assessment tools. A continuous flywheel that makes each part of our business more valuable. I am going to touch on this more later with our workforce initiatives, where we can apply our expertise from across the company into this new space. And finally, I am encouraged by Pearsons agility during the pandemic. The company responded rapidly to the needs of learners, schools and governments around the world, such as through:

The launch of our UK learns portal;

Scaling up our online test services; and

Enrolling dozens of new school districts and tens of thousands of new students into our

Virtual Schools.

The six strengths that I have just outlined are the roots of our future success. But we need to be honest and transparent about where we need to change, do new things and to do them well. Repositioning Pearson for growth to seize the global opportunity

So in just a moment, I will share the details of the five business divisions that are the

foundation for the long-term growth of the company:

Virtual Learning;

Higher Education;

English Language Learning;

Workforce Skills; and

Assessment and Qualifications.

All of which will be supported by our new direct-to-consumer division. Later in the presentation, I will also share new KPIs with a focus on the consumer and shareholder value. Then Sally will talk about our 2020 results and look forward to 2021.

Guiding principles to benchmark success

So now I want to explain the four guiding principles I use to lead this company into its next and most exciting chapter. We will put the consumer at the centre of everything we do, providing them with the highest quality and best value products. We will only be in businesses that can drive growth, scale, profitability and shareholder value. We will have the capabilities to deliver, including an entrepreneurial culture, diverse talent and effective technology. And finally, we will move with speed and agility. So Pearson will develop the highest quality products and services, utilising our technology and talented employees to drive innovation, excellence and quality in everything we do. Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 www.global-lingo.com 6

Virtual Learning

To explain how we will do that in practice, let us take a look at the first of our five business divisions, Virtual Learning. We have a leading position in this segment today in the United

States.

COVID has accelerated online learning and created a consumer trend that is not going away. Our polling suggests that 5% of K-12 parents now think virtual education is a viable permanent option for their children, compared with just 1% pre-COVID. I know that many of you had a variety of home-schooling experiences, but please do not make the mistake of equating our dedicated virtual schools to the home-schooling driven by the pandemic. Take a look at some of Pearsons virtual school students. [VIDEO] Virtual K-12 schooling is a £1.5 billion market in the United States alone and we saw market growth of high-single digits pre-COVID. In 2019, the total US virtual school enrolment was around 400,000 students, which represents only 1% of the entire K-12 population. We think the total addressable market will grow as more school districts retain online schooling post- COVID, and as more parents opt for virtual schooling permanently. We have a 17% share of that market and are present in 29 of the 34 states that currently allow virtual public schools. Last year, our virtual schools revenue was approximately £400 million following significant growth of 29% driven by COVID. In an increasingly global employment market in which parents want the greatest opportunities for their children, we see growing international demand for online UK and US curriculum schools, just as we have seen growth in global demand for online UK and US Higher Education.quotesdbs_dbs2.pdfusesText_2

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