Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 Introduction Andy Bird Chief Executive, Pearson plc We are Pearson plc Hi, everyone. I am Andy Bird, Pearson’s 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 people’s 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 Pearson’s 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 world’s pre-eminent learning company, delivering the world’s 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. www.global-lingo.com 2 Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 • 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 world’s 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 www.global-lingo.com 3 Pearson 2020 Full Year Results and Strategy Update Monday, 8th March 2021 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 technology’s 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 person’s learning needs and helping them to achieve them to assessing their performance and granting credentials.