Annual report and accounts 2024

Growth through

strategicexecution

Growth through

strategic execution

Pearson is a strong, trusted and

diversified business fuelled by a

compelling purpose. By executing

against our strategy we will

continue to enable and enrich

lifelong learning journeys while

driving growth and delivering

value for all our stakeholders.

Omar Abbosh

Chief Executive

Use this QR code to visit our Pearson plc website

where you can find the online version of this report.

Strategic report

At a glance 2

Business unit overviews 3

Accelerating our AI capabilities 6

Capitalising on the enterprise opportunity 7

Chair’s note 8

Chief Executive’s review 10

Strategic framework 12

Our business model and value drivers 13

Evolving our brand 17

Stakeholder engagement 18

Key performance indicators for 2024 24

Financial review 26

Sustainability 33

Sustainability data 49

Risk 57

Governance report

Corporate governance 68

Directors’ Remuneration Report 113

Additional disclosures 137

Financial statements

Statement of Directors’ responsibilities 141

Independent auditor’s report to the

members of Pearson plc

142

Consolidated financial statements 150

Company financial statements 208

Other information

Five-year summary 217

Financial key performance indicators 219

Additional information for

US listing purposes

225

Shareholder information 245

The strategic report, up to and including page 67,

was approved for issue by the Board on 13 March

2025 and signed on its behalf by:

Sally Johnson

Chief Financial Officer

https://plc.pearson.com/en-

GB/investors/2024-annual-

report-accounts

Annual report and accounts 2024 Pearson plc 1

Strategic report Governance report Financial statements Other information

Our purpose

We help people

realise the life

they imagine

through learning.

2024 highlights: Growth through strategic execution

Strong Group adjusted operating

profit margin of 16.9%

Read more on page 7

Sales

£3,552m

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

Underlying sales growth increase of

Free cash flow conversion**

117%

increase year-on-year of 26%

Adjusted operating profit

£600m

increase year-on-year of 10%

onanunderlyingbasis

* Taking portfolio adjustments and FX into account and excluding

theOPM and Strategic Review businesses.

** Free cash flow conversion calculated as free cash flow divided by

adjusted earnings.

What we do

Produce assessments

Author Learning IP

Design courses

Write curriculum standards

Deliver assessments

Distribute lessons

Learning experiences

Facilitate teaching

Score assessments

Measure skills

Credential skills

Evaluate talent

Create and curate

content

Distribute content digitally

andphysically

Build and verify

skills

At a glance

Annual report and accounts 2024 Pearson plc 2

Strategic report Governance report Financial statements Other information

Business unit overviews

We deliver world-class testing and certification solutions through

four distinct hubs: Pearson VUE, Clinical Assessment, US Student

Assessment, and UK & International Qualifications.

Pearson VUE excels as a global leader in scaled testing services, serving a

range of industry sectors with an extensive test centre network and flexible

delivery options. We meet the critical need for workforce reskilling

andprofessional certification, underpinning professional development.

In Clinical Assessment, we provide high-quality, research-backed

assessment products for mental health and learning evaluations,

serving the healthcare and education sectors.

Our US Student Assessment business specialises in customised

large-scale testing programmes for US K-12 education, focusing

on state-specific criteria and providing insights to stakeholders.

Outside the US, we offer globally recognised UK-curriculum-based

qualifications, such as GCSEs and A levels, as well as courseware

for English-speaking regions throughout the world, supporting

foundational student progression worldwide. These qualifications,

coupled with our content expertise and scale of delivery, make us

a key player in shaping global education standards and students’

futures.

In 2024, Assessment & Qualifications continued to demonstrate strong

financial performance, growth and overall customer retention. Pearson

VUE is expanding its test prep offering and growing its enterprise

assessment offering, while US Student Assessment is expanding into the

formative assessmentspace.

In UK & International Qualifications, we are capitalising on the

growingdemand for international education, and Clinical Assessment

is building out its international portfolio, creating new digitally-enabled

business subscription models and providing solutions to be used

inpharmaceutical trials.

In 2025, we will focus on maintaining our market-leading positions

through contract renewals and new wins, while actioning emerging

growth opportunities that include movement up the value chain,

growth into adjacent market segments and geographic expansion.

Assessment & Qualifications

Assessments are at the core

ofwhat we do and are a thread

that runs across Pearson.

We’re proud of the global

market-leading offer we have

developed as a result of our

quality products and

excellent customer

relationships.

Art Valentine

President – Assessment &

Qualifications

Sales

£1,591m

Virtual Learning

We provide high-quality, highly accountable online learning solutions

for K-12 students through two main offerings: Partner Schools (c.96%

sales) and District Partnerships (c.3% sales).

Partner Schools provides tailored virtual school solutions to public K-12

districts in the US, combining Pearson’s courseware, instructional

services and support for high-quality, flexible online learning.

District Partnerships offers customisable virtual education solutions

for K-12 districts, focusing on smaller student cohorts with a more

disaggregated approach than Partner Schools, ensuring access

toquality, adaptable remote learning for various needs.

We scaled our career and college readiness programmes and

enhanced curriculum in 2024, and will expand the offering portfolio-

wide in 2025. We also piloted a new enrolment portal, cutting the

average time to enrol in half and driving underlying enrolment

growth. Our 2025 goals includescaling our career and college

readiness programmes, andcontinuing to drive efficiencies in

enrolment.

Sales

£489m

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Business unit overviews continued

We aim to become the world’s leading destination for language

learners to build and prove their proficiency in English. Our

comprehensive language learning and assessment solutions include

institutional courseware, Wizard by Pearson and Mondly by Pearson,

designed for varied learning environments. For individuals looking

to demonstrate their English proficiency, we provide the Pearson

Test of English (PTE), Versant by Pearson and institutional proficiency

assessments. We blend pedagogical expertise in English language

education with advanced technology to deliver personalised, scalable

learning and assessment solutions for individuals pursuing personal,

academic, or professional objectives. In 2024, we achieved significant

milestones, including the launch of PTE Core, our newest test

designed to meet Canada’s specific migration requirements. Wizard

by Pearson in Brazil expanded, driven by its new online business and

new government partnerships. During the year, we also developed

two new AI products: one assisting teachers in generating lesson

plans and another offering digital language tutoring. In 2025, we

will continue to leverage AI and technology to enhance learning and

assessment, with a focus on growth in key regions.

We are the market leader in providing world-class learning

experiences in the post-secondary market. We also compete in select

disciplines for students in Secondary School Honours, Advanced

Placement, International Baccalaureate, Dual Enrolment and Career

and Technical Education (CTE) programmes.

We create teaching and learning experiences that are built on

thefront end of innovation to deliver positive outcomes at scale.

We bring learning to life for millions of students to help them

succeed and create pathways to careers. We also leverage our strong

relationships with educators to address their needs.

Our active learning is powered by features including AI study tools,

formative assessments, audio and video media and practice modules.

Our eText, MyLab and Mastering, and Revel products are created by

expert authors, backed by learning science and personalised with

interactive features.

In 2024, Higher Education returned to growth and grew adoption

share, led by the expansion of AI study tools products in the US.

In 2025, we will focus on continuing to scale AI-enhanced offerings,

winning adoption share and expanding our footprint in secondary

education (e.g. Honours, Dual Enrolment, CTE), post-secondary and

international markets – delivering exceptional value for learners and

educators through continuous product innovation.

Sales

£826m*

Sales

£420m

Higher Education English Language Learning

With demographic shifts and

the transformative impact

of AI in the jobs market,

the importance of language

learning as a differentiating

skill will continue

to grow.

Sharon Hague

President – English

Language Learning

* Includes sales from the IT & Professional Learning (ITP) business which will move to the Enterprise Learning and Skills business from January 2025.

Annual report and accounts 2024 Pearson plc 4

Strategic report Governance report Financial statements Other information

Workforce Skills**

Sales

£226m*

* Excludes sales from the IT & Professional Learning (ITP) business

which sat in the Higher Education business in 2024.

** In January 2025, Workforce Skills evolved to become Enterprise

Learning and Skills, bringing together Pearson’s enterprise

sales capabilities globally (excluding those of Pearson VUE) and

incorporating IT & Professional Learning (ITP). The Enterprise

Learning and Skills business unit will be led by Vishaal Gupta.

*** Announced in February 2025.

**** Announced in January 2025.

We offer career-focused qualifications and enterprise talent

solutions through two distinct offerings: Vocational Qualifications

(VQ) and Workforce Solutions, which includes the General Education

Development (GED) US High School certification alternative.

Workforce Skills will evolve to become Enterprise Learning and Skills,

incorporating IT & Professional Learning (ITP).

Our VQ business is a global leader in career-focused qualifications,

offering programmes that are rooted in real-world work scenarios.

These qualifications enable students, apprentices and workers

in the UK and globally to develop and apply knowledge, skills and

behaviours essential for employability. One in five working-age

individuals in the UK holds a BTEC from Pearson, and its vocational

qualifications are adopted by ministries of education globally to

advance skills reform.

Workforce Solutions addresses the evolving needs of businesses

forskilled talent in a rapidly changing economy, including

respondingto the opportunity and challenge of AI. We assist

companies in understanding and bridging their skills gaps, through

talent planning and sourcing and genuine skills development to

deliver commercial objectives. Workforce Solutions will be renamed

Enterprise Solutions from January 2025.

The GED helps individuals enter the workforce and pursue higher

education, in addition to enabling employees to advance in their

careers. It has over 20m graduates and is recognised across

90countries.

In 2024, we delivered a strong performance, with our qualifications,

learning and skills solutions performing well in institutional and

corporate markets. We continued to acquire new customers

and expand existing relationships, landing strategic partnerships

with ServiceNow, AWS*** and Microsoft**** and expanding our

partnership with Degreed.

In 2025, we will develop our talent planning, talent sourcing and

talent development solutions, and drive market share by joining

upEnterprise go-to-market (GTM) across Pearson and increasing

customer value.

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Strategic report Governance report Financial statements Other information

Accelerating our AI capabilities

Virtual Learning

We have embedded AI study tools into Biology

and World History homework questions to

provide high school students with step-by-step

assistance when they are faced with tricky

course material. For teachers, we've launched

AI-generated custom assessments for high

school English Language Arts. The goal is to

expand both the student and teacher AI tools

to additional grades, including more subjects,

aswell as adopt the AI study tools from

Pearson eTextbooks.

Higher Education

We have significantly expanded our AI-powered

study tools across Pearson+ eTextbooks,

Pearson+ Channels, MyLab and Mastering (MLM).

This includes growing the number of eTextbooks

and MLM titles that use AI tooling capabilities,

as well as adding AI instructor tools to assist

educators across a number of MLM titles. Select

new AI features include automated creation of

content based on a professor’s curriculum, 'ask

the video' capabilitiesand quiz-me study tools

with AI-generated flashcards.

We have rolled out our AI study tools into global

editions of leading higher education titles.

English Language Learning

We piloted Smart Lesson Generator, which

leverages Pearson's trusted IP with generative

AI to simplify educators' work and saves them

time by creating customised lesson content

and activities. In the 2024 pilot with selected

institutions, 80% of activated users generated

activities to support their lessons. In2025, the

focus will be on enabling educators to create

personalised activities tailored to students’

diverse needs, from those requiring extra

support to those ready for advanced challenges.

We have also launched an AI-powered Digital

Language Tutor, as part of Mondly by Pearson

solution bundles, specifically designed tohelp

businesses improve English proficiency

atscale and unlock employee potential. The

AI-tutor offers highly realistic, personalised

training underpinned by trusted learning

science, and builds on a successful pilot

programmeconducted with corporate clients.

Group-wide

We are deploying AI-driven code assistance to

help the organisation develop and deploy code

faster. Transitioning to a unified solution has

resulted in consistent, secure coding practices

and enhanced AI code generation capabilities.

Theresult is a demonstrable increase in

developer productivity and code quality.

Additionally, we are adopting a variety of data

and analytical AI solutions to enable better

data-driven decision making across our finance

functions. Select initiatives include automating

intelligent balance sheet reconciliation and

adopting AI-enabled propensity to pay models

toaid our cash conversion efforts.

Pearson’s AI-driven innovation spans

all our business units and corporate

functions, each harnessing AI’s

transformative power to enhance

learningexperiences and drive efficiency

and growth.

Each of our AI initiatives has the appropriate

strategies and infrastructure in place to

ensure that AI is being embraced and

utilised in a responsible way. By integrating

AI thoughtfully across our products and

services, we are positioning Pearson to lead

the next generation of learning – where

every student can achieve their full potential

through intelligent, personalised experiences

and every teacher can benefit from maximum

support and efficiency, allowing them to focus

on pedagogy and students.

Technology is

transforming the

skills and learning

landscape at a faster

pace than ever before.

Our goal is to be at

the cutting-edge of

this technology,

while ensuring

we deliver on

accuracy, safety

and compliance.

Dave Treat

Chief Technology Officer

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Strategic report Governance report Financial statements Other information

Capitalising on the enterprise opportunity

Assessment & Qualifications

In 2024, VUE secured several meaningful new

enterprise customer contracts and renewals.

One notable new customer is a Global Big

Tech leader renowned for its comprehensive

set of IT certification programmes in Customer

Relationship Management (CRM) and Cloud

Computing. The contract extends over five

years, showcasing our focus on enterprise

market expansion.

VUE’s comprehensive suite of services addresses

the intricate requirements of multinational

organisations, providing end-to-end testing

and certification capabilities across diverse

technological and geographical landscapes.

From establishing sophisticated sponsor systems

to creating integrated test administration

programmes, we are meeting the rigorous

demands of enterprise clients worldwide. Our

offerings span both in-person and online testing

platforms, proctoring models and web service

integrations, enabling us to solve complex

challenges for global enterprise customers with

precision andtechnological innovation.

Enterprise Learning and Skills

ServiceNow

Pearson is collaborating with ServiceNow

tosupercharge workforce development

andemployee experiences in the age of AI.

Pearson’s talent intelligence, credentialling

and training solutions will allow ServiceNow to

enhance learning for its teams and broader

communities.

In the first phase of the engagement, ServiceNow

will collaborate with Pearson on research and

insights that analyse how emerging technologies

will impact the workforce and will use Credly

by Pearson to transform internal learning

accreditation.

This multi-year deal will reshape how ServiceNow

employees and professional communities

develop critical skills for the AI era, enhancing

workforce productivity, agility and adaptability.

Degreed

Pearson’s partnership with Degreed empowers

organisations to adapt their workforce skills

to rapidly evolving technologies and market

dynamics, ensuring long-term business

resilience.

We will leverage Faethm data sets into Degreed’s

Skills dashboard to offer insights into trending

and valuable skills across industries. With this

capability, organisations will be able to compare

their workforces’ skills to industry benchmarks

to identify gaps and prioritise upskilling

investments.

Further integration between our respective

products holds the promise of improved

creationof learning pathways for a new level

ofmarket responsiveness.

At Pearson, we help enterprises lead

byenhancing workforce capability

intheageof AI.

Organisations need flexible and connected

solutions that can effectively prepare

tomorrow’s talent and foster resilience.

Our enterprise solutions enable people-

leaders to plan for, source and develop

critical future skills that drive business

outcomes and help them remain

competitive in today’s dynamic economy.

We help organisations unlock employee

potential and trapped value, build agile teams

and boost productivity. Our collaborations

with global companies and industry leaders

position Pearson as a trusted partner in

enterprise upskilling.

As the skills landscape continues to shift as

aresult of transformational trends such as AI

and demographic change, we will continue to

refine and expand our enterprise capabilities

to meet the evolving demands of businesses

across multiple sectors.

Microsoft

In January 2025, Pearson and Microsoft

announced a strategic partnership to address

one of the most pressing global challenges:

preparing the workforce for the AI-driven

economy. This collaboration focuses on

equipping employers, workers and learners

withinnovative AI-powered products

andservicesdesigned to support skilling

andreskilling across industries.

Partnership initiatives centre on personalised

learning at scale, expanding existing Microsoft

credentials and developing new ones. They

include powering Pearson content, assessment,

upskilling and certification services with Microsoft

Azure Cloud Computing and AI infrastructure,

rolling out new AI credentials and certifications,

and collaborating on AI-enabled tools to help

people develop skills and identify skills gaps while

they work.

The partnership also extends Microsoft’s

relationship with Pearson VUE through 2029,

emphasising a shared commitment to advancing

skills development globally.

Amazon Web Services (AWS)

In February 2025, Pearson and AWS announced

a global partnership to accelerate the delivery

of AI-powered learning for millions of people

around the world. As a strategic cloud provider

to Pearson, AWS provides infrastructure and

AI capabilities that enable Pearson to enhance

the experience of its products and services and

deliver them to learners at scale and speed.

Building on a long-standing collaboration, AWS

and Pearson are driving innovation in education

and skills development to make learning more

effective, efficient and accessible.

At Pearson, we have the opportunity

and a responsibility to help employers

and employees upskill, so they can

meet the future needs of a world

increasingly shaped by AI.

Vishaal Gupta

President – Enterprise

Learning and Skills

Annual report and accounts 2024 Pearson plc 7

Strategic report Governance report Financial statements Other information

2024 full year dividend growth

Return on capital in 2024

10.5%

Overview

I would like to start by thanking all of Pearson’s employees

for their great contribution to another successful year under

the guidance of Omar Abbosh, Pearson’s new Chief Executive.

Wehave witnessed huge and unprecedented change in our

external environment such as the rapid development of AI and

the need for upskilling employees, as well as significant progress

within Pearson. Our company’s purpose of helping people realise

the life they imagine through learning is more relevant than ever,

and the business continues to improve its ability to deliver on it.

A year of strong delivery

Pearson set three priorities for 2024: to deliver on market

expectations, to sharpen its focus on the enterprise market

and to increase the intensity with which it infuses products

andservices with a wide range of AI capabilities. I am pleased

tosay that by focusing on these priorities, Pearson has

generatedstrong operational and financial outcomes across

itsfive business units with a strategy to deliver long-term

profitable growth.

This has resulted in a strong performance for shareholders, with

distributions of £474m through dividends and the share buyback

programme, and a total shareholder return for 2024 of 36%.

Iam confident in Pearson’s ability to continue to deliver attractive

sales growth with improving margins and strong cash flows

tosupport both investment and shareholder distributions.

Reflecting on Pearson’s robust performance in 2024, and the

Board’s confidence in the outlook for the business, the Board is

recommending a 6% increase in the final dividend, for a full-year

dividend of 24.0p per share. This will be paid on 9 May 2025 to

shareholders on the register on 21 March 2025.

Significant strategic progress

During 2024, the Board oversaw a comprehensive review of

Pearson’s business and its markets. This process shone a light on

the essence of Pearson and three core elements that span every

market it serves: creating and curating content; distributing that

content digitally and physically; and building andverifying skills.

Pearson has come a

long way in the short

time that I have had the

privilege of serving as its

Chair, and I believe its

best years lie ahead.

Omid Kordestani

Chair

Chair’s note

Annual report and accounts 2024 Pearson plc 8

Strategic report Governance report Financial statements Other information

The Board

Pearson has a strong, effective and highly experienced Board,

which offers valuable perspective, insight and leadership.

Therewas one change to the membership of the Board in 2024

as Tim Score stepped down in April from his role as Deputy Chair

and Senior Independent Director. I would like to thank him again

for his long-serving contribution to Pearson, and I am delighted

that Graeme Pitkethly has taken over as Deputy Chair and Senior

Independent Director.

Governance

We have interacted with shareholders over the past year on

a range of topics including strategy, corporate governance,

environmental and social issues, as well as operational and

financial performance. As ever, we take on board their feedback

and seek to enhance our disclosures in the Annual Report.

Thisisa journey of continuous improvement, and I look forward

to hearing how we can continue to develop our approach.

As a Board, we are also committed to ongoing dialogue with

our shareholders on remuneration, and in 2024 our outreach

covered shareholders representing over 80% of Pearson’s equity

as well as certain proxy agencies and representative groups.

We would like to thank all those who have participated in this

engagement who provided us with constructive feedback.

While there is a diverse range of views on this topic, a clear

majority support our approach, which is designed to enable

the business to attract and retain the talent required to drive

Pearson’s success. A number of shareholders have suggested

that it would be beneficial to provide more comprehensive

narrative disclosure on our engagement activities, our

response to feedback, andthetalent markets that inform our

remuneration policies. Wehave sought to do this in the Directors’

Remuneration Report on pages 113-136.

Outlook

The Board is pleased with Pearson’s performance in 2024.

Itisconfident that the updates to Pearson’s strategy announced

by Omar last year set the business up for sustained profitable

growth that will continue to produce attractive returns for

shareholders in 2025 and beyond. Pearson has come a long way

in the short time that I have had the privilege of serving as its

Chair, and I believe its best years lie ahead.

Omid Kordestani

Chair

In a world that is being shaped by powerful demographic

shifts and rapid advances in AI, the review has reinforced the

Board’s conviction in Pearson’s vital role as a trusted provider

of learning and assessment services and the relevance of our

intellectual property. As a digital-first business, Pearson is

accelerating its use of AI across the company and using it as a

growth driver toimprove efficiencies and to enhance learning

andassessmentservices.

The review has also informed Pearson’s potential for growth,

andit is re-orienting to take advantage of the growth

opportunities in faster-growing adjacent markets in which

itiswell-positioned to succeed, with a particular focus

onEarlyCareers and Enterprise Skilling.

Learning for impact

We know that business success relies on talented employees,

who are motivated to lead. Pearson is strengthening its culture

of engagement through embedding performance-driven values

and behaviours, and empowering people to make a difference,

underpinned by our shared belief in the important role we

all play in helping people realise the life they imagine through

learning. This will support sustained performance over the

longer term as we support learning for everyone. Pearson is fully

committed to ensuring an ethical and responsible application of

advanced technologies in its products and services. It continues

to enhance processes and systems to ensure adherence to the

highest standards of compliance and reporting.

Annual report and accounts 2024 Pearson plc 9

Strategic report Governance report Financial statements Other information

Pearson is a

strong, trusted

business that is

well positioned

to capitalise

on emerging

opportunities.

Omar Abbosh

Chief Executive

Adjusted operating profit in 2024

£600m

increase year on year of 10%

on an underlying basis

Dear Shareholders,

After what has been a busy and exciting first year in my role as

CEO, I have been able to dig deep into Pearson, its businesses

and the opportunity ahead of us. I am pleased to report that

my initial observations of Pearson still ring true. We are a

strong business with a platform for growth. The strength of our

high-quality content, assessments and qualifications, gives us

astrong launch pad for our future aspirations. And, importantly,

weareatrusted business and a brand seen as the gold

standardin learning.

This year we once again delivered a strong financial performance

with underlying sales growth of 3% (excluding OPM and the

Strategic Review businesses) and adjusted operating profit of

£600m, up 10% compared to 2023. Operating cash conversion

was also strong at 110% and we achieved a free cash flow

conversion of 117%.

Growth through strategic execution

These results reflect continued strategic progress against

the priorities we set at the beginning of the year, along with

the ongoing momentum we are seeing across the business.

Ourfocus on execution in 2024 has resulted in a number

ofcrucial wins and has laid the foundation for our future

growth,specifically:

• In Assessment & Qualifications, Pearson VUE continued to

deliver good growth despite a particularly strong prior-year

performance. It also won and renewed a number of key

contracts, supporting pipeline growth. PDRI also delivered

strong growth following the completion of its acquisition last

year. In recognition of the need to better equip professionals

and students with AI skills we launched a new Generative AI

Foundations certification, to be delivered on Pearson VUE’s

online testing platform (OnVUE) and in physical test centres.

• In English Language Learning (ELL), our Pearson Test of

English continues to gain market share, despite challenging

market dynamics. Additionally, ELL continues to be a leader

in the use of AI across its products. In 2024, we piloted Smart

Lesson Generator, to help educators create customised

lesson content. And, we launched our first AI-powered Digital

Language Tutor in our Mondly product in the fourth quarter.

Chief Executive’s review

Annual report and accounts 2024 Pearson plc 10

Strategic report Governance report Financial statements Other information

• Higher Education returned to growth this year. This is an

important milestone, as the business continues to drive

improved execution in sales, while enhancing and expanding

the AI tools integrated into our courseware.

• Within Enterprise Learning and Skills, we have signed strategic

partnerships with ServiceNow, Degreed, Microsoft and AWS,

all of which are designed to address issues that enterprises

are facing in talent planning, sourcing and development. These

significant, multi-year partnerships are an important part of our

commitment to scale in the enterprise market.

• In Virtual Learning, we opened three new schools and added

a further 19 career programmes. This brings our total number

of schools to 40, with 24 career programmes across 30 states

for the 2024/25 academic year. Students now have access to

expanded college and career readiness offerings, including

through credentials via Credly.

• Across the business, we have implemented and built AI

powered tools supporting our efforts in customer service and

content generation. We are now putting those into the hands of

our people, with the goal of driving increased productivity and

efficiencies supporting improved operational performance.

• Finally, we have implemented the foundations of driving a

performance culture, with work to distinguish clear career

tracks for our people. We are also optimising organisational

spans of control within our management structure which

has identified additional operational efficiencies within the

business.

Closing the skills gap

As I’ve gotten to know the business and the environment in which

we operate, I’ve been telling you about two seismic trends shaping

learning and work: the breathtaking pace of AI change and massive

demographic shifts. These are creating a global skills gap that,

without intervention, risks becoming a global skills chasm. Pearson

is uniquely placed to help solve this issue and create more

opportunities for millions of people at all stages of their lives. This,

in turn, creates opportunity for Pearson.

We see evidence of this as we increase our focus on the

enterprise market and on our collaboration with partners who

can help grow our business and solve important workforce

challenges. Our multi-year deal with ServiceNow is aimed at

accelerating the identification, development and validation of

skills. As part of this, ServiceNow will collaborate with Pearson

on research and insights, while Pearson will use ServiceNow’s

AIpowered Now Platform to boost employee productivity,

efficiency and talent retention.

Our renewed partnership with Microsoft extends the commercial

relationship with Pearson VUE, drives incremental growth and

provides an opportunity for us to enhance our AI and technology

capabilities across the business. Importantly, it also addresses

one of the key challenges facing organisations today: skilling

in the age of AI. Together, we will launch a series of strategic,

go-to-market collaborations aimed at helping people build AI

proficiency. Thisway we drive joint innovation and growth for

both companies.

Pearson also announced the expansion of the company’s long-

standing strategic partnership with AWS, which will enhance the

learner experience of Pearson products through cloud and AI

tools. This partnership allows Pearson to further scale its learning

experience products, reaching more learners globally, with

more personalised experiences, equipping them with the tools

they need to succeed. In addition, this partnership also includes

opportunities to co-develop innovative go-to-market products to

help propel growth.

You can expect us to continue building the roster of capabilities

with some of the world’s leading players.

At the start of 2024, we set out to increase the intensity by which

we infuse AI into our products and services. There are some

wonderful examples across the business of how we’re integrating

AI into our offerings to enhance and personalise experiences for

learners and educators.

In Higher Education we have continued to evolve and expand the

AI tools embedded into our courseware since launching them in

September 2023. We have received very encouraging feedback

from students, and early results show that those using the tools

were more likely to engage in active studying methods such

as note-taking or self-testing. In addition, new tools for higher

education faculty are helping them automate time-consuming

tasks such as lesson planning. We’ve also applied our AI

technology in our Connections Academy schools, where we have

embedded AI study tools into our content, providing step-by-step

guidance to help high school students through tough material.

I’m particularly encouraged to see the growing commercial

momentum of these AI enhanced offerings alongside the

strategic enterprise partnerships that we have established.

As we look ahead, our priorities for 2025 won’t stray from

what we already have set out to do. We will deliver on market

expectations, continue to lead on the application of innovative

technologies such as AI, and grow our business across the

enterprise customer segment.

I am excited about what the future holds and I believe that

Pearson – fuelled by our purpose of helping people to realise

thelife they imagine through learning – is well positioned

to capitalise on the opportunities presented by the shifting

dynamics within the worlds of education and work.

Omar Abbosh

Chief Executive

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An integrated strategy

Strategic framework

The World’s Lifelong Learning Company

Helping people realise the life they imaginethroughlearning

Why

What

Core

Assessments & Verification

Synergies

Product

Bundling

Product

Development

Strategic

Partnering

Growth Pillars

Early Careers Enterprise Skilling

How

Capital Allocation Innovation Performance Culture

Overview summary

As the world’s lifelong learning company, we are committed to delivering on

ourmission of helping individuals realise the life they imagine through learning.

To do this, we are leveraging the strength of our brand and depth of our

thought leadership to execute a simple but powerful strategy built on three

interconnected pillars: (i) unlocking value from our core business, (ii) driving

execution synergies, and (iii) capitalising on medium-term growth vectors.

We have a strong core business in Assessments & Verification, which is a

significant part of our business today. By focusing on organic growth and

performance management, we will continue to drive value by scaling our

presence across multiple verticals and solution types. We are also prioritising

targeted market expansion via capital allocation to faster growth segments and

driving operational performance through areas ranging from sales, to sales

operations, go-to-market execution and process optimisation, all leveraging the

power of AI.

In addition to this focus, we will unlock additional value through execution-

based synergies across all our business units, specifically from bundling

products and services, a modern approach to software and product

development, and a focus on strategic partnerships.

Finally, we will drive incremental growth by building on two critical growth

vectors: demographic shifts and the expansion of AI, which we’ll capture

through additional solutions for Early Careers and Enterprise Skilling.

In Early Careers, we see a strong need for new approaches and alliances

for talent development, based around career and technical education and

apprenticeships, along with partnerships with educational institutions and

enterprises. We continue to see the Enterprise Skilling market as significant,

andwe have several relevant capabilities that will scale through expanded

go-to-market capabilities.

We will support these strategies through several operational enhancements.

First, we have established a capital allocation approach that will invest more

quickly into higher-growth segments and contribute to a higher, more sustained

growth rate for the business over time. Second, we will maintain a deep focus

on product innovation and aggressive deployment of modern technology, built

upon our robust data and AI capabilities. Finally, we will lean on the excellence

of our people and increase our execution orientation through a performance-

based culture that will drive increased customer centricity, investment in our

leaders and external collaboration in pursuit of value.

Pearson’s Integrated Strategic Framework

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Learning

Cognitively

Physically

Emotionally

Purposefully

Socially

Economically

Helping People Realise The Life They

Imagine Through Learning

* See pages 24 and 25 for our KPIs.

A powerful why

Brand

Our brand stands as a symbol of trust, respect and excellence,

embodying the quality that defines our company and

strengthens our position in the marketplace.

Thought Leadership

Our industry and customer knowledge allows us to be a global

thought leader. We develop deep, rigorous and analytical

perspectives, share domain insights and shape the conversation

on key trends.

Our stakeholders

Educators

Employers

Business Partners

Governments

Consumers

Communities

Employees

Shareholders

Why

Our business model and value drivers

Learning is a very human trait. Like sleep and nutrition, learning is vital in our

lives, and we know that when we learn more, we get happier, we get healthier,

we live longer and we can earn more.

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What we’re doing to progress

against our strategy

Growth driver Progress in FY24 Plans for FY25

What

Core

Assessments

& Verification

We built on our strengths in Assessments & Verification by enhancing

our AI tools and capabilities, exploring opportunities for geographic

and vertical sector expansion, driving cross-selling and assembling

dedicated product and sales teams to support key growth initiatives.

These efforts were underpinned by our unwavering commitment to

maintaining customer trust and delivering a consistently high level of

operational excellence.

We plan to expand our market presence by strengthening our

formative assessment capabilities, while broadening our enterprise

customer base through pre-hire assessments that support talent

acquisition and workforce development. We are also building

a strategy around the future of assessment and exploring new

expansion opportunities across new verticals and solution types.

Synergies

Product

Bundling

We reconfigured our incentive schemes, encouraging sales teams to

bundle products and make it easier for customers to purchase them.

We targeted the enterprise sector, where we built bundled solutions

to address hiring and skill development challenges, streamline badge

issuance and simplify contracting, while also bundling formative and

summative assessment products in the US Student Assessment

space.

We will expand our focus in enterprise by taking modular, commercial

bundles to market, helping companies accelerate skilling in the era

of AI. Solutions will integrate into existing talent lifecycles and tech

stacks, addressing core challenges for business executives and HR

teams. We will also implement key account management processes to

enable more seamless experiences for our top customers.

Product

Development

We are adopting modern approaches to product design,

development and deployment to drive sales and margin synergies.

This includes platform modernisation, common services and data

platforms, harmonised tech stacks and the adoption of tooling best

practices, with an early achievement being the launch of our Digital

Language Tutor. Our new ‘Product Excellence’ programme provides

centralised oversight and governance, ensuring consistent quality

and continued leadership in the application of innovative technology,

like GenAI.

We are extending our platform modernisation initiatives to the

enterprise sector, leveraging AI to enhance learning and experience

platforms. We will improve our data architecture, establish a robust,

enduring product governance framework and align the organisation

to a unified architecture. Our adaptive product roadmap review cycle

will drive courseware evolution and an optimised product mix while

we continue to implement AI and data-driven solutions for content

generation, enablement and customer support.

Strategic

Partnering

We are distinguishing between transactional and strategic

relationships, opening up possibilities for reciprocal trade, joint go-

to-market and joint innovation, while simultaneously consolidating

vendor spend. We’ve expanded several relationships, including

those with Microsoft and AWS, which are set to drive transformative

change across our business.

We will focus on maximising value from our recently announced

partnerships with Microsoft and AWS, while also finalising agreements

with new strategic partners. We intend to leverage the capabilities

and expertise of our key partners to drive scale, enhance our go-

to-market strategies and deliver customer solutions aligned with

evolving market demands.

Our business model and value drivers continued

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Our strategy is evolving to drive value

from existing strengths while addressing

emerging opportunities in order to

deliver sustainable growth.

Sue Kolloru Barger

Chief Strategy Officer

What we’re doing to progress against

our strategy continued

Growth driver Progress in FY24 Plans for FY25

What

Growth

Pillars

Early

Careers

We continued to build upon our unrivalled intellectual property

and expertise in GED and vocational qualifications, grow our

virtual career and technical education offering, and invest in our

strong network of institutional and enterprise partners. We shared

thought leadership focused on the future of work, implications of

technological advancements and evolving roles of governments,

educational institutions and enterprises. These efforts enabled us to

support key stakeholders as they navigate the transformative impact

of AI and demographic shifts on the future workforce.

We are advancing our commitment to future workforce readiness,

launching new learning solutions that leverage our extensive career,

technical, and professional content and expertise. We are also

expanding industry association and employer partnerships to address

critical skill gaps and labour shortages, and expand the scope of

education pathways to employability.

Enterprise

Skilling

We demonstrated our commitment to growth in the Enterprise

Skilling space through dedicated efforts to address several enterprise

needs, including pre-assessing new employees, identifying high-value

skills and aptitudes for Early Careers, creating learning and upskilling

pathways, and supporting the redesign of the future workforce. Our

recent collaborations with ServiceNow and Degreed, as well as the

creation of Faethm’s patented skill proficiency framework, further

exemplify our commitment to impactful human capital investment.

The formation of Enterprise Learning and Skills as a dedicated

business unit will enable a more focused execution model. We will

continue to develop end-to-end Enterprise Skilling solutions that

enable people-leaders to plan for, source, and develop future skills

that drive business transformation and unlock employee potential.

We will leverage our data analytics and insights capabilities to enable

personalisation, while leveraging strategic partnerships and our new

enterprise sales organisation to streamline go-to-market and enable

flexible, cohesive offerings for our customers.

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How we create long-term

stakeholder value

Our operational foundations

How

Performance

Culture

People

Our people are the driving force behind our mission, passionately dedicated to empowering learners

worldwide. Their commitment and expertise form the foundation of our success, shaping who we are

and what we achieve as a company.

Partners

Our partners share Pearson’s values and commitment to education. Our strong relationships with

governments, customers, non-governmental organisations (NGOs) and other global organisations help

us to amplify our positive impact on learners around the world.

We will remain committed to the needs, interests and

development of our people and partners by continuing

to invest in their growth, including in the evolution of

our career architecture, pathways and internal mobility

processes aimed at helping our people connect, learn

and reskill.

Innovation

Data & Insight

Through the effective and responsible use of data, we are able to know our customers better and

serve them more effectively. We are further developing our capabilities in data analytics and insights to

help identify skill gaps and provide compelling solutions to workforce challenges.

R&D and Product Innovation

Our dedicated learning efficacy and product teams are committed to creating learning products that

offer a great user experience and improved learning outcomes. Through ongoing innovation and

Research and Development (R&D), we develop and incorporate the most advanced technologies,

including generative AI, into our products and services.

Artificial Intelligence

We are integrating AI-driven tools across the company to enhance learning outcomes, personalise

educational experiences and streamline operations. Our AI tools cater to both students and

educators, enabling effective, impactful learning to take place at every stage of the educational journey.

We will continue to explore new technologies and

methodologies to enhance learning experiences

and outcomes, while also leveraging our innovation

architecture to systematically identify, experiment with,

and scale innovations to build a strong foundation for

long-term growth. Through this journey, we will remain

committed to responsible AI and ethical data practices,

ensuring transparency, fairness and impact

in education.

Capital

Allocation

Capital Allocation

We align our investment priorities around where we see the best opportunities for growth and

returns. Firstly, Assessments & Verification and then Enterprise Skills and Early Careers. English

Language Learning is relevant to each of these areas of investment focus.

We will invest both organically and inorganically in high-

growth segments to contribute to a higher, sustained

growth rate over time, while keeping a net debt to

EBITDA of around two times on average and upholding

our dividend policy.

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Evolving our brand

As the world’s lifelong learning company, our purpose is clear:

tohelp people realise the life they imagine through learning. This

isn’t just what wedo, it’s who we are, and we must reflect this

in how we show up every day. With a focused business strategy

that positions us for growth, we’re seizing the moment to make

our brand the driver it should be – a force that accelerates our

ambitions and brings clarity and strength to everything we do.

We will launch our new brand in 2025, taking bold steps to

strengthen our position as the leader in lifelong learning.

Wehave developed a comprehensive brand strategy that

notonly differentiates us in a competitive marketplace but also

amplifies the value we bring to our customers and stakeholders.

We see a significant opportunity to reframe how people think

about the role learning plays in their lives, elevating it to be as

vital as sleep, nutrition and exercise. While achieving a specific

grade, securing a new job or upskilling a workforce are significant

outcomes, learning science has shown us that the effects are

even more far-reaching. The research shows us that learning

impacts us cognitively, physically, emotionally, purposefully,

socially and economically. Our brand strategy is designed to

highlight the true power of learning, its multi-faceted outcomes

and our unique expertise, cementing our role as the partner of

choice forlearners and customers worldwide.

At the heart of this transformation is a new visual identity that

unifies our portfolio under a modern, cohesive and impactful

presence. Our refreshed brand will present us as a breakthrough

leader, making it easier for our customers to understand and

navigate the breadth of what we offer.

This clarity will drive deeper connections with

our audiences, ensuring that we continue to

stand out in the crowded landscape of learning

and assessments.

We recognise that rolling out a new brand is

a strategic journey, not an overnight change.

To maximise its impact, we will implement this

transformation in carefully planned phases,

beginning with the areas that are most critical

to our growth. Thisincludes a focused emphasis

on enabling key initiatives suchas Enterprise

Skilling and Early Careers – two segments where

we see significant opportunities to expand our

reach and deliver measurable value. By aligning

our brand launch with these priorities, we are

positioning ourselves to accelerate growth

andenhance our impact on individual learners

and organisations alike.

As we move forward, our new brand will be

a powerful engine for progress, supporting

our purpose and company behaviours. This

evolution marks a significant milestone in our

journey, underscoring our commitment to driving

innovation and delivering meaningful outcomes for

all those we serve.

This rebrand reflects our ambition

to activate our purpose, strengthen

our differentiated position, and

deepen trust with our

stakeholders through an

even stronger, more

focused brand identity.

Ginny Cartwright Ziegler

Chief Marketing Officer

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Engaging with our stakeholders

Pearson has a diverse network of trusted relationships with stakeholders, allowing us to leverage their insights and create real impact. All of these

stakeholders – shareholders, educators, employers, business partners, consumers, governments, communities, and employees – can contribute to

driving growth for the company while helping people realise the life they imagine through learning.

Stakeholder engagement

Educational Institutions & Educators

Why and how we engage

Our engagement with educators not only enables us to better

understand the evolving needs of the teaching profession, but

also provides unique insights on the needs of learners at all

levels. We also draw from the experience of educators to inform

the development of our digital tools, which are designed to

enhance the teaching and learning experience.

In our Virtual Schools business, our annual teacher and school

leader conferences bring together teachers, school staff and

Pearson teams to attend sessions facilitated by experts across

the learning and education industry.

In our US Student Assessment business, we hold working

sessions with educator committees in customer states as

assessments are being developed.

In our Higher Education business unit, we employ a full-

time team of active faculty advisers dedicated to supporting

instructors in the set-up and use of our products. We conducted

two surveys with faculty in 2024, measuring and tracking

educator sentiment on the use of generative AI in learning and

other topics. The business unit delivered nearly one hundred

professional development webinars, including some dedicated

exclusively to AI, that were attended by thousands of college and

university instructors.

We’re engaging with learners

and educators to inform

how we evolve our AI tools

andcontent, so we can create

a frictionless and personalised

learning experience.

Tom ap Simon

President – Higher Education

and VirtualLearning

In our English Language Learning business unit, we are shaping

our AI-powered Smart Lesson Generator tool with input and

feedback from educators as part of its development. This tool is

designed to help create customised lesson content and activities.

In the UK, we released the third Pearson School Report in 2024,

which brings together the perspectives of over 9,000 educators

and 2,000 students. The most recent report expanded in size

and scope to build an even richer snapshot of life in schools and

to articulate how educators are rising to meet challenges while

embracing opportunities such as digital innovation.

Outcome of engagement

Our strong relationships with educators act as a differentiator for

Pearson and allow us to become a trusted partner to them. Our

engagement nurtures a better understanding among educators

of our market offering, while also providing us with insights on

attitudes and engagement with our products.

Many of our Pearson authors are also educators, as well as

experts in their fields. They give us valuable insights about how

their own students use our products, and they help us test new

ways of using digital tools in the courseware they author.

Our Virtual Schools conferences ensure that educators learn

from one another in peer-to-peer engagement, tailoring

solutions and exploring learnings that support the needs

of students.

In our Higher Education business, our faculty engagement

provides ongoing feedback on new AI product features and

helps us understand how to best tailor those features to

the needs of faculty and students, helping to enhance their

learning experience.

The Pearson School Report is another example of how listening

to and engaging with educators builds trust and visibility with this

important customer group.

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Employers

Why and how we engage

Employers are a key stakeholder for Pearson, with their views

becoming increasingly important as demographic shifts and AI

drive demand for new skills and new pools of talent. As a result of

these dynamic shifts, we have identified Enterprise as a medium-

term growth vector for the business, and ongoing consultation

and conversations with employers have helped shape our

offering and realise the opportunities we see in this space. We

also provide useful insights that help employers understand the

evolving labour market and shifting skills demands linked to the

impact of AI.

Our Enterprise Learning and Skills business unit helps workers

gain the skills they need to boost their employability and open

new career opportunities. We also help employers understand,

maintain and enhance the value of their most important asset

– their people. In our Vocational Qualifications unit, we design

Pearson’s BTEC, Higher National and T Level qualifications with

relevant sector experts and employers to ensure they cover the

most relevant content.

We also provide employers with data, thought leadership and

unique insights – shaping their business decisions and helping

to raise the profile of Pearson as a leader in workforce upskilling,

career learning and development.

This year Pearson VUE will launch its ‘2025 Value of IT

Certification Candidate Report’, the ninth in an ongoing series,

analysing the experiences of nearly 24,000 professionals

worldwide who have earned IT certifications with Pearson VUE.

This global study offers insights into why individuals pursue

certifications, how they benefit personally and professionally, and

the effect on their organisation’s performance.

The Pearson Skills Outlook reports, a thought leadership

series that uses data to forecast skills trends, have become

an important outreach and engagement tool with employers.

Our Skills Outlook reports not only help with lead generation;

they also provide data and information to employers and HR

managers looking for a deeper understanding of in-demand skills

and how they may change in the future.

English Language Learning has also published a large research

report in 2024 that analyses the habits of English learners in five

countries and explores how employers can better support them

in the workplace.

Outcome of engagement

Engagement with employers helps us create offerings that meet

the evolving needs of technology-driven labour markets and

appeal to large enterprise customers. Specifically, engagement

with our enterprise customers is helping us refine our offering

and go-to-market approach. For example, we have signed a

global multi-year deal with ServiceNow, the AI platform for

business transformation, through which we aim to supercharge

workforce development and employee experiences in the age

of AI.

Business Partners

Why and how we engage

Working with partners that share our belief in doing business

responsibly strengthens our supply chain relationships and

reduces risk. This helps us to improve our product offerings and

progress our commitments.

We continue to analyse the carbon performance of our major

suppliers, including the use of language in our major supplier

contracts. We regularly engage directly with a targeted pool of

suppliers and encourage them to take steps to improve their

maturity.

Outcome of engagement

These actions are having a direct impact on how we execute

our procurement strategies and help grow our reputation as a

responsible business.

We are investing in the success of high-performing organisations

and contributing to the decarbonisation progress of those

suppliers.

We are also seeking suppliers that enrich Pearson’s products and

services with a wider range of perspectives, and further earn the

trust of our learners, while also investing in communities

We’ve made real progress

building a tech strategy

that supports a cross-

functional approach

todata,content delivery

and product

development.

MaryKay Wells

Chief Information Officer

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Stakeholder engagement continued

We are also making a concerted effort to push consumer insights

further into the company, through newsletters, employee

learning sessions and other resources. This helps us cultivate an

‘outside-in’ approach to understand the people who buy and use

our products and services and generates greater awareness of

the culture and trends that are impacting our business.

Outcome of engagement

Understanding our consumers allows us to be more effective in

how we design and create our products, along with go-to-market

strategies and ongoing implementation.

Consumer feedback has been critical in the roll-out of our

generative AI tools in our Higher Education Courseware, and we

take it into consideration throughout all stages of the product

innovation process, including design and development, roll-

out and expansion into new titles and continued iteration and

feature enhancement.

In autumn 2024, feedback was positive, with 75% of students

using the AI study tools ranking them as ‘helpful’ or ‘very helpful’

in achieving their academic goals. Early results also suggest

that students who use the study tools are four times as likely

to also be regularly employing non-AI study methods in the

eText, meaning they are engaging more holistically. Our product

managers act on other user feedback to improve AI experiences

in real time.

Consumers

Why and how we engage

With our efforts to engage more deeply with consumers,

Pearson is bringing to life its mission to create vibrant and

enriching learning experiences designed for real-life impact. Our

interaction with consumers helps us better understand how

they use our products, perceive our company and feel about the

trends driving learning in an era where digital consumption and

AI are shaping the landscape.

We research and engage with consumers holistically by studying

how they use our products, how they think and the culture that

shapes their behaviour. This includes conducting consumer focus

groups and ethnographic research, trend and sentiment analysis,

and competitive analysis. We also survey consumers directly to

gain unique insights.

This kind of engagement has been used inside Pearson+ and

in Mastering to gauge user opinions on the effectiveness of our

generative AI study tools.

Our Product teams also engage indirectly with consumers

by analysing layers of student usage data and testing

enhancements.

Our Connections Academy programme conducted research in

2024 on the impact of school/life balance on career planning,

with over 1,000 US K-12 students and over 1,000 US parents.

As part of research on the impact of strong English skills on job

satisfaction and pay, Pearson interviewed 1,000 speakers of

English as a second or additional language from Japan, Saudi

Arabia, Brazil, Italy and Florida (USA). According to 85% of

respondents, English is important for their work life, and 88%

think it will grow in importance over the next five years.

We’re combining the gift of

learning with innovation

to deliver exceptional

experiences for Pearson’s

consumers – opening

doors and creating

transformational

opportunities that

can change lives.

Ginny Cartwright Ziegler

Chief Marketing Officer

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Government & Regulators

Why and how we engage

Government policymakers across the world are charged

with implementing policies to grow and sustain productive

economies, ensuring that individuals have the educational and

skill-development opportunities to achieve their life goals.

Pearson acts as an important partner to governments, schools,

colleges, universities and the business sector to help achieve

economic and educational goals within the countries in which

we operate. The importance of our assessments means they

often operate in highly regulated environments.

Governments everywhere are focused on how to position

themselves for the future of work, and how to take advantage of

technological advances to provide people with the requisite high-

quality education and training that meets the needs of a rapidly

evolving workforce.

Increasingly, the rise of AI use – particularly in the labour market

– challenges governments to devise sound policies that take

advantage of opportunities this technology brings, but also

mitigate against risks to the labour force.

Governments need support as economies face labour shortages,

particularly in high-demand sectors, and as students and

workers seek accelerated learning opportunities and skill

development. We engage with governments through meetings

and presentations with elected and appointed government

officials, and discuss key concepts including the impact of

technological innovation on the local labour force, skills-based

hiring, certifications and apprenticeships, which are all vital to

economic growth in their region.

Outcome of engagement

Our engagement helps inform policy decisions and share

best practice in focus areas related to education, training and

recruitment. Countries from all regions are prioritising the critical

topics of AI, digital transformation and energy transition when

developing policies and allocating investment on education

and skills.

Accordingly, we work with government leaders in key markets as

they develop policies and programmes to meet their economic

needs related to skills, training and education.

Communities

Why and how we engage

Pearson has a role in increasing access to education

around the world through our products and services, as

well as our participation in multi-stakeholder initiatives

such as the UN Global Compact, WorldSkills UK and the

Responsible Media Forum. Enabling more people to learn

and develop skills empowers communities and drives socio-

economic development.

We are supporting more learners through accessible, technology-

enabled solutions. For example, in 2024 we provided immigrants

with free access to our Pearson Test of English (PTE) in

partnership with Talent Beyond Boundaries, and we offered free

career planning and assessment support for girls in Afghanistan

through online learning provider Victory Afghanistan.

Our employees engage with their local communities through

volunteering, benefitting from five days of paid leave per year

to support educational or charitable causes. Credly badges

recognise the skills they develop through volunteering. We also

piloted interactive sustainability learning sessions with our not-

for-profit partners Fresk and Planet on Stage.

Outcome of engagement

Our engagement helps inform policy decisions and share

best practice in focus areas related to education, training and

recruitment. Countries from all regions are prioritising the critical

topics of AI, digital transformation and energy transition when

developing policies and allocating investment on education

and skills.

In 2024, our employees volunteered over 33,000 hours in

support of 360 causes. Employee participation in Learning for

Impact activities increased in 2024 to 11%, exceeding the

global average.

We also donated $90,360 in humanitarian aid to the American

Red Cross for hurricane relief.

Read more about our community engagement initiatives in Learning for

Impact on page 38.

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Stakeholder engagement continued

Employees

People and culture

We are committed to creating exceptional employee experiences,

meaningful career opportunities and a high-performing culture

that empowers our people to work in service to our customers.

Our purpose is clear: we help people realise the life they imagine

through learning.

This is the foundation that makes Pearson a great place to work.

We strive to be a company where people bring our purpose

to life, raise the bar and advance in their careers. When our

people’s needs are met, we believe we can better meet the

needs of our customers and drive sustainable growth.

Our business success and ability to positively impact society

heavily rely on our people, who are Pearson’s greatest asset.

We also know that managers account for as much as 70% of

the variance in employee team engagement. We empower our

managers with ongoing training and the right tools to foster a

culture of engagement and drive performance, so our people can

reach their full potential.

At the enterprise level, we regularly communicate with our

people through interactive forums, town halls and newsletters.

Outcome of engagement

Throughout 2024, we encouraged managers to hold regular

one-to-one meetings with their direct reports. Additionally, in

2024, 88% of employees actively participated in our engagement

survey with a Grand Mean score of 4.16 on a 5-point Likert scale,

up from 82% and 4.09 respectively in 2023.

Investors/Shareholders

Why and how we engage

Our shareholders play an important role in both monitoring and

safeguarding the governance of our company and in providing

access to capital. Some shareholders are also employees,

who have a critical role to play in the continued success of our

business.

We have strong and constructive relationships with our

key institutional investors and shareholders and regularly

communicate with them on key issues, including at our financial

results, our AGM and at investor meetings and conferences. We

held nearly 400 meetings with over 200 institutions over 2024,

both virtually and in person, and discussed financial, operational

and strategic matters.

Outcome of engagement

Our investors appreciate the time we spend with them providing

updates on our strategy and progress, and we continue to

develop how to communicate effectively to investors across a

range of formats.

Our 2024 AGM was held as a hybrid (combined physical and

electronic) meeting, enabling shareholders to participate, ask

questions and vote on resolutions via a live webcast, without

being physically present.

We have sought to respond to shareholders’ requests to provide

more comprehensive narrative disclosure on our engagement

activities, our response to feedback, and the talent markets that

inform our remuneration policies. You can read more in the

Directors’ Remuneration Report on pages 113-136.

Annual report and accounts 2024 Pearson plc 22

Strategic report Governance report Financial statements Other information

Directors’ duties statement

In accordance with Section 172 of the Companies Act

2006 (see box to the right), the Directors fulfil their duties

to promote the success of the company through a well-

established governance framework. Typically, in large and

complex businesses such as Pearson, this framework

includes delegation of day-to-day decision-making to

employees of the Group.

This governance framework, summarised throughout this

document, is far more than a simple delegation of financial

authority, and includes the values and behaviours expected

of our employees and business partners, including the

standards to which they must adhere; how we engage

with stakeholders, including understanding and taking

into account their views and concerns; and how the Board

ensures that we have a robust system of control and

assurance processes in place.

In this annual report, we provide examples of how the

Directors promote the success of Pearson while taking into

account the consequences of decisions in the long term,

building relationships with stakeholders (including our

eight key stakeholder groups, as mentioned previously),

and ensuring that business is conducted ethically and

responsibly.

While there are many parts of this annual report that

illustrate how the Directors do this, with the support of

the wider business, the following sections in particular are

relevant:

• Engaging with our stakeholders (pages 18-22),

whichoutlines:

• How we serve and engage with each of our eight key

stakeholder groups, listen to their key concerns and

provide our responses.

• How we have adapted our business to meet their needs.

• How we have had regard to the need to foster the

company’s business relationships with each of the

stakeholder groups.

• Understanding our stakeholders (pages 84-85), which

summarises:

• How Directors have engaged with employees and

shareholders, and had regard to their interests.

• Sustainability (pages 33-56), which describes:

• Initiatives through which we strive to enable more

engaging learning experiences, that are accessible to

more people, and with a smaller carbon footprint.

• Our commitment to creating a culture that prioritises

our customers, employees and sustainable procurement

practices.

• How we align with widely accepted Sustainability

reporting frameworks including GRI, SASB and TCFD.

For further details on TCFD reporting, please see pages

44-48.

A continued understanding of the key issues affecting

stakeholders is an integral part of the Board’s decision-

making process. The insights that the Board gains through

its engagement mechanisms form an important part of the

context for all the Board’s discussions and decision-making

processes. For an insight into how the Board has considered

the interests of various stakeholders in its decision-making,

and the matters the Directors considered when balancing

various stakeholder perspectives, please see our case study

on page 86.

Section 172 of the Companies Act

In summary, as required by Section 172 of the

Companies Act 2006, a Director of a company must act

in the way they consider, in good faith, would most likely

promote the success of the company for the benefit of its

shareholders as a whole. In doing this, the Director must

have regard, among other matters, to:

a. the likely consequences of any decisions in the long

term,

b. the interests of the company’s employees,

c. the need to foster the company’s business

relationships with suppliers, customers and others,

d. the impact of the company’s operations on the

community and environment,

e. the company’s reputation for high standards of

business conduct, and

f. the need to act fairly as between members of the

company.

Annual report and accounts 2024 Pearson plc 23

Strategic report Governance report Financial statements Other information

Monitoring progress

Key performance indicators for 2024

Non-financial measures

Digital: 40%

Digital-enabled: 42%

Total digital: 82%

Digital: 44%

Digital-enabled: 35%

Total digital: 79%

Digital: 43%

Digital-enabled: 31%

Total digital: 74%

Digital: 45%

Digital-enabled: 28%

Total digital: 73%

Non-digital: 18%

Non-digital: 21%

Non-digital: 26%

Non-digital: 27%

Digital: 38% Digital-enabled: 44%

Total digital: 82%

Non-digital: 18%

Partner Schools

US enrolments

96k

(2023: 100k)

OnVUE volumes

2.3m

(2023: 2.7m)

PTE volume

1,108k

(2023: 1,231k)

Higher Education US

digital subscriptions

10.1m

(2023: 9.8m)

Consumer

Engagement

Objective: Create

engaging and

personalised

consumer experiences

NPS for Connections

Academy

+67

(2023: +67)

NPS for PTE

+60

(2023: +55)

Mondly paid subscriptions

495k

(2023: 432k)

Credly new registered

users

6.0m

(2023: 5.3m)

Pearson+ registered users

3.06m

(2023: 3.03m)

Product

Effectiveness

Objective: Improve

theeffectiveness of

our products to deliver

better outcomes

PTE speed of score return

1.3 days

(2023: 1.0 days)

VUE test volumes

20.7m

(2023: 20.7m)

VUE partner retention

99%

(2023: 94%)

Workforce Skills number

of enterprise customers

1,509

(2023: 1,547)

Credly enterprise customer

net retention rate

91%

(2023: 88%)

Higher Education product

usage – text units

4.7m

(2023: 4.5m)

a. Measure definition has changed to number of government-funded student enrolments at partner schools within

theUSasof 30 September 2023. Excludes private-pay students at Pearson Online Academy and district partnerships.

Thisismore closely aligned to business processes.

b. VUE test volumes include PTE and GED tests but sales for each of these tests are reflected in the English Language

Learning and Workforce Skills business units respectively. From 2024 Pearson VUE test volumes now include PDRI tests.

c. Previously reported ‘Workforce Skills enterprise customer net retention rate’ which combined Credly and Faethm. Methodology

change to only include Credly customer retention going forward as Faethm is not a retention based business.

d. The net emissions reduction figures have been assured by an independent third-party, SLR Consulting Ltd. % reduction

in total tCO

e above is calculated using a location-based methodology. In 2024, we updated our 2018 and 2023 GHG

emissions baselines to reflect recent acquisitions and disposals, and to align with changes in data methodology as a result

of transitioning to a new emissions data management system. Annual reductions include a 5% reduction in total tCO

e in

2024 vs 2023.

• Please find further details on our Strategic KPIs here https://plc.pearson.com/en-GB/company/our-targets-kpis

Culture of Engagement & Community

Objective: Build a high performance culture, community and highly engaged workforce

Employee

engagement

Pearson uses

the Gallup

12®

survey

to measure

engagement,

annually

4.16

Grand Mean

ona5-point

Likert scale

(2023: 4.09)

Investing in

talent

The % of

responses who

agree or strongly

agree to Gallup

12®

survey

questions

In the last six

months, someone

at work has talked

to me about my

progress

78%

(2023: 73%)

This last year,

I havehad

opportunities

atwork to learn

and grow

77%

(2023: 76%)

Culture

index

The Grand Mean

of 3 Gallup Q

12®

surveyquestions

• At work, I am

treatedwith

respect

• My company

is committed

to building the

strengths of each

employee

• If I raised a concern

about ethics and

integrity, I am

confident my

employer would

dowhat is right

4.24

Grand Mean on a

5-point Likert scale

(2023: 4.21)

Increasing

talent

Objective: Increase BIPOC/

BAMErepresentation at all

manager levels and maintain

overall gender parity

Representation

of BIPOC/BAME

employees at

manager level

and above

23%

(2023: 22%)

Global %

of female

employees

59%

(2023: 59%)

Digital Growth

Objective: Drive digital sales growth

See how this aligns strategy to management reward: page 119

Digital sales

Underlying growth in group digital and digital-enabled sales

+3%

(2023: +3%)

+4%

*Excluding OPM and

Strategic Review

Reduction in total tCO

in 2024 (vs 2018)

41%

Reduction in total

tCO

in 2023 (vs 2018)

38%

Sustainability Strategy

Objective: Reduce emissions by 50%

by 2030 vs 2018, and achieve Net Zero

Carbon by 2050 as measured through

% carbon reduction

Annual report and accounts 2024 Pearson plc 24

Strategic report Governance report Financial statements Other information

Operating cash flow is an

adjusted measure and

is presented in order to

align the cash flows with

corresponding adjusted

operating profit measures.

This is our net cash

generated from operations

as reported in our cash

flowstatement.

This is the proposed full year

dividend. Our dividend policy

is to be progressive and

sustainable.

This is a measure of financial

performance of shares

overtime.

A non-GAAP measure of how

efficiently we are generating

returns from our asset base.

Financial measures

See how this aligns strategy

tomanagement reward:

page119

Sales

£3,552m

Adjusted operating

profit

£600m

Operating profit

£541m

Net debt

£853m

Adjusted earnings

per share

62.1p

Basic earnings

per share

64.5p

Operating cash flow

and cash conversion

£662m

Net cash generated

from operations

£811m

Dividend per share

24.0p

Total shareholder

returns

36%

Return on capital

10.5%

a. See pages 219-224 for an

explanation and reconciliation

ofthese alternative

performancemeasures and non-

GAAP measures.

b. Statutory measure

c. Source: LSEG Workspace

Datastream

d. Comparatives were restated

in 2022

Note: See pages 219-224 for full

reconciliation of the alternative

performance measures to the

equivalent statutory measure.

This is our sales as reported

in our income statement.

A non-GAAP financial

measure that enables

management to consistently

track the underlying

operational performance

ofthe Group.

This is our operating profit

as reported in our income

statement.

This is a non-GAAP financial

measure and is used by

management to assess

theGroup’s cash position.

A non-GAAP financial

measure used to evaluate

performance.

A measure of the amount

ofprofit that can be

allocated to one share

ofourcommon stock.

24 £3,552m

£3,674m

£3,841m

£3,428m

£3,397m

24 £600m

£573m

£456m

£385m

£313m

24 £541m

£498m

£271m

£183m

£411m

24 £853m

£744m

£557m

£350m

£463m

24 62.1p

58.2p

51.8p

34.9p

28.7p

24 64.5p

53.1p

32.8p

23.5p

43.7p

24 £662m (110%)

£587m (102%)

£401m (88%)

£388m (101%)

£315m (101%)

24 £811m

£682m

£527m

£570m

£450m

24 24.0p

22.7p

21.5p

20.5p

19.5p

5 year

3 year

1 year 36%

+125%

+130%

24 10.5%

10.3%

8.7%

7.9%

Delivering results

Annual report and accounts 2024 Pearson plc 25

Strategic report Governance report Financial statements Other information

Financial Summary

£m 2024 2023

Business performance

Sales 3,552 3,674

Adjusted operating profit 600 573

Operating cash flow 662 587

Free cash flow 490 387

Adjusted earnings per share 62.1p 58.2p

2024 was another year of good financial

performance. The progress we have

made over recent years shows real

momentum in the business, which gives

us confidence in delivering our guidance

for 2025 and beyond.

Sally Johnson

Chief Financial Officer

Financial review

£m 2024 2023

Statutory results

Sales 3,552 3,674

Operating profit 541 498

Profit for the year 435 380

Net cash generated from operations 811 682

Basic earnings per share 64.5p 53.1p

Throughout this section: a) Growth rates are 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 the financial key performance indicators section on pages 219-224; c) Constant

exchange rates are calculated by assuming the average FX in the prior year prevailed through the current year.

Annual report and accounts 2024 Pearson plc 26

Strategic report Governance report Financial statements Other information

2025 expectations

Medium term guidance

reconfirmed

Underlying sales

growth

Adjusted

operating profit

Free cash flow

conversion

Interest** Tax**

In line with current market

expectations

90-100%

+ £0.1bn State

Aid repayment

c.£65m 24% to 25%

Mid-single digit underlying

sales Compound Annual Growth

Rate (CAGR)

Average margin growth of 40

basis points (bps) per annum*

90-100% free cash flow

conversion, on average, across

the period

* Adjusted operating profit margins. ** As reflected in adjusted earnings.

NB: 2025 consensus on the Pearson website dated 27 January 2025; underlying sales growth 4.4%, adjusted operating profit of £656m at £:$ 1.23.

For reference, each 1c move in USD FX rate equates to £5m of adjusted operating profit.

Operating results

On a headline basis, sales decreased by £122m or 3% from £3,674m in 2023 to £3,552m in 2024 and reported operating profit

increased by £43m from £498m in 2023 to £541m in 2024. In addition, adjusted operating profit increased by £27m or 5% from £573m

in 2023 to £600m in 2024 (for a reconciliation of this measure see page 28 and note 2 to the consolidated financial statements).

The reported operating profit of £541m in 2024 compares to an operating profit of £498m in 2023 due primarily to unfavourable FX

movements, investment and inflation costs being offset by operating leverage on sales growth and cost efficiencies.

The headline basis simply compares the reported results for 2024 with those for 2023. 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. Our portfolio change is calculated by excluding sales

and profits made by businesses disposed in either 2024 or 2023 and by ensuring the contribution from acquisitions is comparable year

on year. Portfolio changes mainly relate to the disposals of the Group’s interests in Pearson Online Learning Services (‘POLS’), Pearson

College, our international courseware local publishing business in India and businesses within Higher Education in 2023, and the

acquisition of PDRI in 2023.

On an underlying basis, sales increased by 2% in 2024 compared to 2023 and adjusted operating profit increased by 10%. Currency

movements decreased sales by £104m and decreased adjusted operating profit by £26m. Portfolio changes decreased sales by £97m

and decreased adjusted operating profit by £6m. There were no new accounting standards adopted in 2024 that impacted sales or

statutory or adjusted operating profits.

Group Financial Expectations

2025 outlook

We expect Group underlying sales growth and adjusted operating

profit will be in line with current market expectations. Our interest

charge will be c.£65m reflecting the impact of the Education

Bond and our intention to commence a £350m share buyback.

We expect the effective tax rate on adjusted profit before tax to

be between 24% and 25%. From January this year, Workforce

Skills became Enterprise Learning and Skills, bringing together

Pearson’s enterprise sales capabilities globally (excluding those of

Pearson VUE).

• In Assessment & Qualifications we expect sales growth of low

to mid-single digit.

• In Virtual Learning we expect to return to growth in H2 and

the full year, driven by enrolment increases, partially from new

school openings, for the 25/26 academic year.

• In Higher Education we expect sales growth in 2025 to be

higher than in 2024 as we build on the successful results

of our sales team transformation and product innovations,

particularly using AI.

• In English Language Learning we expect that sales growth will

moderate given the likely impacts of elections on immigration

rates in 2025 affecting our PTE business.

• In Enterprise Learning and Skills we expect sales to

grow high single digit with Vocational Qualifications seeing

solid growth and the addition of several new contracts for

Enterprise Solutions.

• Included within this guidance is new investment to support

our strategy and drive growth, including brand and innovation

spend, as well as transformation costs. This investment is more

than offset by the margin on sales growth, and operational

improvements which drive the Group’s margin expansion.

• We expect a free cash flow conversion of 90-100% plus the

anticipated £0.1bn State Aid repayment in 2025.

Annual report and accounts 2024 Pearson plc 27

Strategic report Governance report Financial statements Other information

Financial review continued

All figures in £ millions 2024 2023

Operating profit 541 498

Add back: Cost of major reorganisation (2) –

Add back: Property charges – 11

Add back: Intangible charges 41 48

Add back: UK pension discretionary increases 13 –

Add back: Other net gains and losses 7 16

Adjusted operating profit 600 573

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 and one-off costs related to the UK pension scheme. A summary of these adjustments is

included below and in more detail in note 2 to the consolidated financial statements.

In 2024, the costs of major reorganisation relate to a release of £2m for amounts previously accrued

that are no longer required.

In 2024, there are no property charges. In 2023, charges of £11m relate to impairments of property

assets arising from the impact of updates in 2023 to assumptions initially made during the 2022 and

2021 reorganisation programmes.

Intangible amortisation charges in 2024 were £41m compared to a charge of £48m in 2023. This is

due to decreased amortisation from recent disposals partially offset by additional amortisation from

recent acquisitions.

UK pension discretionary increases in 2024 relate to one-off pension increases awarded to certain

cohorts of pensioners in response to the cost of living crisis.

Other net gains and losses in 2024 relate to costs arising from prior year acquisitions and disposals,

partially offset by a gain on the partial disposal of an investment in an associate. In 2023, other

net gains and losses relate largely to the gain on disposal of the Pearson Online Learning Services

(POLS) business and gains relating to the releases of accruals and a provision related to previous

acquisitions and disposals, which were more than offset by losses on the disposal of Pearson College

and costs related to disposals and acquisitions.

Business Unit Results

£m 2024 2023 Headline growth CER Growth

Underlying

growth

Sales

Assessment & Qualifications 1,591 1,559 2% 4% 3%

Virtual Learning 489 616 (21)% (19)% (4)%

Higher Education 826 855 (3)% (1)% 1%

English Language Learning 420 415 1% 8% 8%

Workforce Skills 226 220 3% 4% 6%

Strategic Review – 9 (100)% (100)% (100)%

Total 3,552 3,674 (3)% 0% 2%

Total, excluding OPM

and Strategic Review

Adjusted operating

profit/loss

Assessment & Qualifications 368 350 5% 8% 7%

Virtual Learning 66 76 (13)% (9)% (9)%

Higher Education 108 110 (2)% 2% 12%

English Language Learning 50 47 6% 30% 30%

Workforce Skills 8 (8) 200% 188% 200%

Strategic Review – (2) 100% 100% 100%

Total 600 573 5% 9% 10%

1. We completed the sale of the Pearson Online Learning Services (POLS) business in June 2023 and as such have

removed it from underlying measures throughout. Within this specific measure we exclude our entire OPM

business (POLS and ASU) to aid comparison to guidance.

2. Strategic Review is sales in international courseware local publishing businesses which have been wound down.

As expected, there are no sales in these businesses in 2024.

Assessment & Qualifications

In Assessment & Qualifications, sales increased 2% on a headline basis and 3% on an underlying

basis. Adjusted operating profit increased 7% in underlying terms due to operating leverage on

sales growth partially offset by inflation, and 5% in headline terms due to this and portfolio changes

partially offset by currency movements.

Pearson VUE sales were up 3% in underlying terms driven by favourable mix, with PDRI seeing good

growth. Pearson VUE test volumes remained stable year on year and we improved upon our already

high contract renewal track record, reporting a rate of 99% across the business for 2024.

In US Student Assessment, sales increased 1% in underlying terms supported by several key contract

renewals.

Annual report and accounts 2024 Pearson plc 28

Strategic report Governance report Financial statements Other information

In Clinical Assessment, sales increased 4% in underlying terms due to pricing, digital product growth

and successful new product launches.

In UK and International Qualifications, sales increased 8% in underlying terms benefitting from

volume, pricing, and International growth.

Virtual Learning

In Virtual Learning, sales decreased 21% on a headline basis primarily due to the final portion of

the OPM ASU contract in the first half of 2023, the disposal of the POLS business and currency

movements, and 4% on an underlying basis. Adjusted operating profit decreased 9% in underlying

terms, with the prior year comparator benefitting from the ASU contract. Adjusted operating profit

decreased 13% in headline terms due to this coupled with the disposal of the POLS business and

currency movements.

Virtual Schools sales were down 1%, due to the previously announced partner school losses.

Enrolments for the 2024/25 academic year were up 4% on a same school basis and we also opened

3 new schools in 2024 taking our total to 40.

Higher Education

In Higher Education, sales decreased 3% on a headline basis and grew 1% on an underlying basis.

Adjusted operating profit increased 12% in underlying terms driven primarily by cost savings

partially offset by inflation, restructuring charges and one off investment in building a K-12 direct

sales channel, and decreased 2% in headline terms due to this, portfolio changes and currency

movements.

In the US, sales grew 2% driven by continued gains in adoption share, enrolments, and pricing,

partially offset by mix impacts. There was strong growth in Inclusive Access, up 24%, and we

delivered 3% growth in US digital subscriptions. Pearson+ registered users increased 1% compared

to the prior Fall semester, with paid subscriptions flat over the same period. In addition, we have

been successful in monetising our Channels product.

English Language Learning

In English Language Learning, sales were up 1% on a headline basis due to strong growth in

Institutional offset by currency movements and 8% on an underlying basis. Adjusted operating

profit increased by 30% in underlying terms due to operating leverage on sales and increased 6% in

headline terms as this was partially offset by currency movements.

PTE performed well against a tough market backdrop of tightening migration policies. While volumes

declined 10% we grew the business and continued to gain market share. Our Institutional business

continues to deliver a strong performance especially in the Middle East and Latin America markets.

Our Online Self-Study business, Mondly, performed well with paid subscriptions increasing 14%

versus the prior year.

Workforce Skills

In Workforce Skills, sales were up 3% on a headline basis and 6% on an underlying basis. The

business unit turned profitable in 2024 delivering an adjusted operating profit of £8m due to trading

and cost efficiencies.

Sales growth was driven by solid performances in both the Vocational Qualifications and Workforce

Solutions businesses. The Vocational Qualifications business grew by 5% in underlying terms. The

Workforce Solutions business grew by 6% in underlying terms with the Credly enterprise customer

net retention rate increasing to 91%.

Net Finance Costs

Net finance costs increased on a headline basis from a net cost of £5m in 2023 to a net cost of £31m

in 2024. The increase is primarily due to increased borrowings and losses on investments held at

fair value through profit and loss (FVTPL) compared to gains in 2023, partially offset by gains arising

from mark to market movements on derivatives compared to losses in 2023 and the recognition of

interest related to the favourable decision on the State Aid matter (see Taxation section and note 7

to the consolidated financial statements for further details).

Adjusted net finance costs reflected in adjusted earnings in 2024 was £45m, compared to £33m

in 2023. The difference is primarily due to increased interest costs on borrowings, partially offset

by interest recognised in relation to the State Aid matter (see Taxation section and note 7 to the

consolidated financial statements for further details).

Net finance income in respect of 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 included in the net finance costs (but not in our adjusted

measure) 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. In 2024, the total of these items excluded from adjusted

earnings was income of £14m compared to income of £28m in 2023.

All figures in £ millions 2024 2023

Adjusted net finance costs (45) (33)

Finance income in respect of retirement benefits 21 26

Fair value movements on investments held at FVTPL (11) 13

Other net finance costs 4 (11)

Net finance costs (31) (5)

Annual report and accounts 2024 Pearson plc 29

Strategic report Governance report Financial statements Other information

Financial review continued

Taxation

The reported tax charge on a statutory basis in 2024 was £75m (14.7%) compared to a £113m

charge (23.0%) in 2023. The reduction in the statutory rate of tax in 2024 is principally due to the

release of provisions held in relation to the State Aid matter. In September 2024, the Court of

Justice of the European Union (‘CJEU’) handed down its decision, finding that no State Aid had been

provided and as a consequence annulling the European Commission’s previous decision in full and

setting aside the judgment of the EU General Court. In light of the CJEU decision, the Group has now

fully released the £63m provision for tax and £5m provision for interest on tax held in relation to

this matter, leaving on the balance sheet a receivable for the £97m tax and £8m interest on tax paid

under the Charging Notices issued by HMRC in 2021. These receivables have now been reclassified

as current assets. In addition, HMRC Guidance issued to facilitate these pending repayments

confirms that interest will be paid on the tax element of the amounts previously collected and a £9m

interest accrual has also therefore been recorded as mentioned in net finance costs sections above.

The tax on adjusted earnings in 2024 was a charge of £136m (2023: £124m), corresponding to

an adjusted effective tax rate on adjusted profit before tax of 24.4% (2023: 23.0%). The increase

in the effective rate from the prior year is primarily due to reduced availability of tax credits in

key jurisdictions. For a reconciliation of the adjusted measure see the financial key performance

indicators section on pages 219-224.

In 2024, there was a net tax payment of £119m (2023: £97m). The overall amount increased due to

an increase in profits and a reduction in the level of tax credits available in key territories.

A net deferred tax liability of £11m is recognised in 2024 compared to a net deferred tax liability of

£11m in 2023. The current tax creditor principally consists of provisions for tax uncertainties.

Earnings per share

Basic earnings per share is 64.5p in 2024 compared to 53.1p in 2023. The increase in 2024 is mainly

due to increased operating profits, decreased tax charges and a decrease in the number of shares

following the share buy back, partially offset by increased interest charges.

Adjusted earnings includes adjusted operating profit and adjusted finance and tax charges. The

reconciling items between the statutory inputs to earnings per share and the adjusted inputs are

discussed in the previous sections.

Adjusted earnings per share is 62.1p in 2024 compared to 58.2p in 2023 reflecting adjusted

operating profit growth and the reduction in issued shares as a result of share buybacks, partially

offset by increased interest and tax charges.

Other comprehensive income

Included in other comprehensive income are the net exchange differences on translation of foreign

operations. The loss on translation of £35m in 2024 compares to a loss in 2023 of £177m. The

loss in 2024 arises from an overall weakening of the majority of currencies to which the Group is

exposed, partially offset by a slight strengthening of the US dollar. A significant proportion of the

Group’s operations are based in the US and the US dollar strengthened in 2024 from an opening

rate of £1:$1.27 to a closing rate at the end of 2024 of £1:$1.25. At the end of 2023, the US dollar

had weakened from an opening rate of £1:$1.21 to a closing rate of £1:$1.27. The loss in 2023 was

driven by this movement in the US dollar.

Also included in other comprehensive income in 2024 is an actuarial gain of £5m in relation to the

retirement benefit obligations of the Group. The gain arises mainly from a decrease in liabilities

driven by higher discount rates, largely offset by losses on assets and experience losses. The

actuarial gain in 2024 of £5m compares to an actuarial loss in 2023 of £85m.

Fair value losses of £2m (2023: gain of £1m) have been recognised in other comprehensive income

and relate to movements in the value of investments in listed and unlisted securities held at fair

value through other comprehensive income (FVOCI).

In 2023, a gain of £122m was recycled from the currency translation reserve to the income

statement in relation to the disposal of the POLS business.

Cash flow and working capital

Net cash generated from operations, was £811m in 2024 compared to £682m in 2023. The increase

is largely explained by the drop-through of increased trading profits, a reduction in reorganisation

cash outflow and favourable working capital movements.

Our operating cash flow measure is an adjusted measure used to align cash flows with our adjusted

profit measures. Compared to net cash generated from operations, this measure excludes

reorganisation costs and acquisition costs but includes regular dividends from associates. It also

includes 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 2024,

reorganisation cash outflow was £8m compared to £63m in 2023.

Operating cash flow increased on a headline basis by £75m from £587m in 2023 to £662m in 2024.

The increase is largely explained by the drop-through of increased trading profits and favourable

working capital.

Free cash flow increased on a headline basis by £103m from £387m in 2023 to £490m in 2024.

When compared to operating cash flow, free cash flow includes tax paid, net finance costs paid and

net costs paid for major reorganisation.

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Strategic report Governance report Financial statements Other information

In 2024, there was an overall £234m increase in cash and cash equivalents compared to a decrease

of £234m in 2023. The increase in 2024 is primarily due to the cash inflow from operations of £811m

and net proceeds from borrowings of £344m, offset by payments for acquisitions of subsidiaries of

£39m, dividends paid of £156m, share buyback programme payments of £318m, other own share

purchases of £40m, tax paid of £119m, net interest payments of £45m, capital expenditure on

property, plant and equipment and intangibles of £124m, and repayments of lease liabilities

of £78m.

All figures in £ millions 2024 2023

Net cash generated from operations 811 682

Dividends from joint ventures and associates 2 –

Purchase / disposal of PPE and software (118) (121)

Net addition of right-of-use assets (46) (41)

Net costs paid for major reorganisation 8 63

Other net gains and losses 5 4

Operating cash flow 662 587

Tax paid (119) (97)

Net finance costs paid (45) (40)

Net cost paid for major reorganisation (8) (63)

Free cash flow 490 387

Liquidity and capital resources

The Group’s net debt increased from £744m at the end of 2023 to £853m at the end of 2024. The

increase is largely due to free cash flow being more than offset by the share buy back programme

and dividend payments.

In 2024, the Group issued a new £350m 5.375% GBP denominated 10 year Education Bond. The

bond was admitted to trading on the London Stock Exchange. The proceeds from the bond will be

used to finance or refinance projects or expenditure that meets the Eligible categories set out in the

Group’s Social Bond Framework.

At 31 December 2024, the Group had available liquidity of £1.2bn comprising central cash balances

and its undrawn $1bn Revolving Credit Facility (RCF) which matures in February 2028, but which has

options to extend the maturity to February 2030. In assessing the Group’s liquidity and viability, the

Board analysed a variety of downside scenarios including a severe but plausible downside scenario,

where the Group is impacted by a combination of all principal risks, as well as reverse stress

testing to identify what would be required to either breach covenants or run out of liquidity. The

Group would maintain comfortable liquidity headroom and sufficient headroom against covenant

requirements during the period under assessment in the severe but plausible scenario, even before

modelling the mitigating effect of actions that management would take in the event that these

downside risks were to crystallise.

In all scenarios it is assumed that the Revolving Credit Facility is available.

At 31 December 2024, the Group was rated BBB (stable outlook) with Fitch and Baa2 (stable outlook)

with Moody’s.

Net debt

All figures in £ millions 2024 2023

Cash and cash equivalents (excluding overdrafts) 543 312

Overdrafts – (3)

Investment in finance lease 83 100

Derivative financial instruments (7) 5

Bonds (955) (611)

Lease liabilities (517) (547)

Net debt (853) (744)

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. The Group has 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 post-retirement benefits amounted to

£60m in 2024 (2023: £45m), of which a charge of £81m (2023: £71m) was reported in operating

profit and income of £21m (2023: £26m) was reported in other net finance costs. In 2024, a charge

of £13m related to one-off discretionary pension increases has been excluded from adjusted

operating profit.

The overall surplus on UK Group pension plans of £491m at the end of 2023 has decreased to

a surplus of £484m at the end of 2024. The decrease has arisen principally due to the one-off

discretionary pension increases granted in the year, partially offset by the actuarial gain noted in

the other comprehensive income section above. In total, the worldwide net position in respect of

pensions and other post-retirement benefits decreased from a net asset of £455m at the end of

2023 to a net asset of £450m at the end of 2024.

Annual report and accounts 2024 Pearson plc 31

Strategic report Governance report Financial statements Other information

Financial review continued

Businesses acquired and disposed

There were no material acquisitions of subsidiaries in 2024. In March 2023, the Group completed

the acquisition of 100% of the share capital of Personnel Decisions Research Institutes, LLC (‘PDRI’)

for cash consideration of £152m ($187m).

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. There were also £5m of acquisition related costs. In addition, there were

£7m of cash outflows relating to the acquisition of investments. The cash outflow in 2023 relating to

acquisitions of subsidiaries was £171m plus £4m of acquisition costs. In addition, there were cash

outflows relating to the acquisition of associates of £5m and investments of £8m.

There were no disposals of subsidiaries in 2024. In 2023, the Group disposed of its interests in

its POLS businesses in the US, UK, Australia and India, Pearson College and the international

courseware local publishing business in India. In 2024 and 2023, the cash outflow from the disposal

of businesses of £7m (2023: £38m) mainly relates to the businesses disposed in 2023.

Dividends

The dividend accounted for in our 2024 financial statements totalling £156m represents the final

dividend in respect of 2023 (15.7p) and the interim dividend for 2024 (7.4p). We are proposing a

final dividend for 2024 of 16.6p bringing the total paid and payable in respect of 2024 to 24.0p. This

final 2024 dividend, which was approved by the Board in February 2025, is subject to approval at the

forthcoming AGM. For 2024, the dividend is covered 2.6 times by adjusted earnings.

Share buyback

On 20 September 2023, the Board approved a £300m share buyback programme in order to

return capital to shareholders, with a £200m extension being announced by the Group on 1 March

2024. This programme and the extension completed in 2024. During 2024, approximately 32m

(2023: 20m) shares were bought back and cancelled at a cost of £318m (2023: £186m). The nominal

value of these shares, £8m (2023: £5m), was transferred to the capital redemption reserve, and

the remainder of the purchase price was recorded within retained earnings. At 31 December 2024,

no further liability remains (2023: £118m) for shares contracted to be repurchased but where the

repurchases are still outstanding.

On 27 February 2025, the Board approved a £350m share buyback programme in order to return

capital to shareholders.

Climate change

The Group has assessed the impacts of climate change on the Group’s 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 2024 or the assessment of going concern

for the period to June 2026.

Conclusion

2024 performance was in line with expectations, with excellent margin expansion. We saw strong

free cashflow and this, combined with our strong balance sheet, means we are announcing a further

£350m share buyback.

Our confidence in the future and the strength of the business is reflected in our guidance for 2025

and beyond.

Annual report and accounts 2024 Pearson plc 32

Strategic report Governance report Financial statements Other information

Learning for Impact

Sustainability

Why sustainability matters for Pearson

Significant demographic shifts and rapid advances in AI are

increasingly important growth drivers for education and work.

There is a growing demand and pressing need for high-quality

learning that is available for people of all ages and circumstances.

As the world’s lifelong learning company, enabling transformative

learning journeys is fundamental to everything we do. With a

constant focus on learner needs and accessibility, we combine

content and technology responsibly to improve operational

performance and productivity, minimise our environmental impact

and ensure that we remain a key player in our industry. This enables

us to create engaging products that fuel a desire to learn.

Learning for Impact framework

Our approach to sustainability is founded on our Learning for

Impact framework and deeply rooted in our strategy. We strive

for impact across three pillars:

• Driving learning for everyone with our products.

• Empowering our people to make a difference.

• Leading responsibly for a better planet.

We continually review and refine our approach, ensuring we

prioritise the areas of greatest impact for our business, our

learners and other stakeholders – including developing the skills

of learners and employees, protecting our consumers’ data and

decarbonising our business.

Strong governance and effective policies underpin our approach.

Our Reputation & Responsibility Committee (RRC) monitors our

environmental and social impact topics, reporting to the Board on

our sustainability progress. We keep our governance approach

under continuous review to ensure it remains fit for purpose. Read

more about our governance structure on pages 96-98.

We measure our progress against material topics and our

Learning for Impact framework through our corporate non-

financial KPIs (see page 24). Stakeholder engagement ensures

we are delivering on our purpose to help people realise the

life they imagine through learning. Independent ratings and

rankings validate that we are improving shareholder value, while

contributing to a more equitable world. Our KPIs are subject to

regular Board review and are linked to Directors’ remuneration

(see page 113).

Expanding our impact and outlook

During 2024, we made substantial progress towards our

Learning for Impact objectives and laid the foundations to deliver

our social and environmental ambitions in 2025 and beyond. Key

highlights include:

• Actively preparing our business for compliance with the

Corporate Sustainability Reporting Directive (CSRD) and

additional mandatory reporting requirements. We are finalising

our double materiality assessment.

• Increasing use of AI across our portfolio to unlock additional

learning opportunities. Pearson remains deeply committed to

the responsible use of AI. We focused on further strengthening

our policy framework and building partnerships to define best

practice and establish common standards.

• Ongoing improvements in employee engagement. Our

development programmes have empowered managers

and helped them effectively support their teams to drive

performance.

• Significant expansion of learning opportunities for all

employees, focusing on advanced technologies, leadership and

development, helping employees grow their careers and play

their part in delivering our strategy.

• Opening up additional employee communication channels,

giving our people more opportunities to provide feedback and

help shape the future of our business.

• Continuing to use our learning and credentialling platforms

to develop the skills individuals in our communities need to

thrive, including on AI.

• 5.3% reduction in greenhouse gas (GHG) emissions (since

2023, location-based), moving us even closer to our short-term

decarbonisation goals and updating our Climate Action Plan,

setting out our long-term path to decarbonisation.

• Launching an Education Bond to support eligible projects

targeting hard-to-reach learners and communities.

We appreciate the transformative

power of learning and focus

on using technology to build

vibrant and engaging

products that make

learning accessible to all

throughout their lives.

Cinthia Nespoli

General Counsel and Executive

Leader for Sustainability

We are proud of our 2024 achievements. The following sections

expand on our progress and demonstrate how we create value

for stakeholders, grow our business and contribute to the UN

Sustainable Development Goals (SDGs) through our business

model and Learning for Impact framework.

Our main areas of focus in 2025 are:

• Ongoing stakeholder engagement to shape the evolution of

our Learning for Impact framework and how we measure

progress towards our ambitions.

• Establishing new career and performance management

frameworks to transform talent development at Pearson,

enhancing productivity and career development opportunities

and driving growth.

• Developing innovative partnerships that align with our brand

and purpose and further benefit learners.

• Enhancing our long-term environmental strategy to reflect our

increased use of AI and evolving our technology platforms to

continue to run on renewable energy.

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Sustainability continued

Contributing to sustainable development globally

The UN SDGs exist to achieve a better and more sustainable future for all. Through our Learning for

Impact framework, we contribute to the following SDGs:

SDG 4 — Quality education. With our focus on lifelong learning, we recognise

that Pearson can play a unique role in increasing access to education around

the world. We monitor our progress on extending our product reach through

our consumer engagement metrics. See page 24.

SDG 8 — Decent work and economic growth. We work closely with

governments, educators and employers around the world to build the skills

needed for tomorrow’s workforce. For example, over one million professionals

have completed AI-related learning on Credly. See page 35.

SDG 10 — Reduced inequalities. We strive to develop inclusive products that

support every learner’s needs. Our collaboration with Saint Louis University

to develop Inclusio — an AI-powered solution for the visually impaired — is

making science, technology, engineering and mathematics more accessible to

blind learners. See page 36.

Rankings and recognition

Independent rankings help our investors evaluate our performance and management of

sustainability risks and opportunities. In 2024, we received the following recognition:

• Sustainalytics. Included in the Global Top 50 list. Again classified as Negligible Risk, ranking

as the leading company in our industry.

• S&P CSA (Dow Jones Sustainability Indices). Achieved the best score in our industry and

a listing in the S&P Sustainability Yearbook.

• FTSE4Good Index. Constituent of the FTSE4Good Index Series in the top 1% of our sector.

• ISS. Improved our score to B-.

Measuring progress on our commitments

Our sustainability pillars – Learning for Impact

Driving learning for everyone with our products Empowering our people to make a difference Leading responsibly for a better planet

We create impact and contribute to shareholder value by…

Widening access to learning and enhancing consumer engagement

and business growth opportunities through technology and

application of learning science.

Read more on page 56

Our purpose — To help people realise the life they imagine through learning

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Driving learning for everyone

with our products

The development and adoption of AI and digital technologies

rapidly increased in 2024. If applied responsibly, these new

technologies can transform access to learning and acquisition of

knowledge. At Pearson, we combine technology and best-in-class

learning science to bring positive change to the way people learn

throughout their lives. We maintain a constant focus on making

learning more accessible and engaging to reach more people,

from schools to workplaces.

Over 80% of our products are digital or digitally-enabled,

contributing to overall sales growth in 2024 of 4% (excluding the

OPM and Strategic Review businesses).

Access powered by technology

Learning fuels the critical breakthroughs needed to resolve

societal challenges and realise personal goals. New technologies

can spur more effective learning and remove obstacles that

learners face, accelerating progress for individuals, businesses,

and wider society. As discussed throughout this report, and

summarised on pages 6 and 7, we continue to infuse AI into

more products, guided by learning science and our Learning

Design Principles, and we are committed to incorporating

technology responsibly to enhance learning outcomes.

Pearson is spearheading research into the use of AI in education,

sharing our findings and insights on an ongoing basis. Our early

studies published in 2024 have revealed that AI study tools may

encourage more effective study habits, such as note-taking and

self-testing. The research also indicated that students using

Pearson’s AI tools engage in more sessions with their eTextbooks

than those not using the technology. We presented this research to

more than 5,000 registrants at the ED.tech Symposium in October

2024, as part of Pearson’s ongoing efforts to upskill teachers

on AI in education. In September 2024, our English Language

Learning business ran a webinar series on AI in language teaching.

As members of the TeachAI Advisory Committee, we contribute

to developing policy resources that help education leaders to

mitigate the risks and realise the benefits of AI. We have also started

collaborating with TeachAI on a new AI literacy framework.

Case study: Building the skills of tomorrow

We are committed to helping learners adapt to workforce

changes and supporting businesses to build skills for future

success. Our Skills Outlook series explores future skills

needs, as well as how AI can increase individual productivity.

A dedicated Skills Map of the US explores automation, AI and

demographic shifts to help businesses and policymakers

prepare for the future.

As more businesses integrate AI into their operations,

employees will need to upskill. In 2024, Credly issued its

one millionth badge for AI-related learning. We also offer

Certiport Gen AI certification and an Extended Project

Qualification for young people on AI. Our partnership with

Degreed helps businesses identify AI skills gaps and prioritise

training needs. Our strategic collaboration with Microsoft

will expand learning opportunities, accelerate AI proficiency

in the workforce and enable organisations to realise the full

value of AI.

English is a critical skill for the global workforce, but it is

challenging to accurately define the level of proficiency

required for individual roles. Based on Pearson’s Global

Scale of English (GSE) framework, GSE Job Profiles set

accurate English language benchmarks for nearly 1,400 job

roles. This helps to improve candidate matching and reduce

time to hire.

We are committed to providing

products and solutions that are

accessible to all consumers,

including those with disabilities.

Tony Prentice

Chief Product Officer

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Sustainability continued

At a national level, policymakers are looking to regulate AI to

ensure it is deployed responsibly and ethically. We welcome

these initiatives and remain committed to working with

policymakers and using our expertise — directly and through

forums like TeachAI — to inform debate for the benefit of all

learners. Read more about our approach and guidance for

employees and business partners on political activity in our

Global Government Relations Policy and our Code of Conduct

available on our corporate policy hub (https://plc.pearson.com/

en-GB/corporate-policies).

Technology already enables more individuals to learn remotely,

and offers opportunities for new and valuable early careers

experiences that are essential for a smooth transition into work.

We have increased internship and mentoring opportunities

for students in our Connections Academy Virtual Schools

programme. Our new partnerships with Future Business Leaders

of America and SEMI Foundation will give more students an

insight into IT and technical careers, providing learners with

career direction, confidence and connections, and encouraging

them to pursue the jobs in core sectors that are fuelling

economic growth.

Responsible and sustainable content

Every day, people trust Pearson to provide learning content that

is engaging, credible and supports their development goals.

They will only continue to do this if we provide products that

are accessible and accurate.

Our Global Content Policy provides clear and consistent guidance

for employees and third-party contributors to develop content

that is ethical, accurate and adheres to legal requirements.

From 2024, the policy includes guidelines for authoring

content using AI, including the appropriate tools to use and the

processes for reviewing content.

We recognise that with increased digitalisation comes

a growing digital divide. As we continue our digital

transformation, our priority will be to assess how we bridge

this gap and ensure that learners have the resources they

need and are not left behind.

Designing accessibility requirements into our

products and services

Accessibility is core to our mission to drive lifelong learning for all.

We apply best practice from learning and measurement sciences

to design and develop products, and to open up education for

all. Working with CAST, we have embedded Universal Design

for Learning in our Learning Design Principles. We also offer

specialist clinical assessments that help to improve diagnosis

and treatment for people with cognitive, behavioural and speech

conditions, enabling them to access the right support and enjoy

lifelong learning.

We have enhanced our accessibility framework in 2024, providing

increased guidance on building products to reflect learners’

needs. This will form part of our Global Content Policy from

early 2025.

One example of our commitment to accessibility is the work our

Braille Services team is undertaking to meticulously transcribe

school assessments into Braille to improve accessibility for

blind learners. In 2024, we delivered 400,000 pages of tests

and examinations. We partnered with Saint Louis University to

develop Inclusio, using AI to improve product design and deliver

Pearson’s content to blind learners so they can study science,

technology, engineering and mathematics.

We are also making science more accessible wherever students

are based through our Pearson Interactive Labs — an immersive

experience simulating practical laboratory work. Students receive

guided feedback as they master new techniques. In 2024, we

expanded our offering, with labs for Microbiology and Anatomy

& Physiology. For parents from a wide variety of backgrounds, we

are enabling them to play an active role in their child’s education.

In the US, Spotlight translates student progress reports into

multiple languages or user-friendly videos for parents. In 2024,

it was named a ‘Cool Tool’ in the EdTech Digest Awards.

Case study: Supporting people with ADHD

With an estimated 17 million children and adults with

attention deficit hyperactivity disorder (ADHD) in the

US alone, there is a growing need to understand the

condition. Our ADHD Virtual Summit in October 2024

updated almost 4,000 attendees on the latest ADHD-

related research and featured practical insights from social

media influencers advocating for better ADHD support.

In 2024, Pearson acquired Revibe Technologies, which

uses third-party smartwatches to gather insights on

behaviours and enables clinicians to tailor therapy.

Vibration and text reminders help improve focus,

supporting ADHD management. We plan to incorporate

Revibe’s technology into Pearson’s clinical assessment

tools and resources to improve outcomes for those

withADHD.

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“We’ve built robust compliance processes

that enable the business to use AI

responsibly and still move at speed.”

Cinthia Nespoli

General Counsel and

Executive Leader for Sustainability

Case study: Empowering the next

generation of cyber security professionals

For the last five years, our UK employees have been

mentoring students aged 14 and 15 from disadvantaged

backgrounds on cyber security and technology, including

internationally recognised principles, frameworks and risk

management approaches. The mentorships involved a visit

to Pearson’s headquarters to put their new knowledge into

practice. The programme has inspired students to further

their technology careers, with several going on to study at

leading UK universities.

Data privacy and cyber security

We are committed to ensuring learners can access content

safely and securely. This means applying the highest standards

to minimise the risk of attacks and to protect the personal

information that is entrusted to us.

In 2024, we continued to strengthen our approach, aligning more

closely with the National Institute of Standards and Technology

(NIST) frameworks for cyber security and data privacy, and

met the industry average NIST Cybersecurity Framework

score. We have deployed the Cyturus platform to improve

management of governance, risk and compliance. In 2025,

wewill launch a new Trust and Safety Centre, providing greater

information to suppliers, business partners and end users on

our risk management approach. It will help us demonstrate the

protections built into our services and afforded to our learners.

Training on Pearson’s AI, data privacy and cyber security

principles is mandatory for all employees. From 2025, we plan to

introduce regular short modules, keeping employees up to date

as technology and regulations evolve. Through ongoing employee

training and our 2024 ‘See Something, Say Something’ campaign,

more employees can identify phishing emails, helping to improve

our phishing test results and enhance business security.

We have integrated AI into our trust and safety governance

framework, ensuring consistent standards across AI, data privacy

and cyber security. Our AI guidance supports responsible

technology use, while maintaining flexibility to experiment

and create the best user experience. It replicates our product

development playbook, which supports consistently high data

management standards across Pearson.

The playbook is part of our ongoing effort to evolve and

strengthen our data management approach to maintain product

quality and integrity while making learning safe, affordable and

accessible for all.

Case study: Education Bond Framework

In September 2024, we launched a £350m education

bond to finance initiatives aligned with our Education Bond

Framework. The net proceeds will support initiatives that

advance UN SDG 4 (Quality education) by:

• Providing access to education and advancing socio-

economic development.

• Supporting underserved learners and communities,

including people living below the poverty line, those with

disabilities and the unemployed.

Potential programmes identified include:

• Delivering teaching, technology, student materials and

curriculum development to help provide free online

education services through, for example, the Connections

Academy.

• Product development for alternative secondary education

credentials and foundational learning to enable progress

in post-secondary education through, for example, the

General Education Development programme.

• Initiatives for those requiring testing for special needs and

underserved learners with special needs.

We commit to reporting the allocation and impact of our

contributions annually. More information on the Education

Bond and future reporting can be found on our website.

Annual report and accounts 2024 Pearson plc 37

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Sustainability continued

Our purpose

We help people realise the life they

imagine through learning.

To achieve this, we set out the following essential behaviours

that all Pearson employees should embody:

1. Customer centricity

2. Raising the performance bar

3. Exceptional collaboration for value

4. Our leaders inspire

We aim to foster a culture of performance where everyone

can leverage their strengths to create impactful learning and

assessment solutions.

Our people strategy has three focus areas:

• Employee engagement: driving better employee engagement

and high performance

• Investing in talent: providing continuous learning, growth

and progress for our employees

• Culture of community: driving a culture of community and aiming

for a welcoming culture throughout the company

These areas are reflected in our non-financial KPIs on page 24,

which highlight our annual progress in driving sustainable growth

and shareholder value while contributing to a more equitable

world. Key human resources policies, including our Human Rights

Statements and Modern Slavery Statement, are available on our

corporate policy hub (https://plc.pearson.com/en-GB/corporate-

policies).

Employee engagement

Engaging our employees is essential to ensure they feel

heard and valued. We believe empowered employees are

more productive and help to create more innovative learning

experiences for our consumers. In 2024, we continued

prioritising employee engagement across Pearson. We have

improved our mean scores for every question in our engagement

survey conducted by Gallup, and our overall engagement Grand

Mean score increased to 4.16 out of 5 (2023: 4.09). We now

rank in the 79

percentile for engagement against similar-sized

companies in Gallup’s overall company database.

Communicating across our workforce

With most of our workforce based in the UK and US, we engage

with our employees through multiple channels to keep them

connected with our growing business. Employees receive

updates about Pearson from business unit leaders and the CEO

through regular communications, virtual and in-person town

halls and the corporate intranet, The Hub. You can learn more

about how the Board engages with employees on page 85.

Our nine voluntary and employee-led Employee Resource

Groups (ERGs) are open to everyone and help foster a supportive

workplace culture at Pearson, as well as promote collaboration

and community. We renewed our focus on working with ERGs to

increase network opportunities, offer support to communities

in times of need and provide the business with valuable insights

and data.

Our workforce consists of regular and limited-term employees

(full-time and part-time), casual/seasonal employees (primarily

for test scoring) and contingent workers (individual contractors,

consultancy workers, and agency workers).

We follow local labour and human rights regulations, including

having work councils where needed by regulation.

Employee volunteering

Through our Learning for Impact volunteering programme,

we have increased opportunities for employees to foster

relationships with educational non-profits and community

organisations that align with our mission to provide world-

class learning solutions. We now have more targeted events

and programmes, both virtual and in-person, which leverage

employee skills and resources (skills-based volunteering) to

make a meaningful impact within communities. During 2024,

we were pleased to note a significant upward trend in volunteer

hours, with more than 33,000 hours spent supporting 360

organisations. We also increased our volunteer participation to

11% this year — above the global average of 9.2% according to a

recent report.

Empowering our people to

make a difference

We are focused on ensuring that all

employees have the skills needed to

contribute to Pearson’s expanding

digital learning solutions. This year,

our upskilling initiatives have

ranged from developing

AI-related capabilities to

enhancing leadership

techniques at

management level.

Ali Bebo

Chief Human

Resources Officer

Annual report and accounts 2024 Pearson plc 38

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Case study: Volunteering for impact

In 2024, we commissioned Impact Genome to provide an

Employee Volunteering Impact Report. The report highlights our

commitment to advancing the SDGs through offering dedicated

volunteering hours. Our efforts influenced youth development by

enhancing educational persistence, fostering essential social-

emotional skills, and ensuring access to basic needs, thereby

improving overall wellbeing and community engagement:

SDG 4 – Quality education: Employees

volunteered 1,855 hours with at least

75 organisations focused on improving

educational outcomes, resulting in increased

school attendance.

SDG 3 – Good health and wellbeing:

Employees contributed 1,025 volunteering

hours with at least 41 organisations that help

young people improve their social-emotional

skills, provide access to quality healthcare,

and improve mental and physical wellbeing.

SDG 2 – Zero hunger: Volunteers invested

771 hours with at least 34 organisations

tackling hunger, improving food distribution

and access to nutritious meals.

Investing in talent

Effective employee engagement starts with upskilling our

managers, who are essential in ensuring that employees feel

heard and valued. We invest heavily in developing our managers

and leaders, empowering them to support our transformation

into a digital business with a high-performance culture. In 2024,

we continued building manager and leadership capabilities

through multiple initiatives:

• Coaching for Performance series: 770 employees

participated in our peer-led, highly practical events, focused on

developing our managers as coaches.

• Leadership Uplift: We introduced new talent assessments

using the Pearson Leadership model for Directors and above.

Individuals received feedback and are able to access self-

paced support and learning or additional coaching.

• Internal forums: We initiated internal leadership forums

and manager meet-ups that occur monthly and quarterly,

respectively. There are approximately 2,500 line managers and

approximately 120 leaders involved in these meetings.

We measure our progress towards building our managers’

capabilities to act as performance coaches using Gallup’s

Coaching Index, combining two questions into an index to assess

the extent to which managers exhibit key coaching behaviours.

Our Coaching Index score has improved to 4.08 from 3.95 in

2023 (out of 5).

As we transition to a digital-first business, we must continue to

encourage our entire workforce to upskill responsibly and attract

new talent with diverse skills to fuel our growth. In 2024, we

focused on evolving our career architecture, guiding employees

to plan their career paths and support learning, aligning their

career development with the skills necessary to drive Pearson’s

strategy and equipping them for the future of work.

In 2024, we emphasised the importance of technological skills

to our employees for future-proofing Pearson. There were

over 12,000 attendees at our 2024 Technology Summit across

74 sessions led by external experts and Pearson leaders. We

rolled out our Generative AI channel, which enables a broader

proportion of our workforce to understand how to use AI in their

work to create impactful learning solutions. Since it launched,

the channel has had over 5,000 visits and employees have

completed over 3,700 modules of learning content.

We continue to develop the next generation of Pearson

employees by expanding our opportunities for young people.

We have created an Early Careers team in the UK that supports

our apprenticeships and internships. These pathways are an

investment not only in our employees, but also in the future

of our business. We currently have 75 individuals enrolled in

our apprenticeship programme. As a result of our efforts, we

were finalists for Best Apprenticeship Programme at the 2024

Investors in People Awards.

Our work in continuous employee development is reflected in

the increased percentage of employees who agree or strongly

agree in our Gallup engagement survey that they have ‘had

opportunities to learn and grow’, which rose to 77% from 76%

in 2023.

In 2025, we will continue to evolve our people strategy to ensure

our employees advance our purpose in an even safer and more

uplifting environment.

Culture of engagement

We continue to cultivate an environment of community where

everyone at Pearson can thrive. We believe that bringing people

from different backgrounds and experiences together helps us

create more innovative, effective products for our consumers.

In 2024, we continued to meet the FTSE Women Leaders

Review target of 40% of women in leadership roles (defined as

the Executive Committee and their direct reports). Our Board

diversity reporting is on page 54.

Following the 2023 Parker Review Committee’s ruling for FTSE 350

companies to establish ethnic minority targets by 2027, we continue

progressing our goal of 20% ethnic diversity for the Executive

Management team and the senior leaders who report to them.

Currently, 23% of our Executive Management team and senior

leaders in the US and UK self-identify as ethnically diverse.

We are committed to fostering an open and accessible

environment where all employees, including those with

disabilities, feel supported. In 2024, we revised our reasonable

accommodations and accessibility guidelines for employees.

We also give full and fair consideration to all applicants and

support the continued employment of disabled people,

making reasonable adjustments to address individual needs.

Recruitment, promotion and training are conducted based on

merit, against objective criteria that avoid discrimination.

Our suppliers

Pearson has a long history of working with a broad range of

suppliers. The varied perspectives they bring to our products

and services help foster innovation and create more robust

learning experiences.

Annual report and accounts 2024 Pearson plc 39

Strategic report Governance report Financial statements Other information

Sustainability continued

Rewards and benefits

Ensuring our employees feel supported and recognised is a big

part of maintaining our high-performance culture. We pride

ourselves on our extensive rewards, benefits and wellbeing

packages that help us attract and retain the world’s best talent.

We are committed to providing fair and equitable pay and

benefits for all our employees. We offer a holistic Total Reward

package, underpinned by our guiding pay principles, so that

our employees know how pay and benefits are managed

and understood at Pearson. As part of our offering, we have

consistent and robust reward structures and clear guidelines for

determining and rewarding individuals’ contributions.

Our employees are the reason that we continue to be a

successful global learning provider, and we want them to share in

the value they help create. We encourage employees to become

shareholders and owners of Pearson. Around one in five eligible

employees choose to save to purchase Pearson shares via our

savings-related employee share plans (‘Save for Shares’ and the

‘Employee Stock Purchase Plan’).

Health and wellbeing

Having a positive state of mind and body ensures our employees

can thrive at work. To continue providing strong wellbeing

benefits we are focused on improving mental health at work and

outside of it. We recently launched Pearson’s Global WELL – a

digital therapy and wellbeing platform, supported by Unmind

and designed by psychologists. The platform is completely

confidential. All employees have access to a comprehensive suite

of mental health services to help them lead a stress-free and

more fulfilling life. We have also launched a global network of

wellbeing champions, who led a series of talks for World Mental

Health Day on topics including ‘Crafting workplaces where mental

health can flourish’.

Our employee health and safety KPIs are reflected in the

nine standards in our Global Health and Safety Policy, and

performance on those standards is reported to the Board’s

Reputation & Responsibility Committee. Our strategy is modelled

on best practice and internationally recognised standards,

including ISO 45001. Our UK headquarters maintains ISO 45001

certification. In 2024, we commissioned a review of our global

occupational health provision to better understand our impacts

and provide solutions for our workforce. We are evaluating the

findings to assess next steps.

Pearson’s vision for reinventing the

way we learn, combined with its

unmatched global presence, creates

a unique opportunity

to transform lives

at scale around

the world.

Naseem Tuffaha

Chief Business Officer

Annual report and accounts 2024 Pearson plc 40

Strategic report Governance report Financial statements Other information

Decarbonising our business and

our value chain

Pearson’s business transformation is changing the profile of

our environmental impacts. As we build our digital learning

capabilities, Pearson will continue to shift away from physical

products and services, continuing a path of decarbonisation.

With increased use of AI and other advanced technologies in

education, renewable and alternative sources of energy will

play an important role in our industry and critically for our

technology-based suppliers. We will continue to work with our

larger suppliers to align our mutual objectives and encourage

their decarbonisation progress.

2018

previously

reported

2023

previously

reported

2018

rebaselined

figures

2023

re-stated

figures 2024

Location-

based 584,648 321,285 425,932 265,677 251,508

Market-

based 548,452 307,247 399,780 253,991 238,926

Emission

reduction

(location-

based) -45% -38% -41%

Emission

reduction

(market-

based) -44% -36% -40%

During the year, business transformation activities such as

changes in our property portfolio, limitations on air travel,

adjustments to the talent base and reductions in some key areas

of procurement spend, including emission-intensive paper,

resulted in marked carbon efficiencies throughout the business.

Our environmental strategy supports us to manage and mitigate

negative environmental impacts within our operations and

across our value chain. The alignment between our business

and environmental strategies provides an exciting opportunity

for us across our operations and value chain to achieve

our commitments.

Building on a steep decarbonisation journey so far, we have

refined our climate targets to better reflect the nature of

an increasingly digitally-led business, and align with global

milestones. In 2024, our new long-term targets were approved

by the Science Based Targets initiative (SBTi), setting us on an

externally-validated course to become a net zero organisation by

2050. The following targets drive our strategy:

• Achieve a 50% reduction in greenhouse gas (GHG) emissions

across our operations and value chain by 2030 from a 2018

baseline. This target was historically approved by the SBTi

since its adoption.

• Achieve a 90% reduction in GHG emissions across our value

chain and meet our science-based (SBTi approved) net zero

target by 2050.

Our updated Climate Action Plan guides our approach to

deliver on our goals. The plan is underpinned by three focus

areas, aligned with the three interrelated action areas of the UK

Transition Plan Taskforce’s disclosure framework:

• Decarbonising our business

• Contributing to an economy-wide transition

• Responding to climate risks and opportunities

Read more about our journey to net zero in our ClimateAction Plan

(https://plc.pearson.com/en-GB/sustainability/our-sustainability-

reporting).

Leading responsibly

for a better planet

Learning is essential to help

people adapt to the realities

of climate change. Pearson

has an important role to

play in supporting global

sustainability solutions, and

we’re working to position the

business to create maximum

impact. This year, we aligned

our long-term net zero target

with the latest climate

science, which will support

us to drive more meaningful

change forour communities

andtheplanet.

Cinthia Nespoli

General Counsel and Executive

Leader for Sustainability

Annual report and accounts 2024 Pearson plc 41

Strategic report Governance report Financial statements Other information

Sustainability continued

In 2024, these trends resulted in a 5.3% reduction in location-

based GHG emissions compared to 2023. Additionally, there was

a 5.9% reduction in market-based GHG emissions compared

to 2023. Overall, this amounts to a total reduction of 41% since

2018 for location-based emissions and 40% for market-based

emissions, against our 2018 baseline, positioning us to achieve

our target of halving our emissions by 2030.

We have already achieved our 2030 target for direct (scope

1) and market-based GHG emissions (scope 2 – emissions

from purchased electricity), driven by downsizing our property

portfolio, decommissioning emissions-intensive buildings and

dismantling our company vehicles fleet.

Reducing our value chain (scope 3) GHG emissions remains a

challenge, but is essential to meeting our long-term net zero

target. Since 2018, scope 3 emissions have decreased by 39%,

reflecting our transition from paper-based to digital supply chains,

reduced business travel and adopting a hybrid working model.

In 2024, we updated our 2018 baseline and re-stated our 2023

GHG emissions data to reflect recent acquisitions and disposals,

and to align with changes in data methodology as a result of

transitioning to a new emissions data management system.

Thisprocess will improve our data accuracy moving forward.

Our own operations

Ensuring we manage our own operations responsibly is essential

to managing our direct impacts.

Process management

We manage our impacts and reduction activities through a ‘Plan

– Do – Check – Act’ approach, and in some instances, we use

formalised management systems. In 2024, we re-certified our

four main UK sites to the ISO 14001 framework (Environmental

Management). In addition, our VUE test centres are certified to

ISO 22301 standards (Security and Resilience), which have been

amended to integrate climate risk analysis. This robust approach

allows us to deliver our climate strategy more effectively.

Energy

Energy is a critical resource for Pearson’s future as we minimise

our reliance on direct natural resources. Since our scope 1 and

2 GHG emissions primarily come from our buildings, we are

improving the energy efficiency of our sites and re-aligning our

property portfolio to our business needs. We are focused on

having smaller and more shared office spaces globally, which

has led to a 10% reduction in our physical footprint in 2024

compared to 2023.

We have also developed stringent environmental requirements

for the selection of new buildings, enforceable in 2025, including

environmental risk assessments, accessibility requirements,

resource efficiency and management of environmental data

collection. We purchase 100% of our electricity through green

tariffs, on-site generation or Energy Attribute Certificates (EACs).

Since 2022, Pearson has worked to consolidate our data centres,

improve their energy efficiency and move to cloud-based data

centres, which are more resource efficient. This year, we have

shut down three data centres and opened a new, more energy-

efficient data centre. The outcomes of our 2024 consolidation

actions will impact reporting in 2025.

We will continue to push for industry-wide change by establishing

partnerships that support decarbonisation, particularly in the

technology sector as we advance our digital transition. We

recognise that as part of the shift to renewables, new jobs will

require us to upskill not only our existing workforce but also

wider stakeholders.

Waste and water

Though our office-based operations have a limited impact on

overall water use and waste generation, we are encouraging

teams at our largest offices to reduce water and waste at a

locallevel.

Logistics and operations

We continue to increase investment in print-on-demand services

instead of holding paper-based inventory, to reduce the risk

of overproduction and holding out-of-date content, as well as

minimising waste and operational costs.

Moving towards an inventory-free system has reduced our need

for warehouse space and freight carriers. We selected our two

transport partners due to their strong sustainability credentials,

among other business and cost-driven factors. Together, we are

working to further optimise our logistics routes.

We are committed to expanding print service agreements where

vendors can use local printers, reducing the distance that books

are transported (book miles). In 2024, we achieved a reduction of

nearly eight million book miles, mainly from air freight.

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Our value chain

We believe in doing business with partners who share our

commitment to human rights and the environment, as

collaborating with our supply chain is essential to leading

sustainably and managing any associated risks. We outline our

expectations for suppliers in our Responsible Procurement

Policy. We also conduct detailed risk assessments of our larger

suppliers through the third-party sustainability ratings platform

EcoVadis. We continuously monitor our highest-risk suppliers

through the EcoVadis IQ tool, covering 90% of our supply chain

in 2024.

Supplier engagement

We purchased £1.2bn of goods and services in 2024, with

around 80% of our global spend represented by 350 large-scale

suppliers. As 93% of our total location-based GHG emissions

occur indirectly within our value chain, we see a huge opportunity

to support our suppliers to improve their sustainability

performance and efficiency. Our Global Procurement team

is dedicated to strengthening our ethical, sustainable and

efficient procurement practices. It works with our business units

to implement an end-to-end supplier engagement process,

including assessing performance, driving growth and increasing

accountability to accelerate value-chain decarbonisation and

efficiency.

Stakeholder engagement

We have an important role to play in delivering the knowledge

and skills required for a more sustainable future.

In the UK, Pearson was a co-signatory with other RE100

companies to lobby the UK Government to increase

transparency and effectiveness of Renewable Energy Guarantee

of Origin (REGO) certificates.

Where applicable, we incorporate sustainability language into

our supplier contracts, ensuring continuous improvement

and greater transparency in costs and other factors. We have

directly engaged with a number of suppliers through one-

on-one coaching sessions, supporting them to reduce their

environmental impact and future-proof their own workforces. We

continue to consolidate our supply chain to ensure we work with

the right suppliers that share our purpose and are committed to

collaborating on our sustainability and product goals.

Paper sourcing and nature-related impacts

In 2024, our overall paper consumption decreased to 19,255

tonnes (2023: 22,859 tonnes) due to continued digitalisation.

Wecontinue to manage the use of paper and print production to

minimise any potential associated environmental impacts in our

supply chain.

We remain committed to procuring 100% of our paper from

certified sources (FSC, PEFC and SFI) that set standards for

sustainable forest management including banning deforestation,

enhancing biodiversity and protecting nature – achieving 92% in

2024. We are on track to achieve our target by the end of 2025.

Our Manufacturing Terms of Trade detail our requirements for

print suppliers. In 2024, we updated our trade terms for print

suppliers to strengthen provisions on piracy, AI tools, carbon

maturity, third-party sustainability audits and data protection.

We maintain strong due diligence procedures in our direct supply

chain through Book Chain – a tool designed to help companies

identify labour and environmental risks in the supply chain. We

use Book Chain’s Forest Sourcing and Chemicals & Materials

tools to reduce the likelihood of purchasing paper from sources

associated with endangered species, reduce our exposure to

deforestation and ensure our suppliers are complying with safety

legislation. In 2024, we strengthened our process by asking

printers to submit an environmental questionnaire through the

platform to improve supplier-specific insights and prioritise areas

for risk mitigation.

In 2024, we assessed our paper supply chain for human rights

and nature-related risks. The results highlighted the importance

of robust supply chain data. We see opportunities to drive

improvement in this area moving forward, particularly as our

supply chain becomes increasingly tech-focused.

Looking ahead, we are focused on further quantifying GHG

emissions associated with the use of our digital products, though

additional work is required to fully incorporate these emissions

into our reduction roadmap.

Contributing to an economy-wide

transition

To shape a better tomorrow for people, planet and our

company, we must continue collaborating with a wider range of

stakeholders to promote collective sustainability action – both

within our value chain and beyond. We are active members of

the Responsible Media Forum, a partnership of leading media

companies dedicated to identifying and addressing our industry’s

social and environmental challenges.

We are also looking to build a long-term plan for beyond

our value chain mitigation activities. As a lifelong learning

company, we have a unique opportunity to develop educational

programmes that raise awareness about climate change and

support the development of adaptation mechanisms.

Our full set of environmental data and the methodology used

for calculations can be found in the sustainability performance

tables on page 53.

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Strategic report Governance report Financial statements Other information

Task Force on Climate-related

Financial Disclosures

The following sets out our climate-related financial disclosures in

alignment with the four Task Force on Climate-related Financial

Disclosures (TCFD) recommendations and the 11 recommended

disclosures featured in the ‘Recommendations of the TCFD’

report, together with its subsequent annex and implementation

guidelines. We engage with TCFD recommendations to minimise

business risk and ensure our continued financial performance

and growth.

Governance

Board oversight

The Board has ultimate oversight of Pearson’s climate change

strategy, climate-related risks and opportunities and achieving

our targets. Responsibility for managing Pearson’s sustainability

strategy sits with the Board’s Reputation & Responsibility

Committee (RRC). It meets three times a year to develop plans

for delivering and embedding the Responsible Business Strategy

across the Group (including the climate strategy); to monitor and

track progress against plans; to provide support to management,

Group leadership and functions on sustainability-related matters;

and to discuss recommendations for the wider Board. The RRC

receives updates on our greenhouse gas (GHG) emissions twice

a year.

Members of the RRC include two Non-Executive Directors who

have a deep understanding of climate and sustainability and their

impact on our business. The Group Chief Executive is a standing

attendee. For information on the Board’s composition and skills

profile, see page 70.

Pearson’s other Board Committees work alongside the RRC

on several sustainability topics; for example, the link between

climate and remuneration or in relation to reporting compliance

and audit. Read more about our governance structure and

approach, including our organisational structure on climate

governance, on pages 97-98.

Strategy management and implementation

Responsibility for identifying, assessing and managing climate-

related risks and opportunities is shared across Pearson. Our

General Counsel is the Executive sponsor for our sustainability

strategy and chairs the Environmental Steering Group, which

includes our Chief Financial Officer, Chief Strategy Officer and

Head of Procurement. The Environmental Steering Group meets

quarterly to review and update our strategy, communicating

revised objectives to the rest of the Executive Management team

for approval. It also oversees the implementation of our overall

carbon reduction plan.

Each business unit has appointed senior representatives to

lead sustainability actions and ensure that risks and business

opportunities are embedded into planning and business

unit management. Pearson’s central sustainability function

meets quarterly with business unit management to provide

expertise and guidance on implementing carbon reduction

activities at both a central and individual business unit level.

The Sustainability team is also responsible for monitoring and

reporting on our goals, and for representing Pearson in wider

partnerships aimed at achieving transformational change.

Throughout our business, we have subject matter experts on

specific areas of our climate-related plan. For example, our

Global Procurement team engages with our suppliers on a

regular basis and ensures relevant policies and procedures exist

to enable a transition to a green economy.

Strategy and risk management

Identified risks and management approach

In 2022, we worked with a specialist consultancy, ERM to

undertake a group-level climate risk assessment to identify

and quantify the potential impacts of climate change risks and

opportunities on our business, strategy and financial planning.

We refreshed the process in 2024 through an internal review,

and included a range of alternative scenarios.

In total, we identified 113 individual climate-related risks and

opportunities. We then assigned cross-cutting criteria to each,

enabling effective comparison and ensuring coverage of the full

business model. We evaluated business impacts and shortlisted

the most meaningful risks using an evidence-based approach,

drawing on climate scenarios and Pearson’s financial data,

to assess their materiality, likelihood and velocity. Finally, we

identified Pearson’s management responses and mitigation

actions for each of the key risks identified. The shortlist of risks is

detailed in Table 1 on page 45.

As part of the 2024 refresh, we updated ERM’s assessment to

take into account changes in our Responsible Business Strategy.

We also discussed each risk with management to ensure

we focus on risks that are most important to Pearson. The

conclusion of this exercise was that the risks remain consistent

with 2023, as described in Table 1 on page 45.

These risks are integrated into our various risk management

processes, depending on the nature of the risk. For example:

physical risks are integrated into business continuity planning by

the Central Workplace team; the Centralised Procurement team

oversees the costs and availability of paper; and other transition

risks, such as changes in regulations, are managed by regulatory

alert systems held in the legal function. Management of wider

stakeholder expectations and stakeholder engagement is a

shared responsibility between the Sustainability team and the

relevant Communications team.

We have assessed climate-related impacts on the Group’s

financial statements, including our commitment to achieve net

zero by 2050 and the actions we intend to take to achieve those

targets. Our climate risk assessment did not identify any material

impact on the Group’s significant judgements or estimates at

31 December 2024, or on the assessment of going concern for

the period to June 2026 and the Group’s viability over the next

five years.

Sustainability continued

Annual report and accounts 2024 Pearson plc 44

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Table 1 — Key risks identified

Risk description Scale* Pearson mitigation actions

Physical risks

Facility damage due to acute hazards:

Two assets included in the physical risk screening have relevant exposure to acute

hazards.

— Melbourne has present day exposure to a flood; and

— Manila experiences a hurricane once every three years on average, with a

maximum observed wind speed of 127mph.

Time frame – short

Likelihood – possible

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

We have insurance policies in place that would cover

the costs of structural damage and some lost sales.

Therefore, the impact is expected to be minimal.

Wildfire interruption to Assessment & Qualifications:

Wildfire has the potential to trigger widespread disruption to transportation and

prevent access to facilities. Our Assessment & Qualifications business unit is not

fully digitalised and relies on physical locations for provision of its instruction and

examinations. Under a pessimistic warming scenario, wildfire risk may increase

across the US, Canada and Australia.

Time frame – medium

Likelihood – likely

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

We have insurance policies in place that would cover

the costs of structural damage. Therefore, the impact

is expected to be partially mitigated.

Increased water scarcity:

According to data from WRI Aqueduct, Pearson has a relatively low number

of properties with exposure to water scarcity across its portfolio of operating

locations.

Time frame – medium

Likelihood – likely

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

We expect water usage to remain minimal, and any

increased costs or consumption will be offset by

property upgrades (e.g. taps automatically switching

off).

Increased paper costs:

The global paper market is inherently exposed to physical risk, such as exposure

to potential increased destruction from thunderstorms, wildfires, hurricanes and

flooding. These events can also cause logistical disruptions that further impact the

paper market. Accordingly, paper costs may increase.

Time frame – long

Likelihood – likely

Magnitude of impact before any mitigation action – moderate

Magnitude of impact with mitigation actions – low

In the short term, pricing changes will be reflected in

operational and strategic plans. In the medium term,

we expect digital product/service alternatives to be

widely available, reducing the need for paper.

Increased use of cloud services:

Data centres use increasing quantities of electricity and water to cool their

systems. As Pearson increases its reliance on digital products and services,

exposure to the physical risks of data centres owned by cloud service providers

may materialise. For example, this could be increased costs to use services, should

data centre owners face increased costs to run and cool their systems.

Time frame – short

Likelihood – likely

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

Mitigation actions would include shifting services

to alternative locations or servers. Any incremental

increase in costs would be reflected in operational and

strategic plans.

* Impact scales:

Time frame

Short: within 5 years

Medium: between 5 – 10 years

Long: more than 10 years

Likelihood:

Possible

Likely

Magnitude of impact

Low: below £5m

Moderate: £5m – £20m

High: £20m or above

Annual report and accounts 2024 Pearson plc 45

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Sustainability continued

Risk description Scale* Pearson mitigation actions

Transition risks

Building efficiency standards:

Buildings efficiency and performance standards are becoming more stringent and

are being imposed by regulation.

Time frame – short

Likelihood – likely

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

We continuously update our property strategy, and

our selection criteria for newly leased properties is well

above minimum building efficiency requirements.

Procurement of sustainably-certified paper:

There have been issues relating to procurement prices and supply chain shortages

during and following the COVID-19 pandemic.

Time frame – short

Likelihood – likely

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

We expect to reduce paper use based on our ongoing

digitalisation strategy and the increased availability

of digital alternatives. Impact will also be decreased

through improved product design and appropriate

pricing strategies. Therefore, the impact is expected to

be minimal.

Increased cost EU ETS certificates for mills in Belgium, Germany,

Italy and Sweden:

As a result of the Paris Climate Agreement and the resulting Nationally Determined

Contributions (NDCs) framework, there will be an increase in cost of EU Emissions

Trading System (ETS) certificates as more EU countries work to meet their

decarbonisation commitments. This is due to the limited supply of, and growing

demand for, ETS certificates.

Time frame – medium

Likelihood – likely

Magnitude of impact before any mitigation action – low

Magnitude of impact with mitigation actions – low

The risk of impact is decreased through digitalisation,

which assumes a lower ETS exposure level through

product design.

* Impact scales:

Time frame

Short: within 5 years

Medium: between 5 – 10 years

Long: more than 10 years

Likelihood:

Possible

Likely

Magnitude of impact

Low: below £5m

Moderate: £5m – £20m

High: £20m or above

Annual report and accounts 2024 Pearson plc 46

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Opportunities

There are significant contributions Pearson can make to an

economy-wide transition in order to best position the company

and our products. In the short and medium term, this includes

promoting the use and production of renewable energy. We will

ensure our purchase of Energy Attribute Certificates (EACs) is

genuinely supporting generation of new or additional renewable

energy, and we are working in partnership with our value chain

to promote renewable energy consumption. We are also looking

to build a long-term plan for beyond our value chain mitigation

activities. As a lifelong learning company, we are well-placed

to increase awareness about climate change and support the

development of adaptation mechanisms through education.

Resilience to climate change

Our climate risk analysis covers multiple time periods up to 2050

to help us assess if and when various scenarios might impact our

business model and reflect the critical future dates for reducing

GHG emissions. The articulation of short-, medium- and long-

term time horizons aligns with our goals and processes. The

short-term horizon reflects our risk forecasting process, including

our going concern and viability statements. The medium-term

horizon to 2030 alludes to the date of our reduction targets, and

the long-term horizon marks societal goals for achieving net zero

by 2050.

The physical risks to our business were assessed using both the

RCP 2.6 scenario (low GHG emissions that keep the world below

2°C warming by 2100, aligned to current commitments under

the Paris Climate Agreement), and the RCP 7 scenario (high GHG

emissions with average warming greater than 3°C by 2100). Our

financial quantification in Table 1 on page 45 was based on a

pessimistic scenario such as RCP 7 and IEA Beyond 2°C.

Six physical assets were assessed for exposure to material

physical risk. These were chosen because they represent a

sample of assets and provide a range of critical Pearson services.

Disruption caused or aggravated by climate physical risks could

result in delivery failures. Each physical hazard was mapped on a

materiality matrix and changes in materiality from 2023 to 2050

were projected.

The analysis concluded that Pearson’s business is moderately

vulnerable to climate change from physical risks in the medium

and long term. The main areas of exposure are climate change-

driven extreme heat and water scarcity, which may affect the

operations of cloud-based data centres that play a central role in

our business strategy.

Some of Pearson’s physical locations, such as testing centres,

are also moderately vulnerable to wildfires or flooding that could

impact normal business operations. However, we have business

contingency plans, including insurance, in place to reduce our

potential financial exposure to such impacts.

The transition risks on Pearson’s business were also assessed

using four scenarios from the IEA’s World Energy Outlook 2021

(WEO-2021). The analysis concludes that Pearson is minimally

vulnerable to transition risk in the 2030 time frame, but risk

increases for longer time horizons across all risk categories.

The main transition risk in the original analysis related to the

reputational risk associated with having a net zero target for

2030, which was heavily reliant on offsetting unabated GHG

emissions and had not been approved by the Science Based

Targets initiative (SBTi). We have since aligned our climate targets

with the latest climate science. Our approach is now focused

on achieving a 50% reduction in GHG emissions across our

operations and supply chain by 2030 from a 2018 baseline, and

cutting emissions by 90% across all scopes. Our new long-term

net zero target was approved by the SBTi in 2024, setting us

on an externally-validated course to becoming a true net zero

organisation by 2050.

The transition risks identified in the table on page 46 are

mitigated by the opportunities identified in our analysis, including

the ongoing digitalisation of our business, developing climate-

related educational content and services, and adopting more

ambitious reduction plans (see pages 41-43 of this report).

Impacts of climate-related risks

and opportunities

The Board of Directors has undertaken a robust assessment

of the current risks facing Pearson, as disclosed in the risk

section on pages 57–67 of this report. This assessment identifies

principal risks as well as several emerging risks and risks that,

while modest, could have a significant near-term impact. The

corporate risk register reflects these conclusions:

• Climate change overall does not represent a principal risk for

Pearson. The financial impact of climate change-related risks

and opportunities individually and in aggregate are well below

the threshold for an item to be considered a principal risk for

the company.

• The physical and transition risk assessment above highlighted

no significant material risks arising from climate change in the

short term (within the next five years).

• There are no substantial transition risks identified in the short

to medium term.

• There are no material short-term substantial physical risks

identified once the impact of mitigating activities is taken into

account. In the medium to longer term, the most significant

physical risk is water scarcity. In addition, while certain sites

were identified as having exposure to impacts from wildfire,

such as potential temporary closure of VUE test centres, or

from storms, the impact of these is currently expected to be

mitigated through insurance policies and business continuity

insurance.

In making this assessment, we considered the actions needed to

achieve our commitments, as well as the strategic and financial

impact of potential risks and opportunities. We concluded that

these did not have a material impact on the carrying value of any

assets and liabilities as of 31 December 2024, as we explain in

further detail in note 1c to the financial statements.

Strategic outlook

Our business model places the end user at the heart of

everything we do, reaching learners across all their life stages.

As we build out our digital learning capabilities, we will continue

to shift away from physical paper-based products and services

in line with our growth strategy, and, in turn, accelerate our

decarbonisation trajectory. In addition, we continue to reduce

our property footprint by improving the energy efficiency of

our sites, which also contributes to reducing our risk exposure

to physical and transitional risks. We expect these trends to

continue.

With the increased use of AI and other advanced technologies in

education, renewable and alternative energy solutions will play

an important role in our industry, and, more importantly, for our

technology-based suppliers. We will continue to work on driving

industry-wide change by establishing partnerships and actively

engaging our suppliers to ensure alignment of our values and

support progress in their decarbonisation journeys.

Nonetheless, Pearson is well-poised to achieve our goals. Our

Climate Action Plan identifies key actions to further decarbonise

our own operations, value chain and through our products and

services.

Annual report and accounts 2024 Pearson plc 47

Strategic report Governance report Financial statements Other information

Metrics and targets

Our primary target is to reduce our absolute scope 1, 2 and 3

GHG emissions by 50% by 2030 (validated by the SBTi) from a

2018 baseline. We have made good progress this year, achieving

a 41% reduction in GHG emissions since 2018. More detailed

information on our performance can be found on page 53.

Climate-related metrics

In addition to our carbon reduction targets, Pearson has

business-relevant non-financial KPIs that address the climate-

related risks and opportunities discussed throughout this report,

namely:

Metric

category Metrics Page

GHG

emissions

Responsible Business Strategy

Progress against achieving our

near-term emission reduction

target of 50% by 2030.

Strategy Digital growth

Drive digital sales growth

Governance Remuneration

Sustainability-related weighting

129

Our GHG emissions data

Our full set of environmental data and the methodology used

for calculations can be found in the sustainability performance

tables on page 53. The most material categories of scope 3 GHG

emissions represented in our figures include: Purchased goods

and services; Upstream transportation and distribution; Business

travel and Employee commuting. These categories represent

more than 90% of our scope 3 emissions. A breakdown of data

for each category can be found in the external assurance report

on our website: https://plc.pearson.com/en-GB/sustainability.

Our emissions data is calculated following the GHG Protocol

Corporate Accounting and Reporting Standard and can be

summarised as follows:

tCO

e 2024

2023 (re-stated

figures*)

Scope 1 4,095 4,683

Scope 2 location-based 13,942 14,004

Scope 2 market-based 11 1,719

Scope 3 location-based 233,471 246,990

Scope 3 market-based 234,820 247,590

Total location-based 251,508 265,677

Total market-based 238,926 253,991

Intensity ratio – tCO

e/£m sales

revenue

(market-based methodology) 67 69

* Figures have been re-stated to reflect acquisitions, disposals and data

methodology improvements, assured by an independent third party,

SLR Consulting Ltd. The statement can be found on our website:

https://plc.pearson.com/en-GB/sustainability.

TCFD Index

Section Section

Page

Reference

Governance Board’s oversight of

climate-related risks

and opportunities

44-48

Management’s role in

assessing and managing

climate-related risks

and opportunities

Strategy Climate-related risks and

opportunities over the short,

medium and long term

44-47

Impact of climate-related risks

and opportunities

Pearson’s resilience taking

into consideration different

climate-related scenarios

Risk

management

Processes for identifying

and assessing climate-

related risks

Processes for managing

climate-related risks

Integration of climate-related

risks into the organisation’s

overall risk management

Metrics and

targets

Metrics used to assess

climate-related risks

and opportunities

Scope 1, 2, and 3 GHG

emissions

Performance against targets 48

Sustainability continued

Annual report and accounts 2024 Pearson plc 48

Strategic report Governance report Financial statements Other information

Sustainability material issues reporting against GRI and SASB

Material issues  GRI  SASB  Page/web reference  Comments/omissions

Product

effectiveness

GRI 203-2: significant indirect impacts  Risks, opportunities and management approach:

Pages 35-37

Performance: Page 24



Consumer

engagement

GRI 203-2: significant indirect impacts  Risks, opportunities and management approach:

Pages 35-37

Performance: Page 24



Digital growth GRI 203-2: significant indirect impacts  Risks, opportunities and management approach:

Pages 35-37

Performance: Page 24



Employee

learning and

development

GRI 404-1: average hours of training per

year, per employee

GRI 404-2: programmes for upgrading

employee skills and transition assistance

programmes

GRI 404-3: percentage of employees

receiving regular performance and

career development reviews

Risks, opportunities and management approach:

Pages 38-40

Performance: Pages 24

We do not report on average hours of

training, or % of employees receiving

reviews.

Sustainability data

Our performance

About our reporting

This report provides a summary of Pearson’s business and sustainability strategy and performance for the calendar year ended 31 December 2024. The Board’s Reputation & Responsibility Committee has

reviewed progress against our key topic areas as disclosed throughout this report.

Global Reporting Initiative (GRI)

Our report is in accordance with the GRI standards, using the GRI 1: Foundation 2021 guidance. There is no relevant GRI sector standard for our industry.

Sustainability Accounting Standards Board (SASB)

We continue to report in line with the SASB’s standards to provide industry-based insights into the most relevant sustainability-related risks and opportunities for the media and professional services sectors.

UN Global Compact (UNGC) and the UN Sustainable Development Goals (SDGs)

We were proud to participate in the Early Adopter Programme of the UN Global Communication on Progress (CoP) designed to add value and streamline sustainability reporting for all participating companies

of the UNGC. Our CoP is publicly available on our participant profile.

Lifelong learning and education have an important role to play in achieving all the UN SDGs, but we focus our efforts on those where we have the greatest impact. Our priority SDGs are: 4 (Quality education),

8 (Decent work and economic growth), and 10 (Reducing inequalities).

Annual report and accounts 2024 Pearson plc 49

Strategic report Governance report Financial statements Other information

Sustainability data continued

Material issues  GRI  SASB  Page/web reference  Comments/omissions

Employee

engagement

401-1 New employee hires and

employee turnover

SV-PS-330a.2. (1) Voluntary and

(2) involuntary turnover rate for employees

SV-PS-330a.3. Employee engagement %

Risks, opportunities and management approach:

Page 38-39

Performance: Page 55

Inclusion and

diversity

405-1 Diversity of governance bodies

and employees

SV-PS-330a.1. & SV-ME-260a.1. Percentage

of gender and racial/ethnic group

representation for:

(1) Executive Management

(2) professionals

(3) all other employees

Risks, opportunities and management approach:

Page 38-39

Performance: Pages 24, 39, 54-55

Reducing our

environmental

impact

GRI: GHG emissions scope 1, 2 and 3.

Baseline and methodology. Any offsets

including type, amount, criteria

Risks, opportunities and management approach:

Pages 33, 41-43

TCFD Report: Pages 44-48

Performance: Pages 24, 41-43, 53

Data privacy

and cyber

security

GRI 418-1 Substantiated complaints

received concerning breaches of

customer privacy and losses of

customer data

SV-PS-230a.1. Description of approach to

identifying and addressing data security

risks

SV-PS-230a.2. Description of policies and

practices relating to collection, usage and

retention of customer information

SV-PS-230a.3. Number of data breaches

percentage involving customers’

confidential business information or

personally identifiable information number

of customers affected

The following sections of our report detail:

— Our approach to data security risks: Page 102

— Governance of data privacy, cyber security and

technology resilience: Pages 100, 102

— Approach to customer data and safeguarding

and training provided, data privacy and cyber

security: Page 37

— Responsible Security Disclosure Policy (https://

www.pearson.com/en-gb/legal-information/our-

policies/responsible-security-disclosure-policy.html)

— Safeguarding statement (https://plc.pearson.

com/sites/pearson-corp/files/pearson/footer/our-

corporate-policies/safeguarding-statement.pdf)

— Data security and protection schedule for

suppliers (https://www.pearson.com/content/

dam/one-dot-com/one-dot-com/global/Files/

suppliers/Pearson-Data-Privacy-Security-

Schedule.pdf)

— Consumer-facing privacy centre explaining how

Pearson uses personal information (https://

www.pearson.com/en-gb/privacy-center/privacy-

notices.html)

In the event of a reportable breach,

we would disclose information about

the incident and commit to contact

any affected data subjects in a timely

way. In line with regulations, we will

disclose material lapses to the relevant

regulators. To the extent that any

relevant regulator should find fault

with our data management and/or data

security practices, they will publish their

findings/sanctions.

Journalistic

integrity &

sponsorship

identification

SV-ME-270a.3. Description of approach

for ensuring journalistic integrity of news

programming related to: (1) truthfulness,

accuracy, objectivity, fairness and

accountability, (2) independence of content

and/or transparency of potential bias, and (3)

protection of privacy and limitation of harm

— Business Partner Global Content Policy

(https://plc.pearson.com/sites/pearson-corp/

files/pearson/corporate-policies/global-

contents-standards-policy-for-business-

partners.pdf) Page 36

Pearson does not engage in journalism

but we have a publicly available Global

Content Policy.

Annual report and accounts 2024 Pearson plc 50

Strategic report Governance report Financial statements Other information

GRI General Disclosures Index

Disclosure Page Comments/omissions

2-1 Organisational

details

156 Headquarters location: Pearson plc, 80 Strand, London,

WC2R 0RL, UK

2-5 At a Glance – What we do, Highlights,

Business unit overviews – Assessment & Qualifications,

Virtual Learning, Higher Education, English Language

Learning and Enterprise Learning and Skills (formerly

Workforce Skills).

234 Property, plant and equipment

2-2 Entities included

in the organisation’s

sustainability reporting

213-216 All entities within Pearson plc are included in the

sustainability-related disclosures within this annual report,

across all material topics and data. External assurance

of data is based on Group-wide data consolidation and

reporting as noted in the 2024 assurance statement,

found on our corporate website: https://plc.pearson.com/

en-GB/sustainability.

2-3 Reporting period,

frequency and contact

point

Qualitative and quantitative disclosures in the

Sustainability section refer to the calendar year 1 January

2024 to 31 December 2024 in alignment with our financial

reporting period.

Reporting frequency is annual.

Publication date: 14 March, 2025

Contact point: sustainability@pearson.com

2-4 Restatements of

information

42, 48,

2018 GHG emissions data has been rebaselined

2023GHG emissions consequently re-stated to

reflect acquisitions, disposals and data improvements

(seefootnote, page 48). New figures are disclosed in

datatables.

2-5 External assurance 2024 ISAE 3000 (2020) independent assurance statement

covering Pearson’s GHG emissions, energy use and social

data can be found on our corporate website: https://plc.

pearson.com/en-GB/sustainability.

2-6 Activities, value chain

and other business

relationships

12-16 An integrated strategy

18-22 Stakeholder engagement

Disclosure Page Comments/omissions

2-7 Employees 22 Stakeholder engagement (Employees)

38-40 Empowering our people to make a difference

54-55 Social data tables – Our employees

82 Talent and culture

2-8 Workers who are not

employees

We do not currently report on workers who are not

employees. The most common type of workers are

regular and limited term employees (17,116) and the most

common type of work performed is in testing centres,

technology, sales, customer services, and professional

development.

2-9 Governance

structure and

composition

39,

54-55

44,

96-98

Gender and ethnicity composition of the Board

Sustainability governance is explained in the TCFD

disclosure and the Reputation & Responsibility Committee

report.

68-141 Governance report

2-10 Nomination and

selection of the highest

governance body

44,

96-98

Sustainability governance is explained in the TCFD

disclosure and the Reputation & Responsibility Committee

report.

68-141 Governance report

2-11 Chair of the highest

governance body

70 Board of Directors

2-12 Role of the

highest governance

body in overseeing the

management of impacts

70 Board of Directors

77 Division of responsibilities

78-80 Board activities

2-13 Delegation of

responsibility for

managing impacts

70 Board of Directors

77 Division of responsibilities

78-80 Board activities

2-14 Role of the highest

governance body in

sustainability reporting

44,

96-98

Sustainability governance is explained in the TCFD

disclosure and the Reputation & Responsibility Committee

report.

2-15 Conflicts of interest 73 Independence of Directors

79 Board activities

81 How the Board is kept informed

236 Additional information for US listing purposes

Annual report and accounts 2024 Pearson plc 51

Strategic report Governance report Financial statements Other information

Sustainability data continued

Disclosure Page Comments/omissions

2-16 Communication of

critical concerns

81-82 How the Board is kept informed

2-17 Collective

knowledge of the highest

governance body

70-72

TCFD disclosure, Governance section

Board of Directors

2-18 Evaluation of the

performance of the

highest governance

body

89-91 Board performance review

2-19 Remuneration

policies

113-136 Director’s Remuneration Report

2-20 Process to

determine remuneration

113-136 Director’s Remuneration Report

2-21 Annual total

compensation ratio

113-136 Director’s Remuneration Report

2-22 Statement

on sustainable

development strategy

33-34 Learning for Impact framework

2-23 Policy

commitments

33-48 Sustainability section, policy commitments and approaches

noted across all content covering our Learning for Impact

framework

Corporate policies (https://plc.pearson.com/en-GB/

corporate-policies)

Disclosure Page Comments/omissions

2-24 Embedding policy

commitments

33-48 Sustainability section, policy commitments and approaches

noted across all content covering our Learning for Impact

framework

2-25 Processes to

remediate negative

impacts

Corporate policies (https://plc.pearson.com/en-GB/

corporate-policies)

2-26 Mechanisms for

seeking advice and

raising concerns

Raising concerns and anti-retaliation policy (https://plc.

pearson.com/sites/pearson-corp/files/2023-08/raising-

concerns-and-anti-retaliation-policy/raising-concerns-and-

anti-retaliation-policy-english.pdf)

2-27 Compliance with

laws and regulations

64 Risk management

65 Accountability for principal risks

99-109 Audit Committee report

2-28 Membership

associations

Pearson is a member of a number of associations,

including the Responsible Media Forum, TeachAI,

the American Association of Publishers, the Software

Information Industry Association and the Publishers

Association.

2-29 Approach to

stakeholder engagement

18-22 Engaging with our stakeholders

84-85 Understanding our stakeholders

2-30 Collective

bargaining agreements

235 Additional information for US listing purposes (Employees)

Annual report and accounts 2024 Pearson plc 52

Strategic report Governance report Financial statements Other information

Sustainability performance tables

Environment

Methodology: We follow the requirements from the greenhouse gas (GHG) Protocol Corporate

Accounting and Reporting Standard (revised edition) to calculate our GHG emissions.

For scope 2 and 3, we use the dual reporting methodology (location and market-based approach),

together with some of the latest emission factors from recognised public sources, including, but not

limited to, the UK Department for Business, Energy and Industrial Strategy (BEIS), the International

Energy Agency, the US Energy Information Administration, the US Environmental Protection Agency,

and the Intergovernmental Panel on Climate Change (IPCC). Energy use includes combustion of fuel

as well as purchase of electricity, heat, steam or cooling consumption in MWh, and vehicle fuel use

converted from mileage into MWh using BEIS conversion factors. We are also using the latest global

warming potential from the IPCC’s Fourth Assessment Report.

Following our re-baselining policy, in line with best practice standards, we have re-stated our

emissions to reflect the change in reporting scope and categories, as well as reviewed and updated

calculation methodologies for the reporting years 2018 and 2023. This process has been verified

and assured, alongside our environmental and social KPIs (unless otherwise noted) by a third-party

auditor, SLR Consulting.

For more information, see our SLR Consulting assurance statement on our corporate website –

https://plc.pearson.com/en-GB/sustainability/.

Greenhouse gas (GHG) (carbon dioxide equivalent) emissions overview

(metric tons CO

2024

2023re-stated

figures

Scope 1 4,095 4,683

Scope 2 (location-based

) 13,942 14,004

Scope 2 (market-based

) 11

1,719

Scope 3 (location-based

) 233,471 246,990

Scope 3 (market-based

) 234,820 247,590

Total – location-based

 251,508 265,677

Total – market-based

 238,926 253,991

Total scope 1 and 2 (location-based)

18,037 18,687

Total scope 1 and 2 (market-based)

4,106 6,401

UK scope 1 559 693

UK scope 2 (location-based

) 831 1,177

UK scope 2 (market-based

) 5 7

Total UK scope 1 and 2 (location-based

) 1,390 1,871

Total UK scope 1 and 2 (market-based

) 564 700

2024

2023re-stated

figures

Intensity ratio

tCO

e/£m sales revenue (market-based methodology) 67 69

Energy

% electricity from renewable sources 100 89

Total electricity consumption from renewable sources only (MWh) 36,777 33,066

Total electricity consumption from non-renewable sources only (MWh)  0 3,953

On-site generated electricity (MWh) 216 177

Total gas consumption (MWh)  14,369 17,215

Total fuel oil consumption (MWh) 501 585

Vehicles (MWh) 4 1

Total energy consumption (gas, fuel, electricity, transport and other

sources) (MWh) 51,726 54,960

Total energy consumptionUK (gas, fuel, electricity, transport and other

sources) (MWh) 6,056 8,313

Resource use

Paper used (t) 19,255 22,859

% Forest Stewardship Council (FSC)** 59 50

% Programme for the Endorsement of Forest Certification (PEFC)** 4 6

% Sustainable Forestry Initiative (SFI)** 30 13

Waste

Total waste generated (t) 1,749 1,371

% waste recycled in office space 32.6 14.6

Water

Total water consumption (m

) 127,014 137,954

1. The location-based approach reflects emissions from purposefully sourced electricity. It derives emission factors

from a contract for the sale and purchase of energy.

2. The market-based approach reflects the average emissions intensity of grids on which energy

consumption occurs.

* We purchase renewable electricity in countries of consumption. For American Samoa, North Mariana Islands,

US Virgin Islands, Guam, South Korea and Romania, Pearson was not able to purchase country-specific Energy

Attribute Certificates and we had to buy from neighbouring countries/regions such as the United States, the

European Union and China. For the Philippines, we purchased hydro technology as the only available in-country

option. However, this represents only 0.8% of Pearson’s total electricity consumption.

** These data points were not included in SLR Consulting’s assurance scope.

Annual report and accounts 2024 Pearson plc 53

Strategic report Governance report Financial statements Other information

Sustainability data continued

Social

All employee figures, with the exception of total average number of employees (as noted below), are

based on employee volumes as at 31 December 2024. We will review data provided in future years,

in alignment with evolving reporting regulations.

Our employees

 2024 2023

Total average number of employees for the year

†

 17,024 18,360

Employees by geography (regional representation) 17,116 17,612

US as of 31 December 8,821 9,241

UK as of 31 December 3,394 3,359

Rest of world as of 31 December 4,901 5,012

Gender diversity breakdown

% permanent, regular employees 98 97

Male 40 40

Female 59 59

Non-binary 0 0

No data 1 1

% temporary, limited-term employees 2 3

Male 31 36

Female 67 63

Non-binary 0 0

No data 2 1

% full-time, regular employees 79 79

Male 44 44

Female 56 56

Non-binary 0 0

Not disclosed 1 1

% part-time, regular employees 21 21

Male 28 27

Female 71 72

Non-binary 0 0

Not disclosed 0 1

†

Total average number of employees is calculated using a Full-time Equivalent (FTE) methodology, as an average

across the reporting period. Seasonal/temporary staff are excluded from the calculation. All other data in this table

is calculated using a headcount methodology.

Board and Executive Management team’s gender identity or sex



Number

of Board

members

Percentage

of the Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in

Executive

Management*

Percentage

of Executive

Management

Male 4 40% 3 7 58%

Female 6 60% 1 5 42%

Other categories 0 0% 0 0 0%

Not specified/prefer not to say 0 0% 0 0 0%

Board and Executive Management team’s ethnic background

White British or other White

(including minority-white groups) 6 60% 3 8 67%

Mixed/Multiple ethnic groups 2 20% 0 1 8%

Asian/Asian British 1 10% 0 2 17%

Black/African/Caribbean/Black British 0 0% 0 0 0%

Other ethnic group 1 10% 1 1 8%

Not specified/prefer not to say 0 0% 0 0 0%

* Prepared in accordance with UK Listing Rule 6.6.6R(10) as at 31 December 2024. As prescribed by this rule

and for the purpose of this disclosure, the Executive Management includes the Company Secretary. The data

contained in the tables above was collected as part of the annual declaration process, whereby the Board and

the Executive Management team received declaration forms for self-completion. The declaration forms included,

for all individuals whose data is being reported, the same questions relating to ethnicity and gender. The data is

used for statistical reporting purposes and is provided with consent.

Female leadership breakdown (%)

 2024 2023

Senior leadership 49 47

VP and Director 49 47

Manager 51 51

Employee racial and ethnic diversity breakdown (%)

 2024 2023

Total workforce (US and UK) 32 (US)/18 (UK) 32 (US)/17 (UK)

Senior leadership (US and UK) 17 (US)/17 (UK) 15 (US)/14 (UK)

VP and Director (US and UK) 19 (US)/16 (UK) 18 (US)/16 (UK)

Manager (US and UK) 27 (US)/19 (UK) 27 (US)/18 (UK)

Annual report and accounts 2024 Pearson plc 54

Strategic report Governance report Financial statements Other information

 2024 2023

Employee racial and ethnic diversity breakdown – US(%)

Total workforce 32 32

Asian 11 11

Black or African American 11 11

Hispanic or Latino 9 9

Other 2 2

White 68 68

Not stated 0 0

Employee racial and ethnic diversity breakdown – UK(%)

Total workforce 18 17

Asian 10 10

Black 3 4

Hispanic or Latino 0 0

Other 4 4

White 63 64

Not stated 20 18

Total management workforce (US and UK)(%)

Asian 12 12

Black or African American 4 4

Hispanic or Latino 3 4

Other 2 2

White 76 76

Not stated 2 2

Turnover

Turnover rate, total average for the year

 3,331/19% 6,446/34%

Voluntary turnover 2,309/13% 3,037/16%

Involuntary turnover 1,022/6% 3,409/18%

Turnover by gender

Total female 2,052/12% 3,840/20%

Total male 1,239/7% 2,475/13%

Non-binary 8/0% 21/0%

Not disclosed 32/0% 110/1%

Turnover by age group

Under 30 years old 901/5% 1,693/9%

30-50 years old 1,462/8% 3,324/18%

Over 50 years old 961/6% 1,414/7%

No data 7/0% 15/0%

 2024 2023

New hires

Total number and rate of new employee hires (number

of hires/ average headcount)

 2,799/16% 3,770/20%

Total number of new hires – female 1,710/61% 2,289/61%

Total number of new hires – male 1,018/36% 1,374/36%

Total number of new hires – non-binary 13/0% 19/1%

Total number of new hires – not disclosed 58/2% 88/2%

New hires by age group

Under 30 years old 893/32% 1,444/38%

30-50 years old 1248/45% 1,642/44%

Over 50 years old 647/23% 674/18%

No data 11/0% 10/0%

Employee engagement measures

3

Engagement^ 4.16 4.09

Inclusion^ 4.24 4.21

Progress 78% 73%

Learning and growth 77% 76%

Volunteering hours 33,130 20,694

Governance

Total number of concerns raised and investigated 115 92

Percentage of employees completing Code of Conduct

certification or training* 100% 100%

1. % calculated using average 2024 headcount of 17,024, not 2024 year-end position. Both voluntary and

involuntary turnover is reducing, the latter was significantly down compared with 2023 as there were no major

divestiture activities in 2024.

2. % calculated using average 2024 headcount of 17,024, not 2024 year-end position.

3. Sourced from Gallup Access.

^ Grand Mean on a 5-point Likert scale.

* This data point was not included in SLR Consulting’s assurance scope.

Annual report and accounts 2024 Pearson plc 55

Strategic report Governance report Financial statements Other information

Non-financial and sustainability

information statement

In accordance with Sections 414CA and 414CB of the Companies Act 2006, which outline requirements for non-financial reporting, the table below signposts to content in this Strategic report, relevant to the

management, performance and position of the company, and the impact of our activities in specific non-financial areas.

Non-financial matter and relevant sections of annual report Page/link reference 

Business model Business model: Pages 13-16

Stakeholders: Pages 18-22

Environmental matters

Climate

Resource use

Corporate policies: (https://plc.pearson.com/en-GB/corporate-policies)

Position and performance: Pages 41-43

Risks/opportunities: Pages 45-47

KPIs: Page 24

Climate-related financial disclosure as defined in Section 414CB(2a) Companies Act 2006: Governance – (a) on page 44; Strategy – (d), (e)

and (f) on pages 44-47; Risk management – (b) and (c) on pages 44-47; Metrics and targets – (g) and (h) on page 48.

Social and community matters

Driving learning for everyone with our products

Social engagement

Corporate policies: (https://plc.pearson.com/en-GB/corporate-policies)

Position and performance: Pages 35-37

Risks/opportunities:(https://plc.pearson.com/sites/pearson-corp/files/pearson/materiality-2024.pdf)

KPIs: Page 24

Employee matters

Employee engagement

Investing in talent

Corporate policies: (https://plc.pearson.com/en-GB/corporate-policies)

Position and performance: Pages 38-40

Risks/opportunities: (https://plc.pearson.com/sites/pearson-corp/files/pearson/materiality-2024.pdf)

KPIs: Page 24

Human rights matters

Customer welfare (data privacy, security and safeguarding)

Empowering our people to make a difference

Corporate policies:(https://plc.pearson.com/en-GB/corporate-policies)

Position and performance: Page 102

Risks/opportunities: (https://plc.pearson.com/sites/pearson-corp/files/pearson/materiality-2024.pdf)

Anti-corruption and bribery matters Corporate policies: (https://plc.pearson.com/en-GB/corporate-policies)

Position and performance: Pages 105 and 232

Risks/opportunities: Pages 103-105

Pearson has a wide range of policies that underpin our sustainability commitments, including:

• Pearson Code of Conduct

• Pearson Business Partners’ Code of Conduct (Partner Code)

• Responsible Procurement Policy and our Modern Slavery and Human Rights Statements

• Anti-Bribery and Corruption (ABC) Policy; Raising Concerns and Anti-Retaliation Policy

• Pearson’s safeguarding principles (include data privacy/security)

• Global Content Policy

The implementation of these policies is discussed throughout this report and on our website.

Annual report and accounts 2024 Pearson plc 56

Strategic report Governance report Financial statements Other information

Risk management

Effective risk management is essential to executing our strategy, achieving sustainable shareholder value, protecting our brand and

ensuring good governance.

The table below sets out our governance structure for risk management.

Internal audit

function

(Assurance)

Our internal

audit function

is responsible

for providing

independent

assurance to

management and

the Audit Committee

on the design and

effectiveness of

internal controls, to

mitigate strategic,

financial, operational

and compliance risks.

• Provides oversight to the Board concerning the integrity of Pearson’s procedures for

identifying, assessing, managing and reporting on risk and obtains assurance from

internal / external auditors

• Monitors and evaluates our compliance and risk management processes and

control programmes

• Approves our risk management framework

• Approves internal audit plans

• Considers our impact on the communities in which we operate, including

ensuring that we have risk management processes in place to manage

relevant risks

• Comprises the CEO, CFO and other senior leaders (on pages 74-76)

• Accountable for ensuring that risks are mitigated in line with risk appetite

• Responsible for executing our strategy

• Responsible for reviewing and approving our principal risks, mitigation plans

and controls

• Reports to the Audit Committee on risks, where required

Plc Board (oversight)

Audit Committee (oversight)

Reputation & Responsibility Committee (oversight)

Pearson Executive Management (PEM) (identification, assessment,

and mitigation)

• Responsible for Pearson’s strategy

• Responsible for reviewing management’s assessment of our principal risks

• Approves the annual budget and long-term financial plans

• Determines risk appetite in line with our strategy

• Conducts targeted reviews of key risks

• Responsible for monitoring, mitigating and reporting on risk

• Risk committees within each business unit assess the principal risks and implement

further sub-committees as appropriate for business unit-specific exposures

• Functional heads work in conjunction with Group technical experts to

monitor and manage significant risks. These experts provide operational

support, guidance, policy and advice

• Dedicated teams providing guidance, review and assurance over key

operational and financial risks including finance, legal and compliance

• Personnel across Pearson are trained in relevant risk management to

identify, assess, mitigate and escalate risks

Enterprise Risk Management function (identification, assessment,

and mitigation)

Senior leadership (identification, assessment and mitigation)

Technical specialists (identification, assessment and mitigation)

Risk management experts (identification, mitigation and assurance)

Pearson personnel (identification, assessment and mitigation)

• Prepares our risk management framework

• Maintains our risk register and list of principal risks

• Reviews risks with business units to assess and monitor risk exposures

• Prepares a consolidated risk view for the Pearson Executive Management

• Provides oversight over risk management activity

• Reports to the Audit Committee on risks

Annual report and accounts 2024 Pearson plc 57

Strategic report Governance report Financial statements Other information

Risk continued

Risk oversight

Risks are managed by members of the Pearson Executive

Management team (PEM), either on a business unit basis or

by function (as set out in the Accountability for principal risks

section on page 65).

Risk owners conduct regular risk reviews with their leadership

teams, consulting others where appropriate, including technical

specialists, within their business unit or operating in one of

the centres of expertise. Risk reports are shared with key

stakeholders, including the Enterprise Risk Management team,

and are discussed at PEM meetings.

The Audit Committee has the delegated responsibility for

reviewing the effectiveness of our procedures for identifying,

assessing, managing and reporting risk.

Each business unit is expected to present an overview of its risk

deep dive on key risks, supported by central risk team experts

as required. Deep-dive sessions are also held at the Audit

Committee with enterprise-wide functions such as tax, treasury

and cyber security.

The Board uses these deep-dive sessions to understand the

rigour of management’s risk scanning and to challenge any

judgements in response to risks.

The internal audit team provides independent assurance to the

Audit Committee on the design and effectiveness of internal

processes, to mitigate strategic, financial, operational and

compliance risks. Internal audit plans are aligned to the principal

risks but also consider other key risk areas and other assurances

available. Plans are agreed in advance with the PEM team and

the Audit Committee.

Risk environment

We operate in markets in learning, content, assessment and

qualifications where we have held leading positions over several

years as businesses and markets have become more digital.

Factors affecting the markets in which we operate include

our position as an accredited provider of high-stakes tests,

organisational capability, competitive dynamics, learner

preferences and delivery methods, including the growing

adoption of AI tools and the reputation of companies operating

in the market. We seek to maximise the opportunities arising

from these changing market conditions, balanced with

appropriate monitoring and understanding of associated risks.

Further information on our business units and key markets are in

the Strategy section on pages 12-16.

Risk identification and monitoring

Our risk identification processes follow a dual approach. Firstly,

we take a top-down view that considers strategic risks across

Pearson. We then take a bottom-up approach at a business unit

or functional level, to identify and assess a complete list of each

business unit’s risks, with key risks highlighted in management

reporting and in each business unit’s long-range plan.

We conduct detailed interviews throughout the year with each

business unit to assist with risk assessment and management.

We then rank risks according to their likely impact as principal

risks, significant near-term risks, emerging risks or other risks.

Classification as principal risks, significant

near-term risks and emerging risks

We define our principal risks as those that could have a

significant and ongoing effect on the Group’s valuation by

reducing the demand for, or profitability of, our products and

services. Our Group assessment considers multiple dynamics

including the duration, velocity and size of the potential impact.

Effective management of these risks is essential to executing our

strategy, achieving sustainable shareholder value, maintaining

our reputation and ensuring good governance. However, these

risks do not comprise all risks associated with our business

and are not set out in priority order. Additional risks that are as

yet unknown to management, or currently deemed to be less

material, may also have an adverse effect on our business.

Significant near-term risks are risks that could have a significant

near-term cash impact or affect our short-term results but would

not be expected to have a significant ongoing effect on the

Group’s valuation.

Emerging risks are risks that we believe are well mitigated in the

short term but may represent a significant future opportunity or

threat. These include company-specific risks and risks affecting

the macro economy.

Principal risks

The Board has undertaken a robust assessment of the current

risks facing Pearson, in accordance with Provision 28 of the 2018

UK Corporate Governance Code. This assessment identified the

following principal risks, as well as a number of emerging risks

and risks that, while more modest, could have a significant near-

term impact. For each of our principal risks, the tables on pages

59-64 identify:

• change in the risk over the last 12 months

• movement and outlook for that risk

• management actions

• link between the risk and Group strategy

• our risk tolerance

• examples of the risk

• risk ‘contagion’, i.e. the extent to which issues in one area could

increase the risk in other areas

• assessed risk ‘velocity’, i.e. an indication of the speed at which a

risk could materially impact the Group

Annual report and accounts 2024 Pearson plc 58

Strategic report Governance report Financial statements Other information

Accreditation risk

Description

Termination or modification of accreditation due to policy changes or failure

to maintain the accreditation of our courses and assessments by states,

countries, and professional associations, reducing their eligibility for funding or

attractiveness to learners. Awarding bodies may also require modification of

tests to continue to receive accreditation which may reduce the convenience

to learners or increase the cost of delivery.

Movement

and outlook

The risk has reduced from a high to a moderate-high level. There is still

uncertainty around political outcomes with recent elections in the UK and US,

and upcoming elections in Canada and Australia, which could affect many of

our business units. However, no major policy changes have been proposed

that would significantly affect our business in the near term. Furthermore,

significant reforms in US and UK school assessments have not recently

occurred and we have successfully retained a high level of Assessment &

Qualifications’ contracts in 2024. International expansion is a key focus for

many of the business units and assumptions are made that there are no

major geopolitical situations, or government policy changes, in key growth

areas. Despite concerns about lower federal funding post-COVID-19, Clinical

Assessment sales have grown in 2024 due to pricing strategies, digital product

growth and new product launches.

The risk is expected to remain at an elevated level for the foreseeable future.

Management

actions

1. Focus on creating a culture where learners and awarding bodies can

depend on Pearson and know that we will meet their standards. We

recognise our obligations, particularly in the testing space, to ensure

prompt and accurate exam grading, and take actions accordingly.

2. Continuing to evolve and enhance our security, data and governance

standards to ensure we continue to meet and exceed required standards

to be an accredited provider.

3. Broadening the range of services we offer and our range of stakeholders.

4. Continue to grow a full-service offering. This helps to ensure our products

cater for customers’ many needs, especially in the global assessment

market.

5. Focus on flawless or near-flawless execution of marking and delivering

assessment results.

Link to

strategy

Assessments & Verifications is at the core of our strategy.

Risk

tolerance

Low – We seek to operate in stable, well-regulated markets with known

requirements to be accredited, and have a low tolerance for taking risks that

may jeopardise that accreditation.

Examples of

risks

• Political and regulatory

Risk

contagion

Accreditation risks are likely to have a financial impact but have limited risk of

contagion.

Risk velocity

Changes in regulation or loss of contracts could occur within a 12-month

period.

Annual report and accounts 2024 Pearson plc 59

Strategic report Governance report Financial statements Other information

Risk continued

Artificial Intelligence (AI), content and channel risks

Description

The risk that our intellectual property is harder to protect as a result of

increased content generation through AI, and that our content and method

of delivery (channel) is, or is perceived to be, insufficiently differentiated in

terms of outcomes or learner experience. This could lead to lost sales and a

significant decline in our market value.

Movement

and outlook

The risk remains at a moderate-high level. Significant progress has been made

in our use of large language models. We have successfully integrated AI tools

into courses, and have continued to develop AI tools across all business units,

seeing evidence of it driving commercial success. In 2024, we made a number

of new hires including Chief Technology Officer and Chief Marketing Officer, to

strengthen our technology and innovation leadership.

We have taken a proactive approach in leveraging advanced AI technology

positions, with our ongoing developments likely to sustain this momentum.

Management

actions

1. Establishing a centralised data and AI solutions hub for governance

and oversight, as well as forming AI delivery squads to drive a cohesive

Pearson-wide AI approach.

2. Embedding AI into content creation products and services, creating

efficiencies and helping us reach the market more quickly, as well as

enabling us to align to individual learning needs: for example, creating an

AI tutor in Pearson+ Channels and Connections Academy.

3. Driving innovation: infusing AI into our English Language Learning business

unit with the development of Smart Lesson Generator, an AI-powered

tool designed to simplify educators’ work by creating customised lesson

content and activities, leveraging our trusted IP.

4. Reducing piracy and managing and enforcing intellectual property rights

including legal enforcement, where appropriate.

5. Targeted approach to capital allocation focused on opportunities in the

higher growth segments of the markets which we serve and a deep focus

on product innovation.

Link to

strategy

AI has been identified as a key seismic trend providing growth opportunity.

Risk

tolerance

Medium – this is a strategic risk, and we should be rewarded for successfully

developing and delivering products and services that consumers value. Some

risk is accepted to ensure the consumer remains at the centre of what we do.

Examples of

risks

• Intellectual property protection

• Method of delivery

• Speed of innovation

Risk

contagion

Failure to deliver high-quality and engaging products and services may have

an impact on our reputation and responsibility risks and on meeting customer

expectations.

Risk velocity

Significant short-term impacts are less likely due to our 2024 product strategy

using AI as a growth driver and scaling AI across our products and services.

Due to longer-term contracts or the time required for educators or consumers

to learn how to use new products and services, it is more likely that any impact

will be felt over years.

Annual report and accounts 2024 Pearson plc 60

Strategic report Governance report Financial statements Other information

Capability risk

Description

Inability to meet our contractual obligations or to transform as required by our

strategy, due to infrastructure, systems or organisational challenges.

Movement

and outlook

This risk has increased from moderate to moderate-high due to the need to

shift to execution against an evolved strategy. In October, Higher Education

began to directly distribute our proprietary Advanced Placement (AP ®), Dual

Enrolment and Career Technical Education (CTE) materials into states and

school districts, which were previously distributed by a third party, investing in

an in-house dedicated sales team. Our performance is contingent on how our

existing customers respond to the shift from the third party and our ability to

establish a robust go-to-market strategy and high-quality customer service.

We have been successful in the migration of a number of data centres and

have developed our relationships with a number of key technology companies.

Higher Education’s return to growth demonstrates our product and sales

strategies have been effective.

We have made improvements in data and cyber governance and resilience

during 2024. Capability remains a fundamental requirement for achieving our

objectives, with heightened risk when we enter new markets or develop new

products and services. However, we have effectively managed talent costs and

workforce investment will support capability growth and operational resilience

over the next few years.

Management

actions

1. Risk ratings are assigned to each system, with plans to ensure system

uptime. Recovery strategies are established to minimise disruption,

enabling customers to maintain functionality or resume operations as

quickly as possible in the event of downtime.

2. Regular patching, employee training and security measures, such as multi-

factor authentication, help to ensure the stability and security of our key

systems.

3. Migration of servers for platform products to the cloud to enhance

resilience.

4. Dedicated resources to focus on testing and developing AI products and to

understand evolving market capabilities.

5. Business continuity planning to ensure that we are able to respond should

a key customer or supplier fail.

Management

actions

continued

6. Enhanced focus on developing products that serve new markets and

user groups, and cross-selling between business units, as well as product

bundling.

7. Monitoring employee engagement and investing in our leaders to support

key talent retention and effective succession planning.

8. Increasing clarity on our performance expectations for every role across

the company, driving collaboration in pursuit of value.

9. Regularly reviewing our cost base to ensure competitiveness and

identifying options for efficiencies.

10. A focus on the remediation of technical debt, supporting platform

consolidation, and creating a unified user profile, providing an integrated

view of Pearson for users across multiple products.

Link to

strategy

Core performance has been identified as a key strategic growth opportunity.

Risk

tolerance

Medium – we aim to ensure we have the capability to deliver strategic

objectives, requiring strong coordination and planning, without stifling

innovation.

Examples of

risks

• Business resilience

• Business transformation and change

• IT resilience

• Safety and corporate security

• Talent

Risk

contagion

Failures in capability could result in increased reputation and responsibility risk

and failures to meet customer expectations.

Risk velocity

Failures of capability could impact within six to twelve months.

Annual report and accounts 2024 Pearson plc 61

Strategic report Governance report Financial statements Other information

Risk continued

Competitive marketplace

Description

Significant changes in our target markets could make those markets less

attractive. This could be due to significant changes in demand or in supply,

which impact the addressable market, market share and margins (e.g. changes

in enrolments, in-sourcing of learning and assessment by customers, open

educational resources, a shift from in-person to virtual learning or vice versa,

or innovations in areas such as generative AI).

Movement

and outlook

The risk has increased to high from moderate-high driven by tighter migration

policies in key markets affecting the market size for Pearson Test of English.

The Higher Education International business has suffered sales declines,

notably in Canada, Australia and New Zealand, and there has been market

pressure in English institutional sales, especially in Europe. Meanwhile, the

content space faces ongoing risk of price compression due to the rise of open

education resources, especially those powered by large language models.

US Higher Education has seen a significant improvement in sales, driven by

enhanced sales team capabilities, stability and improved product offerings.

Recent contract retention rates for Assessment & Qualifications have been

encouraging.

In Virtual Learning, we anticipate favourable trends in retention as part of

operational improvements, and have invested in growth drivers such as career

and custom curriculum.

The risk is expected to remain elevated for the next 12 months, due to the risk

of continuing tight migration rules, demographic factors and potential for price

compression and disruption in the content space.

Management

actions

1. Working in partnership with customers, including IP owners, at our

Assessment & Qualifications and Virtual Learning business units, to ensure

that our customers’ needs are being met, resulting in high retention rates

on the long-term contracts in place.

2. Progressing in Enterprise: signed a new multi-year enterprise deal with

ServiceNow, a multi-year strategic Enterprise AI partnership with Microsoft

and the expansion of the company's long-standing strategic partnership

with AWS. Leadership and sales team changes are propelling this

momentum.

3. Our Higher Education strategy has prioritised reducing dependence on

channel partners by building an in-house salesforce team to strengthen

and streamline our go-to-market abilities.

4. Undertaking competitive analysis to monitor and respond to competitive

threats, with decentralised teams able to mobilise quickly to maximise

opportunities and manage risk.

5. Monitoring our pipeline of contracts by renewal date and business unit,

and building relationships with our customers to ensure proactive renewal

management.

Link to

strategy

Targeted market expansion has been identified as a key strategic growth

opportunity.

Risk

tolerance

Medium – this is a strategic risk associated with successfully selecting

attractive global opportunities and seizing them. We seek to lead the shift to

digital ways of learning and consequently to maintain strong market positions.

Examples of

risks

• Substitutes

• Market pricing

• Product differentiation

• Consumer learning preferences

Risk

contagion

Changes in the competitive marketplace could increase portfolio change.

Risk velocity

We expect changes in the global learning market over our five-year planning

horizon, but the timing and pace of such changes is uncertain. Assessment

& Qualifications and Virtual Learning benefit from long-term contracts, which

reduce potential velocity in these business units.

Annual report and accounts 2024 Pearson plc 62

Strategic report Governance report Financial statements Other information

Customer expectations

Description

Rising end-user expectations increase our need to offer differentiated

value propositions, risking margin pressure to meet these expectations and

potential loss of sales if not successful.

Movement

and outlook

The risk has remained at a moderate level. We have met customer

expectations across business units. Higher Education is experiencing growth,

with positive reception for new products. We have retained all major contracts

in US Student Assessment. Our NPS score in Virtual Learning remains strong

and Pearson VUE has shown positive performance with strong retention rates.

Enhancing the reporting and use of proactive metrics will improve engagement

and customer experience across digital products, and we expect the outlook

to be similar for the next 12 months.

Management

actions

1. Monitoring and targeting strong NPS scores, responding to customer

feedback.

2. The Group’s direct to consumer offerings such as Mondly, Pearson+

Channels provide valuable insights about usage.

3. Our service businesses conduct regular reviews with customers to ensure

that their expectations are well understood and met and, where gaps arise,

we are taking steps to address these concerns.

4. A unified global enterprise sales team sharpens our focus and enables us

to better meet enterprise customers’ needs.

Link to

strategy

Focus on delighting our customers and meeting their expectations.

Risk

tolerance

Medium – This is a strategic risk, and we should be rewarded for successfully

developing and delivering products and services that consumers value. Some

risk is accepted to ensure the customer remains at the centre of what we do.

Examples of

risks

• Customer experience

• Data architecture and usage

• Accessibility

Risk

contagion

Failure to produce products and services meeting customer expectations

could also impact reputation and responsibility risks.

Risk velocity Typically, one to three years, as long-term contracts run off.

Portfolio change

Description

Failure to effectively execute desired or required portfolio changes to promote

scale or capability and increase focus on key business units and geographic

markets, due to either execution failures or inability to secure transactions at

appropriate valuations.

Movement

and outlook

The risk remains low-moderate as recent acquisitions are integrated and

disposals have been successfully executed.

The risk level will remain at a similar level until further portfolio activity is

undertaken.

Management

actions

1. Including investment plans in our strategic plans, aligning requirements

with business unit structure.

2. A capital committee governance structure is in place with an executive

committee for the review, analysis and approval of M&A transactions, as

well as reviewing integration of acquisitions.

3. An experienced Corporate Finance team to execute transactions,

supported by a dedicated post-deal Operations team.

4. Pearson Ventures allows us to take stakes in companies in early funding

rounds supporting growth through innovation.

5. Clear rules of engagement for any M&A activity.

Link to

strategy

Capital allocation is a core element of our strategy.

Risk

tolerance

Medium – we seek to carefully balance the opportunity to achieve growth

through increasing capability and/or scale with the execution risk of portfolio

change.

Examples of

risks

• Identification of requirements

• Achieving value on acquisitions/disposals

• Integration of acquisitions

Risk

contagion

Failures in managing portfolio change could impact capability and the ability to

meet customer expectations.

Risk velocity

The speed of achieving the full benefits of an acquisition will vary depending

on the size and scope of the acquisition, but typically from six months for a

simple small acquisition, to two years for a larger complex transaction.

Annual report and accounts 2024 Pearson plc 63

Strategic report Governance report Financial statements Other information

Risk continued

Reputation and responsibility

Description

Reputational and responsibility risks involve failing to meet obligations

and demands of key stakeholders, including legal, regulatory, ethical and

behavioural expectations. These risks extend beyond direct consequences to

include broader societal and cultural perceptions. Risks arise not only from our

actions, but also from being perceived as misaligned with societal expectations

or ideological divides, especially in a polarised environment.

Movement

and outlook

This risk remains at moderate-high. There are high ongoing cyber security

threats and reputational risks, including data privacy and biometric risks, and

the complexity of navigating different regional regulatory environments.

We aim to operate in a highly reputable and responsible manner and so we

intend to maintain strong mitigations to reputation and responsibility risks.

However, numerous threats exist including from those who seek to do harm

to the Group or to its customers, including nation-state actors, organised

criminal rings and ransomware attackers, so constant vigilance is required. We

are undertaking initiatives that will enhance our capabilities in cyber and data

governance, ensuring robust protection against emerging threats.

Management

actions

1. Dedicated risk management teams throughout Pearson monitor and

respond to key risks. These teams provide regular updates to senior

management and report to the Reputation & Responsibility Committee or

Audit Committee as relevant.

2. Mandatory training for all employees covers key reputational risks

including cyber and data risks.

3. Insurance cover, where available, supports the Group financially in the

event of major incidents.

4. Significant investment to ensure high levels of IT resilience, including

enforcement of multi-factor authentication for all critical systems. Tools are

in place to repel cyber threats and safeguard customer information.

5. A trust and safety governance framework is in place that covers data

privacy, security and risk, assessing business impacts and ensuring

accountability. We also conduct several industry assessments to

benchmark against security best practices, namely National Institute of

Standards and Technology Cyber Security Framework (NIST CSF), The NIST

Privacy Framework (NIST PF) and Security Scorecard.

6. Strong financial controls are in place and monitored by the Controls

Steering Committee and Compliance teams, as well as local management.

Management

actions

continued

7. An Incident Management Framework for effective incident management

across a wide range of events and concerns. We undertake reviews after

incidents and significant near-misses to allow lessons to be learned and

any remedial actions to be put in place.

8. A going concern model is reviewed by senior management and is

completed twice a year, or more often if there is a material event. We

have a comprehensive treasury policy that addresses key financial risks,

including capital risk, liquidity risk, foreign exchange risk and interest

rate risk, with measurable targets and regular reporting to the Audit

Committee.

9. Fraud assessments completed by business units annually.

10. Comprehensive steps to safeguard students including staff vetting, training

and escalation processes. Staff sign an annual code of conduct.

11. Our Government Relations team fosters constructive partnerships with

policymakers and regulatory bodies to ensure we are aware of and have

appropriate safeguards against emerging policy and political risks. It

reports regularly to our Reputation & Responsibility Committee.

Link to

strategy

Our reputation and commitment to behaving responsibly underpin our

strategy to be a trusted partner.

Risk

tolerance

Low – We seek to be a highly trusted education and learning brand. Any

significant failures could negatively affect our relationship with customers

today and in the future.

Examples

of risks

• Compliance with laws and regulations

• Cyber security

• Data privacy

• Fraud

• Insolvency

• Safeguarding

• Test failure

• Use of third parties

• Culture wars/polarisation of political views

Risk

contagion

Significant failures in this area could increase our capability and accreditation

risks, and weaken our position in the competitive marketplace.

Risk velocity

Reputational risks could have a significant impact in a short period in the event

of a significant issue.

Annual report and accounts 2024 Pearson plc 64

Strategic report Governance report Financial statements Other information

Risks Accountability Change

since 2023

Accreditation risk

Political and regulatory General Counsel and Business Unit

Presidents

Artificial Intelligence, Content and Channel risk

Effective method of delivery (podcast,

video, test, in-person, online)

Chief Product Officer and Business Unit

Presidents

Intellectual property protection General Counsel and Business Unit

Presidents

Products and services – effective

investment in own and third-party content

Chief Product Officer and Business Unit

Presidents

Balance of content creation vs content

purchased

Chief Product Officer and Business Unit

Presidents

Speed of innovation Chief Executive Officer, Chief Product Officer,

Chief Strategy Officer, Chief Technology

Officer and Business Unit Presidents

Yes

Capability risk

Business resilience General Counsel and Business Unit

Presidents

Business transformation and change Chief Executive Officer and Business

Unit Presidents

IT resilience Chief Information Officer and Business

Unit Presidents

Safety and corporate security General Counsel and Business Unit

Presidents

Talent Chief Human Resources Officer and

Business Unit Presidents

Failure to attract talent/succession planning Chief Human Resources Officer Yes

Competitive marketplace risk

Consumer learning preferences Business Unit Presidents No

Market pricing Business Unit Presidents No

Risks Accountability Change

since 2023

Product differentiation Business Unit Presidents No

Substitutes Business Unit Presidents No

Customer expectations risk

Customer experience Chief Product Officer and Business Unit

Presidents

Accessibility Chief Human Resources Officer, Chief

Product Officer and Business Unit

Presidents

Data architecture and usage Chief Information Officer, Chief Technology

Officer and Business Unit Presidents

Yes

Portfolio change risk

Achieving value on acquisitions/disposals Chief Financial Officer and Chief

Strategy Officer

Identification of requirements Chief Executive Officer, Chief Financial

Officer and Chief Strategy Officer

Integration of acquisitions Chief Financial Officer No

Reputation and responsibility risk

Compliance with laws and regulations General Counsel and Business Unit

Presidents

Cyber security Chief Information Officer No

Safeguarding General Counsel and Business Unit

Presidents

Test failure Assessment & Qualifications, English

Language Learning and Enterprise Learning

and Skills Business Unit Presidents

Data privacy General Counsel and Business Unit

Presidents

Use of third parties Chief Financial Officer and Business Unit

Presidents

Polarisation of political views/cultural wars General Counsel and Business Unit

Presidents

Yes

Accountability for principal risks

For each of our principal risks (shown in bold), the table below lists the accountable senior executive(s) for each sub-risk. In 2024, we added three new sub-risks, and we created a new position of Chief

Technology Officer which has led to changes in accountability (marked in the table below).

Annual report and accounts 2024 Pearson plc 65

Strategic report Governance report Financial statements Other information

Risk continued

Significant near-term and emerging risks

The main near-term and emerging risks are shown in the table below, which also notes accountabilities and where the risk represents a change since the previous year.

Risks Description Accountability Classification and

change since 2023

Climate transition

Risks relating to sustainability and climate are outlined in pages 45-46. Expectations around

climate change commitments and measurements change on a regular basis.

General Counsel and

Business Unit Presidents

Emerging risk.

No change.

Economic changes

Economic changes including high global inflation risks, recessions in global markets, high

interest rates and supply change disruption could increase the cost of production for Pearson

and put pressure on school, enterprise and consumer budgets, reducing demand for our

products and services.

Chief Financial Officer,

Chief Executive Officer and

Business Unit Presidents

Significant near-term risk.

No change.

Tax

The outcome of tax decisions relating to prior year transactions in Brazil and the UK could lead

to significant cash costs. In 2024, the EU State Aid case was successfully settled in the Group's

favour.

Chief Financial Officer Significant near-term risk.

No change.

Sanctions and geopolitics

High levels of geopolitical volatility have led to the increased use of sanctions, which could

inhibit our ability to trade or, if inadvertently breached, could lead to fines, penalties and

actions against officers.

We have offices in Israel, which could be affected by the ongoing conflict in the region and

further new conflicts also pose risks.

Chief Executive Officer and

General Counsel

Significant near-term risk.

No change.

Annual report and accounts 2024 Pearson plc 66

Strategic report Governance report Financial statements Other information

Risk assessment of prospects

and viability

Corporate planning process

The Board assessed the prospects of the Group using the

Group’s five-year plan, reviewing going concern over the period

to 30 June 2026 and viability to 31 December 2029. The five-year

period corresponds with Pearson’s strategic planning process

which is discussed by the Board at least annually and represents

the time over which the Group can reasonably predict market

dynamics and the impact of additions to the product portfolio.

The strategic plan takes account of a range of factors including

market conditions, the likely impact of principal risks to the

Group, product and capital investment levels, as well as available

funding. Pearson’s strategy and business model is discussed in

more detail on pages 12-16.

Viability assessment approach

and outputs

Base case five-year plan

In considering going concern and the viability of the Group, the

five-year plan was used as the base case model for assessment.

Sales, profits and cash are forecast to grow in the base case. The

company’s subsidiary Pearson Funding plc has a debt maturity of

€300m due within the going concern assessment period and it is

assumed that this is repaid with available liquidity.

Severe but plausible downside model

A severe but plausible model was prepared based on the base

case adjusted for the probability weighted impact of all principal

risks as well as other significant risks. The net impact of the risks

modelled was to reduce free cashflow by around 30% per year.

At 31 December 2024, the Group had available liquidity of

£1.2bn comprising central cash balances and its undrawn $1bn

Revolving Credit Facility (RCF) which matures in February 2028.

The RCF can be extended by a further year in November 2025,

extending the maturity to February 2029 and a further year in

November 2026, extending the maturity to February 2030. While

the current extension options allow for a potential maturity in

2030, consistent with historical practice, Pearson anticipates

refinancing the facility within the next five years to ensure

liquidity beyond the testing period.

Under the severe but plausible downside case, the Group

would maintain comfortable liquidity headroom and sufficient

headroom against covenant requirements during the period

under assessment before considering mitigating actions.

Reverse stress tests

Two reverse stress tests were modelled to determine the

reduction in profit versus the plan that would be required to

exhaust liquidity.

In the case of the going concern assessment, the profit reduction

needed before 30 June 2026 was calculated. The model showed

that significant profit declines in excess of the severe but

plausible scenario were required in both 2025 and 2026 to

exhaust liquidity.

For viability, the profit reduction and consequent reduction in

cashflow needed to exhaust liquidity in 2029 was calculated,

requiring a cumulative reduction in excess of those identified in

the severe but plausible downside case.

In each case, the downside required to exhaust liquidity exceeds

the downside in the severe but plausible scenario, before

allowing for any mitigation.

Conclusion

Based on the results of these procedures, and considering the

Group’s strong balance sheet, the Directors have a reasonable

expectation that Pearson will be able to continue in operation

and to meet its liabilities as they fall due over the five-year

period ending 31 December 2029. Further details of the Group’s

liquidity are shown in the Financial review on pages 26-32.

Below are the major inputs included in the severe but plausible

scenario:

Accreditation

• Loss of accreditation for Pearson Test of English in a major

market

• Risks associated with potential political and regulatory changes

in US Student Assessment, UK & International Qualifications

and Virtual Learning

• Migration policy changes in key markets and the effect they

may have on demand and market size of Pearson Test of

English

Capability

• Capability challenges in sales and technology reduce sales and

result in increased costs

• Strategic initiatives affecting short term capability risk

Competitive Marketplace

• Sales declines in Higher Education due to demographic shifts

as well as the general competitive environment

• Enrolment growth declines in Virtual Learning

• Long term competitive pressure on US Student

Assessment contracts

AI, Content and Channel

• Loss of sales due to AI related risks and poor choice of content

and/or channel

Customer Expectations

• Additional costs to provide higher than planned functionality

and levels of user experience

• Failure to achieve desired growth in Channels sales

Portfolio Change

• Not applicable: no recent disposals or acquisitions

Reputation and Responsibility

• Potential cyber and data breaches negatively impacting

reputation on an ongoing basis

• Potential safeguarding incidents negatively impacting

reputation on an ongoing basis

Recession and inflation

• Potential for increased costs and lower sales because of a

weak macro environment

Annual report and accounts 2024 Pearson plc 67

Strategic report Governance report Financial statements Other information

Dear fellow shareholders,

It is a pleasure to introduce our Governance report for 2024.

This was an exciting year, with Omar Abbosh joining the Board

as Chief Executive and the development of our strategic goals,

in which the Board played an important role, and which you can

read more about throughout this annual report.

Strategy and performance

The Board has been heavily engaged with the management

team in the development and implementation of our strategic

goals, including participation in workshops with staff during the

strategic planning initiatives, as well as formal Board meetings as

part of the comprehensive review of Pearson’s business and its

markets led by Omar during the year.

Since his appointment at the beginning of the year, the Board

and I have been highly impressed with Omar’s energy and

systematic analysis of the company’s opportunities and his

plans to capture those over the coming years. The Board has

been delighted to welcome Omar to Pearson and to support his

strategic and operational evolution of the company.

The Board’s oversight of performance and risk is underpinned by

the excellent work of our Audit Committee, which you can read

more about on pages 99-112. This includes a number of strategic

risk deep dives and a continued focus on data privacy and cyber

security, as well as overseeing our financial controls and internal

audit programmes, together with the delivery of the external

audit plan, and planning for the changes relating to audit,

risk and internal control matters in the revised UK Corporate

Governance Code. Board members have found the strategic

risk deep dives to be hugely valuable in gaining insight into the

operations of the business, therefore these have been given

more prominence by being integrated into the full Board meeting

agendas with effect from late 2024.

Sustainability, stakeholder engagement

and culture

As the world’s lifelong learning company, Pearson recognises its

enormous potential to make a positive impact on people and

the planet, as outlined in our Learning for Impact framework,

which you can learn more about on page 33. The Reputation

& Responsibility Committee has primary responsibility for

monitoring and inputting into Pearson’s sustainability strategy

and initiatives on behalf of the Board, with more on this

described in the Committee’s report starting on page 96.

Understanding the views and priorities of all our stakeholders is

key to running a successful, sustainable company that meets the

needs of learners, educators, governments and employers. You

can read more about the Board’s engagement activities in the

Stakeholder engagement section on page 18.

During the year, the Board held engagement sessions with

employees in our major employee hubs in London and in the US

in Hoboken, New Jersey, and Durham, North Carolina, to hear

employee views. Read more about this engagement, and plans

for Board engagement with the workforce in 2025, on page 85.

Promoting a culture of community in the workforce environment

throughout Pearson remains a Board priority, and relevant KPIs

form part of the regular dashboard reviewed by the Board.

We have continued our focus on fostering community in our

workforce. More information on our community can be found on

page 38.

The Board is focused on ensuring

Pearson is a successful, effective and

purposeful company for the benefit of

all stakeholders.

Omid Kordestani

Chair

Chair’s letter

The Board continued to pay close attention to maintaining

a strong financial position, which enabled us to increase

the dividend again in 2024, in line with our progressive and

sustainable dividend policy. We also launched an extension of

our share buyback programme to repurchase a further £200m

of shares to return capital to shareholders. On 28 February 2025,

we announced our intention to launch a £350m share buyback

programme during 2025, in line with the priorities and discipline

embodied in our capital allocation policy, which enables Pearson

to create sustainable, long-term value for every stakeholder. You

can read more about our capital allocation approach on page 16.

As part of monitoring execution and performance, the Board

regularly receives a dashboard that allows Directors to monitor

progress on Pearson’s financial and strategic priorities,

supported by agreed indicators and milestones identified as key

measures of performance. You can read more about those KPIs

on pages 24-25 of this annual report.

Annual report and accounts 2024 Pearson plc 68

Strategic report Governance report Financial statements Other information

Talent development and succession planning are also ongoing

themes in the work of the Board and its Committees. The

Board has continued to work with Ali Bebo, Pearson’s Chief

Human Resources Officer, to assess our culture and employee

engagement levels, through analysing the results of the

engagement survey and annual deep dives into succession and

the talent pipeline. During the year, we introduced a ‘Leadership

Uplift’ programme, which is a valuable enhancement to our

leadership and talent review process and will enable us to

have more meaningful discussions about talent across the

organisation and sharpen our ability to identify and prioritise

leadership development opportunities that align with the

evolving needs of our business. You can read more on page 39.

The Board is also supporting the Executive Management team to

drive a culture of performance and accountability throughout the

organisation, which is covered in more detail on page 39.

Board composition, succession

andevaluation

We have a fully engaged Board, with varied backgrounds,

perspectives and skill sets, whose range of expertise includes

technology, education and workforce learning, and leadership

of global, complex organisations. You can read more about the

Board’s skills and experience on page 70.

During the year, Tim Score stepped down after serving nine years

on the Board, having held several key roles, including as Deputy

Chair and Senior Independent Director, and I would like to thank

him again for his long-serving contribution to Pearson. I am

pleased that Graeme Pitkethly has taken over as Deputy Chair

and Senior Independent Director.

During 2024, we commenced a Non-Executive Director search

process and on 7 March 2025 we were delighted to announce

the appointment of Arden Hoffman as an independent Non-

Executive Director, who will join the Board on 1 June 2025.

Arden brings strong expertise and business perspective on

workforce and talent development in an era of innovation and

AI and her insights will prove invaluable as Pearson continues

to execute against its strategy. We will continue to monitor the

Board’s composition to ensure we maintain the range of skills,

experience and perspectives needed to support the company’s

strategy and complement our succession planning. More detail

about the Board’s search process and succession planning can

be found in the Nomination & Governance Committee report on

pages 92-95.

In order to maintain continuity on the Board and to support

a smooth transition of his particular knowledge and expertise

to our new Non-Executive Director, we will be recommending

to shareholders that Lincoln Wallen, who has served for nine

years on the Pearson Board, is re-elected for a further period

until the end of 2025. Lincoln is a valuable member of the Audit

and Reputation & Responsibility Committees, and a steady and

knowledgeable voice on the Board, particularly bringing his

deep expertise in the areas of technology and AI. The Board

is confident in Lincoln’s continued independence, while the

opportunity for him to support our new Board member for a

period of handover will be invaluable.

The annual Board performance review in 2024 was internally

facilitated by the Deputy Chair and Senior Independent Director,

Graeme Pitkethly. The review demonstrated that our Board is

highly engaged, with a strong relationship between the Non-

Executive Directors and the Executive Directors, and operates a

robust governance approach that will support Pearson in driving

our strategy forwards. Good progress has also been made on

the recommendations from the 2023 review. You can read

more about the 2024 performance review, and how the Board

implemented recommendations from the previous performance

review, on pages 89-91.

Conclusion

I hope this report explains clearly to you how Pearson is run

and how we align governance and our Board agenda with

our strategic direction. Shareholders are always welcome to

put their questions or feedback to us, either via our website

(www.pearsonplc.com) or at our AGM. Once again this year,

shareholders will be able to join us and vote at our AGM either

in person or virtually. Details will be included in the forthcoming

AGM notice.

It only remains for me to thank our shareholders for their

continued support and interest in this fantastic company. I look

forward to maintaining our stakeholders’ confidence as we seek

to capture Pearson’s enormous growth potential as a lifelong

digital partner for learners everywhere.

Omid Kordestani

Chair

Compliance with the UK Corporate

Governance Code

For 2024, we are reporting against the 2018 edition of the

UK Corporate Governance Code (the Code). The principles

set out in the Code emphasise the value of good corporate

governance to the long-term sustainable success of listed

companies. The Pearson Board is responsible for ensuring

that the Group has in place appropriate frameworks to

comply with the Code’s requirements, or otherwise for

explaining any instances of non-compliance. This Governance

report and the Strategic report set out how Pearson has

applied the principles of the Code throughout the year.

The Board believes that during 2024 the company was in full

compliance with all applicable principles and provisions of the

Code.

The Board is mindful of the revisions made to the UK

Corporate Governance Code in 2024, which will apply to our

2025 financial year (with the exception of Provision 29, which

will apply to our 2026 financial year). You can read more

about our preparations on page 93 and page 106.

A copy of the Code can be found on the Financial Reporting

Council’s (FRC) website, www.frc.org.uk.

Annual report and accounts 2024 Pearson plc 69

Strategic report Governance report Financial statements Other information

All Board members have strong

leadership experience at global

businesses and institutions.

OurBoardmembers’ biographies

illustrate the contribution each Director

makes to the Board by way of their

individual experience.

Key to Committees

Audit

Nomination & Governance

Reputation & Responsibility

Remuneration

Committee Chair

Current notable commitments reflect

other listed company directorships and

full-time or executive roles.

Omid Kordestani

First appointed to the Board

1 March 2022

Chair since 29 April 2022

Chief Financial Officer

since 24 April 2020

Appointment

Omar has a career spanning more than 30 years

driving growth and transformation for leading

multinational companies. He joined Pearson with a

background steeped in technology and innovation,

and with a deep understanding of how to shape and

execute successful strategies in a world of disruption.

Most recently, Omar was the President of Microsoft

Industry Solutions with responsibility for driving sales,

service and solutions across Microsoft’s largest

customers. While there he led industry and technical

business units, including strategy, engineering,

partnering and sales teams that shaped product

roadmaps and strategic campaigns. Prior to Microsoft,

Omar spent three decades at Accenture where he

helped to orchestrate the company’s digital

transformation, and led a large and highly successful

business unit. He served in numerous senior

leadership roles at Accenture, including Chief Strategy

Officer and ultimately as Chief Executive of the global

Communications, Technology and Media business.

Omar was previously a Non-Executive Director of

Zuora, Inc., an enterprise SaaS company. He holds a

degree in electronic engineering and information

sciences from the University of Cambridge and a

Master’s degree in business administration from

INSEAD.

Omid is an international businessman who serves on

the boards of Klarna Bank AB and Klarna Holding AB

and is a Council Member for Balderton Capital. He was

Executive Chair of Twitter, Inc. between October 2015

and May 2020, and a Board Member until October

2022. From August 2014 to August 2015, Omid served

as Senior Vice President and Chief Business Officer at

Google and previously from May 1999 to April 2009 as

Senior Vice President of Global Sales and Business

Development.

From 1995 to 1999, Omid served as Vice President of

Business Development at Netscape Communications

Corporation. Prior to joining Netscape

Communications Corporation, Omid held positions in

business development, product management and

marketing at The 3DOCompany, Go Corporation and

Hewlett-Packard Company.

Chief Executive

since 8 January 2024

Omar Abbosh Sally Johnson

Sally joined Pearson in 2000 and has held various

finance and operations roles across the business,

both at a corporate level and within the business units,

including The Penguin Group. She brings to the Board

extensive commercial and strategic finance

experience, as well as expertise in transformation,

treasury, tax, risk management, business and financial

operations, investor relations and mergers &

acquisitions.

Sally is a Non-Executive Director of Rentokil Initial plc

and Chair of its Audit Committee, a member of the

Institute of Chartered Accountants in England and

Wales and trained at PricewaterhouseCoopers. She

was also a Trustee for the Pearson Pension Plan from

2012 to 2018.

Current notable commitments

Rentokil Initial plc (Non-Executive Director)

Skills and experience

Chair

Age: 61

Chief Financial Officer

Age: 51

Chief Executive

Age: 58

Board of Directors

Leading

the way

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Sherry Coutu, CBE

Non-Executive Director

since 1 May 2019

Non-Executive Director

since 1 June 2023

Non-Executive Director

since 1 February 2022

Appointment

Alison brings to the Board extensive commercial and

operational finance experience, specifically in digital

businesses. In January 2025, she joined the Board of

Marks and Spencer Group plc as Chief Financial

Officer. Prior to this, she was the Chief Financial Officer

of Rightmove plc between September 2020 and

September 2024 and she held several senior financial

positions at Sky plc, including Group Treasurer,

Director of Finance and was the Deputy Managing

Director at Sky Business. She later moved to News UK

to serve as Chief Strategy Officer at the forefront of

the business’s digital transformation. Alison has a

master’s in Finance from University College Dublin.

Current notable commitments

Marks and Spencer Group plc (Chief Financial Officer)

Sherry is an experienced non-executive director,

having held numerous senior leadership positions,

including Chair, Senior Independent Director and

Chief Executive Officer in the financial services,

technology and education sectors.

She is Non-Executive Director and Senior Independent

Director of Raspberry Pi Holdings plc, the world’s

largest single-board computer company, and she also

chairs its Remuneration Committee. She is a Trustee

of Founders4Schools, the UK’s largest transition-to-

work charity.

Sherry’s previous directorships include the London

Stock Exchange Group plc, DCMS, Zoopla plc, RM plc,

The Scaleup Institute, Cambridge University Press and

Cambridge Assessment (2006–2019). She has also

acted as an adviser to LinkedIn, the National Gallery,

the Royal Society and NESTA.

Prior to her portfolio career, Sherry founded several

technology companies and invested in 70 tech

start-up companies and five venture capital firms.

Current notable commitments

Raspberry Pi Holdings plc (Non-Executive Director and

Senior Independent Director)

Non-Executive Director

since 1 June 2023

Alison Dolan Alex Hardiman Esther Lee

With more than 15 years of experience in media and

technology, Alex brings to the Board deep expertise in

consumer product strategy and growth, scaling

subscription and digital advertising businesses, and

high-quality journalism and content.

Alex currently serves as Chief Product Officer at The

New York Times, where she oversees the company’s

News, Cooking, Games and Audio products that

power its digital business. She also leads its enterprise-

wide approach to generative AI. Alex previously spent

a decade at The New York Times in several leadership

roles before leaving for Facebook in 2016 where she

served as Head of News Products, overseeing news

experiences for Facebook consumers and publishers.

Alex also spent time at The Atlantic as its Chief

Business and Product Officer where she relaunched

the company’s consumer offerings and subscription

model.

Current notable commitments

The New York Times (Chief Product Officer)

Esther brings significant experience to the Pearson

Board through her prior executive management roles

in developing customer strategies to drive growth,

global marketing and branding, driving digital

transformation and building high-performance teams.

She has a long track record of senior leadership roles

working for global consumer-facing brands. Most

recently, she served as Executive Vice President –

Global Chief Marketing Officer at MetLife Inc.

Previously, Esther served as Senior Vice President –

Brand Marketing, Advertising and Sponsorships for

AT&T, and she has served as CEO of North America

and President of Global Brands for Euro RSCG

Worldwide. Prior to that, she served for five years as

Global Chief Creative Officer for The Coca-Cola

Company.

Esther is a Board member at The Clorox Company

where she chairs the Nomination & Governance

Committee and is a Non-Executive Director of

Experian plc.

Current notable commitments

The Clorox Company (Non-Executive Director)

Experian plc (Non-Executive Director)

Skills and experience

Non-Executive Director

Age: 61

Non-Executive Director

Age: 43

Non-Executive Director

Age: 66

Non-Executive Director

Age: 55

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Graeme Pitkethly

Non-Executive Director

since 1 May 2019

Non-Executive Director

since 1 October 2021

Non-Executive Director

since 1 January 2016

Appointment

Graeme was Chief Financial Officer and a Board

member of Unilever plc until December 2023. He

joined Unilever in 2002 and, prior to his appointment

as the CFO, was responsible for its UK and Ireland

business. He also held a number of senior financial

and commercial roles within Unilever and spent the

earlier part of his career in senior corporate finance

roles in the telecommunications industry. Graeme

served as Vice President of Financial Planning and Vice

President of Corporate Development at FLAG Telecom

and started his career at PricewaterhouseCoopers.

Graeme is a Non-Executive Director of Sandoz Group

AG and Chair of its Audit, Risk and Compliance

Committee. He is also a Trustee of The Leverhulme

Trust, a charitable trust funding academic research in

the UK, a member of the Strathclyde University Centre

for Sustainable Development and a chartered

accountant.

Current notable commitments

Sandoz Group AG (Non-Executive Director)

Annette Thomas Lincoln Wallen

Annette has a 25-year track record in leading global

publishing and data analytics businesses, across

academic, educational and consumer media verticals.

Most recently, she served as CEO of Guardian Media

Group, a position she held until June 2021. Prior to

that, Annette was CEO of the Web of Science Group at

Clarivate Analytics, a data, analytics and software

business focused on research and higher education.

She has also served as CEO of Macmillan Publishers

and led the digital and global transformation of Nature

Publishing Group.

She is a Non-Executive Director of Schroders plc and

currently serves as Senior Advisor to General Atlantic.

Her previous non-executive experience includes

serving as a Trustee of Yale University, Non-Executive

Director at Clarivate Analytics (2017), and as a board

member for Cambridge University Press and

Cambridge Assessment (2019–2020). She has also

previously acted as an adviser to Creative Commons

and Bain Capital.

Current notable commitments

Schroders plc (Non-Executive Director)

Lincoln has extensive experience in the technology

and media industries, and is a Non-Executive Director

of Improbable MV, which governs the MSquared

Network of Web2 and Web3 services, and Chief

Technology Officer (CTO) of Framestore Company 3, a

global visual effects and media production company.

He was previously CTO of Improbable Worlds, a

technology start-up supplying cloud hosting,

networking and technology services to the video game

industry, and CEO of DWA Nova, a Software-as-a-

Service spin-out of DreamWorks Animation Studios in

Los Angeles. He worked at DreamWorks Animation for

nine years in a variety of leadership roles including

CTO and Head of Animation Technology. He was

formerly CTO at Electronic Arts Mobile, leading their

entry into the mobile gaming business internationally.

Lincoln is a Non-Executive Director of the Smith

Institute for Industrial Mathematics and Systems

Engineering, and Varjo, a manufacturer of XR/VR

headsets for professional markets. His early career

involved 20 years of IT and mathematics research,

including as a Reader in Computer Science at Oxford.

Lincoln holds a PhD in AI.

Current notable commitments

Framestore Company 3 (Chief Technology Officer)

Skills and experience

Deputy Chair and Senior Independent Director

Age: 58

Non-Executive Director

Age: 59

Non-Executive Director

Age: 64

Board of Directors continued

Annual report and accounts 2024 Pearson plc 72

Strategic report Governance report Financial statements Other information

Board composition

Gender

Male Female

Nationality

American American / British (dual) British

IrishCanadian

11 1

Ethnicity

White Mixed / multiple ethnic group

Other ethnic group

Asian / Asian British

116 2

1. Ethnicity categories are based on the UK’s Office for National Statistics

classification.

Tenure

Under 3 years 3-6 years Over 6 years

145

This data reflects Directors in office as at 31 December 2024.

To learn more about Board demographics, please see page 95.

For diversity data in the format prescribed by UK Listing Rule

6.6.6R(10), please see page 54.

Independence of Directors

All of the Non-Executive Directors who served during 2024 were

considered by the Board to be independent for the purposes of

the UK Corporate Governance Code (the Code) and the listing

standards of the New York Stock Exchange (NYSE). The Board

reviews the independence of each of the Non-Executive Directors

annually. This includes reviewing their external appointments

and any potential conflicts of interest, as well as assessing their

individual circumstances in order to ensure that there are no

relationships or matters likely to affect their judgement. In

addition to this review, each of the Non-Executive Directors

is asked to provide confirmation of their independence on an

annual basis as defined by the NYSE listing rules and the Code.

In January 2025, Lincoln Wallen reached nine years’ service

on the Pearson Board. In view of the upcoming changes to

the Board through the appointment of a new Non-Executive

Director in June 2025, the Board believes that it is in the

company’s interests for Mr Wallen to remain on the Board until

the end of 2025 to ensure a smooth transition of knowledge

and expertise. Upon attainment of nine years’ service by any

Non-Executive Director, the Board undertakes an assessment to

satisfy itself as to the continuing independence of that Director.

In February 2025, ahead of formalising a recommendation to

the Board regarding Mr Wallen’s proposed re-appointment

at the 2025 AGM, the Nomination & Governance Committee

assessed Mr Wallen’s independence. In doing so, the Committee

assessed the degree of objective judgement and constructive

challenge demonstrated by Mr Wallen, and confirmed that

his skills, experience and knowledge contribute to productive

Board discussions. Accordingly, the Board is satisfied that Mr

Wallen remains independent and that he continues to provide

constructive challenge and hold management to account.

In accordance with the Code, Omid Kordestani was considered to

be independent upon his appointment as Chair on 29 April 2022.

The Directors can obtain independent professional advice, at

the company’s expense, in the performance of their duties. All

Directors have access to the advice and services of the Company

Secretary, whose appointment and removal is a matter reserved

for the full Board.

Annual report and accounts 2024 Pearson plc 73

Strategic report Governance report Financial statements Other information

Pearson Executive Management (PEM)

Ali Bebo Ginny Cartwright Ziegler Vishaal Gupta Sharon Hague

Joined Pearson 13 December 2021

Appointed to the PEM

13 December 2021

Joined Pearson 29 July 2024

Appointed to the PEM

29 July 2024

Joined Pearson 15 April 2024

Appointed to the PEM

15 April 2024

Joined Pearson 10 January 2000

Appointed to the PEM

3 March 2025

Ali is a seasoned C-suite executive with over 25 years

of experience building culture for transformative

business performance across multiple industries.

Prior to joining Pearson, she was an executive officer

and CHRO for Hologic, Inc., a global medical

technology company. Prior to Hologic, she held

various HR leadership roles with the speciality retail

company, ANN INC.

With more than 30 years of experience leading

large-scale, global marketing and communications

strategies, Ginny has a proven track record of scaling

businesses, forging valuable partnerships and

catapulting global brands to the top of their markets.

Ginny has guided some of the world’s biggest brands

such as HP, IBM, Intuit, Microsoft, MIT, NCR, Philips,

Sun and Xerox.

Before joining Pearson, Ginny served as Chief

Marketing Officer for Accenture North America and

was a member of the Global Leadership Council.

Ginny earned a BA in Modern Languages & Literature

from the University of Bristol. Ginny serves as chair of

strategic planning, executive board director and VP of

marketing for San Francisco Opera Guild, which

provides K-12 arts education programs to 64,000

children in Bay Area schools.

Vishaal is an accomplished business leader with 29

years of global experience in enterprise technology.

He has a track record of scaling digital businesses and

building high-performance teams.

He joined Pearson from Accenture, where he was

Senior Managing Director and a member of the Global

Leadership Council. During his tenure at Accenture, he

held several leadership roles such as Europe

Technology Sales, Solutions and Ecosystem lead and

Global Technology Industry lead for Telecoms and

Media. Previously, Vishaal worked with Tech Mahindra,

MindTree and HCL Technologies.

Sharon has 25 years of assessment and qualifications

experience. Additionally, she started her career

teaching geography in secondary schools in the UK

and taught for eight years. Sharon is a resilient

business leader with deep experience operating in a

media sensitive, highly regulated environment. She

has worked extensively with governments, schools

and partners to provide teaching, learning and

assessment services that help children and young

people make progress through learning. Sharon is an

elected representative on the Council of the UK

Publishing Association and has previously chaired the

Joint Council for Qualifications. She graduated from

Oxford University with a BA in Geography and PGCE.

Chief Human Resources Officer

Age: 56

Chief Marketing Officer

Age: 57

President – Enterprise Learning andSkills

Age: 52

President – English Language Learning

Age: 54

Internal appointment External appointment

PEM composition

These figures reflect the Executive Management team, excluding the

Company Secretary, as at the date of this annual report. The Chief Executive

and Chief Financial Officer have been excluded and are counted in the Board

metrics on page 73. For diversity data in the format prescribed by UKLR

6.6.6R(10), please see page 54.

Ethnicity

Gender

Female Male

Asian/Asian British Mixed/Multiple

ethnic groups

Other ethnic

groups

White

722 1

1. Ethnicity categories are based on the UK’s Office for National

Statistics classification.

Appointment

Skills and experience

Annual report and accounts 2024 Pearson plc 74

Strategic report Governance report Financial statements Other information

Cinthia Nespoli Sulaekha ‘Sue’ Kolloru

Barger

Joined Pearson 1 February 2014

Appointed to the PEM

21 May 2020

Joined Pearson 16 May 2022

Appointed to the PEM

16 May 2022

Cinthia has over 20 years of international legal and

compliance experience. Before joining Pearson, she

held leadership roles in legal and compliance at

multinational companies. Cinthia was admitted to the

Brazilian bar in 2004 and earned her law degree from

Pontifícia Universidade Católica de Campinas as well

as a post-graduate degree in tax law from Pontifícia

Universidade Católica de São Paulo.

Sue has more than 25 years of global strategy and

corporate experience. Additionally, she held

engineering roles at technology companies. Sue holds

an MBA from The Wharton School at the University of

Pennsylvania and a BSc in electrical engineering from

the University of Ottawa in Canada. She has served on

several non-profit boards and councils focused on

diversity and STEM.

General Counsel

Age: 44

Chief Strategy Officer

Age: 49

Tony Prentice

Tom ap Simon

Joined Pearson 1 May 2023

Appointed to the PEM

1 May 2023

Joined Pearson 1 December 2004

Appointed to the PEM

1 April 2021

Appointment

Tony has more than 25 years of experience in

consumer-led product management in companies

including Sema4, American Express, and Starbucks.

He brings extensive expertise in strategic product

development and consumer marketing. He holds an

MBA from Columbia Business School and a BS in

Mechanical Engineering from Cornell University.

Tom has 20 years of international business and

finance experience. At Pearson, he has led the Virtual

Schools business, worked in finance for the emerging

markets businesses and led M&A activity in the US.

Previously, he worked in investment banking at RW

Baird. Tom holds an MA in Economics and Politics

from the University of Edinburgh.

Skills and experience

Chief Product Officer

Age: 52

President – Higher Education and Virtual Learning

Age: 46

External/Internal appointmentNationality

American Italian/Brazilian

1 1

British Canadian

German

Internal External

Annual report and accounts 2024 Pearson plc 75

Strategic report Governance report Financial statements Other information

Marykay Wells

Joined Pearson 14 July 2014

Appointed to the PEM

16 March 2022

Marykay has over 30 years of strategic planning and

large, global technology transformation experience.

Prior to joining Pearson, Marykay had CIO roles at

Nortel, Tekelec (acquired by Oracle) and Extreme

Networks. Marykay holds a BS degree in Computer

Information Science from Clarkson University and is a

member of the Salesforce CIO Advisory Board, MGT

Board of Directors, and is a Board Member of the

non-profit Rewriting the Code (advancing Women in

Tech).

Art Valentine

Joined Pearson 23 January 2006

Appointed to the PEM

1 February 2022

Art has more than 30 years of leadership experience

in assessments, testing and technology. Prior to his 19

years at Pearson serving as a senior leader of Pearson

VUE and as Managing Director of Pearson Clinical

Assessment, Art worked at global technology

organisations including Accenture and Promissor,

which was acquired by Pearson in 2006. Art earned

his BS in Mathematical Science/Computer Science

from the University of North Carolina Chapel Hill.

President – Assessment & Qualifications

Age: 60

Naseem Tuffaha

Joined Pearson 13 January 2025

Appointed to the PEM

13 January 2025

Naseem has over 30 years of leadership experience in

sales and international and market development. Prior

to joining Pearson, he was Chief Growth Officer of

global advertising technology firm The Trade Desk. He

has also served in a variety of go-to-market leadership

roles during his long career at Microsoft, most recently

as Head of Sales for the company’s Modern Work

businesses. Naseem serves on the board of several

non-profit organisations dedicated to providing

medical relief to children in underserved areas, and

holds a degree in Economics from Harvard University.

Chief Business Officer

Age: 53

Chief Information Officer

Age: 62

Appointment

Skills and experience

Internal appointment External appointment

Pearson Executive Management (PEM) continued

Dave Treat

Joined Pearson 2 July 2024

Appointed to the PEM

2 July 2024

Dave has over 25 years of experience in technology,

innovation and strategic business transformation. He

joined Pearson from Accenture where he served as a

Senior Managing Director. Dave helped to found and

has served on several technology and industry boards

including the Linux Hyperledger Foundation, Linux

Open Wallet Foundation, Digital Dollar Project and the

Global Business Blockchain Council. Dave earned a

master’s degree in Higher Education Administration

from the University of Michigan and a degree in

Psychology from the University of Pennsylvania.

Chief Technology Officer

Age: 50

Annual report and accounts 2024 Pearson plc 76

Strategic report Governance report Financial statements Other information

Division of responsibilities

Chair

The Chair is primarily responsible for the leadership

ofthe Board and ensuring its effectiveness.

Theyensure that the Board upholds and promotes

the highest standards of corporate governance,

setting the Board’s agenda and encouraging open,

constructive debate of all agenda items for effective

decision-making. They regularly meet the Chief

Executive to stay informed and provide advice.

Theyalso ensure that shareholders’ views are

communicated to the Board.

Chief Executive

The Chief Executive is responsible for the operational

management of the business and for the development

andimplementation of the company’s strategy,

asagreedby the Board and management. They are

responsible for developing operations, proposals

andpolicies for approval by the Board, they promote

Pearson’s culture and standards, and they are one

ofthe key representatives of the company to its

external stakeholders.

Authorities and duties

The authorities and duties of theBoard and its

Committees, as well as the roles and responsibilities

ofkey individuals on the Board, are clearly set outin

writing. These documents are reviewed and approved

by the Board on an annual basis and are available

onthe company’s website (www.pearsonplc.com).

Standing Committee

A Standing Committee of the Board is established

toapprove certain operational and ordinary course

ofbusiness items such asbanking matters, guarantees

and intra-Group transactions. They also make

routineapprovals relating to employee share plans.

Additional authority may be delegated on an ad

hocbasis, e.g. to approve and conclude

corporatetransactions.

Pearson Executive Management

The Pearson Executive Management team consists

ofthe Chief Executive and their senior direct reports.

They are the executive management group for

Pearson and are responsible for delivering Pearson’s

strategy under clearly defined accountabilities and

inline with agreed governance andprocesses.

Deputy Chair and Senior

Independent Director

The Deputy Chair and SeniorIndependent Director

supports the Chair on Board effectiveness and

governance matters. This role includes meeting

regularly with the Chair and Chief Executive to

discussspecific issues, as well as being available to

shareholders generally, should they have concerns

that have not been addressed through the normal

channels. The Deputy Chair and Senior Independent

Director also leads the evaluation of the Chair

onbehalf of the other Directors.

Company Secretary

The Company Secretary advises on governance

matters and compliance with Board procedures.

Theyare responsible, under the direction of the Chair,

for ensuring the Board receives accurate, clear and

high-quality information, and has adequate time and

appropriate resources to function effectively and

efficiently. Theyalso support the Chair indelivering the

corporate governance agenda, and organise director

induction, training programmes and the Board

evaluation process.

The Board

The Board has established four formal Committees. The Committees focus on their own areas of expertise, enabling the Board meetings to focus on strategy, performance, leadership and people,

governance and risk, and stakeholder engagement, thereby making the best use of the Board’s time together as a whole. The Committee Chairs report to the full Board at each Board meeting following

their sessions, ensuring a good communication flow while retaining the ability to escalate items to the full Board’s agenda, if appropriate.

Nomination & Governance

Committee

Reviews corporate governance matters, including

Code compliance and Board evaluation; considers the

appointment of new Directors and Board experience;

and reviews Board induction and succession plans as

well as Board engagement with the widerworkforce.

Reputation & Responsibility

Committee

Oversees our sustainability framework, including

progress towards our sustainable business strategy

commitments. Works to assess and advance Pearson’s

reputation with stakeholders, including through the

areas of branding, culture, employee engagement

andvalues.

Audit Committee

Appraises our financial management and reporting

and assesses the integrity of our accounting

procedures and financial controls. The Committee

also oversees risk, compliance and internal audit.

Remuneration Committee

Determines the remuneration and benefits of the

Executive Directors and oversees remuneration

arrangements for the Pearson Executive Management

team, as well as monitoring remuneration policies for

the wider workforce.

Annual report and accounts 2024 Pearson plc 77

Strategic report Governance report Financial statements Other information

The Board is deeply engaged in developing and measuring the company’s long-term strategy, performance, culture and values. We believe that

Board members provide a valuable and varied set of external perspectives and that robust, open debate about significant business issues brings

anadditional discipline to major decisions.

Board activities

The role and business of the Board

The key responsibilities of the Board include:

• Overall leadership of the company and setting the company’s

values and standards, including monitoring culture,

performance and engagement.

• Reviewing and determining the company’s strategy, in

consultation with management, assessing performance against

the strategy and overseeing management’s execution of it.

• Supervising major changes to the company’s corporate, capital,

management and control structures.

• Approval of all transactions or financial commitments in excess

of the authority limits delegated to the Chief Executive and

other Executive Management.

• Oversight of the risk management approach and determining

the company’s risk appetite (see page 57 for more information

on risk management).

• Assessment of management performance, Board and

executive succession planning and talent pipeline.

• Effective engagement with key stakeholders.

Strategic planning and decision-making

The Board spends time assessing whether any proposed action

aligns with the strategy and future direction of the business,

while taking into consideration sustainability and impact on our

stakeholders. In addition, the Board regularly holds strategy

discussions, whether in relation to the specific strategies of

Pearson’s five business units or the vision and execution of the

wider company strategy as a whole, both of which enhance the

Board’s decision-making in shaping the company’s strategic and

financial plans.

The Board and Committees receive timely, regular and necessary

financial, management and other information to discharge

their duties. Comprehensive papers are circulated to Board

and Committee members approximately one week in advance

ofeach meeting.

The Board receives a regular performance dashboard and

key milestones report, together with updates from the Chief

Executive and Chief Financial Officer. In addition to meeting

papers, a library of current and historical corporate information

is made available to Directors to support the Board’s

decision-making process. For items that require significant

consideration and review in advance of a decision, such as the

update to the company’s strategic priorities during 2024, the

Board’s discussions can take place over a number of sessions.

The Directors recognise their duties towards the shareholders

and other stakeholders as set out in Section 172 of the

Companies Act 2006, and a continued understanding of the key

issues affecting stakeholders is an integral part of the Board’s

decision-making process. You can read more on pages 86-87

about how the Board engages with stakeholders and takes their

views into account when making decisions.

Portfolio changes

The Board regularly reviews updates on portfolio and corporate

finance activities throughout the year, including regular updates

on live transactions (disposals, acquisitions and corporate

joint venture activity), outputs of periodic portfolio reviews and

reviews of potential pipeline opportunities. These updates can

take the form of presenting key summaries of information in

Board packs, or oral updates on key matters. These discussions

are typically led by management, supported by the Corporate

Development team and, where necessary, external advisers,

with Board input collated and, where necessary, providing its

formal approval. Subsequently, once portfolio transactions have

closed, the Board is also kept informed of the integration or

transition progress, including post-acquisition reviews conducted

to assess transaction success and any learnings to be taken for

futureprojects.

Board meetings

The Board held seven scheduled meetings in 2024, with

discussions and debates focusing on the ongoing development

and execution of the company’s markets, customer and

people strategies, as well as other strategic drivers for the

company. Major items covered by the Board in 2024 are

shown in the table on page 79. In addition to its scheduled

meetings, the Board convenes as necessary to consider matters

ofatime-sensitivenature.

Reflecting on the level and quality of engagement by the Board

in 2024, the Board is satisfied that each Director contributed to

Board discussions and demonstrated sufficient commitment

to be able to meet their responsibilities. In addition, the

Nomination & Governance Committee confirmed in its annual

assessment that each Director demonstrates the requisite level

of commitment and contribution in accordance with Principle H

and Provision 18 of the Code.

Annual report and accounts 2024 Pearson plc 78

Strategic report Governance report Financial statements Other information

Board attendance

Directors are expected to attend all Board and Committee

meetings, but in certain situations, such as pre-existing business

or personal commitments or certain unforeseen circumstances,

it is recognised that Directors may be unable to attend. In

these circumstances, the Directors receive relevant papers

and, wherever possible, will communicate any comments and

observations in advance of the meeting for raising as appropriate

during the meeting. They are updated on any developments

after the meeting by the Chair ofthe Board or Committee, as

appropriate.

Individuals’ attendance at Board and Committee meetings is

considered as part of the formal review of their performance.

There was a high level of attendance by the Directors at Board

and Committee meetings in 2024, as shown in the table on

page 80 and in the Committee reports that follow.

The exceptions to this in 2024 were Esther Lee, who was

unable to attend the meeting in February due to a pre-existing

commitment and the meeting in July due to a family medical

emergency, and Lincoln Wallen, who was unable to attend the

meeting in October due to unforeseen personal circumstances.

Directors’ commitments and conflicts

ofinterest

Under the Companies Act 2006, the Directors have a statutory

duty to avoid conflicts of interest with the company. The

company’s Articles of Association allow the Directors to authorise

conflicts of interest. The company has an established procedure

to identify actual and potential conflicts of interest, including all

directorships or other appointments to, or relationships with,

companies that are not part of the Pearson Group and which

could give rise to actual or potential conflicts of interest.

Additionally, in response to Provision 15 of the UK Corporate

Governance Code and the FRC’s accompanying guidance on

Board effectiveness, Pearson has developed internal guidance to

be taken into account when considering changes to a Director’s

commitments, or when appointing a new Director, as well as

formalising the Board approval process for such matters.

Once notified to the company, any potential conflicts and

commitments are considered for authorisation by the Board at

its next scheduled meeting or, where necessary in the interests

of timeliness, by a committee comprising the Chair, the Deputy

Chair and Senior Independent Director, and the Company

Secretary. In particular, the Board or committee considers the

type of role, expected time commitment and any impact this

may have on the Director’s duties to Pearson, as well as any

relationships between Pearson and the external organisation.

Board meeting focus 2024

Strategy Performance

Leadership and

people Governance and risk

Shareholder

engagement

• Oversight of strategic planning process,

including market overviews and growth

opportunities, approval of the evolution

of the company’s strategy and oversight

of strategy execution, including deep

dives on the progress of specific

strategic initiatives.

• Consideration and approval of the 2025

annual operating plan and updated long-

range plan.

• M&A pipeline and post-acquisition

reviews.

• Approving 2023 preliminary results and annual report

and accounts.

• Approving 2024 performance expectations and

guidance to the market.

• Approving the 2024 interim results and Q1 and Q3

trading statements.

• Monitoring 2024 operating plan performance.

• Regular dashboard and milestone reports.

• Strategic and non-financial KPIs reviews.

• Continuing review of forecasts.

• Final and interim dividend approvals and other capital

allocation considerations, including share buyback.

• Talent review, pipeline

development and

succession planning

process.

• Culture.

• Employee engagement

sessions with Board.

• Employee engagement

survey assessments.

• Reports on Committees’ activities and

considerations.

• Legal, regulatory and governance

matters.

• Board and Committees’ performance

review.

• Regular review and annual confirmation

of Directors’ commitments and/or

potential conflicts of interest.

• Annual assessment and re-approval of

Committees’ terms ofreference.

• Risk management report.

• Board learning and development through

deepening operational understanding.

• Investor relations strategy

and updates, share price

performance and value

creation considerations.

• Shareholder issues and

voting.

• AGM and related

shareholder interactions.

• Feedback from Board

member meetings with

shareholders.

• Major shareholders and

share register analysis.

Annual report and accounts 2024 Pearson plc 79

Strategic report Governance report Financial statements Other information

The interested Director is not permitted to vote on, or be

counted in the quorum for, any resolution relating to their

proposed commitments, conflict or potential conflict. The

Board further reviews any authorisations previously granted on

an annual basis. When making new appointments, the Board

considers other demands on the proposed Director’s time.

The Board believes that the experience gained by Directors

through their other commitments brings valuable perspectives

to the Pearson Board. During the year, the Board approved the

following new commitments:

• On 30 April 2024, Graeme Pitkethly was appointed to the

Board of Sandoz Group AG as Non-Executive Director and

Chair of its Audit, Risk and Compliance Committee. When

considering this new commitment, the Board assessed any

potential conflicts of interest and the time commitment

required, noting that Mr Pitkethly had recently stepped down

from a full-time executive role as Chief Financial Officer of

Unilever plc.

• On 2 June 2024, Sherry Coutu was appointed to the Board of

Raspberry Pi Holdings plc, which was admitted to the main

market of the London Stock Exchange on 14 June 2024, as

Non-Executive Director and Senior Independent Director

and is also Chair of its Remuneration Committee. When

considering this new commitment, the Board assessed any

potential conflicts of interest and the time commitment

required, noting that Ms Coutu has been associated with

Raspberry Pi since 2012 and that this appointment reflected

their new status as a listed company, rather than being a

significant new commitment in its own right.

• On 6 January 2025, Alison Dolan joined the Board of Marks and

Spencer Group plc as Chief Financial Officer. When considering

this new commitment, the Board assessed any potential

conflicts of interest and the time commitment required, noting

that Ms Dolan had stepped down from her previous full-time

executive role as Chief Financial Officer of Rightmove plc on

15 September 2024.

When considering these new commitments, the Board also took

into consideration the requirements under Provision 15 of the

UK Corporate Governance Code and the FRC’s accompanying

guidance on Board effectiveness. The Board agreed that these

new commitments would not have a negative impact on their

roles at Pearson.

Scheduled meetings

attended

Chair

Omid Kordestani 7/7

Executive Directors

Omar Abbosh 7/7

Andy Bird

0/0

Sally Johnson 7/7

Non-Executive Directors

Sherry Coutu CBE 7/7

Alison Dolan 7/7

Alex Hardiman 7/7

Esther Lee

5/7

Graeme Pitkethly 7/7

Tim Score

3/3

Annette Thomas 7/7

Lincoln Wallen

6/7

1. Andy Bird retired from the Board on 7 January 2024.

2. Esther Lee was unable to attend the Board meeting on 28 February

2024 due to a pre-existing commitment. Ms Lee was unable to attend

the Board meeting on 25 July 2024 due to a family medical emergency.

On each occasion, she reviewed the papers and provided her

perspectives to the Chair outside the meetings.

3. Tim Score retired from the Board on 26 April 2024.

4. Lincoln Wallen was unable to attend the Board meeting on 9 and

10 October 2024 due to unforeseen personal circumstances. He

reviewed the papers and provided his perspectives to the Chair outside

the meeting.

Board activities continued

Annual report and accounts 2024 Pearson plc 80

Strategic report Governance report Financial statements Other information

How the Board is kept informed

The application of our Board and governance processes ensures that our Directors receive accurate, timely and clear information from a range

ofsources. This allows the Board and Committees to monitor and provide feedback on matters of importance, as well as to make informed decisions

in the best interests of the company and its stakeholders.

The Board’s oversight of AI at Pearson

As a digital-first business, Pearson is accelerating its use

of AI across the business and using it as a growth driver to

improve efficiencies and to enhance learning and assessment

services. We expect generative AI to create significant positive

opportunities for Pearson, due to our unrivalled depth of content

and data.

We believe that the rapid advances in AI will be an important

driver of growth in education and the workforce over the

coming years. The rapid development of increasingly powerful

AI models will significantly change the world of work and

skills requirements. Employers will need to find new pools of

talent and continuously develop and verify the skills of their

workforces to keep pace with and benefit from technology and AI

advancements. Learners and educators place enormous trust in

us, so we have a responsibility to be thoughtful and considered

in how we use this technology, while continuing to move at pace

to enhance our products with the customer in mind. AI plays

an important role across Pearson’s product portfolio, more

information on which can be found in the Strategic report. With

AI skills becoming increasingly important in the job market and

helping humans be more productive, the need for AI learning is

growing and we are always exploring opportunities to continue

to leverage innovative AI technology to drive further efficiencies

and cost savings.

During the past year, the Board, the Audit Committee, the

Reputation & Responsibility Committee and the Executive

Management team have kept up to date with AI developments

both within Pearson and across the wider landscape, considering

both opportunities and implications of the technology for

Pearson. Specific activities undertaken by the Board and

Committees during the year have included:

• During 2024 an extensive strategic review process was

undertaken by the business, with the Board’s participation,

to define the strategic priorities that will guide Pearson’s

trajectory over the next decade. As part of this process,

we identified a number of targeted market expansion

opportunities and updated our strategy to drive higher

performance in the core business and unlock new synergies.

The opportunities for Pearson are supported by the infusion of

AI into our products and services.

• One of the three priorities we set as a company for 2024 was

to increase the intensity with which we infuse our products

and services with a wide range of AI capabilities. The Board

considered the specific initiatives, priorities and opportunities

of AI, in terms of product capabilities, potential application

for companies and workforces, and internal back-office

efficiencies leveraging AI technology for content and process

engineering. This included a deep dive on AI enhancements

being applied to the company’s customer services capabilities.

The Board was updated on progress with the new meaningful

multi-year enterprise deal with ServiceNow, on progress

with the new AI features integrated into products in Higher

Education and English Language Learning, and the Board

reviewed and approved the new multi-year strategic Enterprise

AI partnership with Microsoft.

• The Audit Committee was provided with updates on ongoing

work being undertaken to understand potential risks and

opportunities with evolving AI technology. Data privacy and

cyber security remain important parts of the Audit Committee’s

remit and our robust practices in these spaces underpin our

approach to AI governance.

• The Audit Committee considered the risks associated with

generative AI and reviewed its status as part of the Group risk

review. In addition, as part of the business unit strategic risk

deep dives, the Audit Committee discussed:

• In Assessment & Qualifications, an overview of risks

associated with AI and the competitive marketplace, as well

as perspectives on the use of AI in that business, drawing a

distinction between the AI techniques that had been in use

for some time and the recent developments in generative AI.

• In Higher Education, an overview of how Pearson’s

generative AI capabilities were driving content production

efficiencies and personalisation of materials, as well as

consideration of a roadmap to release meaningful new AI-

powered capabilities and actions taken to invest in features

and capabilities that had already been enabled by the

emergence of generative AI platforms.

• In Virtual Learning, an overview of the work to add AI tooling

to our content ecosystem and programming to enhance our

college and career readiness offering.

• The Reputation & Responsibility Committee considered

the AI landscape from a regulatory, policy and media

perspective, including:

• An update on the significant regulatory and policy focus

on this topic, including the EU AI Act, which passed in April

2024, cementing the first comprehensive regulatory scheme

for the development and use of AI in the world and the US

state action on passing AI-related laws.

• Noting the advocacy work conducted by the company in

this field.

• The alignment of Pearson’s safeguarding and online trust

and safety programmes with the company’s broader AI, data

privacy and cyber security governance frameworks.

You can read more about how we manage AI from a risk

perspective on page 60.

The

Board

& AI

Risk

management

Advocacy

and external

policy

Back-office

efficiencies

Regulatory

landscape

Strategy

Product

capabilities

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Talent and culture

Ensuring that we have both a talented, engaged workforce that

is focused on delivering our strategy and an organisational

culture that enables and encourages that delivery is critical

to Pearson’s success. During the past year, the Board and

Executive Management team have continued to lead our focus

on making sure Pearson offers a culture and environment that

is high-performing, and in which our people can leverage their

strengths. We track Group-wide progress through our ‘Culture

of engagement & community’ non-financial KPI (see page 24 for

more details on our KPIs). Pearson’s purpose (set out on page 2)

is key to developing our culture to support our strategic vision,

particularly in driving a culture of performance.

The Board has a particular focus on embedding our desired

culture, with the current and future leaders of Pearson being

essential to the successful embedding of our purpose and culture

of performance. Our strategic priorities are underpinned by our

commitment to provide a vibrant work environment, unparalleled

career opportunities, open communication and tailored feedback,

exceptional leadership and a clear definition of success for our

employees. In connection with this, the Board was provided with

an overview of the new career architecture and the execution

plan ahead of its launch in January 2025.

The Board has also been attentive to our talent pipeline for

leadership and other pivotal roles and, during the year, Pearson

introduced a ‘Leadership Uplift’ programme for senior employees

which includes alignment on the behaviours we expect in our

leaders, assessment of these behaviours and investment in

tools, resources and coaching. This programme is a valuable

enhancement to our leadership and talent review process. By

providing a consistent framework and an objective perspective,

it facilitates more meaningful discussions about talent across

the organisation and sharpens our ability to identify and

prioritise leadership development opportunities that align with

the evolving needs of our business. Our objective was to build

something that fits our purpose, builds trust over time and can

be an asset to our leaders, our managers and our people. The

Board received a detailed overview of the programme, including

the process for building the leadership assessments and the

key themes and insights from the completed assessments.

The Board also reviewed the Executive Management team’s

leadership profiles, which provide a deeper understanding of

the Executive Management team’s strengths and potential, in

order to ensure that we place the right talent in critical roles and

build a leadership pipeline capable of driving sustainable growth,

fostering innovation and delivering on our strategic priorities.

The Board monitors culture and organisational health, together

with its Committees, and receives regular updates from the

Chief Executive and Chief Human Resources Officer on how this

is being embedded within the business. The Board monitors

other Group-wide initiatives that underpin our culture, including

employee engagement, the Code of Conduct programme,

compliance, health and safety and talent attraction and retention

(see table below for further information).

During the year, the Board also conducted a review of the results

of Pearson’s employee engagement survey, to discuss the key

themes and indicators.

The Reputation & Responsibility Committee’s remit includes

oversight of culture, increasing the Board-level focus on this

matter. The Chief Human Resources Officer is a frequent

attendee at Board meetings, as well as a standing attendee at

the Reputation & Responsibility, Remuneration, and Nomination

& Governance Committees. Their attendance and contributions,

together with the Board’s own direct engagement with the

workforce, ensure that our Directors are attuned to our culture

and employee-related considerations through multiple lenses,

including in strategic decision-making (see our case study on

page 86), and in conducting their business more broadly.

Read more on page 38.

Cultural indicator How it is overseen

Board-level

responsibility

Employee

engagement

The Board ensures engagement through multiple channels, including the employee engagement survey, town hall sessions and in-person engagement events, such as listening sessions with

employees in London, Hoboken, New Jersey, and Durham, North Carolina. Read more on page 85.

Board

Code of Conduct

and training

The Audit Committee is briefed on our annual Code of Conduct programme, including development of the Code, completion rates, training and certification methods. Certification of the Code

is mandatory and we achieved a 100% employee completion rate for 2024. We also have mandatory training for all employees on cyber security and data privacy, with targeted training for

employees in certain roles, business units or geographies.

Audit

Compliance,

including

whistleblowing

and investigations

The Associate General Counsel – Employment, Ethics & Compliance reports to the Audit Committee at every meeting on new and ongoing investigations, including matters raised through our

SpeakUp process. The Audit Committee considers the programme’s effectiveness annually, including periodic peer benchmarking. The Audit Committee Chair ensures the Board has visibility on

matters of note. The Board is free to request further information to support its oversight.

Audit

Internal audit Insights into elements impacting our culture and cultural behaviours are provided where necessary by internal audit to the Audit Committee as part of the findings and recommendations in its reports. Audit

Health and safety

(H&S)

The Reputation & Responsibility Committee receives an annual H&S report, so Directors can monitor the key strands of our H&S framework, including oversight of how Pearson is enabled

through awareness, competency, resources and guidance to allow for agile and effective management of H&S risk, while also receiving comfort that we have controls for compliance and

assurance purposes.

Reputation &

Responsibility

Remuneration

practices and

rewarding the

workforce

The Remuneration Committee monitors the wider Employee Reward framework, including incentive target setting for Group plans, fair pay analysis, Chief Executive pay ratios and alignment

of Directors’ pension contributions to the workforce. It also oversees integration of sustainability measures into incentive targets. This suite of activity provides insights into the roles that

remuneration and setting performance goals play in promoting the right behaviours, particularly in driving a culture of performance, and how incentives and rewards align with culture.

Remuneration

Talent attraction

and retention

The Chief Human Resources Officer regularly updates the Remuneration Committee on talent considerations, including trends on recruitment, retention and staff turnover. Talent attraction and

retention plays into our ability to execute our strategy, so it is considered in strategic discussions by the Board and Executive Management team. Recognising the importance of our people, Talent

is a sub-category of our Capability principal risk. Read more about our risk management approach starting on page 57.

Remuneration

How the Board is kept informed continued

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Sustainability

Pearson has a strong governance structure through which the Board and its Committees monitor and oversee the company’s Learning for Impact framework.

The company’s Learning for Impact framework includes three pillars: ‘Driving learning for everyone

with our products’, ‘Empowering our people to make a difference’, and ‘Leading responsibly for a

better planet’. These pillars represent the areas where Pearson can make the biggest positive impact

and where our responsibilities lie towards communities and the environment.

The Reputation & Responsibility Committee leads the Board’s oversight of sustainability matters;

however, given the breadth of topics that feed into our Learning for Impact pillars, as well as the

increasingly complex external landscape around these matters, the other Committees each have a

role to play in supporting the Board’s oversight of sustainability.

Indicative sustainability duties falling within remits of Board Committees

Board

Reputation & Responsibility Committee Audit Committee Remuneration Committee Nomination & Governance Committee

• Overseeing the sustainability strategy

including targets and public commitments.

• Monitoring progress towards non-financial

KPIs linked to the products, people and

planet pillars.

• Sustainability regulatory landscape and

external reporting.

• Integrity and assurance of sustainability data,

reporting and metrics.

• Strategic risk management.

• Compliance elements of ‘governance’ strand

of sustainability.

• Considerations relating to incorporation

of sustainability metrics within remuneration

frameworks.

• Performance against sustainability metrics to

support remuneration decisions.

• Ensuring requisite strength of sustainability

expertise on Board.

• Corporate governance elements

of sustainability.

The graphic above illustrates how the Committees work together to support the Board in overseeing

sustainability at Pearson.

You can read more on the sustainability matters covered during 2024 throughout this Governance

report, in particular in the Reputation & Responsibility Committee’s report on pages 96-98.

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Understanding our stakeholders

A strong understanding of all our stakeholders and their perspectives is integral to our strategic planning and operational delivery. Our Board strategy

sessions are informed by the views and needs of our eight stakeholder groups: shareholders, educational institutions and educators, employers,

business partners and institutions, consumers, governments and regulators, communities and employees.

A number of Non-Executive Directors were involved in

workshops for the strategic review process where they engaged

with employees as part of the strategic planning process.

A key factor in any decision-making is listening to and considering

the interests of stakeholders. We have set out below examples

of the key employee and shareholder engagement activities

undertaken by the Board and by individual Directors over 2024.

Shareholders

Shareholders are a key consideration in the Board’s decision-

making. We have continued our focus on driving shareholder

engagement through in-person and virtual meetings and events.

The Board is committed to fostering shareholder engagement

and recognises that AGMs represent an opportunity for

shareholders to interact with the Board and share their views,

concerns and feedback. We successfully held our third hybrid

AGM in 2024, which again took place at our 80 Strand office in

London, with shareholders able to attend the meeting, vote and

ask questions of the Board either in-person or virtually.

We will be holding a hybrid AGM in 2025 and look forward to

welcoming our shareholders. Further details will be shared in our

notice of the 2025 AGM.

The Board ensured a continued shareholder dialogue

throughout the year. In accordance with the UK Corporate

Governance Code, following a significant minority vote against

our Directors’ Remuneration Report and the re-appointment

of Remuneration Committee Chair, Sherry Coutu, at our 2024

AGM, a subsequent engagement exercise with shareholders

was conducted and reported back to the market on the major

themes of the feedback received. Further information on the

shareholder engagement prior to and after our 2024 AGM is

included in the Directors’ Remuneration Report starting on page

113.

The Board also receives updates and analysis on shareholder

sentiment from Pearson’s corporate brokers, as part of a

regular investor relations update and when considering certain

corporate matters.

Employees

The Board recognises that our employees are one of our

most important assets and are integral to our business and

is committed to continuing to ensure they inform the Board’s

decision-making. Examples of how the Board engaged with

employees in 2024 to ensure that they are listened to, supported

and rewarded, are illustrated on page 85.

As required by the UK Corporate Governance Code,

the Board ensures Pearson engages effectively

with, and encourages participation from, its key

stakeholders. The Board maintains its oversight

through a variety of direct and indirect mechanisms,

and the Reputation & Responsibility Committee

monitors our stakeholder engagement framework.

The Board recognises that stakeholder views

are integral to decision-making and setting the

company’s strategy. More information on Pearson’s

key stakeholders, including the outcomes of our

engagement throughout 2024, is in the Strategic

report on pages 18-22. Further information on how

the Directors discharge their duties under Section 172

of the Companies Act 2006 is on page 23.

Nearly

400

meetings

Over

200

institutions

with

Shareholder engagement at a glance

Over 2024, our Chief Executive, Chief Financial Officer and Business Unit Presidents, as well our Investor Relations team, participated

in meetings with both buy-side and sell-side analysts, conferences, roadshows, salesforce teach-ins and events across the world.

Engagement in 2024

Throughout the year, the Board ensured that it was kept

informed of stakeholder views, concerns and commentary

through a variety of engagement methods. These included

in-person and virtual meetings, reports and presentations at

Board or Committee meetings, feedback from members of the

Executive Management team and other employee groups, and

interactions with different functions, teams and advisers, both

inside and outside Pearson.

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Board and employee engagement

The central role of the Board is to support and oversee Pearson’s

long-term strategy. As part of that, it is vital that the Board

engages with employees, to strengthen the employee voice in the

boardroom enabling the Board to hear first-hand the employees’

perspectives on Pearson’s strategy, performance and culture.

During the year, the Board’s approach to employee engagement

included in-person, structured sessions, which complemented

existing executive employee engagement and expanded

opportunities for direct engagement by Non-Executive Directors.

The Board held three in-person sessions with employees in our

major employee hubs in London and in the US in Hoboken,

New Jersey and Durham, North Carolina, facilitating meaningful

interactions between Board members and various groups of

employees to hear their thoughts, feedback and questions.

Board members engaged on a variety of topics, including the

strategic review process and the clarity of our strategic priorities,

the plans for execution and the pace of transformation required,

and the importance of company culture.

These events were received very positively by employees, and the

Board spent time after each session discussing what they had

heard from employees.

Looking ahead, the Board intends to hold similar in-person

and structured sessions in 2025 to ensure we continue to be

authentic and representative of our entire employee base. The

Board is also invited to join a number of Executive Management

sponsored events with each business unit in 2025, including

Assessment & Qualification’s global sales meetings, English

Language Learning’s annual franchisee meeting and Higher

Education’s annual sales conference.

Town halls

Throughout 2024, the Chief Executive, Chief Financial Officer

and the Executive Management team held in-person and virtual

town hall meetings. Pearson employees were invited to attend

and given the opportunity to ask questions. These discussions

took place at significant points in the year, such as following key

strategic announcements.

Surveys

During 2024, we conducted a further Pearson employee

engagement survey, following the launch of a refreshed

approach in 2022. We heard from c.14,000 employees, with

an overall response rate of 88% compared with 82% in 2023.

The Board received a detailed update on the survey results,

including additional insights on the culture of inclusion, coaching

effectiveness and opportunities to increase engagement.

Further information on the outcomes of the Pearson employee

engagement survey is on page 38.

As someone who recently joined

Pearson through an acquisition, it was

an incredible opportunity to be able

to connect directly with Omar and

the Board in my first few weeks. My

conversations with the Board made it

clear that Pearson leadership has made

innovation a priority and that Pearson

intends to lead the way in areas of AI,

wearable technology and integration.

Rich Brancaccio

Senior Director in Product Development

(Attended the Durham engagement event)

Getting to speak with numerous

Board members was an amazing

opportunity. They asked very

insightful questions and showed

great interest in hearing what we

had to say.

Brennan Matthews

VP Investor Relations

(Attended the Hoboken engagement event)

Having the opportunity to meet

with a few members of the Board

was incredibly inspiring. Hearing

their perspectives and sharing

insights about the work we’re doing

reinforced my passion for our mission.

It’s a privilege to connect on such

a meaningful level and to see how

our efforts align with their vision

for transforming education and

empowering learners.

Carie Addis

VP of Strategic Partnerships within

Higher Education

(Attended the Durham engagement event)

This event was a fantastic opportunity

to engage with our leaders which left me

feeling excited about what lies ahead for

Pearson.

Lucy McAlister

Senior Legal Director for International Markets

(Attended the London engagement event)

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Our Board’s decision-making in action

This case study should be read in conjunction with the Directors’ duties statement on page 23.

During the year, the Board oversaw a company-wide strategic review process, which involved a comprehensive review of Pearson’s business and

its markets, to position the company for growth and ensure our continued success. Led by the Chief Executive, approximately 60 employees came

together in a series of intensive workshops – including current and potential future business leaders, subject matter experts in areas such as data, AI,

legal and HR, and sales and operational employees. This process was a unique opportunity to evolve our strategic priorities in order to be the leader in

shaping the future of next-gen education and work in the era of AI. This case study on the Board’s involvement in the strategic review process over the

year illustrates how the Directors considered the various aspects of their statutory duties when considering the strategic review process and approving

its implementation, and the implications for stakeholders.

The Board reviewed the proposal for the strategic review process

in January 2024, where the Chief Executive confirmed that he

would be initiating the project to build towards a strategic update

to the market as part of Pearson’s interim results in July 2024.

The Board considered an update on progress in February 2024,

including endorsing the criteria for the employees that had been

selected to be involved in the strategic review process, and the

process itself commenced in March 2024.

At its subsequent meeting in April 2024, the Board considered

an overview of the process to date, including assessments of the

company’s assets, industry trends and competitive strengths.

Representatives from the project joined this Board meeting to

provide deep dives into certain key topics, including addressable

market areas, key customer challenges and solutions, and

identifying foundational capabilities in data and AI, to showcase

the progress being made and to provide the Board with an

opportunity to challenge and ask questions. The Board was also

provided with a detailed overview of the activity that had taken

place at the project sessions and an indication of the goals and

priorities for future sessions.

A majority of the Board attended the project sessions held in

April and May 2024, to see the process in-person. The sessions

they attended were focused on topics including competitors’

products, the anatomy of a deal, brand and purpose, as well as

an innovation panel and a product development workshop.

In June 2024, the Board dedicated a specially arranged additional

meeting to discussing the outcome of the strategic review

process, the proposal for the overall corporate strategy and the

strategic priorities over the next two to three years, and how this

would be presented to the market in July 2024. This meeting was

an opportunity for the Board to dive deeper into the process

outcomes, the rationale for the proposed strategic priorities and

the management levers that would drive performance; provide

challenge to management on the proposals and execution plans;

and consider the impact of the proposed strategic priorities on

the company’s stakeholders.

Management framed the strategic priorities by describing

Pearson’s external and internal context, as well as noting the

company’s stakeholders and considerations made for them in

preparing the overall corporate strategy.

Ahead of the strategic update to the market in July 2024, the

Board reviewed the proposed communications plan and

provided feedback on the themes and their perspectives on the

potential market reaction.

Following the presentation of the strategy to the market

in July 2024, the Board’s focus has pivoted to monitoring

implementation, particularly a collection of projects that were

commenced in the second half of the year, focused on strategic

partnerships, such as with Microsoft, and developing our people

and culture strategy, and will continue to monitor the key

milestones and checkpoints of the strategy’s implementation.

Stakeholders

In its consideration of the strategic review, the Board considered

Pearson’s key stakeholders in the following ways:

Customers

In considering the proposal for the strategic direction of the

company, the Board was focused on ensuring that the customer

was front of mind in the work that had been conducted and the

considerations being made. We want to be a trusted partner for

our customers, driving positive outcomes through democratised,

intuitive, high-quality and personalised solutions. Customers

were interviewed as part of the preparation for the project

sessions and the Board received key data on the pressures

facing our customer groups, including institutions, governments,

educators, employers, employees and students. The Board

agreed that the proposed strategic priorities would aim to

address these pressures. This includes tackling cumbersome

course management and teaching effectiveness for educators,

supporting students with poor engagement and navigating their

futures, and helping external workforces to prove their skills and

support their career paths.

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Shareholders

Our priority is to provide diversified coverage of education and

learning markets with sales growth and margin opportunities,

fuelled by technology and AI development, alongside highly rated

sustainability credentials. As part of its oversight of the process,

the Board ensured that our strategic priorities were underpinned

by an aim to provide our shareholders with long-term value

creation. This is achieved through strong growth opportunities,

including with AI, a diversified portfolio, a strong balance sheet,

a progressive and sustainable dividend and a sound capital

allocation policy.

When reviewing the proposal, the Board considered our

shareholders’ interests. As part of this, the Board provided

input to ensure that the strategic update to the market included

sufficient information on the growth opportunities and execution

plans.

Communities

We strive to make a positive and meaningful impact in the

communities in which we operate, and the Board was cognisant

that this ambition was woven into the strategic priorities so that

we can have a positive impact on people globally in supporting

their ambitions and helping people realise the life they imagine

through learning. Our strategic priorities support strong societal

benefits and maintain our net carbon commitment.

Employees

At Pearson, we offer career opportunities that make a real-world

positive impact. In considering the execution of our strategic

priorities, there was a clear focus from the Board on our

employees and how we will raise the bar for our people, with a

focus on an improved performance culture, instilling essential

behaviours, and enhancements in performance management.

The Board was also clear on the importance of how this would

be communicated to employees, particularly the development of

the new career architecture framework, and provided feedback

on the change management aspects of the people and culture

initiatives.

Employers

The Board was cognisant of the importance of Pearson’s

relationship with employers and the trust they have in Pearson

to deliver high-quality products and services, which has fostered

stable long-term relationships which underpin our business. As

part of the review of the pressures facing our customer groups,

the Board noted how our strategic priorities aimed to address

the pressures facing employers and would particularly focus on

talent availability and the skills gap for employers.

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Directors’ induction

On joining the Board, each Director completes a bespoke

induction programme that is guided by the Chair or Deputy Chair

and Senior Independent Director, supported by the Company

Secretary, and overseen by the Nomination & Governance

Committee. Every programme builds on the particular skill

set, attributes and background of the joining Director, their

interests in Board or Committee roles, and the company’s

recommendations.

In addition to background information on the company, every

induction covers a range of topics, including Board procedures,

recent operational performance and strategic direction of the

company, purpose and values, key areas of the business, as

well as directors’ duties and responsibilities. The Directors also

receive a comprehensive introduction to the activities of each of

the Board’s Committees, including their objectives and priorities,

and cover various governance-related issues and their legal

obligations, including procedures for dealing in Pearson shares.

Each induction typically includes a series of meetings with

the members of the Board, the Executive Management team,

external advisers and brokers, and other senior management.

Directors receive a walk-through of the business from senior

executives and a briefing on Pearson’s investor relations

programme.

A newly appointed Director will have met some, ifnot all, fellow

Board members as part of the original search and appointment

process, but additional meetings may nevertheless occur

with the same Board members as part of a rich and thorough

induction.

Omar Abbosh joined the Board as Chief Executive on 8 January

2024. In addition to the typical induction programme detailed

below, Omar conducted comprehensive and engaging meetings

with key individuals in the business.

Typical Board induction programme

Induction programme

participants Meeting purpose

Chair, Deputy Chair and Senior

Independent Director

Introductory meetings to cover the company’s governance structure, the Board’s priority areas

and ways of working, meeting cadence and ongoing matters considered by the Board.

Chairs and members of the Board’s

Committees

Overview of the responsibilities and composition of the Board’s Committees, their governance,

regular attendees and advisers.

Executive Directors;

Business Unit Presidents

Overview of the strategic priorities of the company and each business unit, key performance

indicators, financial performance and projections, and competitive landscape.

Heads of Corporate Functions Introductions with leadership team members, covering an overview of their business area(s),

subject matter expertise, organisational structure, company culture and values.

Company Secretary;

legal advisers

Induction planning, governance framework, Board and Committee matters, duties and

responsibilities of a company director, the company’s policies and procedures, and other legal

and regulatory considerations.

Omar Abbosh

Chief Executive

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Board performance review

The Board employs a variety of methodologies for performance reviews to ensure the most effective results.

Following an internally facilitated review in 2022, led by the

Chair, and an externally facilitated review in 2023, conducted

by Manchester Square Partners, the 2024 review was

internally facilitated and led by the Deputy Chair and Senior

IndependentDirector.

Board performance review process

The format of the review was agreed by the Nomination & Governance Committee.

The scope of the review was finalised by the Deputy Chair and Senior Independent Director with support from the

Company Secretary.

The Deputy Chair and Senior Independent Director conducted one-to-one conversations with each of the Directors

and the Company Secretary on a confidential and unattributable basis.

The output of the performance review was captured in a report to the Board in December 2024, with the Board

then discussing the points raised by the review.

Progress on the findings of the performance review will be monitored by the Nomination & Governance Committee

throughout 2025.

Approach and methodology

The 2024 performance review was carried out by Graeme

Pitkethly, Deputy Chair and Senior Independent Director, through

aseries of one-to-one conversations with each Director and the

Company Secretary.

Discussion areas included matters that are relevant to Pearson

in particular, as well as those items laid down in the Code and

associated guidance, including:

• The effectiveness of the organisation and dynamics of the

Board, including composition, leadership, agendas, meeting

cadence, quality of information provided, governance and

decision-making.

• Relationships between the Board and senior leaders, and

between members of the Board itself, including the remits

ofand interaction among the respective Committees and

withthe Board.

Typical performance review

methodologies

Methodology

Last

undertaken

Questionnaire, tailored to specific needs

of the business

2018

Internally facilitated interviews, to be led by

the Chair, Senior Independent Director and/or

Company Secretary as appropriate

2019, 2021,

2022, 2024

In-depth evaluation, externally facilitated 2020, 2023

• Articulation and implementation of strategy.

• Succession planning and talent pipeline for Executive Directors

and other senior leaders.

• Understanding of risks facing the company, including likelihood

and mitigation.

• Understanding of stakeholder views, products and markets.

• The Board’s monitoring of organisational culture, behaviours

and employee sentiment.

The full Board reviewed the findings from the performance

review at its meeting in December 2024. In reporting back to

the Board, the Deputy Chair and Senior Independent Director

reported that conversations with Board members were positive,

with unanimous agreement that the Board operates effectively.

The Board will develop an action plan to address areas for

improvement, and the Nomination & Governance Committee will

monitor progress during the year.

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Key findings included

• Directors are highly engaged, with a good balance of relevant

and recent experience. The Board further acknowledged the

constructive nature of Board meetings.

• The Board acknowledged the quality of the relationship

between the Non-Executive Directors and the Executive

Directors, noting that Mr Abbosh had quickly established

strong relationships with the Non-Executive Directors.

Directors noted his clear and structured approach, which will

allow the Board to further focus on the pace of execution.

• The Board recognised the improvements that had been made

to the structure of Board meetings to create more space

for discussion and agreed that the cadence of Board and

Committee meetings was correct. The Board is appreciative

of the continued improvements to the quality and clarity of

meeting papers and materials, and would like to see this

continue.

• The Board welcomed the opportunity to engage with

employees and the improvements made to the engagement

events, in particular the ability to have deeper conversations

with employees.

• Directors provided positive feedback on the strategic review

process.

• Directors would like to harness the opportunity to work on the

talent pipeline for the Executive Management team.

• The Board welcomed the opportunity, following articulation

of the evolved strategy, to focus on developing multi-year

strategic KPIs and implementing the right incentive structures

to deliver the strategy.

• The Board recognised their effective role in navigating the

transition and repositioning of the company.

• Positive feedback was noted on the performance and

effectiveness of the Committees.

There was unanimous agreement that the Chair leads the

Board in an effective manner, fulfilling Principle F of the Code.

The Directors agreed that Mr Kordestani has a distinctive

and thoughtful style, demonstrates objective judgement,

promotes a culture of openness and debate, and facilitates

constructive Board relations and the effective contribution of

all Non-Executive Directors. The Directors further noted their

appreciation of Mr Kordestani’ s critical role in managing the

successful Chief Executive appointment process and the energy

given in the development of the relationship between Mr

Kordestani and the Chief Executive. This, in turn, supports the

Non-Executive Directors in fulfilling the requirements of Principle

H of the Code in providing constructive challenge and strategic

guidance, offering specialist advice and holding management to

account.

The main areas identified by the Board for particular focus during

2025 were:

• Continued focus on open and honest reflections and

candid conversations at Board level, to ensure that we are

consistently providing constructive challenge.

• Ongoing focus on applying customer, product and competitor

lenses to Board discussions, and ensuring that key themes of

technology and AI are consistently discussed.

• Continued development of M&A radar scanning for the

Board to ensure a clear, long-term view of inorganic growth

opportunities.

• Continued attention to succession planning and talent pipeline

at Executive Management level.

In addition to the annual performance review exercise, the Chair

meets regularly with the Non-Executive Directors and these

sessions include reciprocal feedback on the functioning of the

Board.

Individual performance review

In addition to the performance review of the Board as a whole,

Executive Directors are evaluated each year on their overall

performance against goals agreed by the Board, and in respect

of strategic measures under the company’s annual incentive

plan. These goals are linked to the key financial and strategic

objectives of the company. Progress against each of these

metrics is reviewed by the Board on a regular basis, as part of a

dashboard of KPIs.

The Chair engages with individual Non-Executive Directors on

their performance and contributions, and encourages open

channels of communication with Directors on an ongoing basis.

In the Board’s opinion, these ongoing lines of communication,

combined with a Group-wide culture which allows and

encourages feedback at any time, provide the most effective

means for review of performance. In assessing the contribution

of each Non-Executive Director, the Chair, with the support of

the Nomination & Governance Committee, has confirmed that

each continues to make a significant contribution to the business

and deliberations of the Board. The Non-Executive Directors

also conduct an annual review of the Chair’s performance, with

the Deputy Chair and Senior Independent Director leading this

review and providing feedback to the Chair.

Committee performance review

All Committees undertake a review of their performance and

effectiveness on an annual basis. For 2024, the Committee

performance review process comprised two elements:

• Feedback relating to Committees was sought from Directors as

part of the wider Board effectiveness review led by the Deputy

Chair and Senior Independent Director.

• Committee members and other key contributors to the

Committees were invited to provide their views by way

of questionnaires tailored to the specific remit of each

Committee.

The findings from this process were considered by each

Committee at its December 2024 meeting. The Committees were

considered by Directors to be working well. Read more in the

Committee reports on the pages that follow.

Board performance review continued

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Progress on findings of previous performance review

A number of actions were taken during the year in response to findings from the 2023 performance review, as set out below. The Board has confirmed that these items were addressed to its satisfaction, with

recommendations having been put into practice or a clear action plan identified for each to be taken forward in 2025.

Finding or focus area Response or action taken

Continue to evolve Pearson’s strategic direction, building on

the optionality that has been created through recent work

on the strategy andvision.

In addition to earlier updates on the formulation and running of the process, the Board discussed the key outcomes from the strategic review

process at a specially convened additional meeting in June 2024, ahead of the announcement to the market as part of the interim results

announcement in July 2024.

Ongoing development of the Board’s meeting and agenda

roadmap to ensure the topics are aligned with Pearson’s

strategic goals and given adequate discussion time.

The Company Secretary and Chief Executive’s office jointly developed a more in-depth roadmap and forward planner, aligned to the

implementation of the strategy, which was introduced in 2024 and will be a standing item for the Board’s information at each meeting moving

forward.

Continued development ofcustomer and marketplace

insights shared with theBoard.

The Board received:

• Updates on the Chief Executive’s meetings with customers during his initial months and their perspectives on Pearson.

• A session on the anatomy of a deal at the April 2024 Board meeting, where colleagues provided insight into Pearson’s large tender process,

contracts, clients and marketplaces.

• Insights into the customer and marketplace at the June 2024 Board meeting as part of the briefing on the strategic review process.

• Insights as part of the business unit strategic risk deep dives submitted to the Audit Committee (and made available to the Board) during

the year.

Ongoing focus on succession planning, talent review and the

culture of the company at executive level, as well as more

broadly.

The Board considered the talent succession pipeline at the December 2024 Board meeting.

Continued focus on the Board having the right mix of skills

and experience as the company continues to transform and

evolve, and ensuring strong stakeholder relationships are

maintained.

The Chair and Chief Executive discussed the future priorities for the Board’s skills and experience, to complement its evolving strategic

direction, together with a wider discussion with the Nomination & Governance Committee and the full Board. In particular, the Chief

Executive’s early thoughts on Board skills and experience priorities were presented to the Board at the February 2024 meeting, and these

informed the Non-Executive Director search process launched during the year.

Ensure there continue to be formal and informal channels

for feedback between the Chair and the Directors, especially

at a time of transition in senior Board roles.

The Chair has continued to engage with Board members in one-to-one discussions, in addition to wider Board discussions, to gather feedback,

both as part of formal Board meetings and informally. Feedback provided as part of this year’s performance review process led by the Deputy

Chair and Senior Independent Director, who took up that role in April 2024, indicated that these formal and informal channels for feedback

are present and working well.

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Principal Committee responsibilities

Appointments

Identifying and nominating candidates for Board vacancies.

Balance

Ensuring that the Board and its Committees have the

appropriate balance of skills, experience, independence and

knowledge tooperate effectively.

Succession

Reviewing the company’s leadership needs with a view to

ensuring the continued ability of the organisation to compete

inthe marketplace.

Governance

Reviewing and overseeing Pearson’s corporate governance

framework, Board performance review and training plans,

andthe Board DiversityPolicy.

Terms of reference

The Committee has written terms of reference which clearly set

out its authority and duties. These are reviewed annually and

canbe found on our website (www.pearsonplc.com).

Omid Kordestani

Committee Chair

Nomination & Governance Committee report

Committee members and attendance

Attendance by Directors at scheduled Nomination & Governance

Committee meetings throughout 2024:

Committee members

Meetings

attended

Sherry Coutu CBE 4/4

Omid Kordestani 4/4

Esther Lee

3/4

Graeme Pitkethly

3/3

Tim Score

1/1

Annette Thomas 4/4

1. Esther Lee was unable to attend the meeting held in February 2024 due

to a pre-existing commitment. She reviewed the papers and provided

her perspectives to the Committee Chair outside the meeting.

2. Graeme Pitkethly joined the Nomination & Governance Committee on

26 April 2024.

3. Tim Score stepped down from the Board and his role as Chair of the

Nomination & Governance Committee on 26 April 2024.

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Role and composition of the Committee

I am pleased to present my first report as Chair of the

Nomination & Governance Committee, having been appointed

to the position in April 2024 following Tim Score stepping down

from the Board. I offer my thanks to Tim for his substantial

contributions to the Committee’s work, most particularly in

ensuring we have a strong and effective Board in place to lead

ourcompany.

The Committee monitors the composition and balance of the

Board and of its Committees, identifying and recommending to

the Board the appointment of new Directors and/or Committee

members. The Committee has oversight of the company’s

compliance with, and approach to, all applicable regulation

and guidance related to corporate governance matters.

TheCommittee is also available to support the Board as needed

in relation to talent and succession plans for senior roles.

The Committee currently has five members, including me as

Chair. The Chief Executive, Chief Financial Officer and other

senior management, including the Chief Human Resources

Officer, attend Committee meetings by invitation.

As Committee Chair, I am available to engage with any

shareholders who would like to discuss the work of the

Committee and look forward to taking any shareholder questions

at our forthcoming AGM in May 2025.

Board succession planning, skills

andexpertise

A key element of the Committee’s remit is to lead the process

for Board appointments in line with appropriate succession

plans. The matter of Chief Executive succession is a regular

item for discussion and is reviewed by the Board on an annual

basis. Thecompany also has contingency plans in place for

the temporary absence of the Chief Executive for health or

other reasons. Succession planning for the Board as a whole

isconsidered at least annually by the full Board, and on an

ongoing basis by the Committee.

The Committee has defined a set of specific criteria for potential

new Non-Executive Directors, in particular giving consideration

to the skills, experience, knowledge and aptitude required in

any candidates. Pearson expects all Non-Executive Directors

to demonstrate the highest level of integrity and credibility,

independence of judgement, maturity, collegiality and also a

commitment to devote the necessary time to the company’s

business.

As part of the Committee’s regular succession planning activity,

all Board members are asked periodically to complete a

self-assessment of the skills and experience which they believe

they each bring to the Board. The assessment focuses on

those categories of skills and experience which are relevant to

Pearson’s strategy, business model and particular organisational

characteristics. When mapped against expected retirement

dates, the assessment helps the Committee to identify the areas

where it may need to focus any future search activity.

The results of the most recent assessment (shown on page 94)

demonstrate that Pearson has a strong spread of skills across

all areas identified as being of particular importance. Looking

ahead to anticipated Board retirements, the Committee agreed

to commence a Non-Executive Director search process in the

latter part of 2024. In preparing for this search, the Committee

agreed that it was particularly interested to identify one or more

candidates who would collectively bring a combination of skills

and expertise in the following areas:

• A senior executive with operating experience at scale and in

a company or sector with insight into what such enterprise

customers would look for or how they would benefit from

Pearson’s products and solutions.

• An active or recently retired executive leader of a publicly

traded company and a track record of success leading a

company at scale and with a global footprint commensurate

toPearson.

• Proven experience developing innovative products and/

or driving digital business transformation through the

development of game-changing, customer-centric strategies.

• A strong understanding of the latest advancements in AI,

machine learning and relevant emerging technologies to

ensure the organisation remains at the forefront of innovation.

Taking into account the agreed specification, the Committee

engaged Spencer Stuart to undertake a search process for new

Non-Executive Directors, who ensured that the search process

had due regard to our regulatory obligations and Provision 23 of

the UK Corporate Governance Code.

On 7 March 2025, we were pleased to announce the

appointment of Arden Hoffman as an independent Non-

Executive Director, with effect from 1 June 2025. Arden is the

Chief People Officer at General Motors (GM). She is responsible

for leading GM’s talent management and organisational

development, as well as helping to shape workforce strategy,

fostering a culture of innovation, and ensuring that the company

attracts, retains, and develops top talent in a rapidly evolving

sector. Arden’s expertise will prove invaluable as Pearson

continues to execute against its strategy and will further enhance

the skill set of our Board. Arden will seek election at the 2026

AGM, being the first AGM following her appointment.

In addition to the Non-Executive Director search process,

Spencer Stuart also undertakes broader executive search

activity for the Group and is a signatory to the Voluntary Code

of Conduct for Executive Search Firms. Spencer Stuart has no

connection with Pearson or members of the Board beyond its

expertise in board and executive search.

Executive succession planning

Succession planning for key positions at Executive Management

level is primarily overseen by the full Board, with support

provided by the Committee in respect of particular initiatives.

The Executive Management team has a key role to play in our

strategic planning process, in the ongoing development of our

talent pipeline and in fostering the culture and values required to

continue to deliver on our strategy. In December 2024 the Board

conducted a review of talent and succession planning.

Preparation for the revised UK Corporate

Governance Code

The Committee oversees the company’s compliance with the

UK Corporate Governance Code and reviews a status tracker to

enable it to consider the appropriateness and maturity of various

elements of our governance framework and to monitor any areas

of qualified or non-compliance. Learn more about Pearson’s

compliance with the 2018 Code on page 69.

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The revised UK Corporate Governance Code 2024 applies to

Pearson from the 2025 financial year, with the exception of

Provision 29 which will apply from the 2026 financial year. To

ensure appropriate preparations were made in advance of

the effective date, the Nomination & Governance Committee

received briefings from the Company Secretary on the key

themes and main areas of change and how the company was

addressing the changes. The most significant changes, set out

in Section 4 of the Code, relate to audit, risk and internal control

matters and therefore the response to these elements is being

overseen by the Audit Committee – more information on this can

be found on page 106.

We will report in accordance with the 2024 UK Corporate

Governance Code in the 2025 annual report.

Other areas of focus during 2024

Other areas of focus for the Committee during the year included:

oversight of the composition of the Board’s Committees,

assessment of the independence of Lincoln Wallen prior to

making a recommendation for his re-election at the 2024 AGM

(recognising his length of service on the Board), oversight of

the approach to the Board’s annual effectiveness review, Board

diversity reporting, and the annual review of the contribution of

each Director to the Board.

Committee performance review

The Committee undertakes an annual process to review its

performance and effectiveness. For 2024, feedback relating to

the Committee was sought from Directors as part of the wider

Board performance review led by the Deputy Chair and Senior

Independent Director. Topics covered included the effectiveness

and dynamics of the Committee, oversight of key areas within

the Committee’s remit, the quality of papers and meeting

discussions, and the relationships between the Committee and

management.

Skills matrix

This matrix represents the

Directors with skills or experience

in areas that are relevant to

Pearson’s strategy, business

model and organisational

characteristics. Directors have

assessed themselves against

each theme and, for those which

they bring to the Board, have

identified whether they believe

each to be one of their core or

supplemental capabilities.

The findings of the 2024 review indicated that the Committee is

considered to be working well with appropriate agendas, papers

produced to a good standard and high-quality discussions.

You can read more about the Board performance review on

page 89.

Committee aims for 2025

The Committee’s priorities for the coming year will be to oversee

the successful onboarding and induction of our new fellow

Board member and, together with our colleagues on the Audit

Committee, oversee the company’s response to and compliance

with the revised UK Corporate Governance Code.

Omid Kordestani

Chair of Nomination &GovernanceCommittee

Omar

Abbosh

Sherry

Coutu CBE

Alison

Dolan

Alex

Hardiman

Sally

Johnson

Omid

Kordestani

Esther

Lee

Graeme

Pitkethly

Annette

Thomas

Lincoln

Wallen

Operating context and future trends

Technology (cloud, infrastructure, product, engineering, AI, cyber security)

Enterprise skilling and workforce transformation

Education and learning

Government and Policy

Challenging and supporting management in shaping strategy

Branding and marketing

Global markets, scale and complexity

Corporate strategy (value creation, M&A, capital markets, sustainability)

Current and/or prior CEO experience

Good company governance

Accounting, finance and controls

People and remuneration

Listed company governance and regulation

Core skill – one of the strongest areas of the Director’s skill and expertise. Their knowledge or experience of this area brings considerable value to Board discussions.

Supplemental skill – an area where the Director is competent or has experience, but is not one of the primary skills or attributes they bring to the Board.

Nomination & Governance Committee report continued

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A representative Board

The Board embraces the UK Corporate Governance Code’s

underlying principles with regard to Board balance and its

principle of promoting diversity, inclusion and equal opportunity.

Research indicates that high-performing boards provide an

increased competitive advantage and wider perspectives, while

the needs for greater inclusion continue to influence global

trends.

We are determined that, as a Board, we must be representative

of our employee base and wider society, including the countries

in which we operate.

The Nomination & Governance Committee ensures that

the Directors of Pearson demonstrate a broad balance of

skills, background and experience, to support our strategic

development and reflect the global nature of our business. In

accordance with Principle J of the UK Corporate Governance

Code, our Board search processes always consider a wide

range of candidates, with varied skills, thought, experience and

background, all of whom are evaluated on the basis of merit. In

any Non-Executive Director search processes, the Nomination &

Governance Committee encourages the retained search firms to

place an emphasis on putting forward candidates from a range

of backgrounds and we prioritise the use of search firms which

adhere to the Voluntary Code of Conduct for Executive Search

Firms.

The Nomination & Governance Committee reviews and monitors

the company’s progress against the objectives which underpin

the Board Diversity Policy.

The objectives that support the Board Diversity Policy, and

which underpin Pearson’s commitment to creating a more

equitable and inclusive company, are in line with and reflect the

requirements under the Financial Conduct Authority’s UK Listing

Rules and include:

• at least 40% female directors

• at least two directors from an ethnic minority background

• at least one of the Chair, Chief Executive, Deputy Chair and

Senior Independent Director or Chief Financial Officer is a

woman

The Committee is pleased to confirm that all three of these

targets have been met. In accordance with UK Listing Rule

6.6.6R(9), as at 31 December 2024, 60% of Directors were

women (2023: 55%), the Board included four Directors from an

ethnic minority background and the Chief Financial Officer role

was, and is currently, held by a woman.

The Nomination & Governance Committee adopts a principles-

based approach to diversity on the Board’s Committees. It is

recognised that it is not necessarily practical to set meaningful

metrics or targets for diverse membership of Committees due

to the notably smaller membership of each of the Committees

compared to the size of the Board. Accordingly, our principles-

based approach endorses the importance of bringing varied

perspectives to all areas of the Board and Committees’ work.

As an example of this principles-based approach in practice, as

part of its regular Committee succession planning activity, the

Nomination & Governance Committee considers the gender

and ethnic balance on each Committee when assessing its

composition and future needs.

The Board will continue to adopt best practice, as appropriate, in

response to the Financial Conduct Authority requirements, FRC

Board Director Effectiveness Review, Parker Review and FTSE

Women Leaders Review.

During its performance review conducted in 2024, the Board

considered the effectiveness of the organisation and dynamics of

the Board. The results and feedback of the performance review

indicated that the Directors believe the Board’s effectiveness is

strong.

Talent at executive level

As at 31 December 2024, five members of our Executive

Management team of 11, excluding the Chief Executive and

Chief Financial Officer who are counted in the Board’s metric,

were women (45%) (2023: 50%). Including the Chief Executive

and Chief Financial Officer, this ratio was 46% (six women out of

13 members) (2023: 50%). As of 31 December 2024, the group

comprising the senior management team (as specified by the

UK Corporate Governance Code, i.e. the Executive Management

team and the Company Secretary) and the Executive

Management team’s direct reports contained 52 women,

representing 52% of that group (2023: 47%). These figures are

reported as at 31 December 2024, in accordance with s414C of

the Companies Act 2006. For figures as at the date of this report,

please see page 74.

In response to the Parker Review’s requirement for listed

companies to set an ethnic diversity target in respect of senior

management positions, the Committee approved a target of

20% of Pearson’s senior management positions to be occupied

by ethnic minority individuals by December 2027. As at

31 December 2024, the senior management team, as defined

above and based in the UK, contained nine individuals who

identify as minority ethnic, representing 24% of that group, who

have provided the company with ethnicity data.

Fordiversitydata in the format prescribed by UKLR 6.6.6R(10),

please see page 54.

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Principal Committee responsibilities

Stakeholders

Monitoring reputational issues that could significantly affect

Pearson’s reputation with stakeholders, including shareholders,

customers, employees, educational institutions and educators,

employers, governments and regulators, communities and

business partners. Overseeing Pearson’s approach to thought

leadership in respect of important issues, and attention to

political and cultural perspectives in the landscape in which

Pearson operates.

Sustainability

Overseeing Pearson’s sustainability framework including: targets

and public commitments; regulatory landscape, reporting and

ratings; sustainability due diligence in our supply chains and

business partnerships; and assisting the Board in monitoring

progress towards climate targets and the three pillars of the

sustainability framework.

Responsible AI

Overseeing Pearson’s application of AI with a focus on: the

identification of AI-related risks (e.g. biases, IP protection);

managing transparency and accountability in AI systems; creation

and implementation of Responsible AI principles and promotion

of AI ethics across the organisation; monitoring of AI practices;

and Pearson’s response to external regulatory requirements.

Communications and regulatory matters

Overseeing Pearson’s communications, strategies, policies and

plans related to reputational issues and the people, processes

and policies that are in place to manage them.

Branding

Overseeing the way in which the company’s brands are managed

and promoted to ensure that their value and the company’s

reputation are maintained and enhanced.

Risk

Monitoring Pearson’s approach to the reputation aspects of the

risk register and ensuring that clear roles have been assigned for

the management of these, including in relation to the company’s

material sustainability risks and opportunities.

Terms of reference

The Committee has written terms of reference that clearly

set out its authority and duties. These are reviewed annually

and can be found in the Governance section of our website

(www.pearsonplc.com).

Committee members and attendance

Attendance by Directors at scheduled Reputation &

Responsibility Committee meetings throughout 2024:

Committee members

Meetings

attended

Andy Bird

0/0

Alex Hardiman 3/3

Graeme Pitkethly 3/3

Annette Thomas 3/3

Lincoln Wallen 3/3

1. Mr Bird stepped down from the Committee with effect from

7 January 2024.

Annette Thomas

Committee Chair

Reputation & Responsibility Committee report

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Reputation & Responsibility

Committee role

The Committee works to assess and advance Pearson’s

reputation across the range of its stakeholders and to maximise

the company’s positive impact on the communities in which we

work and serve.

We are the main governance body for responsible and ethical

business practices at Pearson and we assess progress towards

the company’s sustainability priorities and commitments. As part

of this work, we provide ongoing oversight and scrutiny across all

reputational matters, including climate change considerations,

branding, government relations and safeguarding. Additionally,

in late 2024, we refreshed our remit to increase and codify our

focus on thought leadership and Responsible AI, reflective of

Pearson’s commitment to these areas. We also conducted a

thorough review of our own terms of reference. The Committee’s

principal responsibilities, as revised, are summarised on page

96 and you can read more about our overall Board framework

for sustainability governance, including the related work of other

Committees, on page 83.

The full Board is kept abreast of the Committee’s work through

reports I make following each of our sessions. These reports

include highlighting any material discussion points or areas of

concern and offering specific recommendations for the Board’s

action.

As Committee Chair, I am available at any time to engage

with any shareholders who would like to discuss the work of

the Committee, and particularly look forward to taking any

shareholder questions at our forthcoming AGM in May 2025.

Committee composition and attendees

The Committee currently has four members, including me as

Chair. Together, Committee members bring a range of expertise

across key areas of our remit, including sustainability, product,

stakeholder management, AI, and policy and government

relations. You can read more about the Committee members’

skills and experience on pages 70-72.

Pearson’s Chief Executive, Omar Abbosh, is a standing attendee

at every meeting of the Committee, and we welcomed his and

management’s support in refreshing our remit in late 2024.

In addition, we benefit from the regular attendance of other

senior executives whose work is central to the remit of the

Committee. These include the General Counsel, who is the

executive leader responsible for the development, monitoring

and execution of Pearson’s sustainability strategy; the Chief

Marketing Officer; the Chief Human Resources Officer; the Chief

Strategy Officer; and SVP – Global Corporate Communications.

Sustainability activities in 2024

Throughout the year, the Committee paid particular attention to

the continued evolution of our sustainability strategy, including

how it aligns to our greatest areas of opportunity and challenge

as a business, and how to communicate its tenets to all our

stakeholders in a clear and impactful way.

As described in greater detail in our Sustainability report starting

on page 33, our Learning for Impact framework comprises three

pillars that drive value for our stakeholders and represent the

areas where we can make the biggest positive impact:

• Driving learning for everyone with our products

• Empowering our people to make a difference

• Leading responsibly for a better planet

These areas are materially influential on Pearson’s long-term

success as a business. The sustainability strategy is supported

by Pearson’s robust corporate governance, strong corporate

culture and a range of effective policies to ensure we achieve our

ambitions. You can read more about how the pillars are reflected

in our 2024 non-financial KPIs on page 24.

The Committee receives regular updates from management

on progress against the priorities of the sustainability strategy

and initiatives that support its delivery. Over the past year, key

activities of the Committee in relation to our three Learning for

Impact pillars included the following:

• At each meeting, we received a report on recent incidents

and issues that could have an impact on Pearson’s reputation,

including those relating to our products and business partners.

We considered the company’s responses to coverage on social

media and in traditional media, including paying particular

attention to our protocols for responding to questions about

our content, the integrity with which we handle such situations

and any lessons learned.

• We continue to monitor long-term climate targets, progress

against short-term decarbonisation activities, and an

increased focus on energy efficiency and renewable electricity

consumption.

• We discussed with management their focus on successful

delivery of the 2024 UK summer exams and results season,

considering operational activity, proactive stakeholder

engagement, and incident mitigation and response plans.

• We conducted our annual review of health and safety

(H&S) at Pearson, reviewing a report on the key principles

underpinning our H&S programme, the model through which

our H&S practices are delivered and assured, incident data,

future legislative developments, and priorities for the H&S

programme in 2025.

• We undertook our annual safeguarding review, which

had a particular focus on online trust and safety in our

digital products and services in light of rapid change in the

technology and legislative landscape affecting these areas.

• We noted the progress being made to increase employee

participation in Learning for Impact activities. We are

encouraged by the significant increase in colleague

participation during the year and are supportive of

management’s focus on further strengthening involvement in

citizenship activities. Read more on page 38.

Sustainability governance and policies

The Committee recognised that robust governance, a strong

culture and effective policies are essential to the successful

delivery of our sustainability framework.

During the year, we focused on preparing for mandatory

reporting requirements which take effect for the 2025 financial

year and on which we will first report in 2026. We continue to

work with our Audit Committee colleagues on this topic, and our

activity in this area included:

• Completing a comprehensive assessment of Pearson’s

applicability for upcoming reporting regulations across the

UK, EU and US. We discussed Group-level reporting to

maximise efficiency.

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• Reviewing the company’s double materiality assessment

as required by the EU’s Corporate Sustainability Reporting

Directive and IFRS Sustainability Disclosure Standards. We

provided input and challenge on the methodology and

approach to stakeholder mapping and noted the potential

material impacts, risks and opportunities identified through

the assessment.

• Reviewing the proposed sustainability operating model and

budget for 2025, including those areas where additional

specialist resource would be needed to fulfil assurance and

reporting obligations, and we provided our perspectives on

the proposals.

You can read more about this topic in the Sustainability report

starting on page 33.

In addition to our oversight of regulatory change and

preparedness, we:

• Considered the actions being taken in relation to climate

reporting, including the development of our Climate Action

Plan, and the focus on decarbonisation planning in the short,

medium and long term.

• Reviewed a snapshot of the latest analyst rankings and ratings

of Pearson’s sustainability performance and credentials,

alongside opportunity areas for further improvement. Read

more on page 34.

• Reviewed the annual Modern Slavery Statement with

management prior to recommending that the Board approve

the statement for publication. (https://plc.pearson.com/en-GB/

corporatepolicies).

Other key areas of focus during 2024

In addition to the work relating to the three pillars of our

Learning for Impact framework, we spent time considering a

broader range of matters relating to Pearson’s reputation and

key stakeholders, including the following:

• With the UK general election and US presidential election

taking place during 2024, we discussed the key areas of focus

for the incoming UK and US governments relating to learning,

education and skills, considered their broader policy priorities,

and received an update on engagement with the key political

parties led by Pearson’s government relations team.

• We considered the evolving regulatory landscape on AI, noting

in particular the comprehensive EU AI Act which passed

into law during 2024 and which will apply to certain Pearson

products.

• We conducted a horizon-scanning exercise to identify key

reputational risks and trends facing Pearson, including

business and operational issues and a range of socio-political

themes, and considered the way in which Pearson positions

itself proactively with customers, partners, policymakers and

the media. This exercise, which we conduct periodically, helps

to ensure that the Committee and our Board are alert to

external factors that may impact our business and how we are

mitigating potential risks.

• Following the appointment in July 2024 of Pearson’s new Chief

Marketing Officer, Ginny Cartwright Ziegler, we spent time

understanding Ginny’s perspectives on Pearson’s marketing,

brand and communications model, and we considered her

proposals to refresh this model to unlock growth for Pearson.

We also endorsed a new issue management framework which

guides the company’s communication flows in the event of

an internal or external incident with the potential to impact

Pearson’s stakeholders or reputation.

You can read more about stakeholder engagement at Pearson

starting on page 18.

Committee evaluation

The Committee undertakes an annual evaluation to review

its performance and effectiveness. For our evaluation in

2024, Committee members and other key contributors to the

Committee were invited to provide their views by way of a

tailored questionnaire. As Committee Chair, I then reviewed the

anonymised findings of the questionnaire and conducted one-

to-one conversations with members and contributors to discuss

their perspectives in greater detail.

Topics covered in the evaluation process included the

effectiveness and dynamics of the Committee, oversight of

key areas within the Committee’s remit, the quality of papers

and meeting discussions, and the relationships between the

Committee and management.

The Committee considered the findings from this process at its

December 2024 meeting and concluded that:

• The Committee is functioning well with appropriate agendas,

papers produced to a good standard, and high-quality

discussions.

• There is an appropriate level of focus on the key topics

within the Committee’s remit, however it is important for the

Committee to remain focused on ’move the dial’ topics in our

work.

• Some refreshing of the Committee’s remit was warranted to

specify explicitly that Responsible AI is part of the Committee’s

remit, as well as increased focus on thought leadership,

including the roles of government relations and marketing in

this area. This feedback aligned with the revisions to the terms

of reference review undertaken in late 2024.

• It would remain important to ensure continued alignment

between the work of this Committee and that of the Audit

Committee on the themes of non-financial disclosure,

reporting and assurance.

Committee aims for 2025

Our priorities for the coming year include:

• Continued attention to the impact of AI, including Pearson’s

policy position on responsible use and application of AI to add

value to our customers, enhancing trust in Pearson.

• Overseeing the company’s enhanced approach to thought

leadership, through which Pearson builds deeper connections

with stakeholders.

• We will stay attuned to government policies relating to

education and other public policy matters affecting Pearson

and ensure that the company remains well placed to support a

breadth of learners and customers.

• Continuing our close attention to sustainability matters,

including an updated climate risk analysis.

Annette Thomas

Chair of Reputation &Responsibility Committee

Reputation & Responsibility Committee report continued

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Strategic report Governance report Financial statements Other information

Principal Committee responsibilities

Financial reporting

The quality and integrity of Pearson’s financial reporting and

statements and related disclosures, including significant

reporting judgements.

Policy

Group financial policies, including accounting and treasury

policies and practices.

External audit

External audit, including the appointment, qualification,

independence and effectiveness of the external auditors.

Internal audit, risk and internal control

Risk management systems and the internal control environment,

including oversight of the work and effectiveness of the internal

audit function.

Compliance and governance

Legal and regulatory requirements in relation to financial

reporting and accounting matters, and oversight of compliance

programmes and investigations.

Terms of reference

The Committee has written terms of reference which clearly

set out its authority and duties. These are reviewed annually

and can be found in the Governance section of our website

(www.pearsonplc.com).

Committee members and attendance

Attendance by Directors at scheduled Audit Committee meetings

throughout 2024:

Committee members

Meetings

attended

Alison Dolan

3/4

Alex Hardiman 4/4

Graeme Pitkethly 4/4

Tim Score

2/2

Lincoln Wallen 4/4

1. Ms Dolan was unable to attend the February 2024 meeting due to a pre-

existing commitment that had been notified to Pearson at the time of her

appointment. Ms Dolan discussed her views on the papers and the business

of the meeting with the Committee Chair in advance of the meeting.

2. Mr Score stepped down from the Committee with effect from 26 April 2024.

Graeme Pitkethly

Committee Chair

Audit Committee report

Members

As at the date of this report, the Committee comprises four independent Non-Executive Directors, all of whom have financial

and/or related business experience due to the senior positions they hold or have held in other listed or publicly traded

companies and/or large organisations. The Committee possesses a good balance of skills and knowledge with competence

and experience covering all aspects of the sectors in which Pearson operates and the company’s key markets. Each member

is ‘financially literate’ for the purposes of the NYSE listing standards.

Graeme Pitkethly, Chair of the Committee since August 2022, is the Committee’s designated financial expert within the meaning

of the applicable rules and regulations of the SEC, having recent and relevant financial experience as required by the Code, and

is a Chartered Accountant. From 2015 to 2024, Graeme was Chief Financial Officer of Unilever plc and since April 2024 has been

a Non-Executive Director of Sandoz Group AG and Chair of its Audit, Risk and Compliance Committee. Graeme’s full biography is

shown on page 72.

The qualifications and relevant experience of the other Committee members are detailed on pages70-72. You can read more on

page 73 about the process through which the Board assesses the independence of Non-Executive Directors.

Annual report and accounts 2024 Pearson plc 99

Strategic report Governance report Financial statements Other information

Audit Committee role and composition

The Committee has been established by the Board primarily for

the purpose of overseeing the accounting, financial reporting,

internal control and risk management processes of the company

and the external audit of the Group’s financial statements. As a

Committee, we are responsible for assisting the Board’s oversight

of the quality and integrity of the company’s external financial

reporting and statements, and the company’s accounting policies

and practices, and we work to create a culture – both within the

Committee’s work and Pearson more broadly – which recognises

the work of, and encourages challenge by, the external auditors.

Pearson’s Vice President – Internal Audit & Controls Compliance

has a dual reporting line to the Chief Financial Officer and to me,

and both she and the external auditors have direct access to the

Committee to raise any matters of concern and to report on the

results of work directed by the Committee. As Audit Committee

Chair, I ensure that the full Board is kept abreast of the business

of the Committee in a timely manner, including highlighting any

areas of concern or specific recommendations. I also work closely

with the Chief Financial Officer and senior financial, risk, legal and

internal audit personnel outside the formal meeting schedule

to ensure robust oversight and challenge in relation to financial

control, compliance, investigations and risk management.

As Committee Chair, I am available to engage with any

shareholders who would like to discuss the work of the

Committee, including the scope or effectiveness of the external

audit. There were no requests from shareholders during the year

for any specific matters to be covered in the audit. I look forward

to taking any shareholder questions at our forthcoming AGM in

May 2025.

Audit Committee meetings and activities

At every meeting, the Committee considers reports on the

activities of the internal audit and compliance functions, including

the results of internal audits, project assurance reviews and fraud

and whistleblowing reports. We also monitor the company’s

financial reporting and risk management procedures, discuss

the Group’s control environment, review the work undertaken

by the external auditors and consider any significant legal claims

and regulatory issues in the context of their impact on financial

reporting, each on a regular basis.

Other prominent themes in the Committee’s work throughout

2024 included:

• Oversight of progress with the audit action plan, a programme

of work that sought to enact recommendations that arose

through our 2022 review of effectiveness of the external

auditors, with this second phase building on strong progress

made during 2023 (read more on page 108).

• Responding to the requirements of the FRC minimum

standard for audit committees, published in 2023, we reviewed

our methodology for the oversight and assessment of external

auditor effectiveness (read more on page 107).

• Following publication of the revised UK Corporate Governance

Code (the Code) in January 2024, we considered the impacts

relevant to the Committee’s work, particularly those relating

to Pearson’s risk management and internal control framework

(read more on page 106).

• Continued attention to the application of Pearson’s accounting

policies, key judgements and key areas of estimation as

described in the financial statements.

• Oversight of the accounting treatment relating to the EU State

Aid matter and the reversal of certain historical impairments

against investments in subsidiaries recorded in the parent

company accounts.

• Oversight of management’s approach towards risk

identification and monitoring, including through a series of

business-focused risk deep dives and periodic reviews of

group-wide risk trends and mitigation (read more on pages

101-102).

• Review of important areas such as data privacy, cybersecurity

and business and technology resilience, as well as generative

AI. In addition to their importance at a macro level, these are

key factors in the success of Pearson’s strategy and in ensuring

we maintain trusted relationships with stakeholders.

The Committee also receives technical updates at each meeting,

including on matters such as accounting standards and the audit

and governance landscape, and members are able to request

specific or personal training as appropriate.

You can view the key activities of the Committee and read more

about our work in these areas on the pages that follow.

The Committee’s focus areas for 2025 will include:

• Continuing to oversee work to ensure the company is ready

for implementation of the new Code requirements relating

to risk management and internal control with effect from the

2026 financial year.

• In the first year of applicability of the EU Corporate

Sustainability Reporting Directive (CSRD) to certain

entities within the Group, we will work closely with our

colleagues on the Reputation & Responsibility Committee

to oversee assurance and reporting arrangements, as well

as remaining abreast of other global developments in non-

financial reporting.

Additional meeting attendees

The Chief Executive, Chief Financial Officer, Deputy Chief Financial

Officer, General Counsel, Chief Information Officer, other

executives and senior managers from across the business also

attended meetings during the year, either as regular invitees of

the Committee or to discuss particular items of business.

This direct contact with key leadership augments the

Committee’s understanding of the issues facing the business

as well as helping to develop Pearson’s talent pipeline through

facilitation of Board-level engagement opportunities for those

leaders and managers below executive level. We also meet

regularly in private with the external auditors and with the Vice

President – Internal Audit & Controls Compliance.

In addition to the Committee’s formal meeting schedule, I meet

regularly with the external auditors, Chief Financial Officer,

Deputy Chief Financial Officer, General Counsel, Vice President –

Internal Audit & Controls Compliance, Associate General Counsel

– Employment, Ethics & Compliance and Director of Risk and

Insurance in order to keep abreast of all relevant matters within

the Committee’s remit.

Audit Committee report continued

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Committee evaluation

The Committee undertakes an annual evaluation process

to review its performance and effectiveness. For 2024, the

Committee evaluation process was conducted by way of

a tailored questionnaire. The process sought views on an

anonymous basis from Committee members, Chief Executive

and Chair of the Board together with other key contributors

to the Committee, including the lead external audit partner,

the Chief Financial Officer, Deputy Chief Financial Officer,

the General Counsel, the Vice President – Internal Audit &

Controls Compliance, and senior financial, risk and compliance

management.

Topics covered in the evaluation included the effectiveness

and dynamics of the Committee, the Committee’s oversight of

key areas within its remit, the quality of papers and meeting

discussions, and the relationships between the Committee and

management. Reflecting the requirements of the FRC’s Minimum

Standard, the evaluation sought more extensive views on the

Committee’s role in overseeing the external auditors, including

the Committee’s role in assessing the quality and effectiveness

of the external audit and creating a culture which encourages

challenge.

The Committee considered the findings from the evaluation at its

December 2024 meeting, including the following key points:

• The Committee is considered by Directors and other

contributors to be performing effectively with appropriate

agendas, papers produced to a good standard, and open,

candid discussions at the meetings.

• The composition of the Committee is appropriate and includes

the necessary skills.

• A high quality of debate and challenge is demonstrated by

the Committee, including in respect of complex accounting

matters or judgements, and the Committee is effective at

reviewing the quality and integrity of the Group’s financial

reporting and at holding management to account in this area.

• The Committee provides effective oversight of the quality and

effectiveness of the external audit process and of the external

auditors themselves, and creates a culture which recognises

the work of and encourages challenge by the external auditors.

You can read more about the review of audit quality and

effectiveness and the FRC Minimum Standard on pages 107-108.

Looking ahead to 2025, it will be important for the Committee to

continue to work with the Reputation & Responsibility Committee

to ensure adequate oversight of non-financial reporting and

assurance requirements and to continue to scrutinise follow-up

activity arising from the findings of the internal audit team.

Fair, balanced and

understandable reporting

In response to the Code’s Principle N, the Committee

considered whether the 2024 annual report is fair, balanced and

understandable. In making this assessment, we considered the

following areas:

• The process for preparing the report, including the

contributors, the internal review process and how feedback is

addressed throughout the process.

• The business review narratives presented for each

business area.

• The discussion of reported and underlying results throughout

the report.

The Committee was satisfied that, taken as a whole, the annual

report is fair, balanced and understandable. We reported this

conclusion to the Board.

Learn more about fair, balanced and understandable reporting

on page140.

Financial reporting and policies

In February 2025, the Committee considered the 2024

preliminary results announcement and annual report and

accounts, including the financial statements, Strategic report

and Directors’ report. The significant issues considered by the

Committee relating to the 2024 financial statements are set out

on pages 110-112.

Risk assessment, assurance and integrity

A key role of the Committee is to provide oversight and support

to the Board with regard to the integrity of the company’s

procedures for the identification, assessment, management and

reporting of risk. In fulfilling its remit, the Committee remains

mindful that effective risk management is essential to executing

Pearson’s strategy, achieving sustainable shareholder value,

protecting the brand and ensuring good governance.

During 2024, the Committee had oversight of management’s

approach towards risk identification and monitoring. Pearson’s

enterprise risk management programme aligns with the structure

of the business, which is managed through five global business

units supported by Group-wide corporate functions. Through

a series of business-focused risk deep dives, the President of

each business unit provides an overview of its risk register to

the Committee at least annually and leads a session on the key

risks facing their particular business. The process is supported by

central risk team experts as required, providing the Committee

with a clear and consistent framework within which to evaluate

the strategic and business risks to the company, based upon

the principal, emerging and significant near-term risk categories

described on pages 58-66.

The Committee uses these deep-dive sessions to understand

the rigour of management’s risk scanning and to challenge

judgements being made in response to risks. The Committee

considers that Pearson’s enterprise risk management approach

is robust and proportionate and facilitates a culture of

accountability and ownership among business leaders. The

business unit risk deep dives provide a strategic and increasingly

data-driven lens to the risk management process that is valued

by the Committee and management alike.

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Feedback from Committee members on these deep dives, which

were first introduced in 2022, has been consistently strong, with

the additional insights provided by these sessions being well

received by the Committee. Accordingly, with effect from the

December 2024 meeting, the business unit risk deep dives have

been elevated to the full Board. This change allows all Directors

to participate in the valuable discussions and will increase

alignment with the Board’s wider remit on strategic planning at

both Group and business unit levels.

At least twice a year, the Committee considers a Group-wide

risk management report which highlights risk trends and

themes that exist at an enterprise-wide level. This is further

supported by a number of deep dives which the Committee

conducts with selected Group functions including data privacy,

cybersecurity, tax, treasury, anti-bribery and corruption, and

business resilience. You can read more on some of these themes

elsewhere in this report.

Additionally, following its introduction in 2023, the Committee

reviewed the enterprise risk framework and approved its

continued use. This framework brings together Pearson’s

principles, processes and methodology for risk management and

aims to consistently embed such activity and practice within the

organisation.

Data privacy, cybersecurity and

technology resilience

Prudent management of data privacy, cybersecurity and

Pearson’s technology estate are fundamental to our success

and to maintaining trust with our customers. The Committee

oversees these matters on behalf of the Board from a risk and

assurance perspective and monitors the maturity of Pearson’s

associated governance frameworks. It does this through regular

deep dives, as well as through oversight of the risk-based internal

audit programme, in which these topics are key areas of focus.

We recognise the interlinked nature of these topics and typically

invite the senior leaders for each area to participate in all strands

of these discussions, providing holistic perspectives on the

important and complex themes.

During the year, the Committee:

• Received an update on the work of the Trust & Safety

Committee which operates at senior leadership level and

serves as a forum for data privacy, security and business

leaders to understand risk profiles, assess business impacts

and ensure accountability. As the legal landscape continues

to evolve and threats and opportunities emerge in connection

with generative AI, we continue to adapt our governance

processes to ensure that we are protecting our customers

and our business, and the Trust & Safety Committee has an

increased role to play in ensuring the business has the right

level of focus on data and AI matters.

• Considered the progress that continues to be made through

implementing security processes, leveraging industry-leading

tools and the ongoing modernisation of the technology

estate, as well as investing in defences against increasingly

sophisticated threats. We also noted how management is

continuing to reinforce a culture of security across Pearson’s

employees, partners and seasonal workers through mandatory

cybersecurity and data privacy training and the use of phishing

simulations to drive awareness and understanding of security

protocols.

• Reviewed Pearson’s performance against the NIST

Cybersecurity Framework, which provides the Committee

and management with clear visibility into the current

status of Pearson’s cybersecurity programme and areas of

improvement. The framework is underpinned by industry-

leading standards and facilitates Pearson’s compliance with

FedRAMP requirements in delivering certain US federal

commitments. In 2024, Pearson’s data privacy programme

was also aligned with the NIST Privacy Framework which is

increasingly recognised in Pearson’s largest markets.

• Noted the increase in stabilisation across our digital and

technology platforms driven by our transition to cloud-

based infrastructure, technical debt reduction and increased

standardisation and unification of processes. These

improvements have been underpinned by foundational

resiliency created through greater adoption of core shared

technology services (known as ‘paved road services’), and

overall have contributed to increased reliability in critical

customer-facing or front-line products.

• Reviewed Pearson’s integrated approach to incident

management – the incident management framework – which

is utilised in response to technology, data or cyber-related

incidents as well as operational issues in the business or wider

challenges to which Pearson needs to respond.

• As part of the agreed audit plan, considered the findings of

internal audits of various elements of our data, cyber and

technology practices including: IT system discovery and

vulnerability tracking; the design of data privacy controls in

certain internal and external-facing applications; governance

of Pearson’s web estate; and our approach to technology asset

management. We track the closure rate for agreed actions

arising through these audits, as we do with all internal audit

findings.

You can read more about Pearson’s approach to data privacy

and cybersecurity on page 37.

Audit Committee report continued

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Audit Committee meeting focus during 2024

Area of Committee remit

Financial and non-financial

reporting

Policy and

finance

operations External audit

Internal audit, risk and

internal control

Compliance

and governance

Matters

considered

— Significant issues reporting (p110)

— Fair, balanced and understandable

reporting (p101)

— Going concern and viability

statements including supporting

analysis (p67 and p137)

— Impact of legal claims and

regulatory issues on financial

reporting

— Annual report and accounts:

preliminary announcement and

financial statements

— Review of interim results

— Form 20-F and related disclosures,

including annual Sarbanes-Oxley

Act Section 404 attestation of

financial reporting internal controls

— Accounting and technical updates

— CSRD assurance planning

— Accounting

matters and Group

accounting policies

— Treasury Policy and

reporting

— Tax update

— Report on half-year review

procedures

— 2024 external audit plan (p108)

— Review of the effectiveness of

external auditors (p107)

— Receipt of external auditors’

report on annual report and Form

20-F

— EY findings on internal controls

over financial reporting (ICFR)

— Oversight of audit action plan

— Confirmation of auditors’

independence (p109)

— Provision of non-audit services

by external auditors – approval

of policy and regular reporting

(p109)

— Re-appointment of external

auditors

— Remuneration and engagement

letter of external auditors

— Internal audit activity reports and

review of key findings (p105)

— 2024 and 2025 internal audit plans

including resourcing

— Assessment of the effectiveness of

internal audit function

— Assessment of the effectiveness of

internal control environment and risk

management systems (p106)

— Risk management including Group’s

principal and emerging risks and risk

framework (p57-67)

— Strategic risk reviews led by business

unit Presidents (p101-102)

— Group-wide risk deep dives on

cybersecurity; technology resilience;

data privacy; treasury and insurance;

and corporate security and incident

management (p101-102)

— Controls Centre of Excellence updates,

including on ICFR and 2024 work plan

(p106)

— Fraud, whistleblowing

reports and ethics and

compliance investigations

(p105)

— Anti-bribery and corruption

and sanctions programmes

(p105)

— Compliance with accounting

and audit-related aspects

of the UK Corporate

Governance Code (p106)

— Audit Committee and

internal audit function

terms of reference

— Oversight of Group’s

schedule of delegated

financial authority

— Regulatory briefings,

including monitoring FRC

proposals on audit and

corporate governance

reform

— Review of minutes of the

Verification Committee’s

meetings

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Audit Committee meeting focus during 2024 continued

Area of Committee remit

Financial and non-

financial reporting

Policy and finance

operations External audit

Internal audit, risk and

internal control

Compliance

and governance

Selected key

actions and

outcomes

— The Committee reviewed the

annual report and Form 20-F,

and the company’s annual and

interim financial statements,

and received reports from both

the VP – Group Reporting and

the external auditors on the

significant financial reporting

judgements relating to each

— The Committee reviewed the

going concern analysis and

the viability statement for

recommendation to the Board

— The Committee reviewed

quarterly reports of all material

litigation and disputes provided

by the General Counsel

— The Committee received an

update on preparations for

mandatory sustainability

disclosure requirements,

including monitoring regulatory

developments, considering the

applicability to Pearson Group

entities, enhanced internal data

and reporting practices and

initial considerations relating to

assurance planning

— The Committee

considered the

application of Pearson’s

accounting policies and

practices in reviewing

the financial statements

and significant

accounting matters

— The Committee

considered the

adoption of FRS

101 for the parent

company accounts and

recommended this for

Board approval

— The Committee

reviewed Pearson’s

tax strategy, receiving

updates on anticipated

effective tax rate and

developments in the

global tax regulatory

landscape

— The Committee

considered plans for

the £350m Education

Bond ahead of its

formal approval and

launch, reviewed

quarterly treasury

compliance reports and

approved the updated

Group treasury policy

— The Committee considered the

audit strategy for the 2024 audit,

including the audit approach,

significant risks and areas of

audit focus, scope and level of

materiality

— The Committee received reports

from EY on the results of (i) their

review of the interim financial

statements, and (ii) their audit of

the annual financial statements

and ICFR. The Committee

reviewed the respective

letters of representation and

recommended them for approval

by the Board

— The Committee considered formal

communications by the external

auditors, including disclosures

relating to their independence

as required by the FRC, SEC and

PCAOB

— The Committee reviewed the

effectiveness of the external

auditors to ensure the

independence, objectivity, quality,

rigour and challenge of the audit

process was maintained. The

Committee concluded that the

external auditors and the audit

process were effective

— The Committee considered the

conclusions and themes emerging from

Internal Audit reviews conducted during

the year and approved the Internal

Audit Plan for 2025

— The Committee discussed the outcome

of Internal Audit investigations,

including the most significant issues

raised in Internal Audit reports, and

received updates on the status of

resolution of issues raised

— The Committee received regular

updates on the status of Pearson’s

internal controls programme, including

controls related to financial reporting,

business and IT, and considered

reports from both the Senior Director

– Controls Operations and the external

auditors. This included discussion of

design and operating effectiveness and

any identified deficiencies

— The Committee considered the

Group risks and actions to enhance

their measurement, monitoring and

mitigation, including recommending to

the Board the approval of the principal

and emerging risks disclosed in the

annual report. This oversight was

supported by deep dives into selected

risk areas

— The Committee reviewed

regular reports on fraud,

whistleblowing and

compliance matters, led

by the Associate General

Counsel – Employment,

Ethics & Compliance,

considering investigations,

metrics, controls and

initiatives

— The Committee considered

an in-depth analysis of

compliance with the FRC’s

Minimum Standard

— The Committee approved

changes to the Group’s

schedule of delegated

financial authority, all

changes being below the

threshold requiring full

Board approval

— The Committee undertook

the annual review of

its own effectiveness

and that of the internal

audit function, including

considering the results

of an external quality

assessment of the latter

Audit Committee report continued

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Compliance, fraud and whistleblowing

The Associate General Counsel (AGC) – Employment, Ethics &

Compliance oversees compliance with our Code of Conduct

and works with senior legal, HR and other relevant personnel to

investigate any reported incidents, including ethical, corruption

and fraud allegations. The Committee receives an update at each

meeting on all significant investigations as well as reviewing data

regarding matters raised through our whistleblowing reporting

system. If applicable, any findings of the external auditors with

respect to a particular matter are also considered as part of

these discussions. The Committee may also meet in private if

required with the AGC – Employment, Ethics & Compliance. On

behalf of the Board, the Committee considers an annual review

of the effectiveness of the whistleblowing system including

through benchmarking against peers and by monitoring progress

against previous years’ findings. The Committee Chair’s regular

reports to the Board include a review of investigations or

whistleblowing matters of note.

The Pearson anti-bribery and corruption (ABC) and sanctions

compliance programmes provide the framework to support our

compliance with various regulations such as the UK Bribery Act

2010 and the US Foreign Corrupt Practices Act. The Committee

uses this framework to conduct a deep dive into the ABC and

sanctions compliance programmes on an annual basis. Pearson

and the Committee remain attentive to opportunities to further

enhance the company’s practices and protocols in this space and

we noted the introduction during the year of a new, centralised

process for sanctions screening and third-party ABC due

diligence checks.

In 2024, in addition to our regular review of ethics, compliance

and employee relations investigations, we noted the following

enhancements made to the compliance programme, including:

• Launch of a new social media policy which builds on Pearson’s

Code of Conduct and provides employees with clear guidance

on the standards expected of them when posting online on

both personal and Pearson accounts.

• Introduction of updated sanctions and due diligence

policies, procedures and guidance to align with a new

screening process.

• Implementation of new control measures related to

purchasing and expenses reporting following a comprehensive

review of practices in these areas.

• A review of, and proposals to enhance, the advice and support

provided to employees who are required to obtain business

visas for international Pearson travel.

• Noting management’s response to legislative and regulatory

changes in the areas of fraud, compliance and whistleblowing,

including guidance published by the US Department of Justice

and the UK Serious Fraud Office.

Internal audit

The internal audit function is responsible for providing

independent assurance to management and the Committee

on the design and effectiveness of internal controls to mitigate

strategic, financial, operational and compliance risks. The Vice

President – Internal Audit & Controls Compliance reports

jointly to the Chair of the Committee and the Chief Financial

Officer and is responsible for the day-to-day operations of

internal audit and execution of the annual internal audit

plan. The internal audit mandate is approved annually by

theCommittee.

Internal audit plan and activity

The audit plan and any changes thereto are reviewed and

approved by the Committee throughout the year, and the

Committee is attentive to the resourcing of the internal audit

function. The internal audit plan is aligned to Pearson’s greatest

areas of risk, as identified by the enterprise risk management

process (see graphic below), and the Committee considers issues

and risks arising from internal audits.

Management action plans to improve internal controls and

to mitigate risks are agreed with the business area after each

audit. Internal audit has a robust process in place for the

implementation of audit actions, which also includes review

and testing of evidence to corroborate action implementation.

Progress of management action plans is reported to the

Committee at each meeting. Internal audit has a formal

collaboration process in place with the external auditors to

ensure efficient sharing of insights and outcomes. Opportunities

for reliance by the external auditors on internal audit outcomes

are limited due to strict rules set by the external regulator.

Regular reports on the findings and emerging themes identified

through internal audits are provided to Executive Management

and, via the Committee, to the Board.

In 2024, internal audit carried out engagements across Pearson’s

business units and corporate functions, as well as Group-wide

thematic audits, covering all principal risks. The audit plan

changes throughout the year based on changes in Pearson’s

risk profile. Key themes in 2024 related to compliance with laws

and regulations, information security and data privacy, business

transformation and IT resilience, and operational delivery.

Internal audit evaluation

The International Standards for the Professional Practice of

Internal Auditing published in 2017 by the Institute of Internal

Auditors (the IIA Standards) require an independent external

assessment of internal audit to be conducted at least once every

five years by a qualified, independent assessor or assessment

team from outside the organisation.

At its December 2024 meeting, the Audit Committee considered

the findings of an external quality assessment (EQA) of internal

audit, which was undertaken by PricewaterhouseCoopers LLP

(PwC) during the second half of the year.

The objectives of the EQA were to assess conformance with the

IIA Standards, to assess the effectiveness of internal audit within

the context of its mandate and stakeholder expectations, and

to provide recommendations to internal audit on improvement

opportunities and emerging practices. The process also included

a high-level review of the function’s operations against the new

2024 IIA Standards (effective from January 2025).

Reputation and responsibility

Capability

AI, content and channel

Competitive marketplace

Portfolio

Customer expectations

Accreditation

Section size

reﬂects number

of audits mapped

by principal risk

Technology and data

Governance and compliance

Transformation / change

Customer / consumer

People

Theme

Section size

reﬂects number

of audits mapped

by audit theme

2024 internal audit activity – coverage of principal risks and audit themes:

Annual report and accounts 2024 Pearson plc 105

Strategic report Governance report Financial statements Other information

The independent assessor’s findings indicated an effective

internal audit function that conforms to the IIA Standards and

compares favourably to other large, listed companies in terms of

skills, coverage and quality of deliverables, with Pearson’s internal

audit function ranking in the top quartile compared to other

EQAs performed by PwC in the past three years.

Based on the findings of the EQA, and on our own ongoing

assessment of the effectiveness of the internal audit function,

the Committee is of the opinion that the quality, experience and

expertise of the function are appropriate for the business.

Internal control and risk management

The Board has overall responsibility for Pearson’s systems of

internal control and risk management, which are designed to

manage, and where possible mitigate, the risks facing Pearson,

as well as to safeguard assets and provide reasonable, but not

absolute, assurance against material financial misstatement or

loss. The Board agrees risk management requirements and,

in assessing the effectiveness of the risk management effort,

reviews a range of inputs as described elsewhere in this report.

The Board can and does challenge the reporting it receives

and will request further information as needed to make its

assessment.

The Committee monitors the effectiveness of the company’s

risk management and internal control systems on behalf of

the Board. The Committee oversees a risk-based internal audit

programme which includes assessing risk mitigations and

controls in the areas under audit. It provides assurance on the

management of risk (including via risk deep dives, as described

on pages 101-102), and receives reports at each meeting on the

effectiveness and efficiency of internal controls with input from

the Vice President – Internal Audit & Controls Compliance, the

Senior Director – Controls Operations and the external auditors.

In 2024, internal audit provided assurance over all principal risk

areas, as described on page 105.

Each business area maintains internal controls and procedures

appropriate to its structure, business environment and risk

profile, while complying with company-wide policies, standards

and guidelines. The financial and IT controls and associated

procedures are monitored and certified through the Group-wide

Controls Centre of Excellence and are subject to testing as part

of both the internal and external audit processes.

The Controls Centre of Excellence team took a number of steps

in 2024 to further enhance Pearson’s control environment. This

included updating the risk and controls matrix, further improving

standardised testing scripts, reviewing control materiality and

frequency, and increasing the efficiency of control walkthroughs.

The Committee, acting on behalf of the Board, confirms that

it has reviewed, and continues throughout the year to review,

the effectiveness of Pearson’s systems of risk management and

internal control in accordance with Provision 29 of the Code and

the FRC Guidance on Risk Management, Internal Control and

Related Financial and Business Reporting (‘FRC Guidance’). In

making its assessment as to the effectiveness of these systems

for 2024, the Committee had regard to an assurance opinion

from the internal audit function. Factors considered in this

process included:

• the outcomes of internal audits completed during the year

• significant changes in Pearson’s strategy, processes

and systems

• the wider Pearson risk management and assurance

framework, which includes other assurance activities by first

and second line of defence teams, including enterprise risk

management, the Controls Centre of Excellence, business unit

and technology assurance teams

• work conducted by the external auditors

• the organisation’s response to internal audit actions

• whether any fundamental or significant actions have not been

accepted by management and the consequent risk

• whether any limitations have been placed on the scope of

internalaudit work or remit

The Committee reviewed the detail underpinning these factors

as part of the 2024 year-end process. The Committee also

reviewed all internal financial control deficiencies identified

during the year and noted that the majority were remediated

during 2024. The impact of any unremediated deficiencies

on the financial statements was considered. Following these

reviews, the Committee confirmed that Pearson’s systems of

risk management and internal control operated satisfactorily

throughout the year.

The Board is ultimately accountable for effective risk

management in Pearson and determines our strategic approach

to risk. It confirms our enterprise risk management framework

as well as our risk appetite targets. The involvement of the Board

and Committee in the design, implementation, identification,

monitoring and review of risks (including setting risk appetite and

reviewing how risk is being embedded in our culture) is outlined

in more detail in the Risk management section on page 57.

Response to Code changes

In January 2024, the FRC published a revised version of the

Code. The most significant changes relate to Provision 29, which

governs the Board’s duties in relation to the company’s risk

management and internal control framework and introduces

the requirement for an explicit declaration by the Board of the

effectiveness of material controls as at the balance sheet date.

The Committee has been attentive to Pearson’s proposals to

address these new Code requirements, with specific focus on:

(i) the identification of ‘material controls’ including financial,

operational, reporting and compliance controls; and (ii) the

assurance which is already, or will need to be, in place to

provide sufficient comfort to the Board in making the required

declaration.

As part of this work, we are challenging ourselves to concentrate

on the controls that truly impact Pearson’s success or failure, in

line with the FRC’s guidance on the new Code.

We will continue to monitor progress during the coming year

ahead of the new requirement taking effect on 1 January 2026.

External audit

The Committee is responsible for overseeing and assessing

Pearson’s external audit and its auditors. Ernst & Young LLP

(EY) were first appointed as Pearson’s external auditors by

shareholders at the AGM in April 2022 following a tender

process. Pearson’s 2024 audit was the third undertaken by

both EY and Ben Marles as lead audit partner. As required by

regulation, Pearson will put the external audit contract out to

tender at least every 10 years, with the next tender being in

respect of the 2032 financial year at the latest. The decision to

undertake such a process will be a matter for the Committee.

Audit Committee report continued

Annual report and accounts 2024 Pearson plc 106

Strategic report Governance report Financial statements Other information

Pearson confirms that it was in compliance with the provisions

of The Statutory Audit Services for Large Companies Market

Investigation (Mandatory Use of Competitive Tender Processes

and Audit Committee Responsibilities) Order 2014 during the

financial year ended 31 December 2024.

Appointment of external auditors

The Committee reviews and makes recommendations to the

Board in respect of the appointment and compensation of

the external auditors. These recommendations are typically

made by the Committee after considering the external auditors’

performance during the year, reviewing external auditor fees,

conducting an effectiveness review, considering the annual

report on audit quality of the external audit firm and confirming

the independence, objectivity, qualifications and experience of

the external auditors.

Audit quality and effectiveness

In conducting our 2024 review of the effectiveness of the

external auditors and making our recommendation to re-appoint

EY for 2025, the Committee had regard to factors such as those

set out in the FRC Minimum Standard (see also page 108).

We considered our own observations and interactions with

the external auditors, the quality of the audit, the auditors’

independence, the programme of work conducted by the

auditors and their reports on that work. To support our

assessment, we utilise a bespoke questionnaire to gather views

from Pearson colleagues most familiar with the external audit

process. We refreshed this questionnaire ahead of our 2024

process to ensure we consider all factors described in the FRC

Minimum Standard. We also consider a range of other inputs in

making our assessment. A key additional input which has been

adopted from 2024 is a suite of audit quality indicators (at both a

firm-wide and engagement-specific level) that have been agreed

by the Committee with the external auditors and against which

they now report to the Committee on a regular basis.

The diagram to the right illustrates the main inputs to our

assessment, the colleagues from whom we sought views, the

themes covered in our survey and the outcomes of our work.

Inputs to the external audit effectiveness review:

• EY’s annual audit quality report including discussion of issues raised by the FRC

• Audit quality indicators

• Risks to audit quality identified by the external auditors and how these were addressed

• Observations and interactions between the Committee and external auditors

• Review of mandatory communications by the external auditors, including relating to their independence

• Bespoke survey of Pearson colleagues

Results and

conclusion:

• Results of the survey were

anonymised and analysed

by the Committee

Secretary and presented

to the Committee and EY.

• The responses to the

survey indicated that the

external auditors operate

with independence

and objectivity,

demonstrate open lines

of communication with

the Committee, exhibit

professional scepticism

and appropriate levels

of challenge, possess

the requisite technical

expertise and apply it

appropriately to the

business and any issues

and judgements.

• Following its review of the

relevant inputs, including

the responses to the

survey, the Committee

confirmed that the audit

process was effective and

that it was satisfied with

the quality of the audit.

Who we surveyed to inform our assessment of effectiveness:

• Members of the Committee

• Chief Financial Officer

• General Counsel

• Chief Information Officer

• Senior corporate financial management

• Finance business partners for business units

• Senior internal audit and controls management

Themes covered in the external audit effectiveness survey:

• Professional scepticism, integrity and willingness to challenge management

• Commitment to audit quality, including mindset and culture

• Independence and objectivity

• Partners and the audit team – resourcing, qualifications, skills, knowledge and

experience

• Management and organisation of the audit process

• Planning and scoping of the audit

• Delivery and execution of the agreed audit plan

• Communication with and reporting to the Committee and management –

transparency, timeliness, clarity, conciseness, relevance

• Commentary on systems of internal control and other recommendations

• Technical specialism and use of experts

• Use of technology and data analytics

Annual report and accounts 2024 Pearson plc 107

Strategic report Governance report Financial statements Other information

The Committee received a progress report from management

and EY at each meeting during the year, and we are satisfied

that all 2024 initiatives were successfully completed and,

further, that the enhancements from 2023 have now been

embedded into routine practices. We are pleased to see the

tangible improvements that have resulted from the efforts

of Pearson colleagues and the external audit team alike. We

expect to continue to see incremental improvements resulting

from Pearson and EY’s ongoing focus on audit quality and

effectiveness as part of business as usual.

Review of the external audit

During the year, the Committee discussed the planning, conduct

and conclusions of the external audit as it proceeded.

At its July 2024 meeting, the Committee discussed and approved

the external audit plan and reviewed EY’s assessment of risks of

material misstatement of Pearson’s financial statements.

The external auditors provided an update to the risk assessment

at the December 2024 Committee meeting, explaining to the

Committee their conclusion that the uncertain tax provision in

respect of EU State Aid no longer represented a significant audit

risk following the conclusion of the appeal in the EU courts in

favour of the taxpayer.

The table on pages 110-112 sets out the significant issues

considered by the Committee together with details of how these

items have been addressed and the ways in which the external

auditors challenged management’s assumptions. The Committee

discussed these issues with the auditors throughout the 2024

audit process.

In December 2024, the Committee discussed with the auditors

the status of their work, focusing in particular on internal controls

and Sarbanes-Oxley testing.

FRC Minimum Standard

In May 2023, the FRC introduced the ‘Audit

Committees and the External Audit: Minimum

Standard’ (the ‘FRC Minimum Standard’ or ‘Standard’).

During 2024, the Standard operated on a standalone

‘comply or explain’ basis. From January 2025, the

Standard is incorporated into the latest edition of the

UK Corporate Governance Code.

As indicated in last year’s report, in order to achieve

full compliance for 2024, the Committee refreshed

the methodology for our external audit effectiveness

review ahead of the 2024 process to give full

consideration to the factors described in provisions

15 to 23 of the Standard. You can read more about

our assessment of effectiveness, and how we

considered the required factors, on page 107.

Having reviewed an analysis of Pearson’s approach to

the FRC Minimum Standard, the Committee confirms

that it was in full compliance with all provisions for the

financial year ended 31 December 2024.

The Committee monitors the independence and objectivity of

the external auditors on an ongoing basis and will continue to

formally evaluate their overall performance and effectiveness

and the quality of the external audit on an annual basis, taking

account of all appropriate guidelines.

Building on the audit action plan described in our 2023 report,

the Committee oversaw an additional set of initiatives throughout

2024 to bring further incremental enhancements to both the

delivery of the external audit and Pearson’s internal control

processes. This programme of work was co-owned by the lead

external audit partner and the Chief Financial Officer and primarily

focused on efficiency, effectiveness and the use oftechnology.

As the auditors concluded their audit, they explained to the Committee:

• The work they had conducted over revenue and in particular

the specific risk of fraud in revenue recognition. This included

work over contracts in certain of the Group’s businesses

in the US and UK that span the year end, where revenue is

recognised using an estimated percentage of completion

based on costs and work over manual adjustments to revenue.

In addition, they explained their use of data analytics to cover

entire populations of data with procedures such as correlating

revenue with receivable and cash entries.

• Their work over retirement benefit obligations including

procedures undertaken over assumptions used in determining

the defined benefit obligations and their work over the

valuation of the related pension assets.

• Their work in evaluating management’s goodwill impairment

exercise, on a value-in-use basis, including assessing

assumptions around operating cash flow forecasts, perpetuity

growth rates and discount rates and their views on the

sensitivity of CGU headroom to downside scenarios.

• The work performed over the nature and presentation of

adjusting items, focusing on subjective judgements and the

transparency and prominence with which related adjusted

measures are presented.

• Their work in assessing management’s judgements and

assumptions regarding provisions for uncertain tax positions,

in particular the release of the provision made in relation to

the EU state aid tax matter.

• The work performed over the recognition of the bond issued in

September, including the effective interest rate calculations.

• Their work in assessing management’s judgements and

assumptions regarding the reversal of certain historical

impairments against investments in subsidiaries in the

parentcompany.

• The results of their controls testing for Sarbanes-Oxley Act

Section 404 (SOx 404) reporting purposes and in particular

their findings in relation to information provided by the entity

(IPE), controls over key IT systems and other relevant internal

control over financial reporting (ICFR) matters.

• Their work to address the specific pervasive risk of management

override of controls, including their view on the potential

sources or indicators of bias and override of controls and their

response to those indicators, including procedures such as

review of Board and Committee minutes, journal entry testing,

review of non-routine transactions and the use of data analytics.

Audit Committee report continued

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Strategic report Governance report Financial statements Other information

• The results of their work over the company’s going concern

assessment and viability statement.

• Their work in relation to other matters which are not classified

as key audit matters, but which are considered important

financial reporting matters, key areas of judgement or

estimation, or which may give rise to additional disclosure

requirements. This includes the recognition of provisions and

assets related to legal matters and asset capitalisation.

The auditors also reported to the Committee the unadjusted

misstatements that they had found in the course of their work,

which were immaterial, and the Committee confirmed that there

were no material items remaining unadjusted in these financial

statements.

Auditors’ independence

In line with best practice, our relationship with EY is governed

by our policy on external auditors, which is typically reviewed

annually to ensure it remains effective and appropriate and is

approved by the Committee. The policy establishes procedures

to ensure that the auditors’ independence is not compromised,

as well as defining those non-audit services that external auditors

may or may not provide to Pearson.

Scope of the policy on external auditors

• The policy applies to all Pearson businesses globally, including

associate companies.

• Any identified threats to independence arising from services

provided by the external auditors to a company that is then

acquired by Pearson must be addressed within three months

of the acquisition date.

• The policy applies to all audit firms used by Pearson including

those undertaking statutory audits only.

• In the event of a change in the Group auditor, it also applies to

the outgoing firm until they have discharged their Group audit

responsibilities and for any periods in which they are required

to be independent in order to undertake any specific audit

responsibilities.

Governance of audit and non-audit related services

• The Committee approves all audit and non-audit services

provided by the external auditors.

• Any allowable services are in accordance with relevant UK and

US legislation and auditor standards.

• Our policy on the use of the external auditors for non-audit

services was revised during the year to ensure compliance

with the FRC’s Ethical Standard published in January 2024. The

policy also complies with all relevant SEC independence rules.

• The FRC’s Ethical Standard applies restrictions on certain

non-audit services and applies a cap on the level of permitted

non-audit services fees which can be billed in any year. More

particularly, our policy provides that only non-audit services

which are required to be carried out by the external auditors

or where the work is closely linked to the audit work are

permitted, and only if also permitted by the FRC and SEC.

• The policy reflects the restriction on the use of pre-approval in

the 2016 FRC Guidance on Audit Committees and, accordingly,

all non-audit services, except those considered to be ‘clearly

trivial’, are required to be approved by the Committee.

• We review non-audit services on a case-by-case basis. Non-

audit services below a value of £25,000 are defined as ‘clearly

trivial’ from a materiality perspective and can be pre-approved

following review by the Group Finance team. Any such pre-

approved services are presented for noting by the Committee

at its next meeting.

• We expressly prohibit the provision of certain tax, HR and

other services by the external auditors.

The Committee receives regular reports summarising the

amount of fees paid to the auditors. During 2024, Pearson spent

a similar amount on non-audit fees when compared with 2023.

For 2024, non-audit fees (excluding fees related to SOx 404

attestation) represented 3% of external audit fees (2% in 2023).

Non-audit fees including those related to SOx 404 attestation

represent 12% of audit fees (9% in 2023).

For all non-audit work in 2024, EY was selected only after

consideration that it was best able to provide the services we

required at a reasonable fee and within the terms of our policy

on external auditors. Where EY is selected to provide audit-

related services, we take into account its existing knowledge and

experience of Pearson. Where appropriate, services are tendered

prior to a decision being made as to whether to award work to

the auditors.

Significant non-audit work performed by EY during

2024 included:

• half-year review of interim financial statements

• bond issuance comfort letter and bond proceeds limited

assurance

• SOx 404 attestation of financial reporting controls

A full statement of the fees for audit and non-audit services is

provided in note 4 to the financial statements on page174.

Graeme Pitkethly

Chair of Audit Committee

Annual report and accounts 2024 Pearson plc 109

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Significant issues considered by the Audit Committee

Issue Action taken by Audit Committee Outcome

Going concern and viability

• The assessment of the Group’s viability and

the appropriateness of the going concern

assumption.

• The Committee reviewed future budgets and cash flow forecasts to understand the

Group’s available liquidity and ability to continue as a going concern. The Committee

reviewed and challenged the risks to the forecasts identified. The Committee reviewed the

outcome of the severe but plausible scenario modelling and stress testing.

• EY challenge:

EY challenged the appropriateness of the assumptions used to calculate the cash

forecasts under base and severe but plausible downside case scenarios, including

whether the downside scenarios were sufficiently severe.

• The Committee is satisfied with the modelling process

and the risks identified. In addition, the Committee is

satisfied with the stress testing performed and the severe

but plausible scenario modelling. The Committee noted

that in all scenarios the Group had a high level of liquidity

headroom and sufficient headroom against covenant

requirements.

• The Committee is satisfied with the adequacy of the

Group’s viability and is satisfied that the Group is a going

concern.

• The Committee is satisfied with the disclosures related to

going concern and viability.

Revenue recognition

• Pearson has a number of revenue streams

with different revenue recognition models.

For some revenue streams, judgements and

estimates are required in order to determine

the amount and timing of revenue

recognition.

• The Committee regularly reviews and challenges revenue recognition practices and

the underlying assumptions and estimates. In addition, the Committee has visibility

of the internal control framework over revenue and the results of the monitoring and

certification work performed by the Controls Centre of Excellence over those controls.

In addition, the Committee has visibility of internal audit findings relating to revenue

recognition controls and processes. The Committee routinely monitors the views of the

external auditor on revenue recognition issues. This includes review of their data analytics

testing of revenue and understanding any exceptions that do not follow the expected

process path as well as testing of one off or judgemental items.

• EY challenge:

EY specifically challenged areas where there is manual intervention in the revenue

recognition process, in particular where revenue is recognised over time and assumptions

are used to determine the timing of recognition.

• The Committee is satisfied that revenue is being

recognised appropriately

Audit Committee report continued

Annual report and accounts 2024 Pearson plc 110

Strategic report Governance report Financial statements Other information

Issue Action taken by Audit Committee Outcome

Recoverability of non-current assets

• Pearson (the Group) holds significant

non-current assets including right-of-use

assets (in relation to leased properties);

property, plant and equipment; goodwill and

intangible assets.

• Pearson plc (the Company) holds significant

investments in subsidiaries, some of which

were impaired in previous years. During

2024, historical impairments of £1.3bn have

been reversed.

• There are significant estimates and

assumptions used in the impairment

reviews.

• The Committee monitored the Group’s property strategy during the year to determine

if there were impairment triggers. The Committee considered the results of the Group’s

property impairment reviews with specific focus on the 80 Strand property. Updates to

key assumptions were reviewed and challenged. The Committee considered the adequacy

of related disclosures.

• The Committee monitored the Group’s plans and forecasts during the year to determine

if there were impairment triggers. The Committee considered the results of the Group’s

goodwill impairment reviews which were undertaken in December and refreshed post

year end. Key assumptions – including cash flows derived from strategic and operating

plans, long-term growth rates and the weighted average cost of capital – were reviewed

and challenged. The Committee considered the sensitivities to changes in assumptions

and the adequacy of disclosures required by IAS 36 ‘Impairment of Assets’.

• The Committee considered the valuation of the investments in subsidiaries held in

Pearson plc the company. The Committee specifically considered the application of the

Group goodwill impairment model to the investments and also the existence of indicators

of impairment reversal.

• EY challenge:

EY challenged the judgement in respect of the identification of the impairment reversal

trigger in parent company investments. EY also challenged the assumptions included in

the prospective financial information used for the value in use calculation.

• The Committee is satisfied with the results of the property

impairment reviews and the subsequent impairment

charges recognised in the income statement.

• The Committee noted the reduction in risk related to the

recoverability of right-of-use assets and is comfortable that

it is no longer considered a key area of estimation.

• The Committee is satisfied with the results of the annual

goodwill impairment review.

• The Committee is satisfied with the disclosures relating

to non-current asset impairments and concurs with

management’s view that the recoverability of goodwill is

not a key area of estimation.

• The Committee is satisfied that there is enough headroom

and an appropriate trigger for reversing impairments on

subsidiaries in the parent company. The Committee is

satisfied with the disclosures related to the impairment

reversal.

Annual report and accounts 2024 Pearson plc 111

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Issue Action taken by Audit Committee Outcome

Tax

• Pearson holds provisions in relation to

uncertain tax positions.

• In 2021, Pearson paid £105m (including

interest) in relation to the EU state aid

matter and at that time the amount was

recognised as an asset as it was expected to

be recovered in due course. In 2022, the EU

General Court dismissed the appeal made

by the UK Government in relation to this

matter, with Pearson establishing a provision

of £63m in 2022 representing an estimate

of the expected liability. In 2024, following

a further appeal, the Court of Justice of

the European Union (CJEU) issued its final

judgement in favour of the taxpayer and

annulled the 2019 European Commission

State Aid decision in full. Pearson now

expects to recover the monies paid in due

course and has reversed the associated

provisions which were made in 2022.

• Changes to, and the application of, tax

legislation continues to be a complex and

judgemental area.

• The Committee considered various developments during the year, including the CJEU’s

final judgement in relation to the European Commission’s decision that the UK’s Finance

Company Partial Exemption rules constituted state aid (‘EU state aid’), ongoing tax audits

and the appropriateness of the associated provisions.

• The Committee also considered the impact of changes in tax legislation, including ‘Pillar 2’

of BEPS 2.0 now effective for Pearson from 1 January 2024.

• EY challenge:

EY specifically challenged the inputs and assumptions used in the calculation of provisions

for uncertain tax positions. They also challenged the classification of the receivable in

relation to EU State Aid as a current asset, considering the expected settlement date as

well as the appropriateness of the interest accrued for interest that will be paid on the tax

element of the amounts previously collected based on HMRC guidance.

• The Committee is satisfied with Pearson’s approach to the

EU state aid matter including the reversal of provisions, the

presentation of the associated debtors and the recognition

of related interest amounts.

• The Committee is satisfied with the appropriateness of

provisions held in relation to other uncertain tax positions.

• The Committee is satisfied with Pearson’s approach to

managing the impact of tax legislation changes. The

Committee is satisfied with the disclosures relating to the

expected impact of Pillar 2.

Retirement benefits

• Pearson holds a significant obligation in

relation to the Group’s defined benefit

pension schemes. The UK Group Pension

Plan is in a significant net surplus position

after the recognition of the related assets.

During 2024, discretionary increases were

agreed for certain cohorts of pensioners in

the UK Group Pension Plan.

• The Committee considered developments related to the triennial valuation of the UK

Group Pension Plan and the impacts on the IAS 19 accounting.

• The Committee considered the treatment of discretionary increases for certain cohorts of

pensioners in the UK Group Pension Plan, including the presentation of the related past

service.

• EY challenge:

EY specifically challenged the assumptions used in determining the defined benefit

obligations, taking into account both market practice as well as the specifics of the

Pearson pension schemes.

• The Committee is satisfied with the IAS 19 accounting, and

related disclosures, for the Group’s pension obligations

and assets.

• The Committee is satisfied with the presentation of past

service costs related to discretionary pension increases.

Audit Committee report continued

Annual report and accounts 2024 Pearson plc 112

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Key messages from the

Remuneration Committee

• Shareholder input remains very important to the Committee as

we keep remuneration policy and practice under continuous

review. Following the 2024 AGM vote, and as part of our long-

standing commitment to an ongoing and transparent dialogue with

shareholders and their advisers, we undertook another extensive

shareholder engagement exercise in 2024. Consequently, we have

refined our disclosure in response to the feedback we received,

particularly with respect to benchmarking.

• The Committee considered performance outcomes for 2024.

The annual incentive outcome for Executive Directors is 64% of

maximum, reflecting another year of strong financial and strategic

progress. The long-term incentive award granted in 2022 will vest

at 75.3% of maximum, reflecting strong earnings and Net Return

on Invested Capital (‘Net ROIC’) performance, combined with upper

quartile Total Shareholder Return (‘TSR’) performance over the

three-year performance period.

• For 2025, we have updated the strategic performance metrics

within the incentive plans to ensure they continue to appropriately

support Pearson’s forward-looking strategic transformation. We

will introduce metrics based on renewal rates in Assessments &

Verification and growth in enterprise customers in the 2025 Annual

Incentive Plan (‘AIP’). In the 2025 Long-Term Incentive Plan (‘LTIP’),

the current strategic measures will be replaced with a metric

measuring new business growth in Assessments & Verification,

recognising that enabling even more transformative learning

journeys will result in the greatest positive social impact.

• The Committee approved a salary increase of 2.2% for the Chief

Executive, aligned with the wider UK workforce, and an increase of

8% for the CFO, recognising that her salary level had fallen below

a sufficiently market competitive level for an individual of her skills,

experience and track record, in similarly sized companies.

• The Committee remains focused on ensuring that remuneration

policies and practice for all Pearson’s colleagues are consistent

with our need to attract and retain extra-ordinary talent to

drive Pearson’s forward-looking strategy, aligned with our

purpose, and values which will deliver continued value creation

for our shareholders.

Terms of reference

The Committee’s terms of reference are in line with the UK Corporate

Governance Code and are available on the Governance page of the

Company website at pearsonplc.com. A summary of the Committee’s

responsibilities is on page 135.

Board Committee attendance

There were six scheduled meetings of the Remuneration Committee

in 2024. Attendance by Directors was as follows:

Committee members

Meetings

attended

Sherry Coutu CBE

5/6

Alison Dolan

3/3

Esther Lee

5/6

Tim Score

4/4

Annette Thomas

6/6

1. Sherry Coutu was unable to attend one ad hoc additional committee

meeting due to a pre-existing commitment.

2. Alison Dolan joined the Committee on 1 April 2024.

3. Tim Score stepped down on 26 April 2024.

Dear Shareholder

On behalf of the Board, I am pleased to present Pearson’s 2024

Directors’ Remuneration Report.

Pearson once again delivered a strong financial performance

with underlying sales growth of 3% (taking portfolio adjustments

and FX into account and excluding the OPM and Strategic Review

businesses) and adjusted operating profit of £600m, up 10% on an

underlying basis compared to 2023. Free cash flow performance was

also strong at £490m, up 27% with a free cash flow conversion rate

of 117%. These results reflect continued strategic progress against

the priorities we set at the beginning of the year, which has laid the

foundation for future growth. Pearson has delivered a 36% Total

Shareholder Return over this period (and a return of 125% over the

three-year period to 31 December 2024).

Sherry Coutu CBE

Chair of Remuneration Committee

Directors’ Remuneration Report

Key to Committees

Audit

Nomination & Governance

Reputation & Responsibility

Remuneration

Committee Chair

Annual report and accounts 2024 Pearson plc 113

Strategic report Governance report Financial statements Other information

Directors’ Remuneration Report continued

Reflecting the Board’s confidence in the outlook for the business, we

completed a multiyear share buyback of £500m in 2024, announced

a further £350m buyback and are recommending a 6% increase in

the final dividend, for a full-year dividend of 24.0p per share. Our

strong balance sheet and excellent cash flows also enable investment

in opportunities to drive growth to create further value for our

stakeholders.

The Board is pleased with Pearson’s performance in 2024 and is

confident that the updates to Pearson’s strategy announced by our

Chief Executive, Omar Abbosh, in July 2024 sets us on the path for

sustained growth that will continue to produce attractive returns for

shareholders in 2025 and beyond.

Context for remuneration at Pearson

At Pearson, we broadly do three things:

• We create and curate content. This involves producing

assessments, author learning IP, designing courses and writing

curriculum standards.

• We distribute content physically and digitally including delivering

assessments, distributing lessons and facilitating teaching.

• We build and verify skills. This involves scoring assessments,

assessing gaps, credentials and evaluating talent.

Over the last five years, Pearson has transformed in terms of global

breadth, scope, scale and performance. The business has grown from

Pearson the company to Pearson the brand.

• From a holding company into an operating company.

• From analogue to digital.

• From a content publisher to a learning & assessment company.

• From legacy to a modern, high-performance culture.

Against this backdrop, there is a significant step-change in our talent

requirements. Pearson is a heavily tech-oriented organisation with

c.17,000 employees operating across over 40 countries, competing

for senior leadership talent on a global basis. As set out on page 122,

85% of the Pearson Executive Management team and over 80% of

our employees are based outside of the UK.

At the heart of Pearson’s transformation has been the executive team

assembled under Andy Bird’s and Omar Abbosh’s leadership. The

ambitious strategy developed and executed by our executive team

has strengthened the company, positioning it to grow and succeed,

while creating significant sustainable long-term shareholder value.

For example, since Andy Bird’s appointment as CEO on 19 October

2020, and continuing with Omar Abbosh’s appointment as CEO on

6 January 2024, we have:

• Generated Total Shareholder Return of 164% and created over

£4.4bn in shareholder value (19 October 2020 – 31 December

2024);

• Increased Adjusted EPS by 116% from 28.7p to 62.1p

(31 December 2020 – 31 December 2024);

• Increased our Dividend Per Share 23% from 19.5p to 24.0p

(31 December 2020 – 31 December 2024);

Uppermost in our mind, as a Committee, is the responsibility to

ensure that the Remuneration Policy reflects the quantum and

flexibility required to retain and attract exceptional talent in an

extremely competitive global market.

The principles that have supported our approach to talent attraction

and retention are outlined on page 120. In transitioning from a UK-

based holding company to a global platform that serves institutional,

educational, and corporate clients, we benchmarked compensation

against companies of similar complexity and scale to Pearson. In

consideration of this data when developing the 2023 Policy, the

Committee purposefully avoided relying on a single market reference

point. Instead, we considered diverse benchmarks drawn from

FTSE 41-100 companies, comparable US-listed firms, and a talent

market group (CEO-1 roles in large technology, communications, and

consumer discretionary companies, in particular those that are at the

forefront of transformative, innovative plays within technology and

digital, based on the Nasdaq 100 Index). Further information on our

approach and the data points, expanded from disclosure in previous

years, is set out on page 123.

The revisions to the Directors’ Remuneration Policy also addressed

the Committee’s desire to reinforce Pearson’s pay-for-performance

philosophy, by rebalancing the package to favour ‘at risk’ performance

base pay. The Committee considered this to create better alignment

with the interests of Pearson’s shareholders, further detail is set out

on page 124.

Shareholder engagement

The Committee welcomed the support received from over two-thirds

of our shareholders for the Directors’ Remuneration Report (‘DRR’)

at the 2024 AGM, and were also pleased to receive support from

IVIS and Glass Lewis. It was naturally disappointing that a significant

minority voted against the DRR. We noted that the resolution was

opposed by ISS, which we believe influenced a significant portion of

the vote against, in particular from smaller institutional holders who

may follow this recommendation for their voting.

Our established commitment to an ongoing dialogue with our

shareholders on executive pay means we have engaged extensively in

recent years, as described in more detail on page 121.

As a result, we have a good understanding of how our shareholders

view our approach, which reflects a truly global business with many

shareholders and most of its staff and revenues in the US.

Nevertheless, in light of the outcome at the 2024 AGM, a further

engagement exercise was pursued. This helped ensure we captured

as much feedback about the voting outcomes as possible, and

extended the opportunity for shareholders to provide new or

further feedback on Pearson’s approach to remuneration more

generally. We also expanded the coverage of our engagement from

previous programmes, writing out to our largest 100 shareholders,

representing c.83% of the share register. We have also met with

certain proxy agencies and other representative groups.

We received written feedback from 11 shareholders and the

Committee Chair participated in eight meetings. A number of

shareholders’ responses indicated that they felt there was no need

for engagement given the extensive previous consultations on

Pearson’s current remuneration arrangements.

The feedback we received reconfirmed that while there is a diverse

range of views in our shareholder base with respect to executive

pay, the majority of those we engaged with during this most recent

exercise supported our overall approach and recognised that a

disconnect between pay and performance, pay and market position,

and pay and calibre of talent, created a substantial risk around talent

attraction and retention at Pearson.

Some shareholders, as well as ISS, retained concerns around the

implementation of the increases to variable incentive opportunities

introduced under the Directors’ Remuneration Policy approved by

shareholders at the 2023 AGM. In addition, there was a perception

from ISS that implementing the new Policy immediately after

shareholder approval at the 2023 AGM, represented a failure to

adequately engage with and listen to shareholders, in light of that

vote in 2023.

While acknowledging this view, the Committee notes that we had

consulted widely in developing the Policy in early 2023 and had

refined the final proposals in response to the feedback received.

We were aware, at that time, and as recognised in the Directors’

Remuneration Report for that year, that there remained a range

of views among our shareholder base, such that a significant vote

against the Policy was a possibility.

Following shareholder approval at the 2023 AGM, the Policy was

implemented—not only because it garnered majority support, but

also because the Board maintained that aligning compensation with

performance, market position, and talent calibre was essential for

competing in the global talent market.

Annual report and accounts 2024 Pearson plc 114

Strategic report Governance report Financial statements Other information

This strategic decision ultimately serves the best interests of the

company and its diverse stakeholders.

Critically, that view was subsequently reaffirmed later in 2023 when

the new Policy allowed us to appoint Omar Abbosh as

our new Chief Executive. Without the new Policy, we do not believe

we would have been able to compete to hire a leader

of Omar’s calibre.

During the most recent shareholder engagements, a number of

investors informed us that as a result of this engagement, they

fully understand the talent markets Pearson competes in (and by

extension the rationale underpinning the current Remuneration

Policy) but had a desire to see greater detail on the markets we look

at. To reflect this feedback, we have further expanded information

on our talent markets and approach to pay positioning (see page

123). Some shareholders also wished to better understand the

shareholder engagement we have undertaken and how this

influenced the Policy proposals, which is discussed in more detail on

page 121.

Finally, our engagement revealed that some investors held ongoing

concerns over the legacy Co-Investment Plan for the previous Chief

Executive and did not vote in favour of the Directors’ Remuneration

Report because of this. The Co-Investment Plan has now concluded,

there are no further tranches to vest and no new awards will be

made (because it was not retained as part of the current Directors’

Remuneration Policy we introduced in 2023).

Pearson remains committed to a constructive and positive

relationship with all its shareholders and their advisers and will

continue to engage widely going forward, including later this year in

respect of the development of our next Remuneration Policy.

Incentive outcomes for 2024

2024 AIP

The strong financial and strategic progress delivered in 2024

resulted in a formulaic AIP outcome for Executive Directors of 64%

of maximum, with outperformance against the stretching targets

for adjusted operating profit and free cash flow, and achievement

between threshold and target on sales. Overall, the Committee

was satisfied that the formulaic outcome was reflective of the

performance achieved.

2022 LTIP

The LTIP granted in 2022 will vest in 2025 at 75.3% of maximum,

principally reflecting strong underlying performance in earnings per

share (‘EPS’) and Net ROIC as well as exceptional upper quartile TSR

over the three-year performance period. The shares vesting will

remain subject to a two-year holding period.

Further details of the performance outcome for both incentive

awards are set out on page 128.

Looking forward to 2025

Salaries for 2025

Salary increases for the Executive Directors are reviewed by the

Committee using a framework consistent with that used in the wider

business. For 2025, the CEO's salary will increase by 2.2%, in line

with the average increase in the wider UK workforce, and noting his

recent appointment. For the CFO, the Committee reflected on Sally

Johnson’s continued strong performance since her appointment in

2020, the broad remit of her role which extends into key operational

areas of the business, and the critical role she played in supporting a

highly successful CEO transition last year. Sally has played a key part

in Pearson’s strong and sustained performance (referred to earlier),

growing the market capitalisation of the business above £8.6bn,

with Pearson now positioned within the top 50 largest companies by

market capitalisation in the UK. Against this performance backdrop,

the Committee noted that the salary level had fallen below a

sufficiently market competitive level for an individual of Sally’s skills,

experience and track record, in similarly sized companies. Taking

all of the above into account, the Committee agreed that the CFO’s

salary should be increased to £620k. We recognise that this increase

of 8% is above the average workforce increase, but it is appropriate

to reflect the factors above and is consistent with the framework

used to take into account performance and market relativity for salary

reviews in the wider business. Salary increases will take effect from

1 April 2025.

Performance framework

Each year, the Committee carefully reviews the performance measure

framework to ensure it optimally aligns with key priorities from the

forward looking strategy which will drive long-term shareholder value.

Having undertaken this review for 2025, the Committee is proposing

to update the strategic metrics within both the AIP and LTIP to

directly align with our new Integrated Strategic Framework outlined

in detail on page 12. In particular, growing value in our core business

(Assessments & Verification), while also delivering on our strategic

growth pillars and delivering the greatest positive social impact by

enabling even more transformative learning journeys.

In the AIP, we will update the 10% strategic component to include 5%

which is based on renewal rates within Assessments & Verification

and 5% based on growth in our enterprise customer base. These

are core annual priorities for the Group as we execute on the

strategic framework.

For the LTIP, 10% will be based on driving long-term growth in our

core business, with a metric based on new business growth in

Assessments & Verification.

These new strategic metrics will replace measures on representation

and carbon reduction. Our strong and sustained progress in these

areas means we are comfortable in re-prioritising the strategic

metrics in our incentives. We will continue to keep the metrics and

weightings under regular annual review. No other changes will be

made to the AIP or LTIP metrics, which remain closely aligned to

financial performance and shareholder value.

Target-setting for 2025

One of Pearson’s key remuneration principles, which applies across

the whole organisation, centres on pay for performance, and this is

actively considered by the Committee when determining targets.

For 2025, in line with established practice, a robust target-setting

process has been followed considering Pearson’s strategic plan as

well as other relevant factors such as analyst consensus, to reflect

market expectations.

As reflected by our past track record, the Committee has a very

strong focus on paying only when performance is delivered and

setting truly stretching performance targets. The approach taken this

year is no different. For both EPS and return on capital (‘ROC’), the

stretch of the performance ranges has been increased compared to

last year’s awards. For maximum vesting, performance must be well

in excess of current market guidance, with shareholder returns in the

upper quartile against both the FTSE 100 and the S&P 500.

Remuneration across Pearson

Pearson’s remuneration principles are consistent across the

organisation and designed to support our culture and to attract

and retain talent to execute our strategy. Many of the features

of our Directors’ Remuneration Policy apply more broadly; for

example, over half of all Pearson employees (c.10,000 employees)

participated in the AIP during 2024, which was funded based on

similar performance measures as those used for Executive Directors.

The Committee receives regular updates on talent matters and wider

workforce considerations and rigorously considers the approach to

reward throughout the organisation when determining executive

remuneration.

Pearson is committed to a transparent and positive relationship with

all its stakeholders and will continue to engage widely as appropriate

going forward. I would like to thank shareholders for their continued

support at the 2025 AGM in relation to our 2024 Directors’

Remuneration Report.

Sherry Coutu CBE

Chair of Remuneration Committee

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Annual Report on Remuneration - ‘At A Glance’

Revenue

£3,552m

3% underlying growth on

prior year*

Adj. operating

profit

£600m

10% underlying growth

on prior year

Free cash flow

£490m

27% growth on prior year

Adjusted EPS

62.1p

7% growth on prior year

Return

on capital

10.5%

+0.2% on prior year

Dividend

per share

24.0p

6% increase

on prior year

3 year Total

shareholder return

+125%

+101% on a 3m average

basis to 31 Dec 2024

AIP outcome LTIP outcome

Executive Director shareholdings

Strategic highlights

— 130 basis points of margin expansion to 16.9%

— Strong cash performance, with free cash flow of £490m, and announcement of new £350m share buyback

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

Schools

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

0% 100% 200% 300% 400% 500% 600% 700% 800% 900% 1000% 1100%

Shareholding guideline

Omar Abbosh

Sally Johnson

Adjusted operating proﬁtAdjusted operating proﬁtAdjusted operating proﬁt

SalesSalesSales

Free cash ﬂowFree cash ﬂowFree cash ﬂow

Strategic measureStrategic measureStrategic measure

ThresholdThresholdThreshold

WeightingWeightingWeighting

£555m£555m£555m

£3,535m£3,535m£3,535m

£390m£390m£390m

+2%+2%+2%

£655m£655m£655m

£3,765m£3,765m£3,765m

£475m£475m£475m

+10%+10%+10%

Final outcomeFinal outcomeFinal outcome

£565m£565m£565m

£3,560m£3,560m£3,560m

£400m£400m£400m

+5%+5%+5%

TargetTargetTarget

40%40%40% 28%28%28%

13%13%13%

20%20%20%

3%3%3%

64%64%64%

30%30%30%

20%20%20%

10%10%10%

MaxMaxMax

% of total% of total% of total

£600m£600m£600m

+2.3%+2.3%+2.3%

£3,552m£3,552m£3,552m

£490m£490m£490m

Adjusted operating proﬁt

Sales

Free cash ﬂow

Strategic measure

Threshold

Weighting

£555m

£3,535m

£390m

+2%

£655m

£3,765m

£475m

+10%

Final outcome

£565m

£3,560m

£400m

+5%

Target

40% 28%

13%

20%

64%

30%

20%

10%

Max

% of total

£600m

+2.3%

£3,552m

£490m

33.3%

28.0%

14.0%

33.3%

75.3%

66.2p

8.0%

Upper Quartile

57.2p

7.0%

50.2p

6.0%

Median

62.1p

6.5%

Upper Quartile (rank 9 of 92)

Threshold

Weighting

Final outcome

Max

% of total

Target

Adjusted EPS*

Net ROIC

Relative TSR vs FTSE 100

* Excluding the OPM and Strategic Review businesses.

* The Adjusted EPS target range was adjusted to reflect the impact on the vesting outcome of share buybacks

over the performance period.

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Strategic report Governance report Financial statements Other information

Summary of our Directors’ Remuneration Policy

The table below provides a summary of our Directors’ Remuneration Policy. The full Directors’ Remuneration Policy, as approved at the 2023 AGM, is available on the Governance page of the company’s

website at https://plc.pearson.com/sites/pearson-corp/files/pearson/our-company/Governance/governance-downloads/remuneration-policy-2023.pdf

Base salary

• Base salaries reflect level, role, skills, experience, the competitive market and individual contribution.

• Base salaries are normally reviewed annually, consistent with the framework used to take into account performance and market relativity for salary reviews in the wider

business, with any increases normally in line with typical increases awarded to other Group employees.

Allowances and

benefits

• Reflects the local competitive market and may include travel-related, health-related and risk-related benefits as well as any other benefits provided to the majority of

employees.

• The Committee may introduce other benefits if it is considered appropriate to do so.

Retirement benefits

• Employees in the UK, including Executive Directors, are eligible to join the Money Purchase 2003 Section of the Pearson Pension Plan.

• The Committee has discretion to put in place retirement benefit arrangements in line with local market practice.

• Executive Directors, who opt out of the pension, can receive a cash allowance of up to 16% of base salary, in line with the maximum company contribution as a

percentage of salary that UK employees of a similar age are eligible to receive.

Annual incentive plan

• Maximum opportunity of 300% of salary.

• Based on the achievement of annual business goals and strategic objectives, with financial metrics accounting for at least 75% of total opportunity.

• Payout of 25% of maximum for threshold performance with 50% payable for on-target performance.

• Discretion to adjust formulaic outcome where this does not reflect underlying performance.

• Awards paid fully in cash except where shareholding guidelines have not been met where a bonus deferral applies.

• Malus and clawback provisions apply.

Long-term incentive

plan

• Maximum opportunity of 450% of base salary.

• Based on the achievement of financial targets (e.g. earnings per share and a return measure), shareholder returns (e.g. relative total shareholder return) and

strategicobjectives.

• Payout of 20% of maximum for threshold performance.

• Discretion to adjust formulaic outcome where this does not reflect underlying performance.

• Awards are subject to a post-vesting holding period of two years.

• Malus and clawback provisions apply.

Shareholding

guidelines

• Current in-employment guidelines of:

• 450% for the Chief Executive

• 300% for the Chief Financial Officer

• Post-employment shareholding guidelines apply.

Chair and NED fees

• To attract and retain high-calibre individuals, with appropriate or industry-relevant skills, by offering market-competitive fee levels.

• The Chair and Deputy Chair are paid a single fee for all responsibilities.

• The Non-Executive Directors are paid a basic fee, with Committee Chairs, members of the main Board Committees, and, if relevant, the Senior Independent Director paid

an additional fee to reflect their extra responsibilities.

• The Chair, Deputy Chair and Non-Executive Directors receive no other pay or benefits, except for reimbursement of expenses, and do not participate in incentive plans.

• A minimum of 25% of the Chair, Deputy Chair and Non-Executive Directors’ basic fee is paid in shares.

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Base salary

Salaries with effect from 1 April 2025:

• Omar Abbosh – £1,022,000 (2.2% increase)

• Sally Johnson – £620,000 (8% increase)

Salary increases for the Executive Directors are reviewed by the Committee using a

framework consistent with that used in the wider business. The CEO's salary will increase in

line with the average increase in the wider UK workforce, and noting his recent appointment.

For the CFO, the Committee reflected on Sally Johnson’s continued strong performance since

her appointment in 2020, the broad remit of her role which extends into key operational

areas of the business, and the critical role she played in supporting a highly successful

CEO transition last year. Sally has played a key part in Pearson’s strong and sustained

performance, growing the market capitalisation of the business above £8.6bn, with Pearson

now positioned within the top 50 largest companies by market capitalisation in the UK.

Against this performance backdrop, the Committee noted that the salary level had fallen

below a sufficiently market competitive level for an individual of Sally’s skills, experience

and track record, in similarly sized companies. Taking all of the above into account, the

Committee agreed that the CFO’s salary should be increased to £620k. We recognise

that this increase of 8% is above the average workforce increase, but it is appropriate to

reflect the factors above and is consistent with the framework used to take into account

performance and market relativity for salary reviews in the wider business.

Long-term incentive Plan

Awards will be made as follows:

• 450% of base salary for the Chief Executive

• 300% of base salary for the Chief Financial Officer

Performance will be measured over the three-year period to 31 December 2027, with any shares

vesting subject to an additional two-year holding period. Performance measures and targets for the

2025 award are as follows:

% of total Threshold Maximum

Adjusted EPS 30% 67.0p 85.0p

Return on Capital 30% 10.5% 14.0%

Relative TSR 30% Median Upper quartile

Strategic Measure – Assessments &

Verification: New Business Growth 10% £90m £105m

Note 1: Vesting is on a straight-line basis between Threshold and Maximum.

Note 2: 2025 LTIP targets have been set at a USD:GBP exchange rate of 1.25.

Note 3: Relative TSR will be assessed half against the FTSE 100 and half against the S&P 500. Companies within

financial services, energy, basic materials, utilities and healthcare sectors will be excluded from both TSR groups.

Chair and NED fees

Fees remain unchanged and will be as follows:

• £500,000 for the Chair

• £175,000 for the Deputy Chair and Senior Independent Director

• £70,000 as the base fee for Non-Executive Directors

Audit Committee

Remuneration

Committee

Nomination

& Governance

Committee

Reputation &

Responsibility

Committee

Committee Chair £27,500 £27,500 £15,000 £15,000

Committee member £15,000 £10,000 £8,000 £8,000

Implementation in 2025

Benefits

• Travel, health and risk-related benefits in line with Policy

• Pension cash allowance of 16% of base salary

Annual Incentive Plan

Maximum opportunities of:

• 300% of base salary for the Chief Executive

• 200% of base salary for the Chief Financial Officer

For 2025, the following balanced mix of financial and strategic measures will be used to

determine any payout. As in previous years, we will apply a financial underpin to the strategic

measures. The performance targets are considered commercially sensitive and will be

disclosed in full retrospectively in next year’s report.

Adjusted operating profit Sales Free cash flow Strategic measures*

40% 30% 20% 10%

* Split equally between ‘Enterprise Skilling – number of key enterprise customers’ & ‘Assessments &

Verification – rates of renewal’.

In line with the Policy, a third of any bonus paid will be deferred into shares for two years if

an Executive Director has not met their shareholding guideline.

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Strategic report Governance report Financial statements Other information

Adjusted operating profit

Free cash flow conversion

Return on capital

Financial objectives

Assessments & Verification: Driving performance in the core

business

Enterprise Skilling: targeted market expansion and medium-

term growth vectors

Strategic objectives

Adjusted EPS

Adjusted operating profit

Free cash flow

Return on capital

Businesses rate of renewal

and new business growth

Number of key

enterprise customers

2025 AIP 2025 LTIP

Sales

Sustainable profitable growth

Total shareholder return (TSR)

Alignment of performance framework to Pearson’s strategy

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Remuneration principles

Pearson’s remuneration principles govern pay for the whole organisation. We have developed remuneration arrangements for our

Executive Directors with these principles in mind.

Aligned to

longer-term

strategy

Reward is linked

to achieving

Pearson’s

longer-term

strategy,

growth and

sustainability

Pay for

performance

Remuneration

framework and

outcomes are

aligned with

performance

Market

competitive

Pay levels

are market

competitive,

based on role,

grade and

contribution,

and ensure

individuals are

fairly rewarded

in line with the

market

Targeted

differentiation

We operate

targeted

differentiation of

reward across

our employees,

linked to talent

and performance

management

Tailored

Our approach

to reward

is tailored

in certain

circumstances

to address a

specific market/

business

need, and is

consistent with

our underlying

reward

philosophy

One part

of the

employee

value

proposition

Remuneration

is one part of

our broader

employee value

proposition –

and not the only

reason to work

for Pearson

Discretion framework

When determining performance outcomes, the

Remuneration Committee has the ability to adjust payments

up or down if it believes that the outcome does not reflect

underlying financial or non-financial performance or if such

other exceptional factors warrant doing so. In making this

determination the Remuneration Committee applies the

following framework:

What is the formulaic outcome considering

performance versus existing targets and

underpins?

Is this consistent with overall company

performance?

Is this consistent with the wider stakeholder

experience?

Are there any significant culture, ESG or

operational issues to be considered?

Are there any one-off or exceptional events to

be taken into consideration?

Are outcomes appropriate or should an

adjustment be considered?

Our Directors’ Remuneration Policy and its implementation

supports our company purpose of ‘helping people realise the

life they imagine through learning’, our strategy and ultimately

the delivery of long-term sustainable value for all stakeholders,

including our shareholders.

In developing the Directors’ Remuneration Policy, the Committee

had due regard to the principles outlined within the UK

Corporate Governance Code as it applied to 2024:

• Pearson’s remuneration principles, as set out above, align

with our culture and position us as an employer of choice,

so we can continue to attract and retain the right talent, and

support our strategy. We recognise that remuneration is only

one part of Pearson’s employee value proposition.

• Our executive remuneration framework is designed to

be simple, with total remuneration made up of fixed and

performance-linked elements, supporting different strategic

objectives.

• Our remuneration framework and outcomes are designed to

be aligned with performance:

• Performance measures for the AIP and LTIP are key to

achieving the Group’s strategic objectives. The Committee

reviews performance measures annually to ensure they

incentivise appropriate management behaviours and goals.

• The Committee carries out a robust target-setting process

each year, considering Pearson’s strategic plan, as well

as analyst consensus to reflect market expectations. This

results in stretching, yet achievable, AIP and LTIP targets.

• Maximum awards under the AIP and LTIP are capped and

clearly disclosed in our Directors’ Remuneration Policy

alongside indications of how the Directors’ Remuneration

Policy may apply in various performance scenarios.

• When determining payouts, the Committee considers

whether the outcome reflects overall company performance

and the experience of stakeholders over the period,

including shareholders and colleagues. If not, it has the

discretion to adjust outcomes.

• The Committee is mindful of reputational and other risks

when implementing the Directors’ Remuneration Policy and

determining outcomes for Executive Directors and senior

management. Pearson has safeguards in place, such as malus

and clawback provisions and a two-year LTIP holding period,

as well as robust shareholding guidelines, which extend post-

employment.

• Before signing off the Directors’ Remuneration Report,

the Committee reviews drafts and inputs to clarify our

disclosures. As described on page 121, the Committee

engaged extensively with shareholders on the current

Directors’ Remuneration Policy to give them the opportunity to

feed into the decision-making process.

Directors’ Remuneration Report continued

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Strategic report Governance report Financial statements Other information

Shareholder engagement

We have a well-established commitment to ongoing dialogue with our shareholders on executive compensation. The following table summarises the extensive engagement we have undertaken in recent

years in support of the development and implementation of our current Remuneration Policy:

Pre-2023 AGM Policy consultation Post-2023 AGM Follow up Pre-2024 AGM Post-2024 AGM Follow up

May to July ‘22: Initial soundings taken from top

seven shareholders (c.45% of share register) to

inform thinking and refine Policy proposals.

Nov ‘22 to Jan ‘23: Wider consultation with top

30 shareholders (c.65% of share register) and

outreach to major proxy agencies (ISS, IA,

Glass Lewis).

In total, 25 separate meetings or online

discussions on the proposals. Overall, engaged

with or received feedback from approximately

55% of the share register.

In response to the vote on the Policy at the 2023 AGM,

a further engagement exercise was initiated with the

top 50 shareholders (c.72% of the share register) to

provide an opportunity for shareholders to offer any

additional views.

Only three shareholders (comprising c.3% of the share

relatively small number of responses, with the majority

welcoming the offer to engage, but noting that there

was no requirement to do so given the extensive

consultation prior to the 2023 AGM.

In advance of the

2024 AGM, we

wrote to the top 20

shareholders offering

an opportunity to

provide feedback or

ask any questions on

the 2023 DRR.

In response to the vote on the DRR at the 2024 AGM, we initiated a

further engagement programme.

We expanded the engagement to cover Pearson’s largest 100

shareholders representing c.83% of the share register.

We received written feedback from eleven shareholders and the

Committee Chair participated in eight meetings with shareholders.

Again, a number of shareholders responded to state that there was no

need for engagement given the extensive previous consultations on

Pearson’s current remuneration arrangements.

We also met with certain proxy agencies and other representative groups.

Impact on Policy development

The extensive feedback from shareholders

directly impacted a number of key aspects of

the final Policy:

• Retention of standard UK bonus and

LTIP structure

• Introduction of annual bonus deferral

• Increase to shareholding guidelines

• Reduction to the LTIP threshold vesting

• Choice and calibration of

performance measures

While we encountered a diverse range of

views in our shareholder base, the majority of

those we engaged with, including almost all of

our largest shareholders, were supportive of

our approach.

Key themes from subsequent engagements

• As shown above, we have continued to broaden our engagement in each subsequent outreach to help ensure we can capture as much feedback as

possible, while also extending the opportunity for shareholders to provide any new or further feedback on Pearson’s approach.

• There remains a diverse range of views in our shareholder base. However, the majority of those we engaged with support our overall approach and

recognised that a disconnect between pay and performance, pay and market position, and pay and calibre of talent, created a substantial risk around

talent attraction and retention at Pearson.

• We recognise that some shareholders (as well as ISS) retained concerns around the implementation of the increases to incentive opportunities

introduced under the Directors’ Remuneration Policy approved by shareholders at the 2023 AGM. In addition, there was a perception from ISS that

implementing the new Policy immediately after the AGM represented a failure to adequately engage with and listen to shareholders in light of the voting

outcome. While acknowledging this view, the Committee notes that we had consulted widely in developing the Policy in early 2023 and had refined

the final proposals in response to the feedback received. We were aware, at that time, and as recognised in the Directors’ Remuneration Report for

that year, that there remained a range of views among our shareholder base, such that a significant vote against the policy was a possibility. Following

shareholder approval at the 2023 AGM, the Policy was then implemented on the basis that it was supported by the majority of shareholders, and

because the Board continued to believe that it was critical to compete in the global talent market and ultimately in the best interests of the Company

and its many stakeholders to reduce the risk created by the disconnect between pay and performance, pay and market position, and pay and calibre

of talent. Critically, that view was subsequently reaffirmed later in 2023 when the new Policy allowed us to appoint Omar Abbosh as our new Chief

Executive. Without the new Policy, we do not believe we would have been able to compete to hire a leader of Omar’s calibre.

• During the most recent shareholder engagements, a number of investors informed us that as a result of this engagement, they fully understand the talent

markets Pearson competes in (and by extension the rationale underpinning the current Remuneration Policy) but had a desire to see greater detail on the

markets we look at. To reflect this feedback, we have further expanded information on our talent markets and approach to pay positioning (see page 122).

• Finally, some investors held ongoing concerns over the legacy Co-Investment Plan for the previous Chief Executive and felt unable to vote in favour of

the Directors’ Remuneration Report in part because of this. The Co-Investment Plan has now concluded, with no further tranches to vest and no new

awards to be made (it was not retained as part of the current Remuneration Policy we introduced in 2023).

The Committee would like to thank all those shareholders that have engaged with us during this period. We are committed to an open and ongoing dialogue. Our next Directors’ Remuneration Policy will be

submitted for approval at the 2026 AGM, and we look forward to engaging again on our proposals in advance of that.

Annual report and accounts 2024 Pearson plc 121

Strategic report Governance report Financial statements Other information

Market context for remuneration at Pearson –

our talent markets

Our approach to executive reward is shaped by the characteristics of our business and the talent

markets in which we operate.

Pearson is a global company and over two-thirds of our revenue comes from the US, which remains

a key growth market. This gives us greater US exposure than almost all other UK-listed companies.

Additionally, more than half of Pearson’s employees and over 60% of the Pearson Executive

Management team (PEM) are based in the US. A relatively small proportion of our employees and

executive team are based in the UK (just 15% of the PEM as of 31 December 2024, down from over

half five years prior to that).

As the world’s lifelong learning company, we are committed to delivering on ourmission of helping

individuals realise the life they imagine through learning. To do this, we are leveraging the strength

of our brand and depth of our thought leadership to execute a simple but powerful strategy built

on three interconnected pillars: (i) unlocking value from our core business, (ii) driving execution

synergies, and (iii) capitalising on medium-term growth vectors.

The expertise we require to implement our strategy is increasingly found within principally US-based

large tech companies, EdTech companies or Fortune 500 companies. Our ability to recruit and retain

talent from this North American market is therefore a critical ingredient if we are to continue to

successfully deliver our strategy.

Since 2020, we have refreshed and strengthened our senior management team, with almost all

of the senior hires in that period coming from US companies or global companies that offer ‘US

style’ packages. For example, in this period we have recruited PEM talent from companies such as

Accenture, Delta Air Lines, Hologic Inc, SEMA4, The Trade Desk and Warner Media.

The same theme can be seen at Executive Director level. We recruited Omar Abbosh from Microsoft,

one of the world’s largest multinational technology companies. Our previous Chief Executive had led

the transformation of the Walt Disney’s international business into a digital-first business, and was

based in the US.

In addition to talent market considerations, the composition of our shareholder base is also

changing. North American shareholders now account for around a quarter of our share register, a

proportion which has nearly doubled since 2017.

40%

50%

60%

70%

10%

20%

30%

90%

80%

FTSE 100 (excl. Pearson and Inv. Trusts) Pearson

Proportion of revenue from US geographic segment (FTSE 100)

Based on the publicly disclosed geographic revenue segment, which covers the US or Americas as a

proportion of disclosed Group revenue. Data for Pearson is based on the year ending 31 December

2024. Data is shown for the FTSE 100 excluding investment trusts, and was sourced from

Datastream and published annual reports as at January 2025.

Data as of 31 December 2024

Senior

Management

Pearson

Executive

Management

All employees

52% 19% 29%

62% 23%15%

59% 22% 19%

US UK Rest of World

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 122

Strategic report Governance report Financial statements Other information

Market reference points

As disclosed previously, the Committee’s approach to

market data which informed the development of the current

Remuneration Policy was to consider multiple reference points

to provide a rounded view of overall positioning, reflecting both

the talent markets described above and our status as a UK-listed

company. In calibrating the current Policy, the Committee did not

seek to align with any one specific market reference point and

was mindful of the need to ensure an appropriate balance. The

three reference points considered were:

1. FTSE 41-100. UK-listed companies of a broadly similar financial

size to Pearson, represented by companies ranked between

41 and 100 in the FTSE 100 using 12-month average market

capitalisation (Pearson is ranked 57

on this basis). The group

recognises Pearson’s status as a constituent of the FTSE 100

index, but has no direct relevance to our primary

talent markets.

2. US-listed companies of a broadly similar financial

size and sector. This group includes US-listed companies

of comparable revenue to Pearson (c.$3-4bn) in the

broadcasting, interactive media and software sectors. It

represents what Executive Directors would be paid in broadly

similar US-listed companies, although again it does not directly

align to Pearson’s talent market.

3. Talent market group. This group comprises companies

which are more closely aligned to our key talent market and

strategic ambitions – large technology, communications and

consumer discretionary companies, in particular those that

are at the forefront of transformative, innovative plays within

technology and digital, based on the Nasdaq 100 Index. This

group was only used for the Chief Executive role at Pearson

and, recognising that many of these companies are materially

larger than Pearson, the market data considered was for roles

reporting into the CEO (primarily heads of business units

or subsidiary businesses) and not the CEO role itself. This is

analogous to Omar Abbosh’s previous executive role

at Microsoft.

£20m

£25m

£15m

£30m

FTSE 41-100 US size group Talent market group

(CEO-1 roles)

£0m

£5m

£10m

Salary Bonus LTIP Median Upper and Low Quartiles

Pearson

The constituent companies within each reference point are

shown in the table on page 124.

The market data for these three reference points is summarised

in the charts below for the Chief Executive and for each key

element of remuneration. The data highlights the stark difference

in pay practices between the UK and US markets. While it

is acknowledged that the package for the Chief Executive is

positioned towards the upper end of market practice from a

UK perspective, it remains materially below the market range

for CEO roles in US-listed companies of broadly similar size

and sector. The Pearson package allows us to be competitive

in Pearson’s primary talent market, as reaffirmed by our

appointment of Omar Abbosh in 2024.

We will continue to refine and evolve our approach to market

data as we head into the next Remuneration Policy review.

We are committed to transparently sharing our approach with

shareholders, both in consultation and in the relevant Directors’

Remuneration Report, and always welcome feedback.

Chief Executive – positioning of total target compensation (£) against each reference point

Annual report and accounts 2024 Pearson plc 123

Strategic report Governance report Financial statements Other information

Evolution of CEO pay mix

Directors’ Remuneration Report continued

Evolution of CEO Pay Mix

The revisions to the Directors’ Remuneration Policy addressed the Committee’s desire to reinforce Pearson’s pay-for-performance

philosophy, by rebalancing the package to favour ‘at risk’ performance based pay.

The Committee considered this to create better alignment with the interests of Pearson’s shareholders:

At Target

• The CEO’s fixed pay reduced from 29% to 21% of the overall

pay mix

• Variable pay increased from 71% to 79% of the overall pay

mix and is earned only for delivering against stretching

performance targets.

• 52% of the package is delivered through share based pay, with

a five year time horizon (from date of grant to the end of the

post-vesting holding periods).

£4m

£5m

£3m

£6m

£7m

£8m

£9m

£10m

£0m

71%

47%

24%

29%

52%

27%

21%

49%

32%

19%

52%

35%

13%

£1m

£2m

2020 Policy

Target

Maximum

2023 Policy

(current)

2020 Policy 2023 Policy

(current)

Fixed Pay AIP LTIP

79%

81%

87%

1. FTSE 41-100 2. US-listed companies of a broadly similar financial

size and sector

3. Talent market group (CEO-1 roles)*

Admiral, Airtel Africa, AutoTrader, B&M Retail, Beazley,

Berkeley Holdings, British Land, Bunzl, Centrica, Coca

Cola HBC, ConvaTec, Croda International, DCC, Diploma,

DS Smith, EasyJet, Endeavour Mining, Entain, Frasers

Group, Fresnillo, Halma, Hargreaves Lansdown, Hikma

Pharmaceuticals, Hiscox, Howden Joinery, IMI, Informa,

International Consolidated Airlines, Intertek, J Sainsbury, JD

Sports Fashion, Kingfisher, Land Securities, Londonmetric

Property, M&G, Marks & Spencer, Melrose Industries,

Mondi, Persimmon, Phoenix Group, Rentokil Initial,

Rightmove, Sage, Schroders, Severn Trent, Smith & Nephew,

Smiths Group, Spirax Sarco, Taylor Wimpey, Unite, United

Utilities, Vistry, Weir, Whitbread, and WPP.

AMC Networks, Electronic Arts, Graham Holdings, IAC/

InterActiveCorp, IHeartMedia, Lionsgate Entertainment

corp, Match Group, Nexstar Media, Nortonlifelock, Peloton

Interactive, Pinterest, Roku, Sinclair Broadcast Group, Sirius

XM Holdings, and Snap inc.

Adobe Inc, Advanced Micro Devices Inc, Airbnb Inc, Alphabet

Inc, Amazon.com Inc, Analog Devices Inc, Applied Materials Inc,

ASML Holding NV, Automatic Data Processing Inc, Broadcom

Inc, Cadence Design Systems Inc, Cognizant Technology

Solutions Corp, Comcast Corp, Fiserv Inc, Intel Corp, Intuit

Inc, KLA Corp, Lam Research Corp, Marvell Technology Inc,

MercadoLibre Inc, Microchip Technology Inc, Microsoft Corp,

Okta Inc, Qualcomm Inc, Tesla Inc, T-Mobile US Inc.

*This group was only used for the Chief Executive role at Pearson

and, recognising that many of these companies are materially larger

than Pearson, the market data considered was for roles reporting

into the CEO (primarily heads of business units or subsidiary

businesses) and not the CEO role itself.

At Maximum

• The CEO’s fixed pay reduced from 19% to 13% of the overall

pay mix

• Variable pay increased from 81% to 87% of the overall pay

mix and is earned only for delivering against stretching

performance targets.

• 52% of the package is delivered through share based pay, with

a five year time horizon (from date of grant to the end of the

post-vesting holding periods).

Notes:

Current CEO's base salary has been applied to the 2020 Policy for comparability.

Target performance assumes 50% payout for AIP and LTIP under both the

2020 and 2023 Policies.

No share price growth assumptions are included in any scenarios.

Annual report and accounts 2024 Pearson plc 124

Strategic report Governance report Financial statements Other information

The Committee takes seriously its responsibilities concerning the oversight of remuneration policies and practices for the wider organisation. Our remuneration principles as set out on page 120 are

consistent for all our colleagues, and applied depending on business need, level and geography.

The key difference in our executive remuneration, compared to the approach to remuneration across our workforce, is that remuneration for our Executive Directors is more heavily weighted towards variable

pay and linked to delivering strategic objectives.

Approach to remuneration across Pearson

Base salary

Set considering economic factors, competitive market rates, roles, skills, experience and individual performance.

Allowances

and benefits

Reflect the local labour market in which colleagues are based and may include healthcare and well-being benefits.

Retirement

benefits

Reflect local market practice.

Pearson colleagues in the UK may participate in the same underlying pension arrangements as the Executive Directors, subject to certain age bands and legacy arrangements. The

main contribution plan (Money Purchase 2003) allows employees to pay in between 3% and 8% of their basic salary, depending on their age. Pearson then contributes double that

amount, paying in between 6% and 16% of salary.

Annual

incentives

Over half of all Pearson employees, around 10,000 colleagues, participate in an Annual Incentive Plan, which is funded based on similar performance measures to the Executive

Directors. Several other colleagues (c. 1,700) participate in alternative cash-based annual bonuses, such as sales incentive and commission plans, based on performance targets and

profit-shares where required for legislative reasons.

incentives

We believe in the importance of aligning the interests of management and our shareholders by delivering a significant proportion of total remuneration in the form of share incentives.

Approximately 700 colleagues (4% of all employees) participate in the annual Long-Term Incentive Plan grant, selected based on their role, performance and potential; with other

awards being made from time to time on an ad hoc basis to certain roles based on market need.

Awards for our Executive Directors are made solely in the form of performance shares. However, our SVPs and Executive Management team have an equal mix of both performance

shares (subject to broadly the same performance conditions as the Executive Directors) and restricted shares, recognising prevailing practice in the markets in which we compete for

talent. At other levels, awards are typically made in restricted shares only.

Executive Directors

Executive

Management Team

SVPs

VPs and Directors

100% performance shares

100% restricted shares

50% performance shares 50% restricted shares

In addition to our Long-Term Incentive Plan, all colleagues have the opportunity to become shareholders and owners of the Company and share in the value they help to create

through participation in savings-related share acquisition programmes. Under our ‘Save For Shares’ plan and ‘Employee Stock Purchase Plan’, employees can buy Pearson shares

at a discount (20% discount for ‘Save For Shares’ and a 15% discount for the ‘Employee Stock Purchase Plan’, in line with the maximum discounts permitted by HMRC and the IRS

respectively). Around one in five eligible employees currently save to purchase Pearson shares via our employee share plans, contributing to a strong culture of share ownership.

Workforce remuneration at Pearson

Annual report and accounts 2024 Pearson plc 125

Strategic report Governance report Financial statements Other information

During the year, the Committee received reports from the Chief Executive and Chief Human

Resources Officer on pay and conditions across Pearson, and on the recruitment and retention

experience. We took these into account when determining executive remuneration. We have

established channels in place to inform our colleagues and help them understand how executive

remuneration and wider pay policies are aligned. Views and sentiment expressed by colleagues

around matters relating to reward and culture are taken into consideration by the Remuneration

Committee when determining pay for senior management. In order to give more colleagues the

opportunity to meet the Board, including the members of the Remuneration Committee, three in-

person sessions with employees in our major employee hubs in London and in the US in Hoboken,

New Jersey and Durham, North Carolina, were held.

These facilitated meaningful interactions between Board members and various groups of employees

to hear their thoughts, feedback andquestions.

Board members engaged on a variety of topics, including the strategic review process and the clarity

of our strategic priorities, the plans for execution and the pace of transformation required, and the

importance of company culture. See page 85 for more on how the Board engages with employees.

The Committee also considers Pearson’s gender pay gap and ethnicity pay gap in Great Britain in

light of our reporting requirements, as well as Pearson’s CEO pay ratio. Pearson continues to review

and update its policies and practices relating to the hiring, retention, and development of women, in

line with market practices and applicable UK rules.

Sharing in success

Pearson’s remuneration principles are consistent across the organisation and are designed to support our culture, and to make Pearson an employer of choice, able to attract and retain talent to

execute our digital-first strategy. Many of the features of our Directors’ Remuneration Policy apply more broadly, and we believe that all our people should have the opportunity to benefit when the

Company does well. In particular:

— 2024 was another year of solid performance for the business and this was reflected in the level of funding under the AIP. As noted on page 125, over half of all Pearson employees (c.10,000

employees) benefitted from participating in an AIP during 2024.

— Similarly, all eligible colleagues, including Executive Directors, can participate in savings-related share acquisition programmes that are not subject to any performance conditions. Around one

in five of eligible employees save to purchase discounted Pearson shares via our employee share plans. At the most recent maturity of our ‘Save For Shares’ plan in 2024, the average gain for a

participant was c.£3,400 – allowing those who participated to benefit from the shareholder value they have helped to create over the previous three years.

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 126

Strategic report Governance report Financial statements Other information

Remuneration Report for 2024

Certain parts of this report have been audited, as required by the Large and Medium-sized

Companies and Groups (Accounts and Reports) Regulations 2008 as amended. The tables subject to

audit are marked with an asterisk.

Executive Director ‘single-figure’ remuneration*

The remuneration received by Executive Directors for the financial years ended 31 December 2024

and 31 December 2023 is set out below. The Committee considers that the Directors’ Remuneration

Policy operated as intended during 2024.

Omar Abbosh

£000s

Sally Johnson

£000s

Andy Bird

$000s

2024 2023 2024 2023 2024 2023

Base salary 982 – 570 552 25 1,282

Allowances and benefits 37 – 16 16 9 466

Retirement benefits 157 – 91 88 4 205

Total fixed pay 1,176 – 677 656 38 1,953

Annual incentives 1,878 – 735 947 48 3,299

Long-term incentives – – 1,565 1,373 3,223 3,669

Buy-out award

13,276 – – – – –

Co-investment award – – – – – 5,298

Total variable pay 15,154 – 2,300 2,320 3,271 12,266

Total remuneration 16,330 – 2,977 2,976 3,309 14,219

1. Omar Abbosh was appointed Chief Executive on 8 January 2024.

2. Andy Bird stepped down as Chief Executive and as an Executive Director on 7 January 2024 and retired from

Pearson on 31 March 2024. The amounts shown above for fixed pay and annual incentive in respect of 2024

reflect his services as an Executive Director. Andy Bird was paid in USD.

3. The full value of Omar Abbosh’s buy-out award is included in the single-figure of remuneration for 2024 as

required by the disclosure regulations. However it comprises elements that will not be recieved until 2025 and

2026, therefore a total remuneration figure including only those elements received in respect of 2024 has also

been included below for greater transparency. See page 129 for full detail of Omar Abbosh’s buy-out awards.

Supplementary Disclosure - Omar Abbosh’s 2024 Remuneration

The single-figure table above reflects the statutory basis for disclosure, but the figure set out below better

represents Omar Abbosh’s 2024 remuneration, including the awards that he has received to date.

Omar Abbosh

£000s

Total remuneration (excl. buy-out only receivable in 2025 and 2026) 7,645

Notes to single-figure table*

Allowances and benefits

Travel benefits comprise car allowance and reimbursements of a taxable nature resulting from

business travel and engagements. Health benefits comprise healthcare, health assessment and

dental care. Risk-related benefits comprise life and other insurance policies. Accommodation

benefits for Andy Bird relate to a contribution towards the rental costs of an apartment in New York

used for business purposes. In addition to these allowances and benefits, Executive Directors may

also participate in company benefit or policy arrangements that have no taxable value and/or are

available to all other colleagues in the same location. Sally Johnson’s life cover is arranged under an

excepted policy on a similar basis to other employees who were affected by the lifetime allowance

and have opted out of the Pearson Pension Plan.

Retirement benefits and entitlements*

Omar Abbosh and Andy Bird (until his retirement) received a payment in lieu of pension at 16% of

their base salary, in line with the pension provision for UK employees of a similar age.

From 1 October 2022, Sally Johnson began receiving payments in lieu of pension at 16% of her base

salary, in line with the pension provision for UK employees of a similar age. Prior to October 2022,

Sally Johnson was a member of the Final Pay section of the Pearson Pension Plan, where the pension

accrual rate was 1/60

of pensionable salary per annum, restricted to the Plan’s earnings cap. No

further accrual will apply.

Details of the Executive Directors’ pension-related benefits in 2024 are as follows:

Omar Abbosh

£000s

Sally Johnson

£000s

Andy Bird

$000s

Other allowances in lieu of pension 157 91 4

Accrued pension at 31 December 2024 – 69 –

Note 1: Other allowances in lieu of pension represent the cash allowances paid.

Note 2: The accrued pension at 31 December 2024 is the deferred pension at 30 September 2022

(the date accrual for the pension ceased) revalued to 31 December 2024 in line with the Plan rules. It

relates to the pension payable from the UK Plan. Normal retirement age is 62.

Annual report and accounts 2024 Pearson plc 127

Strategic report Governance report Financial statements Other information

Annual Incentive Plan (AIP) – outcome for 2024*

The 2024 AIP was based on a mix of financial (90% weighting) and strategic measures (10%

weighting). The following table summarises the performance targets (presented on a consistent basis

to the actual results, considering portfolio and currency movements) and performance against these

targets, which resulted in a 64% of maximum payout.

Performance range Payout

% of total

Threshold

(25%)

Target

(50%)

Maximum

(100%) Actual results

% of max

bonus

opportunity

Adjusted operating profit 40% £555m £565m £655m £600m 28%

Sales 30% £3,535m £3,560m £3,765m £3,552m 13%

Free cash flow 20% £390m £400m £475m £490m 20%

Strategic measures 10% See below 3%

100% 64%

The targets and outcomes for the strategic measure are shown in the table below.

Strategic priority Weighting Threshold Target Maximum Outcome

Invest in diverse

pipeline and increase

BIPOC/BAME

representation at all

manager levels

10% 2% increase

+ maintain overall

gender

parity as an

underpin

increase

10%

increase

Achieved 2.3%

increase &

maintained

overall gender

parity

Note 1: Internal Audit provided an independent assessment of the result for the Committee.

For Omar Abbosh and Andy Bird, their maximum AIP opportunity for 2024 was pro-rated to reflect

the period of service during the bonus year. For Andy Bird, the value shown in the single-figure table

represents the portion of the year for which he served as an Executive Director.

Long-term Incentive Plan (LTIP) – vesting outcome for 2024*

The 2022 LTIP award was subject to performance conditions assessed to 31 December 2024.

Performance targets were partially met, resulting in the award vesting at 75.3% of maximum. Vested

shares are subject to an additional two-year holding period.

The targets and performance against these targets are as follows:

Performance range Vesting

% of

total Threshold Stretch Maximum

Payout at

threshold

Payout

stretch

Payout at

maximum Actual

Percentage

achievement

Percentage

of total

award

Adjusted

EPS 33.3% 50.2p 57.2p 66.2p 15% 65% 100% 62.1p 84.1% 28.0%

Net

ROIC 33.3% 6.0% 7.0% 8.0% 15% 65% 100% 6.5% 41.9% 14.0%

Relative

TSR 33.3% Median –

Upper

quartile 25% – 100%

Ranked

9 out

of 92 100% 33.3%

100% Total 75.3%

The Adjusted EPS target range was adjusted to reflect the impact on the vesting outcome of share

buybacks over the performance period.

Relative TSR was measured against the constituents of the FTSE 100 at the start of the performance

period.

Omar Abbosh did not participate in the 2022 LTIP. For Andy Bird, as described in last year’s report, his

award was reduced pro-rata to reflect time served during the performance period. The value shown

in the single-figure table represents the proportion of the vested award for which he served as an

Executive Director.

The 2022 LTIP award was granted on 3 May 2022, based on a share price of 779.4p (five-day average

to 3 May 2022). The value of the 2022 LTIP included in the single-figure table is based on a three-

month average ADR / share price to 31 December 2024 of $14.91 / 1166p. The LTIP values include

dividend equivalent amounts of $225k and £86k for Andy Bird and Sally Johnson respectively. The

proportion of the 2022 LTIP attributable to share price growth is $880k for Andy Bird and £490k for

Sally Johnson. The Remuneration Committee did not exercise discretion in respect of this share price

appreciation.

The value of the 2021 LTIP reported in last year’s report for Andy Bird ($3,482k) and Sally Johnson

(£1,310k) were estimates based on the three-month average ADR / share price to 31 December 2023

($11.63 / 937.0p). The actual values of the 2021 LTIP on the 1 May 2024 vesting date were $3,669k and

£1,373k, respectively, based on a closing ADR / share price of $12.07 / 967.4p.

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 128

Strategic report Governance report Financial statements Other information

Long-term incentives awarded in 2024*

The following LTIP awards were granted during the year:

Director

Date

of award

Vesting

date

Number

of shares

Face

value

Face value

(% of base

salary)

Value for threshold

performance

(% of maximum)1

Performance

period

Omar

Abbosh 1 May 2024 1 May 2027 455,614 £4,500,008 450% 20%

1 Jan 24 –

31 Dec 26

Sally

Johnson 1 May 2024 1 May 2027 174,348 £1,722,000 300% 20%

1 Jan 24 –

31 Dec 26

The face value was determined using a share price of 987.68p, representing the five-day average

up to and including 30 April 2024, which is the same as the approach used for the wider employee

population.

The performance measures and targets for this award are as follows:

% of total

Threshold

(20% vesting)

Maximum

(100% vesting)

Adjusted EPS (in FY26) 30% 63p 82p

Return on Capital 30% 10.3% 13.0%

Relative TSR 30% Median Upper quartile

ESG – Gender diversity 5% Improve gender

representation at leadership

levels overall vs 2023

(VP and above)

Achieve gender parity at

leadership levels in aggregate

(VP and above)

ESG – Carbon reduction 5% 4% reduction vs 2023 13% reduction vs 2023

Note 1: Vesting is on a straight-line basis between Threshold and Maximum.

Note 2: 2024 LTIP targets have been set at an USD:GBP exchange rate of 1.27.

Note 3: Relative TSR will be assessed half against the FTSE 100 and half against the S&P 500.

Companies within financial services, energy, basic materials, utilities and healthcare sectors will be

excluded from both TSR groups.

Note 4: The carbon reduction targets are based on the long-term trajectory required to meet

(Threshold) or substantially exceed (Maximum) our 2030 carbon reduction ambitions. Performance

will be measured from a baseline of 2023, therefore requiring incremental performance to that

delivered to date.

The Committee reserves the right to adjust pay-outs up or down before they are released, if it

believes the vesting outcome does not reflect underlying financial or non-financial performance, or

for other exceptional factors. In making any adjustments, the Committee are guided by the principle

of aligning shareholder and management interests.

Any shares vesting based on performance to 31 December 2026 will be subject to an additional two-

year holding period to 1 May 2029.

Chief Executive buy-out awards*

As disclosed in last year’s report, a buy-out was required to compensate Omar Abbosh for

remuneration he forfeited as a result of resigning from his previous role at Microsoft. The buy-out

was made on a ‘like-for-like’ basis in accordance with Pearson’s Remuneration Policy.

The buy-out consisted of two elements:

• A cash payment in lieu of his forfeited annual cash bonus covering the six months between the

end of his prior employer’s financial year end and the beginning of his eligibility for Pearson’s AIP

in 2024; and

• Awards of restricted shares of equivalent value to the forfeited Microsoft shares which vest

annually in three equal tranches aligned with the timing of the forfeited awards. The vesting

of each tranche is conditional on continued employment as at each vesting date. Any shares

which vest will be subject to a holding period lasting up to the vesting date of the final tranche

(31 December 2026). The award also attracts dividend equivalent awards.

Director

Date of

award

Number

of shares Face value Vesting date

End of holding

period for vested

awards

Omar Abbosh –

buy-out award

9 April

2024 1,378,942 £13,026,724

One-third on 31 December 2024

One-third on 31 December 2025

One-third on 31 December 2026

31 December

2026

The face value in the table was determined using a Pearson share price of 944.69p.

The value disclosed in the single-figure table therefore comprises the following:

Cash payment in respect of forfeited annual cash bonus £249k

Grant date value of the restricted share awards £13,027k

Value disclosed in single-figure table £13,276k

The Committee acknowledges the relative size of the buy-out award in the context of the UK market,

but notes that it is equivalent to the value Omar would have received had he continued in his

previous role at Microsoft, which is reflective of the quantum of remuneration packages (particularly

long-term equity) for global leaders of Omar’s calibre in companies in our key talent markets.

Additionally, the restricted share award creates immediate alignment with shareholders and fulfils

Omar’s shareholding guidelines.

Annual report and accounts 2024 Pearson plc 129

Strategic report Governance report Financial statements Other information

Directors’ interests in shares and value of shareholdings*

Shareholding guidelines

Executive Directors are expected to build up a substantial shareholding in Pearson, in line with our

policy of encouraging widespread employee share ownership, and to align the interests of Executive

Directors and shareholders.

Following the significant increases introduced by the current Directors’ Remuneration Policy, the

current shareholding guideline is 450% of base salary for the Chief Executive and 300% of base

salary for the Chief Financial Officer.

Shares that count towards these guidelines include any shares held unencumbered by an Executive

Director, their spouse and/or dependent children, plus any shares vested but held pending release

under a share plan, and any shares unvested but not subject to future performance conditions (on a

net of tax basis). Executive Directors have five years from their date of appointment to the Board to

reach the guideline. Once the guideline is met, it is not re-tested, other than when shares are sold.

As part of the year-end process, the Committee assessed the level of shareholding against the

guideline in accordance with our shareholding policy and confirmed that the guideline was met for

both Omar Abbosh and Sally Johnson. At the point of standing down from the Board, Andy Bird had

also met his shareholding guideline.

Executive Directors are expected to retain their current shareholding guideline (or actual

shareholding if lower) for two years following stepping down as an Executive Director. This guideline

does not apply to shares purchased by the Executive Director.

Shareholding guidelines do not apply to the Chair, Deputy Chair and Senior Independent Director

and Non-Executive Directors. However, a minimum of 25% of the Chair, Deputy Chair and Senior

Independent Director and Non-Executive Directors’ basic fee is paid in Pearson shares, which the

Chair, Deputy Chair and Senior Independent Director and Non-Executive Directors have committed

to retain for the period of their directorships.

Directors’ interests

The share interests of the Directors and their connected persons are:

Director

Current

shareholding

(ordinary

shares)

Conditional

shares subject

to performance

Conditional

shares subject

to employment

only

Total number

of ordinary and

conditional

Shareholding as

% of salary

Shareholding

requirement

met?

Executive

Directors

Omar Abbosh 384,853 458,780 925,681 1,769,314 1021% Yes

Sally Johnson 178,482 554,285 – 732,767 363% Yes

Andy Bird* 1,010,568 1,316,087 – 2,326,655 1165% Yes

Non-Executive

Directors

Omid Kordestani 91,857 – – – - n/a

Sherry Coutu CBE 18,891 – – – - n/a

Alison Dolan 1,678 – – – - n/a

Alex Hardiman 2,124 – – – - n/a

Esther Lee 5,083 – – – - n/a

Graeme Pitkethly 17,248 – – – - n/a

Tim Score* 81,102 – – – - n/a

Annette Thomas 5,568 – – – - n/a

Lincoln Wallen 20,561 – – – - n/a

Note 1: Share interests are shown as at 31 December 2024 or where marked with an asterisk at the

date of stepping down from the Board.

Note 2: Ordinary shares include both ordinary shares listed on the London Stock Exchange and

American Depositary Receipts (ADRs) listed on the New York Stock Exchange.

Note 3: Conditional shares subject to performance means unvested shares, which are subject to

performance conditions and continuing employment for a pre-defined period. This includes the LTIP

awards granted in 2022, 2023 and 2024. For Andy Bird, these shares were pro-rated for time served

on cessation of his employment.

Note 4: Conditional shares subject to employment only means unvested shares, which are subject to

a holding period and / or continued employment only.

Note 5: There have been no other changes in the interests of any Director between 31 December

2024 and 7 March 2025, being the latest practicable date prior to the publication of this report.

Note 6: Shareholding as a % of salary is based on a three-month average ADR / share price to

31 December 2024 of $14.91 / 1166p.

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 130

Strategic report Governance report Financial statements Other information

Chair, Deputy Chair and Senior Independent Director and Non-

Executive Director remuneration in 2024*

The remuneration paid to the Chair, Deputy Chair and Senior Independent Director and Non-

Executive Directors for the financial years ended 31 December 2024 and 31 December 2023 is set

out below.

Director

£000s

2024 2023

Total fees

Taxable

benefits Total Total fees Taxable benefits Total

Omid Kordestani 500 22 522 500 34 534

Tim Score 57 3 60 175 5 180

Sherry Coutu CBE 106 8 114 106 11 116

Alison Dolan 92 1 93 47 - 47

Alex Hardiman 93 9 102 45 8 54

Esther Lee 88 7 95 88 16 104

Graeme Pitkethly 152 6 158 105 5 110

Annette Thomas 103 6 109 101 12 113

Lincoln Wallen 93 6 99 93 15 108

Total 1,284 68 1,352 1,260 106 1,367

Note 1: A minimum of 25% of the Chair, Deputy Chair and Senior Independent Director and Non-

Executive Directors’ basic fee is paid in shares.

Note 2: Taxable benefits refer to travel, accommodation and subsistence expenses incurred while

attending Board meetings during the period that were paid or reimbursed by the company, and

which HMRC deems taxable in the UK.

Note 3: Tim Score stepped down from the Board on 26 April 2024.

Note 4: Some figures and subtotals add up to different amounts than the totals due to rounding.

Payments to former Directors*

As disclosed last year, Andy Bird was entitled to be paid for all accrued, unused paid time off upon

his retirement, which amounted to $179,000. There were no other payments to former Directors

in 2024, other than those set out in the single-figure table and disclosed in a previous Directors’

Remuneration Report.

Payments for loss of office*

Andy Bird stepped down as Chief Executive and as an Executive Director of Pearson plc on 7 January

2024 and retired from Pearson on 31 March 2024. The remuneration arrangements in respect of

his retirement were disclosed in detail in last year’s report. There were no other payments for loss of

office made to or agreed for Directors in 2024.

Service contracts

Terms and conditions of our Directors’ appointments are available for inspection at our registered

office during normal business hours and at the AGM. So that appropriate arrangements can be

made for shareholders wishing to inspect documents, we request that shareholders contact the

Company Secretary by email at companysecretary@pearson.com in advance of any visit to ensure

that access can be arranged.

The Executive Directors have notice periods in their service contracts of 12 months from the

company and six months from the Executives.

The Deputy Chair and Senior Independent Director and Non-Executive Directors serve Pearson

under letters of appointment, which are renewed annually and do not have service contracts. The

Deputy Chair and Senior Independent Director and Non-Executive Directors’ letters of appointment

do not contain provision for notice periods or for compensation if their appointments are

terminated. The Chair’s appointment may be terminated on 12 months’ notice.

Executive Directors’ Non-Executive directorships

Our current Executive Directors hold the following external commitments: Sally Johnson is a Non-

Executive Director of Rentokil Initial plc and Chair of its Audit Committee.

Annual report and accounts 2024 Pearson plc 131

Strategic report Governance report Financial statements Other information

Historical performance and remuneration

Total shareholder return performance

Set out below is Pearson’s total shareholder return (TSR) performance, relative to the FTSE All-

Share index, on an annual basis over the 10-year period 1 January 2015 to 31 December 2024. We

chose this comparison because the FTSE All-Share represents the broad market index within which

Pearson shares are traded. TSR is a measure of returns a company provides for shareholders,

reflecting share price movements and assuming reinvestment of dividends. Opposite this is a

summary of the single figure of total remuneration, and variable pay outcomes, for the Chief

Executive over the same 10-year period.

For additional context, the same data is presented over the period from 1 January 2020, broadly

corresponding with Pearson’s transformation from an analogue to a digital-first business.

Total Shareholder Return since 2014

100

120

140

160

180

200

Pearson TSR FTSE All Share TSR

20242014 2015 2016 2017 2018 2019 2020 2021 2022 2023

LSEG Workspace Datastream

Total Shareholder Return since 2020

100

150

200

250

300

Pearson TSR FTSE All Share TSR

Dec-24Jan-20 Dec-20 Dec-21 Dec-22 Dec-23

Source: LSEG Workspace Datastream

This graph shows the value, by 31 December 2024, of £100 invested in Pearson on 1 January 2020,

compared with the value of £100 invested in the FTSE All-Share on the same date.

John

Fallon

Andy

Bird

Omar

Abbosh

2015 2016 2017 2018 2019 2020 2020 2021 2022 2023 2024 2024

Total

remuneration

(single figure,

£000s) 1,263 1,518 1,758 3,094 1,616 855 334 5,167 6,856 11,419 2,588 16,330

Annual

incentive (%

of maximum) Nil 24% 44% 45% Nil Nil N/A 63% 76% 85% 64% 64%

Long-term

incentive (%

of maximum) Nil Nil Nil 42% 33% Nil N/A N/A N/A 85% 75% –

Note 1: Total remuneration is as reflected in the single-total figure of remuneration table.

Note 2: Annual incentive is the actual annual incentive received by the incumbent as a percentage of

maximum opportunity.

Note 3: Long-term incentive is the payout of performance-related share awards where the year

shown is the final year of the performance period for the purposes of calculating the single total

figure of remuneration.

Note 4: The single-figure remuneration for Andy Bird has been converted using the average

USD:GBP exchange rate for the relevant period.

Dilution and use of equity

Awards under Pearson’s various share plans can be satisfied using existing shares bought in the

market, treasury shares or newly issued shares. For restricted stock awards under the LTIP, we

would expect to use market-purchased shares. There are limits on the amount of new-issue equity

that can be used: In any rolling 10-year period, no more than 10% of Pearson equity will be issued, or

be capable of being issued, under all Pearson’s share plans, and no more than 5% of Pearson equity

will be issued, or be capable of being issued, under executive or discretionary plans.

The current dilution from all Pearson plans, executive or discretionary, and shares held in trust is as

follows:

Dilution 2024

All Pearson plans 2.4%

Executive or discretionary plans 0.4%

Shares held in trust 0.1%

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 132

Strategic report Governance report Financial statements Other information

Comparative information

The following information provides additional context regarding Directors’ total remuneration.

Relative percentage change in remuneration of Directors and employees

The following table sets out the year-on-year percentage change in base salary/fees, allowances and benefits and annual incentives in respect of all Directors during the year, compared to the average

percentage change for all employees of Pearson. The figures for all Directors are calculated based on remuneration received in the relevant year as set out in the tables on page 127 and page 131. For base

salary/fees, we have annualised part-year figures for this disclosure. Part-year allowances and benefits are not annualised and are excluded from the table.

While the Committee reviews base pay for the Executive Directors relative to Pearson’s broader employee population, local practices drive our approach to benefits, and we determine eligibility depending on

level and individual circumstances, which do not lend themselves to comparison.

2024 2023 2022 2021 2020

Base

salary/fees

Allowances

and benefits

Annual

Incentives

Base

salary/fees

Allowances

and benefits

Annual

Incentives

Base

salary/fees

Allowances

and benefits

Annual

Incentives

Base

salary/fees

Allowances

and benefits

Annual

Incentives

Base

salary/fees

Allowances

and benefits

Annual

Incentives

Average employee

5% 12% -5% 2% 6% 22% 4% 8% 16% 4% 17% 38% 1% 6% 9%

Executive Directors

Omar Abbosh – – – – – – – – – – – – – – –

Sally Johnson 3% 0% -22% 4% 1% 37% 2.5% 0% 24% 1% – – – – –

Andy Bird 0% – – 3% 4% 74% 0% 20% 21% 0% – – – – –

Chair and Non-Executive Directors

Omid Kordestani 0% -35% – 0% 78% – – – – – – – – – –

Tim Score 2% -51% – 7% 73% – 25% – – 13% – – 0% -20% –

Sherry Coutu CBE 0% -24% – 6% 119% – 9% – – 5% – – 5% – –

Alison Dolan 14% - – – – – – – – – – – – – –

Alex Hardiman 19% -39% – – – – – – – – – – – – –

Esther Lee 0% -52% – 3% 122% – – – – – – – – – –

Graeme Pitkethly 44% 22% – 8% 23% – 5% – – 1% – – 8% – –

Annette Thomas 2% -51% – 12% 102% – 7% – – – – – – – –

Lincoln Wallen 0% -60% – 0% 154% – 0% – – 1% – – 1% -97% –

Note 1: The average employee pay figure is impacted by changes in headcount (17,024 employees for 2024 vs 18,360 in 2023). Actual merit increase budgets for 2024 were 3% in the UK and 3.5% in the US.

Note 2: Changes in Non-Executive Director fees during the year are a result of changes in Committee Chairs and membership. Allowances and benefits for the Chair and Non-Executive Directors refer to

travel, accommodation and subsistence expenses incurred while attending Board meetings that were paid or reimbursed by the company, and which HMRC deems taxable in the UK. In 2020 and 2021, the

impact of the coronavirus pandemic meant that there were very few in-person Board meetings, and as such the benefits figures for these years were negligible. This also meant that for 2022 there is no

comparative percentage, as the value in the prior year was zero.

Annual report and accounts 2024 Pearson plc 133

Strategic report Governance report Financial statements Other information

Chief Executive to employee pay ratio

The table below illustrates the ratio of Chief Executive to employee pay for 2024. We use the single

total figure of remuneration, compared to the full-time equivalent total reward of employees whose

pay is ranked at the 25

, 50

and 75

percentiles (as identified by the gender pay gap methodology)

in Great Britain’s (GB) workforce.

Year Method

Chief Executive pay ratio

percentile 50

percentile 75

percentile

2024 B: Gender pay gap methodology 534.3 354.9 228.4

2024

B. Gender pay gap methodology

(Omar Abbosh 2024 remuneration) 289.0 192.0 123.5

2023 B: Gender pay gap methodology 304.0 209.9 148.5

2022 B: Gender pay gap methodology 214.3 181.3 117.2

2021 B: Gender pay gap methodology 150.1 145.0 88.4

2020 B: Gender pay gap methodology 42.5 31.9 19.5

2019 B: Gender pay gap methodology 65.9 47.2 36.0

• We used GB gender pay gap data from April 2024 to identify employees at the 25

, 50

and 75

percentiles, and analysed data for employees around each quartile figure to ensure there were no

anomalies.

• Using the gender pay gap data to identify the employees at each pay quartile gives a general

representation of the relevant employee population at the year end, and is the most practicable

methodology given the timing of the disclosure and determination of remuneration outcomes for

the wider workforce.

• For the employees at each pay quartile, we calculated total remuneration on a similar basis to

the Chief Executive’s single figure. We based base salary, pension and benefits on full-year figures

taken from payroll. Annual bonus figures are based on the relevant manager recommendations

and relate to performance in 2023. None of the employees at the 25

, 50

or 75

percentile had

share awards vesting in 2024.

• Total remuneration figures for the 25

, 50

and 75

percentile employees are: £35,407, £53,304

and £82,835. The respective base salaries are: £32,000, £43,000 and £61,800.

• We compared total remuneration for each of the identified employees, calculated with reference

to 31 December 2024, compared to the sum of Omar Abbosh and Andy Bird’s 2024 remuneration

as per the single-figure table on page 127.

• For 2024, in order to maximise the comparability of the figures, we have also provided the

single-figure for Omar Abbosh, with only the value of the buy-out award released to him in 2024

included. As the full value of the buy-out award is required to be included in the single-figure for

2024 (despite awards only being released to Omar Abbosh over the three-year period from 2024

to 2026), using the headline sIngle-figure numbers necessarily results in a higher pay ratio than if

calculated by reference to the remuneration actually received by the CEO in respect of 2024. In

addition, the statutory basis for the 2024 pay ratio requires the figure for CEO remuneration to be

the sum of Omar Abbosh and Andy Bird’s 2024 remuneration, which is not representative of the

pay received by any single individual.

• A significant proportion of the Chief Executive’s pay is linked to performance and, in respect of any

LTIP award, share price performance. Therefore, the Chief Executive’s pay can vary significantly

year-on-year, based on company performance. The increase in the pay ratio for 2024 is driven

by the requirement to add the remuneration received by Andy Bird and Omar Abbosh together,

along with the inclusion of the full grant date value of Omar Abbosh’s buy-out award in the 2024

single-figure, which, as noted above is not reflective of remuneration actually received.

• The median pay ratio is consistent with our wider policies on employee pay, reward and

progression. The Committee is focused on ensuring that remuneration for all Pearson colleagues

reflects our need to attract and retain the right talent for our digital future.

Relative importance of pay spend

The Committee considers Directors’ remuneration in the context of the company’s allocation and

disbursement of resources to different stakeholders. Adjusted operating profit measures Pearson’s

ability to reinvest, and dividends are an important element of our return to shareholders.

All figures in £ 2024 2023

Headline change

£m %

Adjusted operating profit 600 573 27 5%

Dividends 156 155 1 1%

Dividend per share 24.0p 22.7p 1.3p 6%

Share buybacks

318 186 132 71%

Total wages and salaries

1,188 1,252 (64) (5)%

Note 1: The Board approved a £300m share buyback programme in September 2023 with an

extension of £200m announced 1 March 2024.

Note 2: Wages and salaries include continuing operations only and include Directors. Average

employee numbers for continuing operations for 2024 were 17,024 (2023:18,360), hence the year-

on-year negative movement in overall spend. Further details are set out in Note 5 to the financial

statements on page 174.

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 134

Strategic report Governance report Financial statements Other information

The Remuneration Committee in 2024

Role Name Title

Chair Sherry Coutu CBE Independent Non-Executive Director

Members Alison Dolan* Independent Non-Executive Director

Esther Lee Independent Non-Executive Director

Tim Score* Deputy Chair and SID

Annette Thomas Independent Non-Executive Director

Internal attendees Omid Kordestani Chair

Omar Abbosh Chief Executive

Sally Johnson Chief Financial Officer

Ali Bebo Chief Human Resources Officer

Paul Christian Senior Vice President, Reward

Graeme Baldwin Company Secretary

External advisers Alvarez & Marsal

*Alison Dolan joined the Committee on 1 April 2024 and Tim Score stepped down on 26 April 2024.

No individual is present when their own remuneration is discussed.

Advisers to the Remuneration Committee

During 2024, the Remuneration Committee received advice from Alvarez & Marsal (“A&M”), our

independent Remuneration Committee advisers. A&M were appointed by the Committee in 2023,

following a formal tender process. A&M advises the Committee on market trends and developments,

incentive plan design and target setting, investor engagement and other general executive

remuneration matters. For provision of these services in 2024, A&M were paid fees of £102,250

(excluding VAT), based on time spent. A&M does not provide any other services to Pearson. A&M

is a member of the Remuneration Consultants’ Group and adheres to its Code of Conduct. The

Committee is satisfied that A&M’s advice was objective and independent. The Committee believes

that the A&M engagement partner and team do not have any connections with Pearson or its

Directors that may impair its independence.

Terms of reference

The Committee’s full charter and terms of reference are available on the Governance page of our

website. A summary of the Committee’s responsibilities is set out on the right of this page. The terms

of reference reflect the provisions of the UK Corporate Governance Code.

Committee responsibilities

Determine and review policy

Determine and regularly review the remuneration policies for the Executive Directors, Presidents

and other members of Pearson’s Executive Management team who report directly to the

Chief Executive. These policies include base salary, annual and long-term incentives, pension

arrangements, any other benefits and termination of employment. When setting the Remuneration

Policy, the Committee considers remuneration practices and related policies for all employees.

Shareholder engagement

Ensure Pearson engages with its shareholders and shareholder representative bodies on the

Remuneration Policy and its implementation.

Review and approve implementation

Regularly review the implementation and operation of the Remuneration Policy, and approve the

individual remuneration and benefits packages of Pearson’s Executive Management team, including

Executive Directors.

Approve performance-related plans

Approve the design of, and determine targets for, any performance-related pay plans operated by

the Group for Pearson’s Executive Management team, and approve total payments to be made

under such plans.

Set termination arrangements

Advise and decide on general and specific remuneration arrangements in connection with the

termination of employment of Pearson’s Executive Management team, including Executive

Directors.

Determine Chair’s remuneration

Delegated responsibility for determining the Chair’s remuneration and benefits package.

Appoint remuneration consultants

Appoint and set the terms of engagement for any remuneration consultants who advise the

Committee, and monitor the cost of such advice.

Talent, retention and gender pay gap

Review updates from management on talent, retention and gender pay gap.

Workforce remuneration

Have oversight of workforce remuneration, policies and practice for the wider organisation.

Annual report and accounts 2024 Pearson plc 135

Strategic report Governance report Financial statements Other information

Remuneration Committee meeting focus during 2024

During the year, the Committee undertook the following activities:

• Reviewed and approved annual and long-term performance and payouts to Executive Directors

and senior management for 2023.

• Reviewed and approved incentive arrangements for Pearson, and how these will apply to

Executive Directors and senior management in 2024.

• Approved the 2023 Directors’ Remuneration Report.

• Engaged extensively with shareholders in advance of and following the 2024 AGM to understand

the views of shareholders (further detail on this is set out on page 121).

• Reviewed and considered all feedback received from shareholder engagement exercises as part of

the Committee’s discussions and considered ongoing shareholder engagement strategy.

• Received updates on Pearson’s financial performance and progress against strategic measures.

Noted and reviewed the status of in-flight incentives.

• Received updates on pay and conditions across Pearson, and took these into account when

determining executive remuneration.

• Noted updates on corporate governance, including a review of the 2024 AGM remuneration

reporting season, and anticipated areas of focus in 2025.

• Reviewed Pearson’s UK gender and ethnicity pay gap disclosures and noted actions to address the

respective gaps.

• Noted the activity of the Standing Committee on operating Pearson’s equity-based reward

programmes and noted Pearson’s use of equity for employee share plans.

• Evaluated the Remuneration Committee’s effectiveness and reviewed the Committee’s Terms of

Reference.

Committee performance review

The Committee undertakes an annual process to review its performance and effectiveness. For 2024,

the Committee performance review was conducted by way of a tailored questionnaire. The process

sought views on an anonymous basis from Committee members, the Chief Executive and Chair

of the Board, together with other key contributors to the Committee, including the Chief Financial

Officer, Chief Human Resources Officer, SVP Reward and external adviser. Topics covered in the

performance review included the effectiveness of the Committee, the Committee’s oversight of key

areas within its remit, the quality of papers and meeting discussions and the relationships between

the Committee and management.

Overall, the Committee was considered to be operating effectively with appropriate meeting

focus, papers produced to a good standard and an open atmosphere for high quality discussions,

challenge and debate. The composition of the Committee is appropriate and includes the necessary

skills. The review recognised the quality of the process to appoint Alvarez & Marsal as independent

advisers to the Committee and the positive impact they have on meeting discussions and the

development of the remuneration strategy. There was acknowledgement of the ongoing focus

needed on the evolution of the company’s strategy and business model and how this impacts

remuneration discussions and decisions. In 2025, the Committee will continue to focus on ensuring

remuneration arrangements for senior management and the wider workforce support the attraction

and retention of key talent as well as the delivery of Pearson’s strategy. The Committee assesses how

its activities support and enable Pearson’s progress.

The Directors’ Remuneration Report has been approved by the Board on 13 March 2025 and signed

on its behalf by:

Sherry Coutu, CBE

Chair of Remuneration Committee

Voting on remuneration resolutions

The following table summarises votes cast for remuneration resolutions:

Votes cast for

% of votes

cast for Votes cast against

% of votes

cast against

Votes

withheld

Annual Report on Remuneration (2024 AGM) 371,925,459 69.83% 160,714,355 30.17% 211,473

Directors’ Remuneration Policy (2023 AGM) 299,899,081 53.63% 259,251,476 46.37% 223,851

Directors’ Remuneration Report continued

Annual report and accounts 2024 Pearson plc 136

Strategic report Governance report Financial statements Other information

Additional disclosures

The Directors’ report for the year ended 31 December 2024 is on

pages 68-141 of this document.

Set out below is other statutory and regulatory information that

Pearson is required to disclose in its Directors’ report.

Going concern

The Directors have confirmed that there are no material

uncertainties that cast doubt on the Group’s going concern

status and that they have a reasonable expectation that the

Group has adequate resources to continue in operational

existence beyond 30June 2026. The consolidated financial

statements have therefore been prepared on a going

concern basis.

Further details on the procedures undertaken may be found on

page 164.

Viability statement

The Board assessed the prospects of the company using the

company’s long-range plan. Viability was assessed by considering

downside scenarios. Basedon the result of these procedures

and considering the company’s strong balance sheet, the

Directors have a reasonable expectation that Pearson will be

able to continue in operation and to meet its liabilities as they fall

due over the five-year period ending 31 December 2029. Further

details may be found on page 67.

Share capital

Details of share issues and cancellations are given in note 27 to

the financial statements on page 199. The company has a single

class of shares which is divided into ordinary shares of 25p each.

The ordinary shares are in registered form. As at 31 December

2024, 666,264,831 ordinary shares were in issue. At the AGM

held on 26 April 2024, the company was authorised, subject to

certain conditions, to acquire up to 68,659,005 ordinary shares

by market purchase and to issue up to 457,726,702 ordinary

shares. Shareholders will be asked to renew these authorities,

subject to revised caps, at the AGM on 2 May 2025.

As at 10 March 2025, 2,211 record holders with registered

addresses in the United States held 27,880,480 ADRs which

represented 4.18% of the company’s outstanding ordinary

shares. Some of these ADRs are held by nominees and so these

numbers may not accurately represent the number of shares

beneficially owned in the United States.

Share buyback

On 21 September 2023, the company launched a £300m share

buyback programme, while a further £200m extension was

announced by the company on 1 March 2024. The £300m

programme completed on 7 March 2024 and approximately

32m shares were bought back and cancelled at a cost of £300m.

The nominal value of these shares, approximately £8m, was

transferred to the capital redemption reserve. The £200m

extension commenced on 8 March 2024 and completed on

8 August 2024. Under the £200m extension, approximately

20m shares were bought back and cancelled at a cost of

£200m. The nominal value of these shares, approximately £5m,

was transferred to the capital redemption reserve.

On 28 February 2025, the company announced its intention to

launch a £350m share buyback programme during 2025. The

repurchased shares will be cancelled and the nominal value of

the shares will be transferred to the capital redemption reserve.

The Board believes that the company’s strategic priorities,

combined with the disciplined approach to capital allocation, will

enable Pearson to create sustainable, long-term value for every

stakeholder.

We have set out clear capital allocation priorities as follows:

• Maintaining a strong balance sheet and solid investment-grade

credit ratings through an appropriate capital structure.

• Focused and disciplined approach to investing in the business

to accelerate growth opportunities.

• Delivering shareholder returns through a progressive and

sustainable dividend policy.

• Returning surplus cash to shareholders as and when

appropriate through buybacks or special dividends.

Major shareholders

Information provided to the company pursuant to the Financial

Conduct Authority’s Disclosure Guidance and Transparency Rules

(DTR) is published on a Regulatory Information Service and on

the company’s website.

As at 31 December 2024, the company had been notified under

DTR 5 of the following holders of significant voting rights in its

shares.

Number

of voting rights

Percentage

as at date of

notification

Cevian Capital II GP Limited 85,202,977 12.02%

BlackRock, Inc.

69,580,016 9.69%

Ameriprise Financial, Inc. and

itsgroup 33,879,475 5.08%

Artisan Partners Limited

Partnership 33,783,078 5.04%

Artemis Investment

Management LLP 35,207,368 5.00%

Libyan Investment Authority

24,431,000 3.01%

1. Includes 10,034,738 (1.38%) qualifying financial instruments to which

voting rights are attached.

2. Based on notification to the company dated 7 June 2010. We have

not been notified of any change to this holding since that date. Assets

belonging to, or owned, held or controlled on 16 September 2011 by

the Libyan Investment Authority and located outside Libya on that

date, are frozen in accordance with The Libya (Sanctions) (EU Exit)

Regulations 2020.

Between 31 December 2024 and 10 March 2025, being the

latest practicable date before the publication of this report, the

company received a further notification under DTR 5, with the

most recent position being as follows:

Number

of voting rights

Percentage

as at date of

notification

Ameriprise Financial, Inc.

and its group 32,863,820 <5.00%

Annual general meeting

The notice convening the AGM, to be held at 10:30am on Friday,

2 May 2025 at 80 Strand, London WC2R 0RL, is contained in a

circular to shareholders to be dated 27 March 2025.

Registered auditors

In accordance with section 489 of the Companies Act 2006 (the

Act), a resolution proposing the re-appointment of Ernst & Young

LLP as auditors to the company will be proposed at the AGM, at a

level of remuneration to be agreed by the Audit Committee.

Annual report and accounts 2024 Pearson plc 137

Strategic report Governance report Financial statements Other information

Additional disclosures continued

Amendment to Articles of Association

Any amendments to the Articles of Association of the company

(the Articles) may be made in accordance with the provisions of

the Act by way of a special resolution.

Rights attaching to shares

The rights attaching to the ordinary shares are defined in the

Articles. A shareholder whose name appears on the company’s

evidenced by share certificates (i.e. in certificated form) or held

electronically (i.e. uncertificated form) in CREST (the electronic

settlement system in the UK).

Subject to any restrictions below, shareholders may attend

any general meeting of the company and, on a show of hands,

every shareholder (or his/her representative) who is present at

a general meeting has one vote on each resolution and, on a

poll, every shareholder (whether an individual or a corporation)

present in person or by proxy shall have one vote for every

25p of nominal share capital held. A resolution put to the vote

at a general meeting held partly by means of electronic facility

or facilities shall, unless the chair of the meeting determines

that it shall be decided on a show of hands, be decided on a

poll. Subject to this, at any general meeting, a resolution put to

the vote at the meeting shall be decided on a show of hands,

unless before, or on the declaration of the result of, a vote on a

show of hands, a poll is demanded. A poll can be demanded by

the chair of the meeting, or by at least three shareholders (or

their representatives) present in person and having the right to

vote, or by any shareholders (or their representatives) present

in person having at least 10% of the total voting rights of all

shareholders, or by any shareholders (or their representatives)

present in person holding ordinary shares on which an aggregate

sum has been paid up of at least 10% of the total sum paid up

on all ordinary shares. At this year’s AGM, voting will again be

conducted on a poll, consistent with best practice.

Shareholders can declare a final dividend by passing an ordinary

resolution but the amount of the dividend cannot exceed

the amount recommended by the Board. The Board can pay

interim dividends on any class of shares of the amounts and

on the dates and for the periods they decide. In all cases, the

distributable profits of the company must be sufficient to justify

the payment of the relevant dividend.

The Board may, if authorised by an ordinary resolution of the

shareholders, offer any shareholder the right to elect to receive

new ordinary shares, which will be credited as fully paid, instead

of their cash dividend.

Any dividend which has not been claimed for eight years after it

became due for payment will be forfeited and will then belong to

the company, unless the Directors decide otherwise.

If the company is wound up, the liquidator can, with the sanction

of a special resolution passed by the shareholders, divide among

the shareholders in specie all or any part of the assets of the

company and can value assets and determine how the division

shall be carried out as between the shareholders or different

classes of shareholders.

The liquidator can also, with the same sanction, transfer the

whole or any part of the assets to trustees upon such trusts for

the benefit of the shareholders.

Voting at general meetings

Any form of proxy sent by the shareholders to the company

in relation to any general meeting must be delivered to the

company (via its registrars), whether in written or electronic form,

not less than 48 hours before the time appointed for holding the

meeting or adjourned meeting at which the person named in the

appointment proposes to vote.

The Board may decide that a shareholder is not entitled to

attend or vote either personally or by proxy at a general meeting

or to exercise any other right conferred by being a shareholder

if they or any person with an interest in shares has been sent a

notice under section 793 of the Act (which confers upon public

companies the power to require information with respect to

interests in their voting shares) and they or any interested

person failed to supply the company with the information

requested within 14 days after delivery of that notice.

The Board may also decide, where the relevant shareholding

comprises at least 0.25% of the nominal value of the issued

shares of that class, that no dividend is payable in respect of

those default shares and that no transfer of any default shares

shall be registered unless the shareholder is not themself in

default as regards supplying the information requested and the

transfer, when presented for registration, is accompanied by a

certificate from the shareholder in such form as the Board of

Directors may require to the effect that after due and careful

inquiry, the shareholder is satisfied that no person in default

is interested in any of the ordinary shares which are being

transferred, or the transfer is an approved transfer as defined in

the Articles, or the registration of the transfer is required by the

Uncertificated Securities Regulations 2001.

Pearson operates an employee benefit trust to hold shares,

pending employees becoming entitled to them under the

company’s employee share plans. There were 678,659 shares

held as at 31 December 2024. The trust has an independent

trustee which has full discretion in relation to the voting of such

shares. A dividend waiver operates on the shares held

in the trust.

Pearson also operates nominee shareholding arrangements

which hold shares on behalf of employees. As at 31 December

2024, there were 1,967,965 shares held in the Corporate

Sponsored Nominee account administered by Computershare

Investor Services PLC (Computershare). The beneficial

owners of shares held in the Corporate Sponsored

Nominee are invited to submit voting instructions online at

http://www.investorcentre.co.uk/eproxy. If no instructions are

given by the beneficial owner by the date specified, the trustees

holding these shares will not exercise the voting rights.

Transfer of shares

The Board may refuse to register a transfer of a certificated

share which is not fully paid, provided that the refusal does not

prevent dealings in shares in the company from taking place on

an open and proper basis. The Board may also refuse to register

a transfer of a certificated share unless: (i) the instrument of

transfer is lodged, duly stamped (if stampable) or duly certified or

otherwise shown to the satisfaction of the Board to be exempt

from stamp duty, at the registered office of the company or

any other place decided by the Board, and is accompanied by

the certificate for the share to which it relates and such other

evidence as the Board may reasonably require to show the right

of the transferor to make the transfer; (ii) it is in respect of only

one class of shares; and (iii) it is in favour of not more than

four transferees.

Annual report and accounts 2024 Pearson plc 138

Strategic report Governance report Financial statements Other information

Transfers of uncertificated shares must be carried out using

CREST and the Board can refuse to register a transfer of an

uncertificated share in accordance with the regulations governing

the operation of CREST.

Variation of rights

If at any time the capital of the company is divided into different

classes of shares, the special rights attaching to any class may be

varied or revoked either:

i. with the written consent of the holders of at least 75% in

nominal value of the issued shares of the relevant class;

ii. with the sanction of a special resolution passed at a

separate general meeting of the holders of the shares of

the relevant class.

Without prejudice to any special rights previously conferred on

the holders of any existing shares or class of shares, any share

may be issued with such preferred, deferred or other special

rights, or such restrictions, whether in regard to dividend, voting,

return of capital or otherwise as the company may from time to

time by ordinary resolution determine.

Appointment and replacement of Directors

The Articles contain the following provisions in relation to

Directors.

Directors shall be no less than two in number. Directors may be

appointed by the company by ordinary resolution or by the Board.

A Director appointed by the Board shall hold office only until the

next AGM and shall then be eligible for re-appointment.

The Board may from time to time appoint one or more Directors

to hold Executive office with the company for such period

(subject to the provisions of the Act) and upon such terms as the

Board may decide and may revoke or terminate any appointment

so made.

The Articles provide that, at every AGM of the company, every

Director shall retire from office and, unless not willing to act, be

eligible for re-appointment.

If a Director is not re-appointed, they shall, subject to the Articles,

retain office until the meeting appoints someone in their place,

or, if it does not do so, until the end of the meeting, or, if the

meeting is adjourned, the end of the adjourned meeting. Where

a Director has been appointed after notice of the annual general

meeting has been given, that Director shall retire at the next

annual general meeting of which notice is first given after their

appointment as Director.

If there is an insufficient number of appointed or re-appointed

Directors at any of the company’s annual general meetings

thus rendering the Board inquorate, all Directors shall be

automatically re-appointed only for the purposes of filling

vacancies and convening general meetings of the company

and to perform such duties as are appropriate to maintain the

company as a going concern and to enable it to comply with its

legal and regulatory obligations. The Directors are required to

convene a further general meeting of the company as soon as

reasonably practicable to allow new Directors to be appointed,

and such Directors who were not appointed at the original

general meeting shall subsequently retire.

The company may by ordinary resolution remove any Director

before the expiration of their term of office. In addition, the

Board may terminate an agreement or arrangement with any

Director for the provision of their services to the company.

Powers of the Directors

Subject to the Articles, the Act and any directions given by special

resolution, the business of the company will be managed by the

Board who may exercise all the powers of the company, including

powers relating to the issue and/or buying back of shares by the

company (subject to authorisation, and any statutory restrictions

or restrictions imposed by shareholders in a general meeting).

Directors’ indemnities

A qualifying third-party indemnity (QTPI), as permitted by the

Articles and sections 232 and 234 of the Act, has been granted

by the company to each of its Directors. Under the provisions of

the QTPI, the company undertakes to indemnify each Director

against liability to third parties (excluding criminal and regulatory

penalties) and to pay Directors’ costs as incurred, provided that

they are reimbursed to the company if the Director is found

guilty, the court refuses to grant the relief sought or, in an action

brought by the company, judgement is given against the Director.

The indemnity has been in force for the financial year ended

31 December 2024 and is currently in force. The company has

purchased and maintains Directors’ and Officers’ insurance cover

against certain legal liabilities and costs for claims in connection

with any act or omission by such Directors and Officers in the

execution of their duties.

Significant agreements

The following significant agreements contain provisions entitling

the counterparties to exercise termination or other rights in the

event of a change of control of the company.

As at 31 December 2024, the Group’s principal bank facility, the

$1bn Revolving Credit Facility (RCF) agreement, allowed that upon

a change of control of the company, any participating bank may

require its outstanding advances, together with accrued interest

and any other amounts payable in respect of such facility,

and its commitments, to be cancelled, each within 55 days of

notification to the banks by the agent. The facility was undrawn

at year end. The Group’s outstanding fixed rate notes (see note

18 Borrowings for more information) also contain a provision

requiring that, in the event of a change of control which leads to

a downgrade in credit rating below Baa3 (Moody’s) or BBB- (Fitch

Ratings), the company is required to make an offer to investors to

repurchase outstanding instruments at par plus accrued interest,

which investors are not obliged to accept.

For these purposes, a ‘change of control’ occurs if the company

becomes a subsidiary of any other company, or one or more persons

acting either individually or in concert obtains control (as defined in

section 1124 of the Corporation Tax Act 2010) of the company.

Shares acquired through the company’s employee share plans

rank pari passu with shares in issue and have no special rights.

For legal and practical reasons, the rules of these plans set out

the consequences of a change of control of the company.

Other statutory information

Other information that is required by the Act and by the Large

and Medium-sized Companies and Groups (Accounts and

Reports) Regulations 2008 (as amended) to be included in the

Directors’ report, and which is incorporated by reference, can be

located as follows:

Annual report and accounts 2024 Pearson plc 139

Strategic report Governance report Financial statements Other information

Summary disclosures index See more

Dividend recommendation page 32

Financial instruments and financial

riskmanagement

page 188

Important events since year end page 206

Future development of the business pages 10-11

Research and development activities page 16

Employment of disabled persons page 39

Employee involvement page 38

Greenhouse gas emissions and energy

consumption data

page 53

Statement describing employee engagement page 22

Statement describing regard to suppliers,

customers and other stakeholders’ interests

page 23

With the exception of the dividend waiver described on page 138

there is no information to be disclosed in accordance with UK

Listing Rule 6.6.1.

No political donations or contributions were made or

expenditure incurred by the company or its subsidiaries during

the year.

Our disclosures are consistent with the recommendations of the

Task Force on Climate-related Financial Disclosures (TCFD) and

are set out on pages 44-48.

Fair, balanced and understandable

reporting and disclosure of information

As required by the UK Corporate Governance Code, we have

established arrangements to ensure that all information

we report to investors and regulators is fair, balanced and

understandable. In making its assessment, the Board pays

particular attention to a set of criteria recommended by the

Financial Reporting Council, including the use of straightforward

language, focus on content that is important to investors and

exclusion of irrelevant information.

A process and timetable for the production and approval of

this year’s annual report and accounts was agreed by the

Board at its meeting in December 2024. The full Board then

had the opportunity to review and comment on the report as it

progressed.

The Audit Committee is available to advise the Board on

certain aspects of the annual report and accounts, to enable

the Directors to fulfil their responsibility in this regard. As part

of supporting the Board in this regard, the Audit Committee

considers a report evidencing how the fair, balanced and

understandable criteria are satisfied throughout the annual

report and accounts.

Following their review, and taking into account a

recommendation by the Audit Committee, the Directors consider

that the annual report and accounts, taken as a whole, are fair,

balanced and understandable and provide the information

necessary for shareholders to assess the company’s position,

performance, business model and strategy.

Representatives from the Financial Reporting, Strategy, Investor

Relations, Corporate Affairs, Sustainability, Company Secretarial,

Legal, Internal Audit, Risk, HR and Reward teams are involved

in the preparation and review of the annual report to ensure a

cohesive and balanced approach and, as with all of our financial

reporting, a thorough verification of narrative and financial

statements is conducted. We also have procedures in place to

ensure the timely release of inside information, through our

Market Disclosure Committee.

The Directors also confirm that, for each Director in office at the

date of this report:

• so far as the Director is aware, there is no relevant audit

information of which the Group and company’s auditors

are unaware

• they have taken all the steps that they ought to have taken

as Directors to make themselves aware of any relevant audit

information and to establish that the Group and the company’s

auditors are aware of that information

Streamlined Energy and Carbon

Reporting (SECR)

In line with the requirements set out in the UK Government’s

guidance on Streamlined Energy and Carbon Reporting, the

following data points representing Pearson’s energy use and

associated GHG emissions from electricity and fuel can be found

on page 53 in the Sustainability section of this report:

• Annual global and UK GHG emissions from activities for which

the company is responsible, including combustion of fuel and

operation of any facility, and the annual emissions from the

purchase of electricity, heat, steam or cooling by the company

for its own use.

• Underlying global and UK energy use.

• Energy use and GHG emissions figures from previous year.

• Emissions intensity ratio.

• Energy efficiency measures taken throughout the year.

Our performance metrics have been calculated with reference

to the Greenhouse Gas Protocol, and externally verified.

The external verification statement can be found here:

https://plc.pearson.com/en-GB/sustainability/our-esg-

reporting.

Directors in office

The following Directors were in office during the year and up to

the date of approval of these financial statements:

O P Abbosh – appointed on 8 January2024

A Bird – retired on 7 January 2024

S L Coutu

A Dolan

A Hardiman

S K M Johnson

O Kordestani

E S Lee

G D Pitkethly

T Score – retired on 26 April 2024

A C Thomas

L A Wallen

The Directors’ report has been approved by the Board on

13 March 2025 and signed on its behalf by:

Graeme Baldwin

Company Secretary

Additional disclosures continued

Annual report and accounts 2024 Pearson plc 140

Strategic report Governance report Financial statements Other information

Statement of Directors’ responsibilities

The Directors are responsible for preparing the annual report

and accounts and the financial statements in accordance with

applicable law and regulation.

Company law requires the Directors to prepare financial

statements for each financial year. Under that law, the Directors

have prepared the consolidated financial statements in

accordance with UK-adopted international accounting standards.

In preparing the consolidated financial statements, the Directors

have also elected to comply with IFRS Accounting Standards as

issued by the International Accounting Standards Board (IFRS

Accounting Standards as issued by IASB). The Directors have

elected to prepare the individual Company financial statements

in accordance with Financial Reporting Standard 101 Reduced

Disclosure Framework.

Under company law, the Directors must not approve the financial

statements unless they are satisfied that they give a true and fair

view of the state of affairs of the Group and company and of the

profit or loss of the Group for that period.

In preparing the consolidated financial statements, the Directors

are required to:

• Select suitable accounting policies and then apply

them consistently.

• State whether applicable UK-adopted international accounting

standards and IFRS Accounting Standards as issued by IASB

have been followed, subject to any material departures

disclosed and explained in the financial statements.

• Make judgements and accounting estimates that are

reasonable and prudent.

• Prepare the financial statements on the going concern basis

unless it is inappropriate to presume that the Group will

continue in business.

In preparing the company financial statements, the Directors are

required to:

• Select suitable accounting policies and then apply

them consistently.

• State whether Financial Reporting Standard 101 Reduced

Disclosure Framework has been followed, subject to any

material departures disclosed and explained in the financial

statements.

• Make judgements and accounting estimates that are

reasonable and prudent.

• Prepare the financial statements on the going concern basis

unless it is inappropriate to presume that the company will

continue in business.

The Directors are responsible for safeguarding the assets of the

Group and company and hence for taking reasonable steps for

the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Group and

company’s transactions, and disclose with reasonable accuracy

at any time the financial position of the Group and company and

enable them to ensure that the financial statements and the

Directors’ Remuneration Report comply with the Companies

Act 2006.

The Directors are responsible for the maintenance and integrity

of the company’s website. Legislation in the United Kingdom

governing the preparation and dissemination of financial

statements may differ from legislation in other jurisdictions.

Directors’ confirmations

Each of the Directors, whose names and functions are listed

in the Governance report, confirms that, to the best of

their knowledge:

• The Group financial statements, which have been prepared

in accordance with UK-adopted international accounting

standards and IFRS Accounting Standards as issued by the

IASB, give a true and fair view of the assets, liabilities and

financial position of the Group, and of the profit of the Group.

• The company financial statements, which have been prepared

in accordance with Financial Reporting Standard 101 Reduced

Disclosure Framework, give a true and fair view of the assets,

liabilities and financial position of the company, and of the

profit of the company.

• The Strategic report includes a fair review of the development

and performance of the business and the position of the

Group and company, together with a description of the

principal risks and uncertainties that it faces.

This responsibility statement has been approved by the Board on

13March 2025 and signed on its behalf by:

Sally Johnson

Chief Financial Officer

Statement of Directors’ responsibilities in respect of the financial statements

Annual report and accounts 2024 Pearson plc 141

Strategic report Governance report Financial statements Other information

Independent Auditor’s Report to the members of Pearson plc

Opinion

In our opinion:

• Pearson plc’s Group financial statements and parent company

financial statements (the “financial statements”) give a true

and fair view of the state of the Group’s and of the parent

company’s affairs as at 31 December 2024 and of the Group’s

profit for the year then ended;

• the Group financial statements have been properly prepared

in accordance with UK adopted international accounting

standards and IFRS accounting standards as issued by the

International Accounting Standards Board (IASB);

• the parent company financial statements have been properly

prepared in accordance with United Kingdom Generally

Accepted Accounting Practice; and

• the financial statements have been prepared in accordance

with the requirements of the Companies Act 2006.

We have audited the financial statements of Pearson plc (the

‘parent company’) and its subsidiaries (the ‘Group’) for the year

ended 31 December 2024 which comprise:

Group Parent company

Consolidated income statement for

the year ended 31 December 2024

Balance sheet as at

31 December 2024

Consolidated statement of

comprehensive income for the year

ended 31 December 2024

Statement of changes

in equity for the

year ended

31 December 2024

Consolidated balance sheet as at

31 December 2024

Related notes 1 to

11 to the financial

statements including

material accounting

policy information

Consolidated statement of changes

in equity for the year ended

31 December 2024

Consolidated cash flow statement for

the year ended 31 December 2024

Related notes 1 to 38 to the financial

statements, including material

accounting policy information

The financial reporting framework that has been applied

in the preparation of the Group financial statements is

applicable law, UK adopted international accounting standards

and IFRS accounting standards as issued by the International

Accounting Standards Board (IASB). The financial reporting

framework that has been applied in the preparation of the

parent company financial statements is applicable law and

United Kingdom Accounting Standards, including FRS 101

“Reduced Disclosure Framework” (United Kingdom Generally

Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our

responsibilities under those standards are further described

in the Auditor’s responsibilities for the audit of the financial

statements section of our report. We believe that the audit

evidence we have obtained is sufficient and appropriate to

provide a basis for our opinion.

Independence

We are independent of the Group and parent in accordance

with the ethical requirements that are relevant to our audit of

the financial statements in the UK, including the FRC’s Ethical

Standard as applied to listed public interest entities, and we

have fulfilled our other ethical responsibilities in accordance with

these requirements.

The non-audit services prohibited by the FRC’s Ethical Standard

were not provided to the Group or the parent company and we

remain independent of the Group and the parent company in

conducting the audit.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that

the directors’ use of the going concern basis of accounting in

the preparation of the financial statements is appropriate. Our

evaluation of the directors’ assessment of the group and parent

company’s ability to continue to adopt the going concern basis of

accounting included:

• In conjunction with our walkthrough of the Group’s financial

statement close process, we confirmed our understanding

of management’s going concern assessment process to

understand and challenge the key assumptions made in

their assessment.

• We assessed the appropriateness of the duration of the

going concern assessment period to 30 June 2026 and

considered the existence of any significant events or

conditions beyond this period based on our procedures on

the Group’s long-range plan and knowledge arising from other

areas of the audit.

• We agreed the 31 December 2024 cash and debt balances

included in the going concern assessment to the Group’s year

end balances.

• We read the Group’s debt agreements to confirm

availability and to understand the covenant requirements

and reperformed management’s covenant compliance

test to confirm that no covenants have been breached

during the year to 31 December 2024. We have also tested

management’s forecast covenant compliance test to confirm

that there is no forecast covenant breach in either the base or

severe but plausible downside case scenarios during the going

concern assessment period to 30 June 2026.

• For debt amounts that are repayable within the going concern

assessment period we have understood the assumptions that

management has made in respect of refinancing.

• We checked the logic and arithmetical integrity of

management’s going concern model that includes the

cash forecasts for the going concern assessment period to

30 June 2026.

• We challenged the appropriateness of the assumptions used

to calculate the cash forecasts under base and severe but

plausible downside case scenarios, including whether the

downside scenarios were sufficiently severe, by reference

to historical forecasting accuracy and comparison to other

evidence obtained during the audit, such as audit procedures

on the long range plans which underpin management’s

goodwill impairment assessments.

• We evaluated the key assumptions by searching for contrary

evidence to challenge these assumptions, including third party

sector forecast and analyst expectations. Further, we validated

that these cash flow forecasts were consistent with the long

range plan approved by Pearson’s Board.

Annual report and accounts 2024 Pearson plc 142

Strategic report Governance report Financial statements Other information

• We considered the mitigating actions that are within the

control of the Group and evaluated the Group’s ability to

control these outflows if required.

• We considered the Group’s reverse stress testing to identify

the magnitude of decline in revenue and operating profit that

would lead to the Group utilising all liquidity or breaching a

covenant during the going concern assessment period and we

have challenged the likelihood of such a decline.

• We reviewed the Group’s going concern disclosures included

in the Annual Report, in note 1b to the financial statements,

to assess that they were accurate and in conformity with the

reporting standards.

We observe that in management’s base case and severe but

plausible downside scenarios, there is sufficient headroom

without taking the benefit of any identified mitigations

Based on the work we have performed, we have not identified

any material uncertainties relating to events or conditions

that, individually or collectively, may cast significant doubt on

the Group and parent company’s ability to continue as a going

concern for a period to 30 June 2026.

In relation to the Group and parent company’s reporting on how

they have applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to the

directors’ statement in the financial statements about whether

the directors considered it appropriate to adopt the going

concern basis of accounting.

Our responsibilities and the responsibilities of the directors

with respect to going concern are described in the relevant

sections of this report. However, because not all future events or

conditions can be predicted, this statement is not a guarantee as

to the Group’s ability to continue as a going concern.

Overview of our audit approach

Audit scope • We performed an audit of the complete

financial information of 5 components and

audit procedures on specific balances for a

further 5 components. We also performed

specified audit procedures on one account

for one additional component. We performed

central procedures on financial statement line

items as detailed in the “Tailoring the scope”

section below.

Key audit

matters

• Fraud risk in revenue recognition

• Valuation of United Kingdom (UK) Group

Pension Plan defined pension obligation

Materiality

• Overall Group materiality of £25.7m which

represents 5% of adjusted Profit before tax,

excluding intangible charges.

An overview of the scope of the parent

company and Group audits

Tailoring the scope

In the current year our audit scoping has been updated to

reflect the new requirements of ISA (UK) 600 (Revised). We have

followed a risk-based approach when developing our audit

approach to obtain sufficient appropriate audit evidence on

which we base our audit opinion. We performed risk assessment

procedures to identify and assess risks of material misstatement

of the Group financial statements and identified significant

accounts and disclosures. When identifying components at

which audit work needed to be performed to respond to the

identified risks of material misstatement of the Group financial

statements, we considered our understanding of the Group and

its business environment, the potential impact of climate change,

the applicable financial framework, the Group’s system of internal

control at the entity level, the existence of centralised processes,

applications and any relevant internal audit results.

We determined that centralised audit procedures on Group

balances would be performed for goodwill, acquired intangible

assets, investments in associates and joint ventures, other

financial assets, finance income, finance costs and other

operating income, income tax expense, equity, intercompany,

current and deferred income tax, defined benefit plan

liabilities, assets and related OCI amounts and financial

liabilities (borrowings).

We then identified 5 of the components of the Group as

individually relevant due to materiality or financial size of the

component relative to the Group. We then identified a further 5

of the components as individually relevant to the Group based

on the materiality of specific accounts relative to the Group.

For the above 10 individually relevant components, we

identified the significant accounts where audit work needed to

be performed at these components by applying professional

judgement, having considered the Group significant accounts on

which centralised procedures will be performed, the reasons for

identifying the financial reporting component as an individually

relevant component and the size of the component’s account

balance relative to the Group significant financial statement

account balances.

We then considered whether the remaining Group significant

account balances not yet subject to audit procedures, in

aggregate, could give rise to a risk of material misstatement

of the Group financial statements. We selected 1 further

component of the Group to include in our audit scope to address

these risks.

Having identified the components for which work will

be performed, we determined the scope to assign to

each component.

Of the 11 components selected, we designed and performed

audit procedures on the entire financial information of 5

components (“full scope components”), some of which were

performed centrally as described above. For a further 5

components, we designed and performed audit procedures

on specific significant financial statement account balances

or disclosures of the financial information of the component

(“specific scope components”). For the remaining component, we

performed specified audit procedures to obtain evidence for one

or more relevant assertions over a significant financial statement

account balance.

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Strategic report Governance report Financial statements Other information

Our scoping to address the risk of material misstatement for

each key audit matter is set out in the Key audit matters section

of our report.

All audit work performed for the purposes of the audit was

undertaken by the Group audit team with the exception of

certain procedures in relation to one cash balance, where work

was performed by a non-EY firm.

The Group operates finance shared service centres in Belfast

and Manila, the outputs of which are included in the financial

information of the reporting components they service and

therefore they are not separate reporting components. Each

of the service centres is subject to specified risk-focused audit

procedures, predominantly the testing of transaction processing

and controls testing.

The audit procedures performed at the finance shared service

centres were performed by the Group audit team which included

staff members from EY teams in Belfast and Manila. The Senior

Statutory Auditor and other senior members of the London-

based team visited the Belfast and Manila locations.

The audit procedures over cash performed by the non-EY firm

were reviewed by the Group audit team and the Senior Statutory

Auditor held a virtual meeting with the non-EY auditor to discuss

the results of their testing.

Climate change

Stakeholders are increasingly interested in how climate change

will impact Pearson. The Group has determined that the

most significant future impacts from climate change on their

operations will be from physical risks in the medium and long

term. These risks are explained on page 44-48 in the required

Task Force on Climate-related Financial Disclosures. They have

also explained their climate commitments on page 41. All of

these disclosures form part of the “Other information”, rather

than the audited financial statement. Our procedures on these

unaudited disclosures therefore consisted solely of considering

whether they are materially inconsistent with the financial

statements or our knowledge obtained in the course of the audit

or otherwise appear to be materially misstated, in line with our

responsibilities on “Other information”.

In planning and performing our audit we assessed the potential

impacts of climate change on the Group’s business and any

consequential material impact on its financial statement.

The Group has explained in the Basis of Presentation note how

they have reflected the impact of climate change in their financial

statements including how this aligns with their commitment

to the aspirations of the Paris Agreement to achieve net zero

emissions by 2050. Significant judgements and estimates relating

to climate change are included in note 1c.

Our audit effort in considering the impact of climate change

on the financial statements was focused on evaluating

management’s assessment of the impact of physical and

transition climate risk, their climate commitments, the effects of

material climate risks disclosed on page 47 and whether these

have been appropriately reflected in asset values where these

are impacted by future cash flows and associated sensitivity

disclosures, this primarily being impairment assessments

following the requirements of UK-adopted international

accounting standards and IFRS accounting standards as issued

by the International Accounting Standards Board (IASB). As

part of this evaluation, we performed our own risk assessment,

supported by our climate change internal specialists, to

determine the risks of material misstatement in the financial

statements from climate change which needed to be considered

in our audit.

We also challenged the Directors’ considerations of climate

change risks in their assessment of going concern and viability

and associated disclosures. Where considerations of climate

change were relevant to our assessment of going concern, these

are described above.

Based on our work we have not identified the impact of climate

change on Group financial statements to be a key audit matter or

to impact a key audit matter.

Independent Auditor’s Report continued

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Strategic report Governance report Financial statements Other information

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks

of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and

directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate

opinion on these matters.

Risk Our response to the risk

Fraud risk in revenue recognition

(Revenues of £3,552 million, 2023 £3,674 million)

Refer to the Audit Committee’s Report (page 110); Accounting policies (page 162); and note 3 of the

Group financial statements (page 167)

Given revenue is a key performance indicator, both in communication of the Group’s results and

for management incentives, we have identified a risk of management override of controls through

inappropriate topside manual journal entries or adjustments recorded by management to revenue.

The risk is consistent with the prior year.

We obtained an understanding and evaluation the design and tested the operating effectiveness of

controls over the Group’s material revenue processes.

The audit of topside manual journals included central testing of the consolidation and

close-process adjustments, testing any journals that had an entry against revenue and

obtaining corroborative evidence.

We have understood each significant revenue stream and considered for each individual process where

management override of controls is more likely to occur.

For Courseware revenue we have determined that the fraud risk procedures were targeted on

the manual process of deferral of revenue, particularly focused on the underlying calculations and

adjustments to the deferred revenue manual calculation that could lead to the manipulation of revenue

through the incorrect deferral of revenue. For the remaining revenue streams, we have determined

that the fraud risk procedures were targeted on the potential for recording fictitious manual journals

to revenue, particularly near the year-end, to achieve the target profit at year end. Our testing of these

manual journals and adjustments involved tracing these back to underlying source documentation, to

evaluate the appropriateness, completeness and accuracy of the postings.

Where it was deemed to be most effective, for certain revenue streams we extended the use of data

analytics. These incremental procedures involved testing full populations of transactions, including

performing a correlation analysis between invoiced revenue, receivables and cash. We performed

targeted audit procedures over material items that did not correlate as expected.

Key observations communicated to the Audit Committee

Revenue for the year to 31 December 2024 has been recognised in accordance with IFRS 15: Revenue from Contracts with Customers.

How we scoped our audit to respond to the risk

We performed testing over revenue recognition in 4 full scope components and 3 specific scope components, which covered 80% of the risk amount.

All audit work performed to address this risk was undertaken by the Group audit team.

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Risk Our response to the risk

Valuation of United Kingdom (UK) Group Pension Plan defined pension obligation

(Defined benefit obligation of £2,443 million, 2023 £2,569 million)

Refer to the Audit Committee’s Report (page 112); Accounting policies (page 162); and note 25 of

the Group financial statements (page 197)

Calculating the present value of the UK Group Pension Plan defined benefit pension obligation

is complex and requires the involvement of actuarial specialists due to the highly judgemental

nature of actuarial assumptions, including discount rates, price inflation and mortality rates, used

in the valuation.

The present value of the UK defined benefit pension obligation is very sensitive to changes in

these assumptions.

The risk is consistent with the prior year.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls

that address the measurement and valuation of the UK defined benefit pension obligation.

We performed audit procedures that included evaluating the methodology used by management’s

independent actuary for the significant actuarial assumptions, discount rates, price inflation and

mortality rates.

We involved our actuarial specialists to assist with our audit procedures specific to the valuation and

measurement of the defined benefit obligation.

We compared the actuarial assumptions used by management to historical trends, current investment

conditions, market practice and the requirements of the accounting standard.

We assessed the individual impact that changes in the key assumptions (discount rate, price

inflation and mortality rate) at year end has on the total benefit pension obligation. As part of

this evaluation, we compared management’s selected discount rate and price inflation to an

independently developed range.

To evaluate the mortality rate assumption, we compared the information with recent publicly available

mortality base tables, and whether a consistent approach to developing the mortality assumption was

applied against prior year.

Key observations communicated to the Audit Committee

Based on our procedures performed, we conclude that management’s valuation and measurement of the UK Group Pension Plan defined benefit obligation is in line within our independently developed

range of outcomes and the methodology used is in line with the requirements of IAS 19.

How we scoped our audit to respond to the risk

We performed audit procedures over the consolidated balance, covering 100% of the risk amount

All audit work performed to address this risk was undertaken by the Group audit team.

In the prior year, our auditor’s report included a key audit matter in relation to the Valuation of acquired intangible assets following the acquisition of Personnel Decisions Research Institutes, LLC (‘PDRI’). In

the current year, the Company has not acquired any material intangible assets. As such, this was removed as a key audit matter. Additionally in the prior year, our auditor’s report included a key audit matter in

relation to the EU State Aid uncertain tax position. In the current year, the Court of Justice of the European Union issued a final judgement. Since the case has concluded, no uncertainty or judgement remains

in respect of the potential exposure. As such, this was removed as a key audit matter.

Independent Auditor’s Report continued

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Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of

identified misstatements on the audit and in forming our opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could

reasonably be expected to influence the economic decisions of the users of the financial statements.

Materiality provided a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Group to be £25.7 million (2023: £24.6 million), which is 5%

(2023: 5%) of adjusted Profit before tax, excluding intangible charges. We believe that adjusted

Profit before tax, excluding intangible charges is the appropriate basis since it is earning-based and

excludes certain non-recurring items.

We determined materiality for the Parent Company to be £55.9 million (2023: £44 million), which is

approximately 1% (2023: 1%) of net assets.

During the course of our audit, we reassessed initial materiality and updated it for actual 2024 results,

which resulted in a small increase to £25.7m.

Starting basis

Adjustments

Materiality

• Profit before tax – £510 million

• Add: £7 million other net gains and losses

• Less: £2 million cost of major reorganisation

• Less: £14 million other net finance income

• Add: £13m UK pension discretionary increases

• Adjusted Profit before tax £514 million (materiality basis)

• Materiality of £25.7 million (5% of materiality basis)

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount

to reduce to an appropriately low level the probability that the aggregate of uncorrected and

undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the group’s overall control

environment, our judgement was that performance materiality was 50% (2023: 50%) of our planning

materiality, namely £12.8 million (2023: £12.3 million). We have set performance materiality at this

percentage to reduce to an appropriately low level the probability that the aggregate of uncorrected

and corrected misstatements exceeds materiality.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences

in excess of £1.3 million (2023: £1.2 million), which is set at 5% of planning materiality, as well as

differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluated any uncorrected misstatements against both the quantitative measures of materiality

discussed above and in light of other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report set out on pages

1 to 140, other than the financial statements and our auditor’s report thereon. The directors are

responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the

extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion

thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other

information is materially inconsistent with the financial statements or our knowledge obtained in

the course of the audit or otherwise appears to be materially misstated. If we identify such material

inconsistencies or apparent material misstatements, we are required to determine whether this

gives rise to a material misstatement in the financial statements themselves. If, based on the work

we have performed, we conclude that there is a material misstatement of the other information, we

are required to report that fact.

We have nothing to report in this regard.

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Strategic report Governance report Financial statements Other information

Opinions on other matters

prescribed by the Companies

Act 2006

In our opinion, the part of the directors’ remuneration report to

be audited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of

the audit:

• the information given in the strategic report and the directors’

report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

• the strategic report and the directors’ report have been

prepared in accordance with applicable legal requirements.

Matters on which we are required to

report by exception

In the light of the knowledge and understanding of the Group

and the parent company and its environment obtained

in the course of the audit, we have not identified material

misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in

relation to which the Companies Act 2006 requires us to report

to you if, in our opinion:

• adequate accounting records have not been kept by the

parent company, or returns adequate for our audit have not

been received from branches not visited by us; or

• the parent company financial statements and the part of

the Directors’ Remuneration Report to be audited are not in

agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law

are not made; or

• we have not received all the information and explanations we

require for our audit

Corporate Governance Statement

We have reviewed the directors’ statement in relation to going

concern, longer-term viability and that part of the Corporate

Governance Statement relating to the Group and company’s

compliance with the provisions of the UK Corporate Governance

Code specified for our review by the UK Listing Rules.

Based on the work undertaken as part of our audit, we have

concluded that each of the following elements of the Corporate

Governance Statement is materially consistent with the financial

statements or our knowledge obtained during the audit:

• Directors’ statement with regards to the appropriateness

of adopting the going concern basis of accounting and any

material uncertainties identified set out on page 156;

• Directors’ explanation as to its assessment of the company’s

prospects, the period this assessment covers and why the

period is appropriate set out on page 67;

• Director’s statement on whether it has a reasonable

expectation that the Group will be able to continue in

operation and meets its liabilities set out on page 67;

• Directors’ statement on fair, balanced and understandable set

out on page 101;

• Board’s confirmation that it has carried out a robust

assessment of the emerging and principal risks set out on

page 58;

• The section of the annual report that describes the review of

effectiveness of risk management and internal control systems

set out on page 106; and

• The section describing the work of the audit committee set out

on page 103.

Responsibilities of directors

As explained more fully in the directors’ responsibilities

statement set out on page 141, the directors are responsible

for the preparation of the financial statements and for being

satisfied that they give a true and fair view, and for such internal

control as the directors determine is necessary to enable the

preparation of financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are

responsible for assessing the Group and parent company’s ability

to continue as a going concern, disclosing, as applicable, matters

related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the

Group or the parent company or to cease operations, or have no

realistic alternative but to do so.

Auditor’s responsibilities for the audit of

the financial statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with ISAs (UK) will always

detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material

if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on

the basis of these financial statements.

Independent Auditor’s Report continued

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Explanation as to what extent the audit was considered

capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance

with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect irregularities, including

fraud. The risk of not detecting a material misstatement due

to fraud is higher than the risk of not detecting one resulting

from error, as fraud may involve deliberate concealment by, for

example, forgery or intentional misrepresentations, or through

collusion. The extent to which our procedures are capable of

detecting irregularities, including fraud is detailed below.

However, the primary responsibility for the prevention and

detection of fraud rests with both those charged with governance

of the company and management.

• We obtained an understanding of the legal and regulatory

frameworks that are applicable to the Group and determined

that the most significant frameworks which are directly

relevant to specific assertions in the financial statements are

those that relate to the reporting framework (UK-adopted

International Accounting Standards, IFRS accounting standards

as issued by the International Accounting Standards Board

(IASB), the Companies Act 2006 and the UK Corporate

Governance Code) and the relevant tax laws and regulations in

the countries in which the Group operates.

• We understood how Pearson plc is complying with those

frameworks by making enquiries of management, Internal

Audit, those responsible for legal and compliance procedures

and the General Counsel. We corroborated our enquiries

through reading of Board minutes and papers provided to

the Audit Committee and observation in Audit Committee

meetings, as well as consideration of the results of our audit

procedures across the Group.

• We assessed the susceptibility of the Group’s financial

statements to material misstatement, including how

fraud might occur and met with finance and operational

management from various parts of the business to understand

where they considered there was susceptibility to fraud. We

also considered performance targets and their potential to

influence management to manage earnings or influence the

perception of analysts. We have determined that there is a

fraud risk on revenue recognition referred to in the Key audit

matters section. We considered the policies, processes and

controls that the Group has established to address the risks

identified, including the design of controls over each significant

revenue stream. We also considered the controls that the

Group has that otherwise prevent, deter and detect fraud, and

how senior management monitors those controls.

• Based on this understanding we designed our audit

procedures to identify non-compliance with such laws and

regulations including where necessary using our forensic and

other relevant specialists. Our procedures included reading

any correspondence with regulators, making enquiries of

management’s specialists, and journal entry testing, with a

focus on manual journal entries, consolidation journals and

journal entries indicating large or unusual transactions using

data analytics. We based this testing on our understanding

of the business, enquiries of management, including internal

audit and other advisors, the Company Secretary and reading

relevant reports. We performed specific searches derived

from forensic investigations experience and leveraged our

data analytics platform in performing our testing. We have also

reviewed the whistleblowing reports issued during the year.

A further description of our responsibilities for the audit of the

financial statements is located on the

Financial Reporting Council’s website at https://www.frc.org.

uk/auditorsresponsibilities. This description forms part of our

auditor’s report.

Other matters we are required to address

• Following the recommendation from the Audit Committee we

were appointed by the company on 29 April 2022 to audit the

financial statements for the year ending 31 December 2022

and subsequent financial periods.

• The period of total uninterrupted engagement including

previous renewals and reappointments is three years, covering

the years ending 31 December 2022 to 31 December 2024.

• The audit opinion is consistent with the additional report to

the Audit Committee.

Use of our report

This report is made solely to the company’s members, as a body,

in accordance with Chapter 3 of Part 16 of the Companies Act

2006. Our audit work has been undertaken so that we might

state to the company’s members those matters we are required

to state to them in an auditor’s report and for no other purpose.

To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the company and

the company’s members as a body, for our audit work, for this

report, or for the opinions we have formed.

Ben Marles

(Senior statutory auditor)

for and on behalf of Ernst & Young LLP,

Statutory Auditor

London

13 March 2025

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Strategic report Governance report Financial statements Other information

Consolidated income statement

Year ended 31 December 2024

All figures in £ millions	Notes	2024	2023	2022
Continuing operations
Sales	2,3	3,552	3,674	3,841
Cost of goods sold	4	(1,741)	(1,839)	(2,046)
Gross profit		1,811	1,835	1,795
Operating expenses	4	(1,265)	(1,322)	(1,549)
Other net gains and losses	4	(7)	(16)	24
Share of results of joint ventures and associates	12	2	1	1
Operating profit	2	541	498	271
Finance costs	6	(112)	(81)	(71)
Finance income	6	81	76	123
Profit before tax		510	493	323
Income tax	7	(75)	(113)	(79)
Profit for the year		435	380	244
Attributable to:
Equity holders of the company		434	378	242
Non-controlling interest		1	2	2
Earnings per share attributable to equity holders of the company during the year
(expressed in pence per share)
—basic	8	64.5p	53.1p	32.8p
—diluted	8	63.5p	52.7p	32.6p

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Consolidated statement of comprehensive income

Year ended 31 December 2024

All figures in £ millions	Notes	2024	2023	2022
Profit for the year		435	380	244
Items that may be reclassified to the income statement
Net exchange differences on translation of foreign operations		(35)	(177)	330
Currency translation adjustment disposed	31	–	(122)	(5)
Attributable tax	7	2	–	4
Items that are not reclassified to the income statement
Fair value (losses)/gains on other financial assets	15	(2)	1	18
Attributable tax	7	–	–	1
Remeasurement of retirement benefit obligations	25	5	(85)	54
Attributable tax	7	(2)	20	(12)
Other comprehensive (expense)/income for the year	29	(32)	(363)	390
Total comprehensive income for the year		403	17	634
Attributable to:
Equity holders of the company		402	16	630
Non-controlling interest		1	1	4

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Consolidated balance sheet

As at 31 December 2024

All figures in £ millions	Notes	2024	2023
Assets
Non-current assets
Property, plant and equipment	10	216	217
Investment property	10	77	79
Intangible assets	11	3,026	3,091
Investments in joint ventures and associates	12	12	22
Deferred income tax assets	13	52	35
Financial assets – derivative financial instruments	16	20	32
Retirement benefit assets	25	491	499
Other financial assets	15	141	143
Income tax assets	7	4	41
Trade and other receivables	22	125	135
		4,164	4,294
Current assets
Intangible assets – product development	20	947	947
Inventories	21	74	91
Trade and other receivables	22	1,030	1,050
Financial assets – derivative financial instruments	16	31	16
Income tax assets	7	103	15
Cash and cash equivalents (excluding overdrafts)	17	543	312
		2,728	2,431
Assets classified as held for sale	32	–	2
Total assets		6,892	6,727
Liabilities
Non-current liabilities
Financial liabilities – borrowings	18	(1,157)	(1,094)
Financial liabilities – derivative financial instruments	16	(4)	(38)
Deferred income tax liabilities	13	(63)	(46)
Retirement benefit obligations	25	(41)	(44)
Provisions for other liabilities and charges	23	(13)	(15)
Other liabilities	24	(83)	(98)
		(1,361)	(1,335)

All figures in £ millions	Notes	2024	2023
Current liabilities
Trade and other liabilities	24	(1,054)	(1,275)
Financial liabilities – borrowings	18	(315)	(67)
Financial liabilities – derivative financial instruments	16	(54)	(5)
Income tax liabilities	7	(32)	(32)
Provisions for other liabilities and charges	23	(23)	(25)
		(1,478)	(1,404)
Liabilities classified as held for sale	32	–	–
Total liabilities		(2,839)	(2,739)
Net assets		4,053	3,988
Equity
Share capital	27	166	174
Share premium	27	2,649	2,642
Treasury shares	28	(7)	(19)
Capital redemption reserve		41	33
Fair value reserve		(14)	(12)
Translation reserve		376	411
Retained earnings		827	745
Total equity attributable to equity holders of the company		4,038	3,974
Non-controlling interest		15	14
Total equity		4,053	3,988

These financial statements have been approved for issue by the Board of Directors on

13 March 2025 and signed on its behalf by

Sally Johnson

Chief Financial Officer

Pearson plc

Registered number: 00053723

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Consolidated statement of changes in equity

Year ended 31 December 2024

							Equity attributable to equity holders of the company
				Capital	Fair				Non-
	Share	Share	Treasury	redemption	value	Translation	Retained		controlling	Total
All figures in £ millions	capital	premium	shares	reserve	reserve	reserve	earnings	Total	interest	equity
At 1 January 2024	174	2,642	(19)	33	(12)	411	745	3,974	14	3,988
Profit for the year	–	–	–	–	–	–	434	434	1	435
Other comprehensive (expense)/income	–	–	–	–	(2)	(35)	5	(32)	–	(32)
Total comprehensive (expense)/income	–	–	–	–	(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 under share option schemes	–	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.

The capital redemption reserve reflects the nominal value of shares cancelled in the Group’s share buyback programme. The fair value reserve arises on revaluation of other financial assets. The translation

reserve includes exchange differences arising from the translation of the net investment in foreign operations and of borrowings and other currency instruments designated as hedges of such investments.

							Equity attributable to equity holders of the company
				Capital					Non-
	Share	Share	Treasury	redemption	Fair value	Translation	Retained		controlling	Total
All figures in £ millions	capital	premium	shares	reserve	reserve	reserve	earnings	Total	interest	equity
At 1 January 2023	179	2,633	(15)	28	(13)	709	881	4,402	13	4,415
Profit for the year	–	–	–	–	–	–	378	378	2	380
Other comprehensive (expense)/income	–	–	–	–	1	(298)	(65)	(362)	(1)	(363)
Total comprehensive (expense)/income	–	–	–	–	1	(298)	313	16	1	17
Equity-settled transactions	–	–	–	–	–	–	40	40	–	40
Taxation on equity-settled transactions	–	–	–	–	–	–	1	1	–	1
Issue of ordinary shares under share option schemes	–	9	–	–	–	–	–	9	–	9
Buyback of equity	(5)	–	–	5	–	–	(304)	(304)	–	(304)
Purchase of treasury shares	–	–	(35)	–	–	–	–	(35)	–	(35)
Release of treasury shares	–	–	31	–	–	–	(31)	–	–	–
Dividends	–	–	–	–	–	–	(155)	(155)	–	(155)
At 31 December 2023	174	2,642	(19)	33	(12)	411	745	3,974	14	3,988

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				Equity attributable to equity holders of the company
				Capital					Non-
	Share	Share	Treasury	redemption	Fair value	Translation	Retained		controlling	Total
All figures in £ millions	capital	premium	shares	reserve	reserve	reserve	earnings	Total	interest	equity
At 1 January 2022	189	2,626	(12)	18	(4)	386	1,067	4,270	10	4,280
Profit for the year	–	–	–	–	–	–	242	242	2	244
Other comprehensive income/(expense)	–	–	–	–	18	323	47	388	2	390
Total comprehensive income/(expense)	–	–	–	–	18	323	289	630	4	634
Equity-settled transactions	–	–	–	–	–	–	38	38	–	38
Taxation on equity-settled transactions	–	–	–	–	–	–	3	3	–	3
Issue of ordinary shares under share option schemes	–	7	–	–	–	–	–	7	–	7
Buyback of equity	(10)	–	–	10	–	–	(353)	(353)	–	(353)
Purchase of treasury shares	–	–	(37)	–	–	–	–	(37)	–	(37)
Release of treasury shares	–	–	34	–	–	–	(34)	–	–	–
Transfer of gain on disposal of FVOCI investment	–	–	–	–	(27)	–	27	–	–	–
Dividends	–	–	–	–	–	–	(156)	(156)	(1)	(157)
At 31 December 2022	179	2,633	(15)	28	(13)	709	881	4,402	13	4,415

Consolidated statement of changes in equity continued

Year ended 31 December 2024

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Strategic report Governance report Financial statements Other information

Consolidated cash flow statement

Year ended 31 December 2024

All figures in £ millions	Notes	2024	2023	2022
Cash flows from operating activities
Profit before tax		510	493	323
Net finance costs/(income)		31	5	(52)
Depreciation and impairment – PPE, investment
property and assets held for sale		77	90	136
Amortisation and impairment – software		117	123	125
Amortisation and impairment – acquired
intangible assets		41	46	54
Other net gains and losses		5	13	(24)
Product development capital expenditure		(284)	(300)	(357)
Amortisation and impairment – product development		291	284	303
Share-based payment costs		44	40	35
Change in inventories		15	9	(34)
Change in trade and other receivables		32	(24)	33
Change in trade and other liabilities		(99)	(20)	(84)
Change in provisions for other liabilities and charges		(1)	(61)	50
Other movements		32	(16)	19
Net cash generated from operations		811	682	527
Interest paid		(65)	(60)	(57)
Tax paid		(119)	(97)	(109)
Net cash generated from operating activities		627	525	361
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired	30	(39)	(171)	(228)
Acquisition of joint ventures and associates		–	(5)	(5)
Purchase of investments		(7)	(8)	(12)
Purchase of property, plant and equipment and investment property		(33)	(30)	(57)
Purchase of intangible assets		(91)	(96)	(90)
Disposal of subsidiaries, net of cash disposed	31	(7)	(38)	333
Proceeds from disposal of investments		–	7	17
Proceeds from disposal of property, plant
and equipment		6	5	14
Lease receivables repaid including disposals		18	15	18
Interest received		20	20	22
Dividends received		2	–	1
Net cash (used in)/generated from investing activities		(131)	(301)	13

All figures in £ millions	Notes	2024	2023	2022
Cash flows from financing activities
Proceeds from issue of ordinary shares	27	7	9	7
Buyback of equity	27	(318)	(186)	(353)
Settlement of share-based payments	28	(40)	(35)	(37)
Proceeds from borrowings		1,265	285	–
Repayment of borrowings		(921)	(285)	(171)
Repayment of lease liabilities		(78)	(84)	(93)
Dividends paid to company’s shareholders	9	(156)	(154)	(156)
Dividends paid to non-controlling interest		–	–	(1)
Net cash used in financing activities		(241)	(450)	(804)
Effects of exchange rate changes on cash and cash equivalents		(21)	(8)	36
Net increase/(decrease) in cash and cash
equivalents		234	(234)	(394)
Cash and cash equivalents at beginning of year		309	543	937
Cash and cash equivalents at end of year	17	543	309	543

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General information

Pearson plc (‘the company’), its subsidiaries and associates (together ‘the Group’) are international

businesses covering educational courseware, assessments and services.

The company is a public limited company incorporated in England and Wales and domiciled in the

United Kingdom. The address of its registered office is 80 Strand, London WC2R 0RL.

The company has its primary listing on the London Stock Exchange and is also listed on the New York

Stock Exchange.

These consolidated financial statements were approved for issue by the Board of Directors on

13 March 2025.

1a. Accounting policies

The material accounting policies applied in the preparation of these consolidated financial

statements are set out below.

Basis of preparation

These consolidated financial statements have been prepared on the going concern basis (see note

1b) and in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority

and in accordance with UK-adopted International Accounting Standards and with the requirements

of the Companies Act 2006. The consolidated financial statements have also been prepared in

accordance with IFRS Accounting Standards as issued by the International Accounting Standards

Board (IASB). These standards are collectively referred to as IFRS in these financial statements.

These consolidated financial statements have been prepared under the historical cost convention

as modified by the revaluation of financial assets and liabilities (including derivative financial

instruments) at fair value.

These accounting policies have been consistently applied to all years presented, unless

otherwise stated.

1. Interpretations and amendments to published standards effective 2024 – No new

standards were adopted in 2024.

A number of other new pronouncements are effective from 1 January 2024 but they do not have

a material impact on the consolidated financial statements. Additional disclosure has been given

where relevant.

2. Standards, interpretations and amendments to published standards that are not yet

effective – The following new accounting standards and amendments to new accounting standards

have been issued but are not yet effective and unless otherwise indicated, have been endorsed:

— Amendments to IAS 21 ’Lack of exchangeability’;

— Amendment to IFRS 9 and IFRS 7 ‘Classification and measurement of financial instruments’ (not

yet endorsed;

— IFRS 18 ‘Presentation and disclosure in financial statements’ (not yet endorsed); and

— IFRS 19 ’Subsidiaries without Public Accountability: Disclosures (not yet endorsed).

IFRS 18 will replace IAS 1 ’Presentation of financial statements’ for the period beginning 1 January

2027. The main new requirements in the standard will be a change in presentation of the income

statement with new categories and new sub-totals, management-defined performance measures

being presented in a single note in the financial statements, the cash flow statement using the

operating profit sub-total as the starting point, and certain other changes to how information is

grouped in the financial statements. The Group is still assessing the impact of the new standard.

The Group is currently assessing the impact of the remaining changes to other standards,

interpretations and amendments, but they are not expected to have a material impact. The Group

does not plan to early adopt any of the above new accounting standards or amendments. The Group

has not adopted any other standard, amendment or interpretation that has been issued but is not

yet effective.

3. Critical accounting assumptions and judgements – The preparation of financial statements

in conformity with IFRS requires the use of certain critical accounting assumptions and estimates.

It also requires management to exercise its judgement in the process of applying the Group’s

accounting policies.

All assumptions and estimates constitute management’s best judgement at the date of the financial

statements, however, in the future, actual experience may deviate from these estimates and

assumptions.

The areas requiring a higher degree of judgement or complexity, or areas where assumptions and

estimates have a significant risk of resulting in material adjustments to the carrying value of assets

and liabilities within the consolidated financial statements are:

— Taxation; and

— Employee benefits: pensions.

The key judgements and key areas of estimation are set out below, as well as in the relevant

accounting policies and in the notes to the accounts where appropriate.

Notes to the consolidated financial statements

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Strategic report Governance report Financial statements Other information

The Group has assessed the impact of the uncertainty presented by the volatile macro-economic

and geo-political environment on the financial statements, specifically considering the impact on key

judgements and significant estimates along with other areas of increased risk as follows:

— Financial instruments and hedge accounting; and

— Translation methodologies.

No material accounting impacts relating to the areas assessed above were recognised in the year.

The Group will continue to monitor these areas of increased judgement, estimation and risk.

Subsequent to the release of the 2024 unaudited preliminary results, a £10m adjustment has

been made which reduces other comprehensive income and which reduces net assets by increasing

tax liabilities.

Key judgements

— The application of tax legislation in relation to provisions for uncertain tax positions. See

notes 7 and 34.

— The Group is eligible to receive the surplus associated with the UK Group Pension Plan in

recognising a pension asset. See note 25.

Key areas of estimation

— The level of provisions required in relation to uncertain tax positions is complex and each

matter is separately assessed. The estimation of future settlement amounts is based on a

number of factors including the status of the unresolved matter, clarity of legislation, range

of possible outcomes and the statute of limitations. See notes 7 and 34.

— The determination of the pension cost and defined benefit obligation of the Group’s

defined benefit pension schemes depends on the selection of certain assumptions, which

include the discount rate, inflation rate, salary growth and longevity. See note 25.

Consolidation

1. Business combinations – The acquisition method of accounting is used to account for

business combinations.

The consideration transferred for the acquisition of a subsidiary is the fair value of the assets

transferred, the liabilities incurred and the equity interest issued by the Group. The consideration

transferred includes the fair value of any asset or liability resulting from a contingent consideration

arrangement. Acquisition-related costs are expensed as incurred in the operating expenses line of

the income statement. Identifiable assets acquired and identifiable liabilities and contingent liabilities

assumed in a business combination are measured initially at their fair values at the acquisition date.

The determination of fair values often requires significant judgements and the use of estimates,

and, for material acquisitions, the fair value of the acquired intangible assets is determined by an

independent valuer. The excess of the consideration transferred, the amount of any non-controlling

interest in the acquiree and the acquisition date fair value of any previous equity interest in the

acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill (note 30).

See the ‘Intangible assets’ policy for the accounting policy on goodwill. If this is less than the fair

value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is

recognised directly in the income statement.

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the

acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s

net assets.

Management exercises judgement in determining the classification of its investments in its

businesses, in line with the following:

2. Subsidiaries – Subsidiaries are entities over which the Group has control. The Group controls

an entity when the Group is exposed to, or has rights to, variable returns from its involvement with

the entity and has the ability to affect those returns through its power over the entity. Subsidiaries

are fully consolidated from the date on which control is transferred to the Group. They are

deconsolidated from the date that control ceases.

3. Transactions with non-controlling interests – Transactions with non-controlling interests

that do not result in loss of control are accounted for as equity transactions, that is, as transactions

with the owners in their capacity as owners. Any surplus or deficit arising from disposals to a

non-controlling interest is recorded in equity. For purchases from a non-controlling interest, the

difference between consideration paid and the relevant share acquired of the carrying value of the

subsidiary is recorded in equity.

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1a. Accounting policies continued

Consolidation continued

4. Joint ventures and associates – Joint ventures are entities in which the Group holds an interest

on a long-term basis and has rights to the net assets through contractually agreed sharing of

control. Associates are entities over which the Group has significant influence but not the power to

control the financial and operating policies, generally accompanying a shareholding of between 20%

and 50% of the voting rights. Ownership percentage is likely to be the key indicator of investment

classification; however, other factors, such as Board representation, may also affect the accounting

classification. Judgement is required to assess all of the qualitative and quantitative factors which

may indicate that the Group does, or does not, have significant influence over an investment.

Investments in joint ventures and associates are accounted for by the equity method and are initially

recognised at the fair value of consideration transferred.

The Group’s share of its joint ventures’ and associates’ post-acquisition profits or losses is recognised

in the income statement and its share of post-acquisition movements in reserves is recognised

in reserves.

The Group’s share of its joint ventures’ and associates’ results is recognised as a component of

operating profit as these operations form part of the core business of the Group and are an integral

part of existing wholly-owned businesses. The cumulative post-acquisition movements are adjusted

against the carrying amount of the investment. When the Group’s share of losses in a joint venture

or associate equals or exceeds its interest in the joint venture or associate, the Group does not

recognise further losses unless the Group has incurred obligations or made payments on behalf of

the joint venture or associate.

Unrealised gains and losses on transactions between the Group and its joint ventures and associates

are eliminated to the extent of the Group’s interest in these entities.

Foreign currency translation

1. Functional and presentation currency – Items included in the financial statements of each of

the Group’s entities are measured using the currency of the primary economic environment in which

the entity operates (the functional currency). The consolidated financial statements are presented in

sterling, which is the company’s functional and presentation currency.

2. Transactions and balances – Foreign currency transactions are translated into the functional

currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange

gains and losses resulting from the settlement of such transactions and from the translation at

year-end exchange rates of monetary assets and liabilities denominated in foreign currencies

are recognised in the income statement, except when deferred in equity as qualifying net

investment hedges.

3. Group companies – The results and financial position of all Group companies that have a

functional currency different from the presentation currency are translated into the presentation

currency as follows:

— Assets and liabilities are translated at the closing rate at the date of the balance sheet;

— Income and expenses are translated at average exchange rates; and

— All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in

foreign entities, and of borrowings and other currency instruments designated as hedges of such

investments, are taken to shareholders’ equity. The Group treats specific inter-company loan

balances, which are not intended to be repaid in the foreseeable future, as part of its net investment.

When a foreign operation is sold, such exchange differences are recognised in the income statement

as part of the gain or loss on sale.

The principal overseas currency for the Group is the US dollar. The average rate for the year

against sterling was $1.28 (2023: $1.25; 2022: $1.24) and the year-end rate was $1.25 (2023: $1.27;

2022: $1.21).

Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Cost includes the

original purchase price of the asset and the costs attributable to bringing the asset to its working

condition for intended use. Land is not depreciated. Depreciation on other assets is calculated using

the straight-line method to allocate their cost less their residual values over their estimated useful

lives as follows:

Buildings (freehold):	20–50 years
Buildings (leasehold):	over the period of the lease
Plant and equipment:	3–10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance

sheet date.

The carrying value of an asset is written down to its recoverable amount if the carrying value of the

asset is greater than its estimated recoverable amount.

Investment property

Properties that are no longer occupied by the Group and which are held for operating lease

rental are classified as investment property. Investment property assets are carried at cost less

accumulated depreciation and any recognised impairment in value. The depreciation policies for

investment property are consistent with those described for property, plant and equipment.

Notes to the consolidated financial statements continued

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4. Acquired intangible assets – Acquired intangible assets include customer lists, contracts and

relationships, trademarks and brands, publishing rights, content, technology and software rights.

These assets are capitalised on acquisition at cost and included in intangible assets. Intangible assets

acquired in material business combinations are capitalised at their fair value as determined with the

support of a third-party specialist. Intangible assets are amortised over their estimated useful lives

of between two and twenty years, using an amortisation method that reflects the pattern of their

consumption. The assets are assessed for impairment triggers on an annual basis or when triggering

events occur.

5. Product development assets – Product development assets represent direct costs incurred

in the development of educational programmes and titles prior to their publication. These costs

are recognised as current intangible assets where the title will generate probable future economic

benefits and costs can be measured reliably.

Product development assets relating to content are amortised upon publication of the title over

estimated economic lives of seven years or less, being an estimate of the expected operating

lifecycle of the title, with a higher proportion of the amortisation taken in the earlier years. Product

development assets relating to product platforms are amortised over ten years or less, being an

estimate of the expected useful life. Amortisation is included in the income statement in cost of

goods sold.

The assessment of the useful economic life and the recoverability of product development assets

involves judgement and is based on historical trends and management estimation of future

potential sales.

Product development assets are assessed for impairment triggers on an annual basis or when

triggering events occur. The carrying amount of product development assets is set out in note 20.

The investment in product development assets has been disclosed as part of net cash generated

from operating activities in the cash flow statement.

Other financial assets

Other financial assets are non-derivative financial assets classified and measured at estimated

fair value.

Marketable securities and cash deposits with maturities of greater than three months are classified

and subsequently measured at fair value through profit and loss (FVTPL). They are remeasured at

each balance sheet date by using market data and the use of established valuation techniques.

Any movement in the fair value is immediately recognised in finance income or finance costs in

the income statement.

Intangible assets

1. Goodwill – For the acquisition of subsidiaries made on or after 1 January 2010, goodwill

represents the excess of the consideration transferred, the amount of any non-controlling interest in

the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over

the fair value of the identifiable net assets acquired. For the acquisition of subsidiaries made from

the date of transition to IFRS to 31 December 2009, goodwill represents the excess of the cost of an

acquisition over the fair value of the Group’s share of the net identifiable assets acquired. Goodwill

on acquisitions of subsidiaries is included in intangible assets.

Goodwill on acquisition of associates and joint ventures represents the excess of the cost of an

acquisition over the fair value of the Group’s share of the net identifiable assets acquired. Goodwill

on acquisitions of associates and joint ventures is included in investments in associates and joint

ventures.

Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment

losses. An impairment loss is recognised to the extent that the carrying value of goodwill exceeds

the recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and

value in use. These calculations require the use of estimates in respect of forecast cash flows and

discount rates and management judgement in respect of cash-generating unit (CGU) and

cost allocation.

Goodwill is allocated to aggregated CGUs for the purpose of impairment testing. The allocation is

made to those aggregated CGUs that are expected to benefit from the business combination in

which the goodwill arose. Where there are changes to CGUs, goodwill is reallocated to the new CGUs

and aggregation of CGUs using a relative value method.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the

entity sold.

2. Acquired software – Software separately acquired for internal use is capitalised at cost. Software

acquired in material business combinations is capitalised at its fair value, with the valuation being

determined with the support of a third-party specialist. The assets are assessed for impairment

triggers on an annual basis or when triggering events occur. Acquired software is amortised on a

straight-line basis over its estimated useful life of between three and eight years.

3. Internally developed software – Internal and external costs incurred during the preliminary

stage of developing computer software for internal use are expensed as incurred. Internal and

external costs incurred to develop computer software for internal use during the application

development stage are capitalised if the Group expects economic benefits from the development.

Capitalisation in the application development stage begins once the Group can reliably measure

the expenditure attributable to the software development and has demonstrated its intention to

complete and use the software. Internally developed software is amortised on a straight-line basis

over its estimated useful life of between three and ten years. The assets are assessed for impairment

triggers on an annual basis or when triggering events occur.

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1a. Accounting policies continued

Other financial assets continued

Investments in the equity instruments of other entities are classified and subsequently measured at

fair value through other comprehensive income (FVOCI) where the investment meets the definition

of equity from the perspective of the issuer. Changes in fair value are recorded in equity in the fair

value reserve via other comprehensive income. On subsequent disposal of the asset, the net fair

value gains or losses are reclassified from the fair value reserve to retained earnings. Any dividends

received from equity investments classified as FVOCI are recognised in the income statement unless

they represent a return of capital.

Investments in funds which have a limited life and those investment which do not meet the criteria

to be classified as FVOCI are classified and subsequently measured at fair value through profit and

loss (FVTPL). Changes in fair value are included within finance income or finance costs within the

income statement.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the

weighted average method or an approximation thereof, such as the first in first out (FIFO) method.

The cost of finished goods and work in progress comprises raw materials, direct labour, other direct

costs and related production overheads. Net realisable value is the estimated selling price in the

ordinary course of business, less estimated costs necessary to make the sale. Provisions are made

for slow-moving and obsolete stock.

Royalty advances

Advances of royalties to authors are included within trade and other receivables when the advance is

paid less any provision required to adjust the advance to its net realisable value. The realisable value

of royalty advances relies on a degree of management estimation in determining the profitability of

individual author contracts. If the estimated realisable value of author contracts is overstated, this

will have an adverse effect on operating profits as these excess amounts will be written off.

The recoverability of royalty advances is based upon an annual detailed management review

of the age of the advance, the future sales projections for new authors and prior sales history of

repeat authors.

The royalty advance is expensed at the contracted or effective royalty rate as the related revenues

are earned. Royalty advances which will be consumed within one year are held in current assets.

Royalty advances which will be consumed after one year are held in non-current assets.

Cash and cash equivalents

Cash and cash equivalents in the cash flow statement include cash in hand, deposits held on call with

banks, other short-term highly liquid investments with original maturities of three months or less,

and bank overdrafts. Bank overdrafts are included in borrowings in current liabilities in the

balance sheet.

Short-term deposits and marketable securities with maturities of greater than three months do

not qualify as cash and cash equivalents and are reported as financial assets. Movements on these

financial assets are classified as cash flows from financing activities in the cash flow statement where

these amounts are used to offset the borrowings of the Group or as cash flows from investing

activities where these amounts are held to generate an investment return.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a

deduction, net of tax, from the proceeds.

Where any Group company purchases the company’s equity share capital (treasury shares), the

consideration paid, including any directly attributable incremental costs, net of income taxes, is

deducted from equity attributable to the company’s equity holders until the shares are cancelled,

reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration

received, net of any directly attributable transaction costs and the related income tax effects, is

included in equity attributable to the company’s equity holders.

Ordinary shares purchased under a buyback programme are cancelled and the nominal value of the

shares is transferred to a capital redemption reserve.

Borrowings

Borrowings are recognised initially at fair value, which is proceeds received net of transaction costs

incurred. Borrowings are subsequently stated at amortised cost with any difference between the

proceeds (net of transaction costs) and the redemption value being recognised in the income

statement over the period of the borrowings using the effective interest method. Accrued interest is

included as part of borrowings.

Where a debt instrument is in a fair value hedging relationship, an adjustment is made to its carrying

value in the income statement to reflect the hedged risk.

Where a debt instrument is in a net investment hedge relationship, gains and losses on the effective

portion of the hedge are recognised in other comprehensive income.

Derivative financial instruments

Derivatives are recognised at fair value and remeasured at each balance sheet date. The fair value

of derivatives is determined by using market data and the use of established estimation techniques

such as discounted cash flow and option valuation models.

For derivatives in a hedge relationship, the currency basis spread is excluded from the designation

as a hedging instrument.

Changes in the fair value of derivatives are recognised immediately in finance income or costs.

However, derivatives relating to borrowings and certain foreign exchange contracts are designated

as part of a hedging transaction.

Notes to the consolidated financial statements continued

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The accounting treatment is summarised as follows:

	Reporting of gains
	and losses on effective	Reporting of gains and losses
Typical reason for designation	portion of the hedge	on disposal
Net investment hedge
The derivative creates a foreign	Recognised in other	On the disposal of foreign
currency liability which is used	comprehensive income.	operations or subsidiaries,
to hedge changes in the value of		the accumulated value of
a subsidiary which transacts in		gains and losses reported
that currency.		in other comprehensive
		income is transferred to the
		income statement.
Fair value hedges
The derivative transforms the	Gains and losses on the	If the debt and derivative are
interest profile on debt from	derivative are reported in	disposed of, the value of the
fixed rate to floating rate.	finance income or finance	derivative and the debt (including
Changes in the value of the debt	costs. However, an equal and	the fair value adjustment) are
as a result of changes in interest	opposite change is made to	reset to zero. Any resultant gain
rates and foreign exchange	the carrying value of the debt	or loss is recognised in finance
rates are offset by equal and	(a ‘fair value adjustment’) with	income or finance costs.
opposite changes in the value of	the benefit/cost reported in
the derivative. When the Group’s	finance income or finance
debt is swapped to floating	costs. The net result should be
rates, the contracts used are	a zero charge on a perfectly
designated as fair value hedges.	effective hedge.
Non-hedge accounted contracts
These are not designated as	Recognised in the income
hedging instruments. Typically,	statement. No hedge
these are short-term contracts	accounting applies.
to convert debt back to fixed
rates or foreign exchange
contracts where a natural
offset exists.

Taxation

Current tax is recognised at the amounts expected to be paid or recovered under the tax rates and

laws that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax is provided, using the balance sheet liability method, on temporary differences

arising between the tax bases of assets and liabilities and their carrying amounts. Deferred income

tax is determined using tax rates and laws that have been enacted or substantively enacted by the

balance sheet date and are expected to apply when the related deferred tax asset is realised or the

deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be

available against which the temporary differences can be utilised.

Deferred income tax is provided in respect of the undistributed earnings of subsidiaries, associates

and joint ventures other than where it is intended that those undistributed earnings will not be

remitted in the foreseeable future.

Current and deferred tax are recognised in the income statement, except when the tax relates to

items charged or credited directly to equity or other comprehensive income, in which case the tax

is also recognised in equity or other comprehensive income. The Group has applied the exception

under IAS 12 to recognising and disclosing information about deferred tax assets and liabilities

related to Pillar Two income taxes.

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required

in determining the estimates in relation to the worldwide provision for income taxes. There are

many transactions and calculations for which the ultimate tax determination is uncertain during

the ordinary course of business. The Group recognises tax provisions when it is considered

probable that there will be a future outflow of funds to a tax authority. The provisions are based

on management’s best judgement of the application of tax legislation and best estimates of future

settlement amounts (see note 7). Where the final tax outcome of these matters is different from the

amounts that were initially recorded, such differences will impact the income tax and deferred tax

provisions in the period in which such determination is made.

Deferred tax assets and liabilities require management judgement and estimation in determining

the amounts to be recognised. In particular, when assessing the extent to which deferred tax

assets should be recognised, judgement is used when considering the timing of the recognition

and estimation is used to determine the level of future taxable income together with any future tax

planning strategies (see note 13).

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1a. Accounting policies continued

Employee benefits

1. Pensions – The retirement benefit asset and obligation recognised in the balance sheet represent

the net of the present value of the defined benefit obligation and the fair value of plan assets at the

balance sheet date. The defined benefit obligation is calculated annually by independent actuaries

using the projected unit credit method. The present value of the defined benefit obligation is

determined by discounting estimated future cash flows using yields on high-quality corporate bonds

which have terms to maturity approximating the terms of the related liability.

When the calculation results in a potential asset, the recognition of that asset is limited to the asset

ceiling – that is the present value of any economic benefits available in the form of refunds from the

plan or a reduction in future contributions. Management uses judgement to determine the level of

refunds available from the plan in recognising an asset.

The determination of the pension cost and defined benefit obligation of the Group’s defined benefit

pension schemes depends on the selection of certain assumptions, which include the discount rate,

inflation rate, salary growth and longevity (see note 25).

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions are charged or credited to equity in other comprehensive income in the period in

which they arise. The service cost, representing benefits accruing over the year, is included in the

income statement as an operating cost. Net interest is calculated by applying the discount rate to the

net defined benefit obligation and is presented as finance costs or finance income.

Obligations for contributions to defined contribution pension plans are recognised as an operating

expense in the income statement as incurred.

2. Other post-retirement obligations – The expected costs of post-retirement medical and

life assurance benefits are accrued over the period of employment, using a similar accounting

methodology as for defined benefit pension obligations. The liabilities and costs relating to significant

other post-retirement obligations are assessed annually by independent qualified actuaries.

3. Share-based payments – The fair value of options or shares granted under the Group’s share

and option plans is recognised as an employee expense after taking into account the Group’s

best estimate of the number of awards expected to vest. Fair value is measured at the date of

grant and is spread over the vesting period of the option or share. The fair value of the options

granted is measured using an option model that is most appropriate to the award. The fair value of

shares awarded is measured using the share price at the date of grant unless another method is

more appropriate. Any proceeds received are credited to share capital and share premium when

the options are exercised. Where options or shares are net settled in respect of withholding tax

obligations, these are accounted for as equity settled transactions. Payments to local tax authorities

are accounted for as a deduction from equity for the shares withheld.

Provisions

Provisions are recognised if the Group has a present legal or constructive obligation as a result

of past events; it is more likely than not that an outflow of resources will be required to settle the

obligation and the amount can be reliably estimated. Provisions are discounted to present value

where the effect is material.

Revenue recognition

The Group’s revenue streams are courseware, assessments and services. Courseware includes

curriculum materials provided in book form and/or via access to digital content. Assessments

includes test development, processing and scoring services provided to governments, educational

institutions, corporations and professional bodies. Services includes the operation of schools,

colleges and universities, as well as the provision of online learning services in partnership with

universities and other academic institutions.

Revenue is recognised in order to depict the transfer of control of promised goods and services

to customers in an amount that reflects the consideration to which we expect to be entitled in

exchange for those goods and services. This process begins with the identification of our contract

with a customer, which is generally through a master services agreement, customer purchase order,

or a combination thereof. Within each contract, judgement is applied to determine the extent to

which activities within the contract represent distinct performance obligations to be delivered and

the total amount of transaction price to which we expect to be entitled.

The transaction price determined is net of sales taxes, rebates and discounts, and after eliminating

sales within the Group. Where a contract contains multiple performance obligations such as the

provision of supplementary materials or online access with textbooks, revenue is allocated on

the basis of relative standalone selling prices. Where a contract contains variable consideration,

estimation is required to determine the amount to which the Group is expected to

be entitled.

Revenue is recognised on contracts with customers when or as performance obligations are

satisfied, which is the period or the point in time where control of goods or services transfers to

the customer. Judgement is applied to determine first whether control passes over time and if not,

then the point in time at which control passes. Where revenue is recognised over time, judgement

is used to determine the method which best depicts the transfer of control. Where an input

method is used, estimation is required to determine the progress towards delivering

the performance obligation.

If a contract with a customer is modified (change of scope, price or both), management uses

judgement to determine whether changes to existing rights and obligations should be accounted

for as a separate contract or as an adjustment to the existing contracts. Adjustments to existing

contracts are either accounted for prospectively or through a cumulative catch up adjustment.

Revenue from the sale of books is recognised net of a provision for anticipated returns. This

provision is based primarily on historical return rates, customer buying patterns and retailer

behaviours including stock levels. If these estimates do not reflect actual returns in future periods

then revenue could be understated or overstated for a particular period. When the provision for

returns is remeasured at each reporting date to reflect changes in estimates, a corresponding

adjustment is also recorded to revenue.

Notes to the consolidated financial statements continued

Annual report and accounts 2024 Pearson plc 162

Strategic report Governance report Financial statements Other information

The Group may enter into contracts with another party in addition to our customer. In making the

determination as to whether revenue should be recognised on a gross or net basis, the contract

with the customer is analysed to understand which party controls the relevant good or service

prior to transferring to the customer. This judgement is informed by facts and circumstances of the

contract in determining whether the Group has promised to provide the specified good or service

or whether the Group is arranging for the transfer of the specified good or service, including which

party is responsible for fulfilment, has discretion to set the price to the customer and is responsible

for inventory risk. On certain contracts, where the Group acts as an agent, only commissions and

fees receivable for services rendered are recognised as revenue. Any third-party costs incurred on

behalf of the principal that are rechargeable under the contractual arrangement are not included

in revenue.

Income from recharges of freight and other activities which are incidental to the normal revenue-

generating activities is included in other income.

Additional details on the Group’s revenue streams are also included in note 3.

Leases

1. The Group as a lessee – The Group assesses whether a contract is or contains a lease at the

inception of the contract. A contract is, or contains, a lease, if the contract conveys the right to

control the use of an identified asset for a period of time in exchange for consideration. The Group

recognises a right-of-use asset and a lease liability at the lease commencement date with respect to

all lease arrangements except for short-term leases (leases with a lease term of 12 months or less)

and leases of low-value assets. For these leases, the lease payments are recognised as an operating

expense on a straight-line basis over the term of the lease.

The right-of-use asset is initially measured at cost, comprising the initial amount of the lease liability

plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less

any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-

line method from the commencement date to the earlier of the end of the useful life of the asset

or the end of the lease term. The Group applies IAS 36 to determine whether a right-of-use asset is

impaired. The lease liability is initially measured at the present value of the lease payments that are

not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that

rate cannot be readily determined, the incremental borrowing rate. The lease liability is measured at

amortised cost using the effective interest method. It is remeasured when there is a change in future

lease payments arising from a change in an index or a rate or a change in the Group’s assessment of

whether it will exercise an extension or termination option. When the lease liability is remeasured, a

corresponding adjustment is made to the right-of-use asset.

Management uses judgement to determine the lease term where extension and termination options

are available within the lease.

2. The Group as a lessor – When the Group is an intermediate lessor, the head lease and sublease

are accounted for as two separate contracts. The head lease is accounted for as per the lessee policy

above. The sublease is classified as a finance lease or operating lease by reference to the right-of-use

asset arising from the head lease. Where the lease transfers substantially all the risks and rewards

of ownership to the lessee, the contract is classified as a finance lease; all other leases are classified

as operating leases. Rental income from operating leases is recognised on a straight-line basis over

the term of the relevant lease. Amounts due from lessees under finance subleases are recognised as

receivables at the amount of the Group’s net investment in the leases discounted using the interest

rate implicit in the lease or, if that rate cannot be readily determined, the discount rate used in the

head lease.

Dividends

Final dividends are recorded in the Group’s financial statements in the period in which they are

approved by the company’s shareholders. Interim dividends are recorded when paid.

Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major

line of business or geographical area of operations that has been disposed of or meets the criteria to

be classified as held for sale.

When applicable, discontinued operations are presented in the income statement as a separate line

and are shown net of tax.

Assets and liabilities held for sale

Assets and liabilities are classified as held for sale and stated at the lower of carrying amount and fair

value less costs to sell if it is highly probable that the carrying amount will be recovered principally

through a sale transaction rather than through continuing use. No depreciation is charged in respect

of non-current assets classified as held for sale. Amounts relating to non-current assets and liabilities

held for sale are classified as discontinued operations in the income statement where appropriate.

Trade receivables

Trade receivables are stated at fair value after provision for bad and doubtful debts. Provisions for

bad and doubtful debts are based on the expected credit loss model. The ‘simplified approach’ is

used with the expected loss allowance measured at an amount equal to the lifetime expected credit

losses. A provision for anticipated future sales returns is included within trade and other liabilities

(also see Revenue recognition policy).

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Strategic report Governance report Financial statements Other information

1b. Going concern

In assessing the Group’s ability to continue as a going concern for the period to 30 June 2026, the

Board reviewed management’s five-year plan, which was used as the base case. The review included

available liquidity throughout the period and headroom against the Group’s two main covenants,

which require net debt to EBITDA to be a maximum of four times and interest cover to be at least

three times.

At 31 December 2024, the Group had available liquidity of c.£1.2bn, comprising central cash

balances and its undrawn $1bn Revolving Credit Facility (RCF) which matures in February 2028,

but which has options to extend the maturity to February 2030. Significant liquidity and covenant

headroom was observed throughout the assessment period in this base model.

A severe but plausible scenario was analysed, where the Group is impacted by all principal risks

in both 2025 and 2026, adjusted for probability weighting as well as other significant risks. The net

impact of the risks modelled was to reduce free cashflow by around 30% per year. Even under a

severe downside case, the company 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 if these downside risks were

to crystalise.

A reverse stress test was performed to identify the reduction in profit required to exhaust liquidity at

30 June 2026. The model showed that significant profit declines in excess of the severe but plausible

were required in both 2025 and 2026 to exhaust liquidity.

The Directors have confirmed that there are no material uncertainties that cast doubt on the Group’s

going concern status and that they have a reasonable expectation that the Group has adequate

resources to continue in operational existence beyond 30 June 2026. The consolidated financial

statements have therefore been prepared on a going concern basis.

1c. Climate change

The Group has assessed the impacts of climate change on the Group’s financial statements,

including our commitment to achieving a 50% reduction in greenhouse gas (GHG) emissions across

our operations and supply chain by 2030, and achieve a 90% reduction in GHG emissions across our

value chain and meet our science-based (SBTi approved) net zero target by 2050, and the actions

the Group intends to take to achieve those targets. The assessment did not identify any material

impact on the Group’s significant judgements or estimates at 31 December 2024, or the assessment

of going concern for the period to June 2026 and the Group’s viability over the next five years.

Specifically, we have considered the following areas:

— The physical and transition risks associated with climate change; and

— The actions the Group is taking to meet its carbon reduction and net zero targets.

As a result, the Group has assessed the impacts of climate change on the financial statements, and

in particular, on the following areas:

— The impact on the Group’s future cash flows, and the resulting impact that such adjustments

to our future cash flows would have on the outcome of the annual impairment testing of our

goodwill balances (see note 11 for further details), the recognition of deferred tax assets and our

assessment of going concern;

— The carrying value of the Group’s assets, in particular the recoverable amounts of inventories,

product development assets, intangible assets and property, plant and equipment; and

— Any changes to our estimates of the useful economic lives of product development assets,

intangible assets and property, plant and equipment.

2. Segment information

There are five main global business units, which are each considered separate operating segments

for management and reporting purposes, as these are reported separately to the Group’s chief

operating decision-maker, the Pearson Executive Management team. These five business units are

Assessment & Qualifications, Virtual Learning, English Language Learning, Higher Education and

Workforce Skills.

In addition, the International Courseware local publishing businesses, which were under strategic

review, were previously being managed as a separate business unit, known as Strategic Review. In

2022, some of the businesses from the Strategic Review business unit were disposed of (see note

31). There are no longer any reported results for the Strategic Review business unit.

The following describes the principal activities of the five main operating segments:

— Assessment & Qualifications – Pearson VUE, US Student Assessment, Clinical Assessment, UK

GCSE and A Levels and International academic qualifications and associated courseware including

the English-speaking Canadian and Australian K-12 businesses, and PDRI;

— Virtual Learning – Virtual Schools and Online Program Management (up to the point of disposal);

— English Language Learning – Pearson Test of English, Institutional Courseware and English

Online Solutions;

— Workforce Skills – BTEC, GED, TalentLens, Faethm, Credly, Pearson College and Apprenticeships;

and

— Higher Education – US, Canadian and International Higher Education Courseware businesses.

The Pearson Executive Management team evaluates and allocates resources to operating segments,

and evaluates the performance of each of its operating segments on the basis of adjusted operating

profit, which is considered to be the segment measure.

Notes to the consolidated financial statements continued

Annual report and accounts 2024 Pearson plc 164

Strategic report Governance report Financial statements Other information

			Sales			Adjusted operating profit
	2024	2023	2022	2024	2023	2022
Assessment & Qualifications	1,591	1,559	1,444	368	350	258
Virtual Learning	489	616	820	66	76	70
English Language Learning	420	415	321	50	47	25
Workforce Skills	226	220	204	8	(8)	(3)
Higher Education	826	855	898	108	110	91
Strategic Review	–	9	154	–	(2)	15
Total	3,552	3,674	3,841	600	573	456

A reconciliation of the operating segments’ measure of profit to profit for the year is provided below:

		2024	2023	2022
Adjusted operating profit		600	573	456
Cost of major reorganisation		2	–	(150)
Property charges		–	(11)	–
Intangible charges		(41)	(48)	(56)
UK pension discretionary increases		(13)	–	(3)
Other net gains and losses		(7)	(16)	24
Operating profit		541	498	271
Finance costs	6	(112)	(81)	(71)
Finance income	6	81	76	123
Profit before tax		510	493	323
Income tax	7	(75)	(113)	(79)
Profit for the year		435	380	244

There were no material inter-segment sales in either 2024, 2023 or 2022. Corporate costs are allocated to business segments on an appropriate basis depending on the nature of the cost and therefore the

total segment result is equal to the Group operating profit.

Other segment disclosures are as follows:

			Amortisation, depreciation, and impairment
All figures in £ millions	2024	2023	2022
Assessment & Qualifications	196	196	202
Virtual Learning	64	76	108
English Language Learning	56	58	51
Workforce Skills	33	31	33
Higher Education	177	179	201
Strategic Review	–	3	23
Total	526	543	618

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Strategic report Governance report Financial statements Other information

2. Segment information continued

Adjusted operating profit is shown in the above tables as it is the key financial measure used by management to evaluate the performance of the Group. The measure also enables investors 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, certain property charges, major reorganisation programmes and certain other items that are also not representative of underlying performance, which are explained below and reconciled within

this note.

Cost of major reorganisation – In 2024, there was a release of £2m relating to amounts previously accrued. In 2023, there were no costs of major reorganisation. In 2022, the reorganisation costs of £150m

mainly related to staff redundancies and impairment of right of use property assets. The 2022 charge includes the impact of updated assumptions related to the recoverability of right-of-use assets made in

2021. The costs of these reorganisation programmes are significant enough to exclude from the adjusted operating profit measure so as to better highlight the underlying performance.

Property charges – In 2024, there were no property charges. In 2023, charges of £11m related to impairments of property assets arising from the impact of updates in 2023 to assumptions initially made

during the 2022 and 2021 reorganisation programmes.

Intangible charges – These represent amortisation relating to intangibles acquired through business combinations. These amortisation charges are excluded as they reflect past acquisition activity and do

not necessarily reflect the current year performance of the Group. Intangible amortisation charges in 2024 were £41m compared to a charge of £48m in 2023. This is due to decreased amortisation from

disposals partially offset by additional amortisation from recent acquisitions. In 2022, intangible charges were £56m. In all three years, there were no impairment charges.

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 2024

relate to costs related to prior year acquisitions and disposals, which were partially offset by a gain on the partial disposal of our investment in an associate. Other net gains and losses in 2023 relate to the

gain on the disposal of the POLS business and gains related to the release of accruals and a provision related to historical acquisitions, offset by losses on the disposal of Pearson College and costs related to

current and prior year disposals and acquisitions. In 2022, they related to the gains on the disposal of our international courseware local publishing businesses in Europe, French-speaking Canada and Hong

Kong and a gain arising on a decrease in the deferred consideration payable on prior year acquisitions, offset by a loss on disposal of our international courseware local publishing businesses in South Africa

due to recycling of currency translation adjustments and costs related to disposals and acquisitions.

UK pension discretionary increases – Charges in 2024 and 2022 relate to one-off pension increases awarded to certain cohorts of pensioners in response to the cost of living crisis. There were no such awards

in 2023.

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 revenue. The Group’s definition of adjusted operating profit may not be comparable to other similarly titled measures reported by other companies.

The Group operates in the following main geographic areas:

			Sales		Non-current assets
All figures in £ millions	2024	2023	2022	2024	2023
UK	487	450	424	505	518
Other European countries	120	130	192	160	179
US	2,444	2,504	2,668	2,310	2,320
Canada	68	83	110	174	186
Asia Pacific	313	386	290	169	186
Other countries	120	121	157	13	20
Total	3,552	3,674	3,841	3,331	3,409

Sales are allocated based on the country in which the customer is located. This does not differ materially from the location where the order is received. The geographical split of non-current assets is based

on the subsidiary’s country of domicile. This is not materially different to the location of the assets. Non-current assets comprise investment property, property, plant and equipment, intangible assets and

investments in joint ventures and associates.

Notes to the consolidated financial statements continued

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Strategic report Governance report Financial statements Other information

3. Revenue from contracts with customers

The following tables analyse the Group’s revenue streams. Courseware includes curriculum materials provided in book form and/or via access to digital content. Assessments includes integrated test

development, processing and scoring services provided to governments, educational institutions, corporations and professional bodies. Services includes the operation of schools, colleges and universities,

as well as the provision of online learning services to universities and other academic institutions.

The Group derived revenue from the transfer of goods and services over time and at a point in time in the following major product lines:

							2024
			English
	Assessment &	Virtual	Language	Workforce	Higher	Strategic
All figures in £ millions	Qualifications	Learning	Learning	Skills	Education	Review	Total
Courseware
Products transferred at a point in time	56	–	142	1	230	–	429
Products and services transferred over time	17	–	13	–	596	–	626
	73	–	155	1	826	–	1,055
Assessments
Products transferred at a point in time	184	–	11	5	–	–	200
Products and services transferred over time	1,334	–	198	179	–	–	1,711
	1,518	–	209	184	–	–	1,911
Services
Products transferred at a point in time	–	–	35	–	–	–	35
Products and services transferred over time	–	489	21	41	–	–	551
	–	489	56	41	–	–	586
Total	1,591	489	420	226	826	–	3,552

							2023
			English
	Assessment &	Virtual	Language	Workforce	Higher	Strategic
All figures in £ millions	Qualifications	Learning	Learning	Skills	Education	Review	Total
Courseware
Products transferred at a point in time	57	–	135	2	254	9	457
Products and services transferred over time	20	–	15	–	595	–	630
	77	–	150	2	849	9	1,087
Assessments
Products transferred at a point in time	198	–	5	5	–	–	208
Products and services transferred over time	1,284	–	204	170	–	–	1,658
	1,482	–	209	175	–	–	1,866
Services
Products transferred at a point in time	–	–	35	–	–	–	35
Products and services transferred over time	–	616	21	43	6	–	686
	–	616	56	43	6	–	721
Total	1,559	616	415	220	855	9	3,674

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3. Revenue from contracts with customers continued

							2022
			English
	Assessment &	Virtual	Language	Workforce	Higher	Strategic
All figures in £ millions	Qualifications	Learning	Learning	Skills	Education	Review	Total
Courseware
Products transferred at a point in time	64	–	110	2	302	148	626
Products and services transferred over time	21	–	25	–	588	6	640
	85	–	135	2	890	154	1,266
Assessments
Products transferred at a point in time	169	–	5	14	–	–	188
Products and services transferred over time	1,190	–	138	142	–	–	1,470
	1,359	–	143	156	–	–	1,658
Services
Products transferred at a point in time	–	–	29	–	–	–	29
Products and services transferred over time	–	820	14	46	8	–	888
	–	820	43	46	8	–	917
Total	1,444	820	321	204	898	154	3,841

a. Nature of goods and services

The following is a description of the nature of the Group’s performance obligations within contracts

with customers broken down by revenue stream, along with judgements and estimates made within

each of those revenue streams.

Courseware

Revenue is generated from customers through the sales of print and digital courseware materials to

schools, bookstores and direct to individual learners. Goods and services may be sold separately or

purchased together in bundled packages. The goods and services included in bundled arrangements

are considered distinct performance obligations, except for where Pearson provides both a licence

of intellectual property and an ongoing hosting service. As the licence of intellectual property is only

available with the concurrent hosting service, the licence is not treated as a distinct performance

obligation separate from the hosting service.

The transaction price is allocated between distinct performance obligations on the basis of their

relative standalone selling prices.

In determining the transaction price, variable consideration exists in the form of discounts and

anticipated returns. Discounts reduce the transaction price on a given transaction. A provision for

anticipated returns is made based primarily on historical return rates, customer buying patterns

and retailer behaviours including stock levels. If these estimates do not reflect actual returns in

future periods then revenue could be understated or overstated for a particular period. Variable

consideration as described above is determined using the expected value approach. The sales

return liability at the end of 2024 was £27m (2023: £31m; 2022: £53m).

While payment for these goods and services generally occurs at the start of these arrangements,

the length of time between payment and delivery of the performance obligations is generally short-

term in nature or the reason for early payment relates to reasons other than financing, including

customers securing a vendor in a longer-term arrangement or the transfer of goods or services is at

the discretion of the customer. For these reasons and the use of the practical expedient on short-

term financing, significant financing components are not recognised within Courseware transactions.

Notes to the consolidated financial statements continued

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Revenue from the sale of physical books is recognised at a point in time when control passes. This is

generally at the point of shipment when title passes to the customer, when the Group has a present

right to payment and the significant risks and rewards of ownership have passed to the customer.

Revenue from physical books sold through the direct print rental method is recognised over the

rental period, as the customer is simultaneously receiving and consuming the benefits of this rental

service through the passage of time.

Revenue from the sale of digital courseware products is recognised on a straight-line basis over the

subscription period, unless hosted by a third party or representative of a downloadable product, in

which case Pearson has no ongoing obligation and recognises revenue when control transfers as the

customer is granted access to the digital product.

Revenue from the sale of ‘off-the-shelf’ software is recognised on delivery or on installation of the

software where that is a condition of the contract. In certain circumstances, where installation is

complex, revenue is recognised when the customer has completed their acceptance procedures.

Assessments

Revenue is primarily generated from multi-year contractual arrangements related to large-scale

assessment delivery, such as contracts to process qualifying tests for individual professions and

government departments, and is recognised as performance occurs. Under these arrangements,

while the agreement spans multiple years, the contract duration has been determined to be each

testing cycle based on contract structure, including clauses regarding termination.

While in some cases the customer may have the ability to terminate during the term for convenience,

significant financial or qualitative barriers exist limiting the potential for such terminations in the

middle of a testing cycle.

Within each testing cycle, a variety of service activities are performed such as test administration,

delivery, scoring, reporting, item development, operational services and programme management.

These services are not treated as distinct in the context of the customer contract as Pearson

provides an integrated managed service offering and these activities are accounted for together as

one comprehensive performance obligation.

Within each testing cycle, the transaction price may contain both fixed and variable amounts.

Variable consideration within these transactions primarily relates to expected testing volumes to

be delivered in the cycle. The assumptions, risks and uncertainties inherent to long-term contract

accounting can affect the amounts and timing of revenue and related expenses reported. Variable

consideration is measured using the expected value method, except where amounts are contingent

upon a future event’s occurrence, such as performance bonuses. Such event-driven contingency

payments are measured using the most likely amount approach. In estimating and constraining

variable consideration, historical experience, current trends and local market conditions are

considered. To the extent that a higher degree of uncertainty exists regarding variable consideration,

these amounts are excluded from the transaction price and recognised when the uncertainty is

reasonably removed.

Customer payments are generally defined in the contract through a payment schedule, which may

require customer acceptance for services rendered. Pearson has a history of providing satisfactory

services which are accepted by the customer. While a delay between rendering of services and

payment may exist, payment terms are within 12 months and the Group has elected to use the

practical expedient available in IFRS 15 ‘Revenue from Contracts with Customers’ and not identify a

significant financing component on these transactions.

Revenue is recognised for Assessment contracts over time as the customer is benefiting as

performance takes place through a continuous transfer of control to the customer. This continuous

transfer of control to the customer is supported by clauses in the contracts which may allow the

customer to terminate for convenience, compensate us for work performed to date, and take

possession of work in process.

As control transfers over time, revenue is recognised based on the extent of progress towards

completion of the performance obligation. The selection of the method to measure progress

towards completion requires judgement and is based on the nature of the services provided.

Revenue is recognised on a percentage of costs basis, calculated using the proportion of the total

estimated costs incurred to date. Percentage of completion is used to recognise the transfer of

control of services provided as these services are not provided evenly throughout the testing cycle

and involve varying degrees of effort during the contract term.

Losses on contracts are recognised in the period in which the loss first becomes foreseeable.

Contract losses are determined to be the amount by which estimated total costs of the contract

exceed the estimated total revenue that will be generated.

In Assessments contracts driven primarily by transactions directly to end users, Pearson’s main

obligation to the customer involves test delivery and scoring. Test delivery and scoring are defined

as a single performance obligation delivered over time whether the test is subsequently manually

scored or digitally scored on the day of the assessment. Customers may also purchase print and

digital supplemental materials. Print products in this revenue stream are recognised at a point in

time when control passes to the customer upon shipment. Recognition of digital revenue will occur

based on the extent of Pearson’s ongoing hosting obligation.

Annual report and accounts 2024 Pearson plc 169

Strategic report Governance report Financial statements Other information

3. Revenue from contracts with customers continued

Services

Revenue is primarily generated from multi-year contractual arrangements related to large-scale

educational service delivery to academic institutions, such as schools and higher education

universities. Under these arrangements, while an agreement may span multiple years, the contract

duration has been determined to be each academic period based on the structure of contracts,

including clauses regarding termination. While in some cases the customer may have the ability

to terminate during the term for convenience, significant financial or qualitative barriers exist

limiting the potential for such terminations in the middle of an academic period. The academic

period for this customer base is normally an academic year for schools and a semester for higher

education universities.

Within each academic period, a variety of services are provided such as programme development,

student acquisition, education technology and student support services. These services are not

distinct in the context of the customer contract as Pearson provides an integrated managed service

offering and these activities are accounted for together as a comprehensive performance obligation.

Where Services are provided to university customers, volume and transaction price are fixed at the

start of the semester. Where Services are provided to school customers, the transaction price may

contain both fixed and variable amounts which require estimation during the academic period.

Estimation is required where consideration is based upon average enrolments or other metrics

which are not known at the start of the academic year. Variable consideration is measured using

the expected value method. Historical experience, current trends, local circumstances and customer-

specific funding formulas are considered in estimating and constraining variable consideration.

To the extent that a higher degree of uncertainty exists regarding variable consideration, these

amounts are excluded from the transaction price and recognised when the uncertainty is

reasonably removed.

Customer payments are generally defined in the contract as occurring shortly after invoicing. Where

there is a longer payment term offered to a customer through a payment schedule, payment terms

are within 12 months and the Group has elected to use the practical expedient available in IFRS 15

and not identify a significant financing component on these transactions.

Revenue is recognised for Service contracts over time as the customer is benefiting as performance

takes place through a continuous transfer of control to the customer. This continuous transfer of

control to the customer is supported by clauses in the contracts which may allow the customer to

terminate for convenience, compensate for work performed to date, and take possession of work

in process.

As control transfers over time, revenue is recognised based on the extent of progress towards

completion of the performance obligation. The selection of the method to measure progress

towards completion requires judgement and is based on the nature of the products or services

provided. Within the comprehensive service obligation, the timing of services occurs relatively evenly

over each academic period and, as such, time elapsed is used to recognise the transfer of control to

the customer on a straight-line basis.

Losses on contracts are recognised in the period in which the loss first becomes foreseeable.

Contract losses are determined to be the amount by which estimated total costs of the contract

exceed the estimated total revenue that will be generated.

In cases of optional or add-on purchases, institutions may purchase physical goods priced at their

standalone value, which are accounted for separately and recognised at the point in time when

control passes to the customer upon shipment.

b. Disaggregation of revenue

The tables in notes 2 and 3 show revenue from contracts with customers disaggregated by operating

segment, geography and revenue stream. These disaggregation categories are appropriate as they

represent the key groupings used in managing and evaluating underlying performance of each of the

businesses. The categories also reflect groups of similar types of transactional characteristics, among

similar customers, with similar accounting conclusions.

c. Contract balances

Transactions within the Courseware revenue stream generally entail customer billings at or near the

contract’s inception and accordingly Courseware deferred income balances are primarily related to

subscription performance obligations to be delivered over time.

Transactions within the Assessments and Services revenue streams generally entail customer billings

over time based on periodic intervals, progress towards milestones or enrolment census dates.

As the performance obligations within these arrangements are delivered over time, the extent of

accrued income or deferred income will ultimately depend upon the difference between revenue

recognised and billings to date.

Refer to note 22 for opening and closing balances of accrued income. Refer to note 24 for opening

and closing balances of deferred income. Revenue recognised during the period from changes in

deferred income was driven primarily by the release of revenue over time from digital subscriptions.

d. Contract costs

The Group capitalises incremental costs to obtain contracts with customers where it is expected

these costs will be recoverable. Incremental costs to obtain contracts with customers are considered

those which would not have been incurred if the contract had not been obtained. For the Group,

these costs relate primarily to sales commissions and royalty payments. The Group has elected

to use the practical expedient as allowable by IFRS 15 whereby such costs will be expensed as

incurred where the expected amortisation period is one year or less. Where the amortisation period

is greater than one year, these costs are amortised over the contract term on a systematic basis

consistent with the transfer of the underlying goods and services within the contract to which these

costs relate, which will generally be on a rateable basis.

The Group does not recognise any material costs to fulfil contracts with customers as these types of

activities are governed by other accounting standards.

Notes to the consolidated financial statements continued

Annual report and accounts 2024 Pearson plc 170

Strategic report Governance report Financial statements Other information

e. Remaining transaction price

The below table depicts the remaining transaction price on unsatisfied or partially unsatisfied performance obligations from contracts with customers.

							2024
				Total
				remaining
		Deferred	Committed	transaction			2027
All figures in £ millions	Sales	income	sales	price	2025	2026	and later
Courseware
Products transferred at a point in time	429	–	–	–	–	–	–
Products and services transferred over time	626	94	–	94	50	17	27
Assessments
Products transferred at a point in time	200	1	–	1	1	–	–
Products and services transferred over time	1,711	273	253	526	469	56	1
Services
Products transferred at a point in time	35	–	–	–	–	–	–
Products and services transferred over time – subscriptions	533	7	–	7	7	–	–
Products and services transferred over time – other	18	16	232	248	248	–	–
Total	3,552	391	485	876	775	73	28

							2023
				Total
				remaining
		Deferred	Committed	transaction			2026
All figures in £ millions	Sales	income	sales	price	2024	2025	and later
Courseware
Products transferred at a point in time	457	–	–	–	–	–	–
Products and services transferred over time	630	78	–	78	38	15	25
Assessments
Products transferred at a point in time	208	1	–	1	1	–	–
Products and services transferred over time	1,658	261	332	593	496	94	3
Services
Products transferred at a point in time	35	–	–	–	–	–	–
Products and services transferred over time – subscriptions	660	12	–	12	11	1	–
Products and services transferred over time – other	26	16	234	250	250	–	–
Total	3,674	368	566	934	796	110	28

Annual report and accounts 2024 Pearson plc 171

Strategic report Governance report Financial statements Other information

3. Revenue from contracts with customers continued

e. Remaining transaction price continued

All figures in £ millions

							2022
				Total
				remaining
		Deferred	Committed	transaction			2025
	Sales	income	sales	price	2023	2024	and later
Courseware
Products transferred at a point in time	626	1	–	1	1	–	–
Products and services transferred over time	640	95	–	95	56	14	25
Assessments
Products transferred at a point in time	188	–	–	–	–	–	–
Products and services transferred over time	1,470	262	472	734	524	206	4
Services
Products transferred at a point in time	29	–	–	–	–	–	–
Products and services transferred over time – subscriptions	351	20	7	27	27	–	–
Products and services transferred over time – other	537	22	225	247	247	–	–
Total	3,841	400	704	1,104	855	220	29

Committed sales amounts are equal to the transaction price from contracts with customers, excluding those amounts previously recognised as revenue and amounts currently recognised in deferred

income. The total of committed sales and deferred income is equal to the remaining transaction price. Time bands stated above represent the expected timing of when the remaining transaction price will be

recognised as revenue.

Notes to the consolidated financial statements continued

Annual report and accounts 2024 Pearson plc 172

Strategic report Governance report Financial statements Other information

4. Operating expenses

All figures in £ millions	2024	2023	2022
By function:
Cost of goods sold	1,741	1,839	2,046
Operating expenses
Distribution costs	43	47	61
Selling, marketing and product development costs	510	549	564
Administrative and other expenses	754	767	823
Reorganisation costs	(2)	–	150
Other income	(40)	(41)	(49)
Total net operating expenses	1,265	1,322	1,549
Other net gains and losses	7	16	(24)
Total	3,013	3,177	3,571

Other income includes freight income and sublet income. Included in administrative and other

expenses are research and efficacy costs of £6m (2023: £8m; 2022: £10m). Costs capitalised relate

primarily to employee costs.

Other net gains and losses in 2024 relate to costs related to prior year acquisitions and disposals,

partially offset by a gain on the partial disposal of our investment in an associate. In 2023, other net

gains and losses relate to the gain on the disposal of the Pearson Online Learning Services business

and gains related to the release of accruals and a provision related to historical acquisitions, offset

by losses on the disposal of Pearson College and costs related to current and prior year disposals

and acquisitions. Other net gains in 2022, largely relate to the gain on the sales of certain businesses

and a gain arising on a decrease in the deferred consideration payable on prior year acquisitions,

offset by costs related to disposals and acquisitions.

In 2024, the costs of major reorganisation relate to a release of £2m for amounts previously

accrued that are no longer required. In 2023, there are no costs of major reorganisation. In 2022,

the reorganisation costs of £150m mainly related to staff redundancies and impairment of right-of-

use property assets. The 2022 charge includes the impact of updated assumptions related to the

recoverability of right-of-use assets made in 2021. In 2023, charges of £11m relating to impairments

of property assets arising from the impact of updates to assumptions made during the 2022 and

2021 reorganisation programmes are included within administrative and other expenses.

All figures in £ millions	Notes	2024	2023	2022
By nature:
Royalties expensed		162	164	194
Other product costs		371	393	412
Employee benefit expense	5	1,411	1,467	1,605
Contract labour		56	70	73
Employee-related expense		53	60	52
Promotional costs		113	146	268
Depreciation and impairment of property, plant
and equipment and investment property and assets held for sale	10	77	90	136
Amortisation and impairment of intangible assets – product development	20	291	284	303
Amortisation and impairment of intangible assets – software	11	117	123	125
Amortisation and impairment of intangible assets – other	11	41	46	54
Property and facilities		70	82	102
Technology and communications		215	215	221
Professional and outsourced services		395	443	501
Other general and administrative costs		72	43	76
Costs capitalised		(398)	(424)	(478)
Other net gains and losses		7	16	(24)
Other income		(40)	(41)	(49)
Total		3,013	3,177	3,571

Annual report and accounts 2024 Pearson plc 173

Strategic report Governance report Financial statements Other information

4. Operating expenses continued

During the year the Group obtained the following services from the Group’s auditors:

All figures in £ millions	2024	2023	2022
The audit of parent company and consolidated financial
statements	7	8	6
The audit of the company’s subsidiaries	2	2	1
Total audit fees*	9	10	7
Audit-related and other assurance services	–	–	–
Other non-audit services	–	–	–
Total other services	–	–	–
Total non-audit services	–	–	–
Total	9	10	7

Reconciliation between audit and non-audit service fees is shown below:

All figures in £ millions	2024	2023	2022
Group audit fees including fees for attestation under section
404 of the Sarbanes-Oxley Act	9	10	7
Non-audit fees	–	–	–
Total	9	10	7

* Includes fees in connection with the interim review, preliminary announcement and elements of the controls audit required under

Section 404 of the Sarbanes Oxley Act. In total this amounted to £1m in each of the years presented.

In 2024, 2023 and 2022, the external auditor performed several permitted non-audit services. In all

years the fees rounded to £nil.

5. Employee information

All figures in £ millions	Notes	2024	2023	2022
Employee benefit expense
Wages and salaries (including termination costs)		1,188	1,252	1,382
Social security costs		100	107	113
Share-based payment costs	26	42	37	35
Retirement benefits – defined contribution plans	25	41	45	46
Retirement benefits – defined benefit plans	25	40	26	29
Total		1,411	1,467	1,605

An additional £2m of share-based payment costs (2023: £3m; 2022: £3m) in respect of remuneration

for post-acquisition services for recent acquisitions is included in other net gains and losses in the

income statement.

The details of the emoluments of the Directors of Pearson plc are shown in the report on Directors’

remuneration.

Average number employed	2024	2023	2022
Employee numbers
UK	2,798	3,045	3,244
Other European countries	681	633	809
US	9,258	10,125	11,357
Canada	315	398	522
Asia Pacific	3,111	3,257	3,369
Other countries	861	902	1,137
Total	17,024	18,360	20,438

Notes to the consolidated financial statements continued

Annual report and accounts 2024 Pearson plc 174

Strategic report Governance report Financial statements Other information

6. Net finance costs

All figures in £ millions	Notes	2024	2023	2022
Interest payable on financial liabilities at
amortised cost and associated derivatives		(48)	(34)	(32)
Interest on lease liabilities	35	(22)	(23)	(25)
Interest on deferred and contingent
consideration		(2)	(4)	(5)
Fair value movements on investments held at fair value	15	(11)	–	–
Net foreign exchange losses		(3)	–	–
Interest on provisions for uncertain tax positions		(7)	–	(7)
Fair value movement on derivatives		(19)	(20)	(2)
Finance costs		(112)	(81)	(71)
Interest receivable on financial assets at amortised cost		25	16	18
Interest on lease receivables	35	4	4	5
Net finance income in respect of retirement
benefits	25	21	26	9
Fair value movements on investments held at fair value	15	–	13	28
Net foreign exchange gains		–	3	1
Interest on provisions for uncertain tax positions		5	4	35
Fair value movement on derivatives		26	10	27
Finance income		81	76	123
Net finance (costs)/income		(31)	(5)	52

Net movement in the fair value of hedges is further explained in note 16. Derivatives not in a hedge

relationship include fair value movements in the interest rate and cross-currency interest rate swaps.

7. Income tax

All figures in £ millions	Notes	2024	2023	2022
Current tax
Charge in respect of current year		(132)	(105)	(127)
Adjustments in respect of prior years		60	20	18
Total current tax charge		(72)	(85)	(109)
Deferred tax
In respect of temporary differences		8	(11)	29
Other adjustments in respect of prior years		(11)	(17)	1
Total deferred tax credit/(charge)	13	(3)	(28)	30
Total tax charge		(75)	(113)	(79)

The adjustments in respect of prior years in 2024 is primarily driven by the State Aid provision

release (see page 176 for further details), with 2024 and 2023 also being impacted by revising the

previous year’s reported tax provision to reflect the tax returns subsequently filed. In 2022, the

difference is primarily due to movements in provisions for tax uncertainties. This results in a change

between deferred and current tax as well as an absolute benefit to the total tax charge.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using

the UK tax rate as follows:

All figures in £ millions	2024	2023	2022
Profit before tax	510	493	323
Tax calculated at UK rate (2024: 25%; 2023: 23.5%;
2022: 19%)	(127)	(116)	(62)
Effect of overseas tax rates	(1)	(1)	(12)
Effect of UK rate change	–	(1)	3
Net expense not subject to tax	3	(3)	(9)
Gains and losses on sale of businesses not subject to tax	–	5	2
Unrecognised tax losses	2	1	3
State Aid provision release	63	–	–
Movement in provisions for tax uncertainties – current year	(1)	(2)	(23)
Adjustments in respect of prior years – movement in provisions for tax uncertainties	(12)	1	13
Adjustments in respect of prior years – other	(2)	3	6
Total tax charge	(75)	(113)	(79)
UK	21	(54)	(41)
Overseas	(96)	(59)	(38)
Total tax charge	(75)	(113)	(79)
Tax rate reflected in earnings	14.7%	23.0%	24.5%

Annual report and accounts 2024 Pearson plc 175

Strategic report Governance report Financial statements Other information

7. Income tax continued

Key judgements

— The application of tax legislation in relation to provisions for uncertain tax positions.

Key areas of estimation

— The level of provisions required in relation to uncertain tax positions is complex and each

matter is separately assessed. The estimation of future settlement amounts is based on a

number of factors including the status of the unresolved matter, clarity of legislation, range

of possible outcomes and the statute of limitations.

The movement in provisions for tax uncertainties primarily reflects reassessment of existing

exposures based on currently available information and tax authority correspondence, releases

due to the expiry of relevant statutes of limitation and settlement of certain audits. The current

tax liability of £32m (2023: £32m) includes £35m (2023: £27m) of provisions for tax uncertainties,

whilst the net deferred income tax liability of £11m (2023: £11m) includes £25m (2023: £23m) of

provisions for tax uncertainties, both principally in respect of several matters in the US and the UK.

This includes matters under enquiry from the UK tax authorities with the relevant years being 2019

to 2021, as previously disclosed in note 34 of the 2023 Annual Report.

The Group is currently under audit in several countries, and the timing of any resolution of these

audits is uncertain. In most countries, tax years up to and including 2018 are now statute barred

from examination by tax authorities, however, a balance of £16m relates to certain remaining

open issues. Of the remaining £44m balance, £21m relates to 2019, £9m to 2020, £6m to 2021,

£3m to 2022, £3m to 2023 and £2m to 2024. The tax authorities may take a different view from

management and the final liability may be greater or lower than provided.

Refer to note 34 for details of other uncertain tax positions.

UK legislation in relation to Pillar Two was substantively enacted on 20 June 2023 and is effective

from 1 January 2024. The Group is in scope of this legislation and has performed an assessment

of the Group’s potential exposure to Pillar Two income taxes based on the most recent financial

information available for the constituent entities in the Group. Based on this assessment, the Pillar

Two effective tax rates in most of the jurisdictions in which the Group operates are above 15%.

However, there are a limited number of jurisdictions where the transitional safe harbour relief does

not apply, and the Pillar Two effective tax rate is close to 15%. The Group has concluded that it does

not have a material exposure to Pillar Two income taxes in those jurisdictions. In addition, we note

US President Trump’s Executive Order of 20 January 2025 withdrawing the US from the Pillar Two

agreement; this development does not impact our assessment of Pillar Two for 2024.

The tax benefit/(charge) recognised in other comprehensive income is as follows:

All figures in £ millions	2024	2023	2022
Net exchange differences on translation of
foreign operations	2	–	4
Fair value gains on other financial assets	–	–	1
Remeasurement of retirement benefit obligations	(2)	20	(12)
	–	20	(7)

Notes to the consolidated financial statements continued

Included in net income not subject to tax is the benefit of available tax credits less the impact

of foreign taxes not creditable, the tax impact of share-based payments and other expenses

not deductible.

Factors which may affect future tax charges include changes in tax legislation, transfer

pricing regulations, the level and mix of profitability in different countries, and settlements

with tax authorities.

The State Aid provision release of £63m is a result of the Court of Justice of the European Union

(‘CJEU’) handing down its decision on 19 September 2024 determining that the United Kingdom

controlled foreign company group financing partial exemption (‘FCPE’) did not constitute State Aid.

Previously, on 25 April 2019, the European Commission published its final decision that the UK FCPE

partially constituted State Aid. This decision was appealed by the UK Government, and other parties.

Notwithstanding these appeals, the UK was obliged to recover the deemed unlawful State Aid with

Charging Notices issued in 2021. On 8 June 2022, the EU General Court found in the Commission’s

favour resulting in a further appeal to the CJEU by the UK Government and other parties. As a

consequence of the CJEU’s decision on 19 September 2024, the Commission’s decision was annulled

in full and the judgment of the EU General Court set aside. In light of this, the Group has now fully

released the £63m provision for tax and £5m provision for interest on tax held in relation to this

matter, leaving on the balance sheet a receivable for the £97m tax and £8m interest on tax paid

under the Charging Notices issued by HMRC in 2021. These receivables have been disclosed as

current assets. In addition HMRC Guidance issued to facilitate these pending repayments confirms

that interest will be paid on the tax element of the amounts previously collected and a £9m interest

accrual has also therefore been recorded.

Annual report and accounts 2024 Pearson plc 176

Strategic report Governance report Financial statements Other information

8. 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 year, 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.

Certain contingently issuable shares vested on 31 December 2023 and 31 December 2022 but had

not yet been issued. These shares were considered dilutive but did not materially impact basic EPS.

All figures in £ millions	2024	2023	2022
Earnings for the year	435	380	244
Non-controlling interest	(1)	(2)	(2)
Earnings attributable to equity shareholders	434	378	242
Weighted average number of shares (millions)	673.0	711.5	738.1
Effect of dilutive share options (millions)	11.0	5.8	3.9
Weighted average number of shares (millions) for diluted
earnings	684.0	717.3	742.0
Earnings per share (in pence per share)
Basic	64.5p	53.1p	32.8p
Diluted	63.5p	52.7p	32.6p

9. Dividends

All figures in £ millions	2024	2023	2022
Final paid in respect of prior year 15.7p (2023: 14.9p;
2022: 14.2p)	107	106	107
Interim paid in respect of current year 7.4p (2023: 7.0p;
2022: 6.6p)	49	49	49
	156	155	156

The Directors are proposing a final dividend in respect of the financial year ended 31 December

2024 of 16.6p per equity share which will absorb an estimated £111m of shareholders’ funds. It will

be paid on 9 May 2025 to shareholders who are on the register of members on 21 March 2025.

These financial statements do not reflect this dividend as a liability.

10. Property, plant and equipment and investment property

					Owned assets
					Assets in
	Investment	Right-of-use	Land and	Plant and	the course of
All figures in £ millions	property	assets	buildings	equipment	construction	Total
Cost
At 1 January 2023	190	359	178	257	22	1,006
Exchange differences	–	(14)	(9)	(11)	(1)	(35)
Additions	24	27	–	6	24	81
Disposals of businesses
(see note 31)	–	–	(4)	(3)	(2)	(9)
Disposals and retirements	–	(30)	(10)	(36)	–	(76)
Reclassifications
and transfers	–	–	10	24	(34)	–
At 31 December 2023	214	342	165	237	9	967
Exchange differences	–	2	1	1	1	5
Additions	7	39	–	4	27	77
Disposals of businesses
(note 31)	–	–	–	–	–	–
Disposals and retirements	–	(33)	(22)	(84)	–	(139)
Reclassifications and transfers	–	–	7	21	(28)	–
At 31 December 2024	221	350	151	179	9	910

Annual report and accounts 2024 Pearson plc 177

10. Property, plant and equipment and investment property

continued

					Owned assets
	Investment	Right-of-use			Assets in
All figures in £ millions	property	assets	Land and	Plant and	the course of	Total
			buildings	equipment	construction
Depreciation and impairment
At 1 January 2023	(130)	(234)	(133)	(199)	–	(696)
Exchange differences	–	12	6	10	–	28
Charge for the year	(5)	(39)	(10)	(25)	–	(79)
Disposals of businesses
(note 31)	–	–	2	2	–	4
Disposals and retirements	–	29	10	35	–	74
Reclassifications
and transfers	–	–	–	–	–	–
Impairment	–	(2)	–	–	–	(2)
At 31 December 2023	(135)	(234)	(125)	(177)	–	(671)
Exchange differences	–	(2)	(2)	(2)	–	(6)
Charge for the year	(8)	(35)	(8)	(25)	–	(76)
Disposals of businesses
(note 31)	–	–	–	–	–	–
Disposals and retirements	–	32	22	83	–	137
Reclassifications
and transfers	–	–	–	–	–	–
Impairment	(1)	–	–	–	–	(1)
At 31 December 2024	(144)	(239)	(113)	(121)	–	(617)
Carrying amounts
At 1 January 2023	60	125	45	58	22	310
At 31 December 2023	79	108	40	60	9	296
At 31 December 2024	77	111	38	58	9	293

Depreciation expense of £42m (2023: £40m; 2022: £45m) has been included in the income

statement in cost of goods sold and £34m (2023: £39m; 2022: £45m) in operating expenses. The

impairment charge of £1m (2023: £2m; 2022: £46m) has been included within operating expenses

within the income statement.

Property, plant and equipment (including investment property) assets are assessed for impairment

triggers annually or when triggering events occur. In 2024, there were impairment charges of

£1m (2023: £11m) in respect of property assets including £nil (2023: £9m) in relation to property

assets which are classified as assets held for sale. The recoverability of certain of the Group’s right-

of-use assets is now based on the Group’s ability to sublease vacant space. This involves the use

of assumptions related to future subleases including the achievable rent, lease start dates, lease

incentives such as rent free periods and the discount rate applied. Should the future sublease

outcomes be more or less favourable than the assumptions used by management, this could result in

additional impairment charges or reversals of impairment charges.

In 2024, total additions to right-of-use-assets are £46m (2023: £42m) including £7m (2023: £15m) in

respect of investment property.

Investment property

Buildings, or portions of buildings, that are no longer occupied by the Group and are held for

operating lease rental are classified as investment property. Investment property includes both

right-of-use assets and owned assets. The Group recognised rental income of £9m (2023: £6m; 2022

£3m) in relation to properties classified as investment property. Investment property is measured

using the cost model. As a result of recent impairments, the fair value of investment property is

equal to the carrying value. The fair value of investment property has been determined using a

discounted cash flow model. The valuation model is internally generated but uses inputs from

external, independent property valuers, having appropriate recognised professional qualifications

and recent experience in the location and category of the property being valued. The valuations

require the application of judgement and involve the use of known inputs for existing contracted

subleases as well as assumptions related to future potential subleases including the achievable

rent, lease start dates, lease incentives such as rent free periods and the discount rate applied.

The fair value measurement of investment properties has been classified as level 3 within the fair

value hierarchy based on the inputs and valuation technique used. Should the future sublease

outcomes be more or less favourable than the assumptions used by management, this could result

in additional impairment charges or reversals of impairment charges.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 178

11. Intangible assets

			Acquired
			customer lists,	Acquired	Acquired	Other
			contracts and	trademarks	publishing	intangibles
All figures in £ millions	Goodwill	Software	relationships	and brands	rights	acquired	Total
Cost
At 1 January 2023	2,480	1,115	838	186	103	430	5,152
Exchange differences	(107)	(40)	(42)	(5)	(3)	(12)	(209)
Additions – internal
development	–	96	–	–	–	–	96
Additions – purchased	–	–	–	–	–	–	–
Disposals and retirements	–	(18)	–	(1)	–	(3)	(22)
Acquisition of business
(note 30)	61	–	82	6	–	29	178
Disposal of businesses
(note 31)	–	(15)	(298)	(2)	–	–	(315)
Transfers	–	(1)	–	–	–	–	(1)
At 31 December 2023	2,434	1,137	580	184	100	444	4,879
Exchange differences	2	12	6	(7)	–	(20)	(7)
Additions – internal
development	–	91	–	–	–	–	91
Additions – purchased	–	–	–	–	–	–	–
Disposals and	–
retirements	–	(89)	–	(1)	–	(5)	(95)
Acquisition of business
(note 30)	1	–	–	–	–	1	2
Disposal of businesses
(note 31)	–	–	–	–	–	–	–
Transfers	–	(5)	–	–	–	–	(5)
At 31 December 2024	2,437	1,146	586	176	100	420	4,865

			Acquired
			customer lists,	Acquired	Acquired	Other
			contracts and	trademarks	publishing	intangibles
All figures in £ millions	Goodwill	Software	relationships	and brands	rights	acquired	Total
Amortisation and impairment
At 1 January 2023	–	(693)	(698)	(155)	(101)	(328)	(1,975)
Exchange differences	–	24	31	4	3	9	71
Charge for the year	–	(123)	(19)	(7)	(1)	(19)	(169)
Disposals and retirements	–	18	–	1	–	3	22
Disposal of businesses
(note 31)	–	8	252	2	–	–	262
Transfers	–	1	–	–	–	–	1
At 31 December 2023	–	(765)	(434)	(155)	(99)	(335)	(1,788)
Exchange differences	–	(8)	(6)	7	–	18	11
Charge for the year	–	(117)	(17)	(6)	–	(18)	(158)
Disposals and retirements	–	89	–	1	–	5	95
Disposal of businesses
(note 31)	–	–	–	–	–	–	–
Transfers	–	1	–	–	–	–	1
At 31 December 2024	–	(800)	(457)	(153)	(99)	(330)	(1,839)
Carrying amounts
At 1 January 2023	2,480	422	140	31	2	102	3,177
At 31 December 2023	2,434	372	146	29	1	109	3,091
At 31 December 2024	2,437	346	129	23	1	90	3,026

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Annual report and accounts 2024 Pearson plc 179

11. Intangible assets continued

Software and acquired intangible assets

Acquired intangible assets are valued separately for each acquisition. For material business

combinations, the valuation is determined with the support of a third-party specialist. The primary

method of valuation used is the discounted cash flow method. Acquired intangibles are amortised

either on a straight line basis or using an amortisation profile based on the projected cash flows

underlying the acquisition date valuation of the intangible asset, which generally results in a larger

proportion of amortisation being recognised in the early years of the asset’s life, depending

on the individual asset. The Group keeps the expected pattern of consumption under review. Other

intangibles acquired includes technology.

Amortisation of £40m (2023: £37m; 2022: £32m) is included in the income statement in cost of

goods sold and £118m (2023: £132m; 2022: £147m) in operating expenses. Impairment charges of

£nil (2023: £nil; 2022: £nil) are included in operating expenses within the income statement.

The range of useful economic lives for each major class of intangible asset (excluding goodwill and

software) is shown below:

	At 31 December 2024
	Useful economic life
Class of intangible asset
Acquired customer lists, contracts and relationships	3-20 years
Acquired trademarks and brands	2-20 years
Acquired publishing rights	5-20 years
Other intangibles acquired	2-20 years

The expected amortisation profile of acquired intangible assets is shown below:

					At 31 December 2024
	One to	Six to	Eleven to	Sixteen to
All figures in £ millions	five years	ten years	fifteen years	twenty years	Total
Class of intangible asset
Acquired customer lists, contracts
and relationships	63	38	24	4	129
Acquired trademarks and brands	18	5	–	–	23
Acquired publishing rights	1	–	–	–	1
Other intangibles acquired	73	11	6	–	90

Impairment tests for cash-generating units (CGUs) containing goodwill

Impairment tests have been carried out as described below. Goodwill was allocated to CGUs, or an

aggregation of CGUs, where goodwill could not be reasonably allocated to individual business units.

Impairment reviews were conducted on these aggregated CGUs as follows:

	2024	2023
All figures in £ millions	Goodwill	Goodwill
Assessment & Qualifications	1,369	1,355
Virtual Learning	426	419
English Language Learning	246	255
Workforce Skills	330	337
Higher Education	66	68
Total	2,437	2,434

Goodwill is tested at least annually for impairment. The recoverable amount of each aggregated

CGU is based on the higher of value in use and fair value less costs of disposal. The impairment

assessment is based on value in use. Other than goodwill there are no intangible assets with

indefinite lives. No impairments of goodwill were recorded in 2024 or 2023.

Determination of CGUs and reallocation of goodwill

Pearson identifies its CGUs based on its operating model and how data is collected and

reviewed for management reporting and strategic planning purposes in accordance with IAS

36 ‘Impairment of Assets’. The CGUs and CGU aggregations reflect the level at which goodwill is

monitored by management.

In 2023, business disposals resulted in the disposal of £53m of intangible assets (see note 31 for

further details). A relative value method was used to allocate goodwill to the disposed business in

the Virtual Learning CGU aggregation. The result of this was that no goodwill was allocated to the

disposed business.

Key assumptions

For the purpose of estimating the value in use of the CGUs, management has used an income

approach based on present value techniques. The calculations for all CGUs use cash flow projections

based on financial budgets approved by the Board covering a five-year period.

The key assumptions used by management in the value in use calculations were:

Discount rates – The discount rates are based on the Group’s weighted average cost of capital,

where the cost of equity is calculated based on the risk-free rate of government bonds, adjusted

for a risk premium to reflect the increased risk in investing in equities. Where CGUs cover multiple

territories, a blended risk-free rate is used. Base discount rates were assessed as reflecting

underlying economic conditions, and so no further risk premiums were considered necessary. The

average pre-tax discount rates range from 10.8% to 13.2% (2023: pre-tax 10.4% to 13.0%).

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 180

Perpetuity growth rates – The perpetuity growth rates are based on inflation trends. A perpetuity

growth rate of 2% (2023: 2%) was used for cash flows subsequent to the approved budget period for

CGUs operating primarily in mature markets. This perpetuity growth rate is a conservative rate and

is considered to be lower than the long-term historical growth rates of the underlying territories in

which the CGU operates and the long-term growth rate prospects of the sectors in which the CGU

operates. A blended growth rate of 3.5% (2023: 3.5%) was used for cash flows subsequent to the

approved budget period for English Language Learning which has a higher exposure to emerging

markets with higher inflation. This geographically blended growth rate is generally in line with the

long-term historical growth rates in those markets.

The key assumptions used by management in setting the financial budgets were as follows:

Forecast sales growth rates – Forecast sales growth rates are based on past experience adjusted

for the strategic direction and near-term investment priorities within each CGU. Key assumptions

include growth in English Language Learning and Workforce Skills – due to product-led share gains

and contribution from recent acquisitions, continued growth in Higher Education, growth in Virtual

Learning – albeit impacted by school churn in Virtual Schools in the short term, and steady growth

in Assessments and Qualifications. The sales forecasts use average nominal growth rates of low-mid

single digits for mature businesses in mature markets and double digit growth where there has been

significant organic and/or inorganic investment.

Operating profits – Operating profits are forecast based on historical experience of operating

margins, adjusted for the impact of changes to product costs, strategic developments and new

business cases to the extent they have been formally approved prior to the balance sheet date.

Management applies judgement in allocating corporate costs on a reasonable and consistent basis

in order to determine operating profit at a CGU level.

Management have considered the impact of climate change risks (including physical and transition

risks and the costs associated with achieving the Group’s net zero commitment) and are satisfied

that any related costs will not materially impact the Group’s cash flow projections or impairment

judgements at 31 December 2024.

The table below shows the key assumptions used by management in the value in use calculations.

		2024		2023
		Perpetuity		Perpetuity
	Discount rate	growth rate	Discount rate	growth rate
Assessment & Qualifications	11.0%	2.0%	10.8%	2.0%
Virtual Learning	10.9%	2.0%	11.0%	2.0%
English Language Learning	13.2%	3.5%	13.0%	3.5%
Workforce Skills	10.8%	2.0%	10.4%	2.0%
Higher Education	10.8%	2.0%	10.7%	2.0%

Sensitivities

Impairment testing for the year ended 31 December 2024 did not find any of the CGUs to be

sensitive to reasonably possible changes in key assumptions.

12. Investments in joint ventures and associates

The amounts recognised in the balance sheet are as follows:

All figures in £ millions	2024	2023
Associates	12	22
Total	12	22

	The amounts recognised in the income statement for the year ended 31 December 2024 were £2m
(2023: £1m; 2022: £1m).

The Group has no material associates or joint ventures. The largest associate is a 49% interest in The

Egyptian International Publishing Company-Longman, which had a carrying value of £9m as at 31

December 2024 (2023: £13m).

During 2024, the Group sold part of its investment in its associate, Academy of Pop, for £4m,

resulting in a gain of £2m. The remaining stake is now classified as a financial investment.

Other than the £5m payment in respect of Academy of Pop in 2023 disclosed in note 36, there were

no material transactions with associates or joint ventures during 2024 or 2023.

13. Deferred income tax

All figures in £ millions	2024	2023
Deferred income tax assets	52	35
Deferred income tax liabilities	(63)	(46)
Net deferred income tax liability	(11)	(11)

Substantially all of the deferred income tax assets are expected to be recovered after more than

one year. See note 7 for details of provisions for tax uncertainties held within deferred tax.

Deferred income tax assets and liabilities shall be offset when there is a legally enforceable right to

offset current income tax assets with current income tax liabilities and where the deferred income

taxes relate to the same fiscal authority.

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Annual report and accounts 2024 Pearson plc 181

13. Deferred income tax continued

At 31 December 2024, the Group has gross tax losses for which no deferred tax asset is recognised

of £965m (2023: £1,029m). The expiry date and key geographic split of these losses is set out in the

following table.

		Gross				Tax effected
Year ended
31 December 2024	UK	US	Other	Total	UK	US	Other	Total
Tax losses expiring:
Within 10 years	–	443	21	464	–	92	5	97
Within 10-20 years	–	135	–	135	–	7	–	7
Available indefinitely	167	38	161	366	42	2	52	96
Total	167	616	182	965	42	101	57	200

		Gross				Tax effected
Year ended
31 December 2023	UK	US	Other	Total	UK	US	Other	Total
Tax losses expiring:
Within 10 years	–	437	34	471	–	91	9	100
Within 10-20 years	–	143	–	143	–	7	–	7
Available indefinitely	168	48	199	415	42	2	65	109
Total	168	628	233	1,029	42	100	74	216

The decrease in unrecognised tax losses in Other is principally due to the increased recognition of

tax losses in Brazil during the period, as well as the expiry of tax losses in Japan and the impact of

foreign exchange movements. Other unrecognised tax losses includes £116m gross (2023: £155m)

and £39m tax effected (2023: £53m) relating to Brazil.

Other gross deductible temporary differences for which no deferred tax asset is recognised total

£194m (2023: £201m). This includes £188m (2023: £196m) in respect of interest limitations. The

amount of temporary differences associated with subsidiaries for which no deferred tax has been

provided totals £290m (2023: £268m).

Deferred income tax assets of £9m (2023: £18m) have been recognised in countries that reported

a tax loss in either the current or preceding year. This primarily arises in respect of tax losses in

Australia and Argentina. It is considered more likely than not that there will be sufficient future

taxable profits to realise these assets.

The recognition of the deferred income tax assets is supported by management’s forecasts of the

future profitability of the relevant countries. In some cases deferred income tax assets are forecast

to be recovered through taxable profits over a period that exceeds five years. Management consider

these forecasts are sufficiently reliable to support the recovery of the assets. Where there are

insufficient forecasts of future profits, deferred income tax assets have not been recognised.

The movement in deferred income tax assets and liabilities during the year is as follows:

		Accruals	Retirement		Goodwill
	Trading	and other	benefit	Deferred	and	Interest
All figures in £ millions	losses	provisions	obligations	revenue	intangibles	limitations	Other	Total
Deferred income tax
assets/(liabilities)
At 1 January 2023	130	67	(127)	63	(206)	55	38	20
Exchange differences	(1)	(3)	(1)	(3)	9	(2)	1	–
Acquisitions
and disposals of subsidiaries	(3)	6	–	–	(26)	–	–	(23)
Income statement
benefit/(charge)	(25)	(11)	(6)	(17)	71	(19)	(21)	(28)
Tax charge in OCI/equity	–	–	20	–	–	–	–	20
At 31 December 2023	101	59	(114)	43	(152)	34	18	(11)
Exchange differences	(2)	–	–	–	–	–	(1)	(3)
Acquisitions
and disposals of subsidiaries	–	–	–	–	–	–	–	–
Income statement
benefit/(charge)	(23)	(2)	3	2	29	(16)	4	(3)
Tax charge in OCI/equity	–	7	(2)	–	–	–	1	6
At 31 December 2024	76	64	(113)	45	(123)	18	22	(11)

Included within accruals and other provisions is an amount of £23m in respect of share based

payments. Other deferred income tax items include temporary differences in respect of right-of-use

assets (deferred tax asset of £47m, with an offsetting deferred tax liability of £37m), and accelerated

capital allowances of £11m.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 182

14. Classification of financial instruments

The accounting classification of each class of the Group’s financial assets, and their carrying values, is as follows:

						2024					2023
				Fair value	Amortised cost				Fair value	Amortised cost
		Fair value					Fair value
		through other	Fair value	Fair value		Total	through other	Fair value	Fair value		Total
		comprehensive	through profit	– hedging	Financial	carrying	comprehensive	through profit	– hedging		carrying
All figures in £ millions	Notes	income	and loss	instrument	assets	value	income	and loss	instrument	Financial assets	value
Investments in listed and unlisted securities	15	28	113	–	–	141	23	120	–	–	143
Cash and cash equivalents	17	–	62	–	481	543	–	31	–	281	312
Derivative financial instruments	16	–	30	21	–	51	–	1	47	–	48
Trade receivables	22	–	–	–	614	614	–	–	–	695	695
Contract assets - unbilled	22	–	–	–	71	71	–	–	–	–	–
Investment in finance lease receivable	22	–	–	–	83	83	–	–	–	100	100
Other receivable		–	12	–	–	12	–	–	–	12	12
Total financial assets		28	217	21	1,249	1,515	23	152	47	1,088	1,310

The carrying value of the Group’s financial assets is equal to, or approximately equal to, the market value. The other receivable relates to the contingent consideration receivable on the disposal of POLS.

The accounting classification of each class of the Group’s financial liabilities, together with their carrying values and market values, is as follows:

						2024					2023
				Amortised
			Fair value	cost				Fair value	Amortised cost
		Fair value	Fair value	Other		Total	Fair value	Fair value	Other	Total	Total
		through profit	– hedging	financial	Total	market	through profit	– hedging	financial	carrying	market
All figures in £ millions	Notes	and loss	instrument	liabilities	carrying value	value	and loss	instrument	liabilities	value	value
Derivative financial instruments	16	(10)	(48)	–	(58)	(58)	(7)	(36)	–	(43)	(43)
Trade payables	24	–	–	(273)	(273)	(273)	–	–	(317)	(317)	(317)
Deferred and contingent consideration	24	(1)	–	(21)	(22)	(22)	(57)	–	–	(57)	(57)
Borrowings due within one year	18	–	–	(315)	(315)	(312)	–	–	(67)	(67)	(67)
Borrowings due after more than one year	18	–	–	(1,157)	(1,157)	(1,123)	–	–	(1,094)	(1,094)	(1,062)
Total financial liabilities		(11)	(48)	(1,766)	(1,825)	(1,788)	(64)	(36)	(1,478)	(1,578)	(1,546)

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Annual report and accounts 2024 Pearson plc 183

14. Classification of financial instruments continued

Fair value measurement

Financial instruments that are measured subsequently to initial recognition at fair value are grouped

into levels 1 to 3, based on the degree to which the fair value is observable, as follows:

Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets

for identical assets or liabilities. The Group’s bonds valued at £918m (2023: £611m) and money

market funds of £62m (2023: £31m) included within cash and cash equivalents, and listed securities

of £6m (2023: £nil) are classified as level 1.

Level 2 fair value measurements are those derived from inputs, other than quoted prices included

within level 1, that are observable for the asset or liability, either directly (as prices) or indirectly

(derived from prices). The Group’s derivative assets valued at £51m (2023: £48m) and derivative

liabilities valued at £58m (2023: £43m) are classified as level 2.

Level 3 fair value measurements are those derived from valuation techniques that include inputs

for the asset or liability that are not based on observable market data (unobservable inputs).

The Group’s investments in unlisted securities are valued at £135m (2023: £143m), contingent

consideration of £1m (2023: £57m) and the other receivable of £12m (2023: £12m) are classified as

level 3.

The movements in fair values of level 3 financial assets measured at fair value are shown in the

table below:

			2024	2023
		Investments
	Other	in unlisted
All figures in £ millions	receivable	securities	Total	Total
At 1 January	12	143	155	136
Exchange differences	–	2	2	(5)
Acquisition of investments and other receivable	–	9	9	20
Repayments	–	–	–	(3)
Disposal of investments	–	–	–	(7)
Reclassification out of level 3	–	(6)	(6)	–
Fair value movements – OCI	–	(2)	(2)	1
Fair value movements – income statement	–	(11)	(11)	13
At 31 December	12	135	147	155

The fair value of the investments in unlisted securities is determined by reference to the financial

performance of the underlying asset, recent funding rounds and amounts realised on the sale of

similar assets. During the year, one of the investments held was listed, and therefore the investment

of £6m was reclassified out of level 3 and into level 1.

The other receivable relates to £12m (2023: £12m) in respect of the contingent consideration

receivable for the sale of the POLS business, which comprises a 27.5% share of positive adjusted

EBITDA in each calendar year for six years from the date of disposal, and 27.5% of the proceeds

received by the purchaser in relation to any future monetisation event.

The valuation of the contingent consideration receivable has been determined on the basis of

a discounted cash flow model, and valued by a third-party specialist. The key inputs into the

discounted cash flow model are the estimates of adjusted EBITDA for the 6 years from the date of

disposal and the estimate of the valuation of the business thereafter. Reasonably possible changes

in assumptions for the inputs into the model would not have a material impact on the carrying value

of the contingent consideration, and therefore sensitivities have not been disclosed.

The deferred and contingent consideration payable in respect of prior year acquisitions is measured

as the net present value of the expected cash flows. The movement in the fair value of the deferred

and contingent consideration payable is shown in the table below:

All figures in £ millions	2024	2023
At 1 January	(57)	(79)
Exchange differences	–	3
Acquisitions	(1)	–
Fair value movements – income statement	(2)	(4)
Repayments	38	23
At 31 December	(22)	(57)

15. Other financial assets

All figures in £ millions	2024	2023
At 1 January	143	133
Exchange differences	2	(5)
Acquisition of investments	9	8
Disposal of investments	–	(7)
Fair value movements – OCI	(2)	1
Fair value movements – income statement	(11)	13
At 31 December	141	143

Other financial assets are listed and unlisted securities of £141m (2023: £143m), of which £28m

(2023: £23m) are classified at fair value through other comprehensive income (FVOCI), with the

remaining £113m (2023: £120m) mainly relating to investments in funds, being required to be held

at fair value through profit and loss (FVTPL). The assets, which are not held for trading, relate to the

Group’s interests in new and innovative educational ventures across the world. These are strategic

investments and where permitted, the Group made the election to classify such investments as

FVOCI on initial recognition of the assets. None of the investments are individually significant to the

financial statements and therefore sensitivities have not been provided.

During the year, the Group did not dispose of any investments that were classified as FVOCI (2023:

£3m). In 2023, the cumulative loss on disposal was £2m.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 184

The Group uses a combination of interest rate and cross-currency swaps to convert its €300m

1.375% Euro notes 2025.

Receive Notional	Receive coupon	FX rate	Notional	Pay coupon
€100m	1.375%	GBPEUR: 1.1295	£87m	3.51%
€181m	1.375%	GBPUSD: 1.206	$193m	3.402%
€19m	1.375%	GBPUSD: 1.206	$27m	SOFR +1.36%

To create the synthetic debt positions outlined above, the Group converts €100m to £87m at a rate

of 3.51%. This is not in a hedge relationship. The remaining €200m of its EUR fixed debt is swapped

to EUR floating debt via interest rate swap contracts that are in a designated fair value hedge. The

EUR floating debt is then converted to GBP floating debt via cross-currency swap contracts that

are in a designated fair value hedge. The GBP floating debt is then converted to USD floating debt

through cross-currency swap contracts that are in a designated net investment hedging relationship.

Additionally, the Group uses FX derivatives including forwards, collars, cross-currency swaps and

swaptions to create synthetic USD debt as a hedge of its USD assets and to achieve reasonable

certainty of USD currency conversion rates, in line with the Group’s FX hedging policy. As at

31 December 2024, the Group held FX forwards and swaps with a notional of £690m, with an

additional £180m of collars.

The Group’s portfolio of derivatives is diversified by maturity, counterparty and type. Natural offsets

between transactions within the portfolio and the designation of certain derivatives as hedges

significantly reduce the risk of income statement volatility. The sensitivity of the portfolio to changes

in market rates is set out in note 19.

Fair value hedges

The Group uses interest rate swaps and cross-currency swaps as fair value hedges of the Group’s

euro issued debt.

Interest rate exposure arises from movements in the fair value of the Group’s euro debt attributable

to movements in euro interest rates. The hedged risk is the change in the euro bonds fair value

attributable to interest rate movements. The hedged items are the Group’s euro bonds which are

issued at a fixed rate. The hedging instruments are fixed to floating euro interest rate swaps where

the Group receives fixed interest payments and pays three-month Euribor.

As the critical terms of the interest rate swaps match the bonds, there is an expectation that the

value of the hedging instrument and the value of the hedged item will move equally in the opposite

direction as a result of movements in the zero coupon Euribor curve. Potential sources of hedge

ineffectiveness would be material changes in the credit risk of swap counterparties or a reduction or

modification in the hedge item.

A foreign currency exposure arises from foreign exchange fluctuations on translation of the Group’s

euro debt into GBP. The hedged risk is the risk of changes in the GBP:EUR spot rate that will result

in changes in the value of the euro debt when translated into GBP. The hedged items are a portion

of the Group’s euro bonds. The hedging instruments are floating to floating cross-currency swaps

which mitigates an exposure to the effect of euro strengthening against GBP within the hedge item.

16. Derivative financial instruments and hedge accounting

The Group’s approach to the management of financial risks is set out in note 19. The Group’s

outstanding derivative financial instruments are as follows:

			2024			2023
	Gross			Gross
	notional			notional
All figures in £ millions	amounts	Assets	Liabilities	amounts	Assets	Liabilities
Interest rate derivatives – in a fair value hedge relationship	166	–	(1)	174	–	(5)
Interest rate derivatives – not in a hedge relationship	779	22	(6)	356	14	(1)
Cross-currency rate derivatives
– in a hedge relationship	342	21	(32)	352	26	(31)
Cross-currency rate derivatives
– not in a hedge relationship	83	–	(4)	87	–	(1)
FX derivatives – in a hedge
relationship	1,049	–	(15)	420	7	–
FX derivatives – not in a hedge
relationship	711	8	–	526	1	(5)
Total	3,130	51	(58)	1,915	48	(43)
Analysed as expiring:
In less than one year	2,505	31	(54)	1,047	16	(5)
Later than one year and not later than five years	325	3	(1)	868	32	(38)
In greater than five years	300	17	(3)	–	–	–
Total	3,130	51	(58)	1,915	48	(43)

The Group’s treasury policies only allow derivatives to be entered into where the objective is risk

mitigation. These are then designated for hedge accounting using the following criteria:

— Where interest rate and cross-currency interest rate swaps are used to convert fixed rate debt to

floating and we expect to receive inflows equal to the fixed rate debt interest, these are classified

as fair value hedges;

— Where derivatives are used to create a future foreign currency exposure to provide protection

against currency movements affecting the foreign currency movements of an overseas

investment, these are designated as a net investment hedge;

— All other derivatives are not designated in a hedge relationship.

The Group’s fixed rate GBP debt is held as fixed rate instruments at amortised cost.

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Annual report and accounts 2024 Pearson plc 185

16. Derivative financial instruments and hedge

accounting continued

As the critical terms of the cross-currency swap match the bonds, there is an expectation that

the value of the hedging instrument and the value of the hedged item move in the opposite

direction as a result of movements in the EUR:GBP exchange rate. Potential sources of hedge

ineffectiveness are a reduction or modification in the hedged item or a material change in the credit

risk of swap counterparties.

The Group held the following instruments to hedge exposures to changes in interest rates and

foreign currency risk associated with borrowings:

			2024
		Change in fair
	Carrying	value of hedging	Nominal
	amount of	instrument used to	amounts
	hedging	determine hedge	of hedging
All figures in £ millions	instruments	ineffectiveness	instruments
Derivative financial instruments for interest rate risk	(1)	5	166
Derivative financial instruments for currency risk	21	(8)	166

			2023
		Change in fair
	Carrying	value of hedging	Nominal
	amount of	instrument used to	amounts
	hedging	determine hedge	of hedging
All figures in £ millions	instruments	ineffectiveness	instruments
Derivative financial instruments for interest rate risk	(6)	5	174
Derivative financial instruments for currency risk	26	(7)	174

The amounts at the reporting date relating to items designated as hedge items were as follows:

					2024
		Accumulated
		amount of fair	Change in
		value hedge	fair value
		adjustments	of hedged		Line item
		on the hedged	item used to		in profit or
	Carrying	item included	determine		loss that
	amount of	in the carrying	hedge	Hedge	includes hedge
All figures in £ millions	hedged items	amount	ineffectiveness	ineffectiveness	ineffectiveness
Interest rate risk					Finance
Financial liabilities – borrowings	(166)	1	(5)	–	costs
Currency risk					Finance
Financial liabilities – borrowings	(166)	n/a	8	–	costs

					2023
		Accumulated
		amount of fair
		value hedge	Change in
		adjustments	fair value
		on	of hedged		Line item
		the hedged	item used to		in profit or
	Carrying	item included	determine		loss that
	amount of	in the carrying	hedge	Hedge	includes hedge
All figures in £ millions	hedged items	amount	ineffectiveness	ineffectiveness	ineffectiveness
Interest rate risk					Finance
Financial liabilities – borrowings	(169)	6	5	1	costs
Currency risk
Financial liabilities – borrowings	(169)	n/a	5	–	n/a

Hedge of net investment in a foreign operation

A foreign currency exposure arises from the translation of the Group’s net investments in its

subsidiaries. The hedged risk is the risk of changes in the currency spot rate (eg GBP:USD) that

will result in changes in the value of the Group's net investment in its overseas subsidiaries when

translated into GBP. The hedged items are a portion of the Group's assets which are denominated

in USD. The hedging instruments are debt and derivative financial instruments, including cross-

currency swaps, FX forwards and FX collars, which mitigates an exposure to the effect of a weakening

USD on the hedged item against GBP. It is expected that the change in value of each of these items

will mirror each other as there is a clear and direct economic relationship between the hedging

instrument and the hedged item in the hedge relationship.

Hedge ineffectiveness would arise if the value of the hedged items fell below the value of the hedging

instruments; however, this is unlikely as the value of the Group’s assets denominated in USD is

significantly greater than the proposed net investment programme.

The amounts related to items designated as hedging instruments were as follows:

					2024
		Change in
	Carrying	value of hedging	Nominal	Hedging	Hedge
	amount of	instrument used to	amounts	gains/(losses)	ineffectiveness
	hedging	determine hedge	of hedging	recognised	recognised in
All figures in £ millions	instruments	ineffectiveness	instruments	in OCI	profit or loss
Derivative financial
instruments	(47)	(29)	1,225	(29)	–
Financial liabilities –
borrowings	–	–	–	–	–

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 186

					2023
		Change in
	Carrying	value of hedging	Nominal	Hedging	Hedge
	amount of	instrument used to	amounts	gains/(losses)	ineffectiveness
	hedging	determine hedge	of hedging	recognised	recognised in
All figures in £ millions	instruments	ineffectiveness	instruments	in OCI	profit or loss
Derivative financial
instruments	(24)	26	599	26	–
Financial liabilities –
borrowings	–	–	–	–	–

Included in the translation reserve is a cost of hedging reserve relating to the time value of FX

collars which is not separately disclosed due to materiality. The value of that reserve will decrease

over the life of the hedge transaction. The balance as at 31 December 2024 was £3m (2023: £nil).

During the year £nil (2023: £nil) of hedging gains were recycled to the profit and loss.

Offsetting arrangements with derivative counterparties

All of the Group’s derivative financial instruments are subject to enforceable netting arrangements

with individual counterparties, allowing net settlement in the event of default of either party.

Derivative financial assets and liabilities subject to offsetting arrangements are as follows:

			2024			2023
			Net			Net
	Gross	Gross	derivative	Gross	Gross	derivative
	derivative	derivative	assets/	derivative	derivative	assets/
All figures in £ millions	assets	liabilities	liabilities	assets	liabilities	liabilities
Counterparties in an asset position	24	(7)	17	26	(14)	12
Counterparties in a liability position	27	(51)	(24)	22	(29)	(7)
Total as presented in the balance sheet	51	(58)	(7)	48	(43)	5

Offset arrangements in respect of cash balances are described in note 17.

Counterparty exposure from all derivatives is managed, together with that from deposits and bank

account balances, within credit limits that reflect published credit ratings and by reference to other

market measures (e.g. market prices for credit default swaps) to ensure that there is no significant

exposure to any one counterparty’s credit risk.

The Group has no material embedded derivatives that are required to be separately accounted for

in accordance with IFRS 9 ‘Financial Instruments’.

17. Cash and cash equivalents (excluding overdrafts)

All figures in £ millions	2024	2023
Cash at bank and in hand	444	312
Short-term bank deposits	99	–
Cash and cash equivalents	543	312

All figures in £ millions	2024	2023
Cash and cash equivalents	543	312
Bank overdrafts	–	(3)
Cash and cash equivalents in the cash flow statement	543	309

Included within cash at bank and in hand is £62m (2023: £31m) of money market funds. Short-term

bank deposits are invested with banks and earn interest at the prevailing short-term deposit rates.

At the end of 2024, the currency split of cash and cash equivalents was US dollar 33% (2023: 16%),

sterling 27% (2023: 11%), and other 40% (2023: 73%).

Cash and cash equivalents have fair values that approximate to their carrying value due to their

short-term nature.

The Group has certain cash pooling arrangements in US dollars, sterling and Canadian dollars where

both the company and the bank have a legal right of offset. The company presents these amounts

net in the balance sheet where legal right of offset exists and the company has the intention to settle

net if required. As at 31 December 2024, £2m of financial liabilities (2023: £23m) were presented net

within financial assets.

18. Financial liabilities – borrowings

The Group’s current and non-current borrowings are as follows:

All figures in £ millions	2024	2023
Non-current
1.375% Euro notes 2025 (nominal amount €300m)	–	257
3.75% GBP notes 2030 (nominal amount £350m)	355	354
5.375% GBP notes 2034 (nominal amount £350m)	350	–
Lease liabilities (see note 35)	452	483
	1,157	1,094
Current (due within one year or on demand)
1.375% Euro notes 2025 (nominal amount €300m)	250	–
Lease liabilities (see note 35)	65	64
Overdrafts	–	3
	315	67
Total borrowings	1,472	1,161

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Annual report and accounts 2024 Pearson plc 187

18. Financial liabilities – borrowings continued

Included in the non-current borrowings above is £13m of accrued interest (2023: £10m). £2m of

accrued interest is included in the current borrowings above (2023: £nil). The maturities of the

Group’s non-current borrowings are as follows:

All figures in £ millions	2024	2023
Between one and two years	71	70
Between two and five years	149	419
Over five years	937	605
	1,157	1,094

In 2024, the Group issued a new £350m 5.375% GBP denominated Education Bond. The bond was

admitted to trading on the London Stock Exchange. The proceeds from the bond will be used to

finance or refinance projects or expenditure that meets the Eligible categories set out in the Group’s

Social Bond Framework.

The carrying amounts and market values of borrowings are as follows:

			2024			2023
	Effective	Carrying	Market	Effective	Carrying	Market
All figures in £ millions	interest rate	value	value	interest rate	value	value
1.375% Euro
notes 2025	1.44%	250	247	1.44%	257	252
3.75% GBP
notes 2030	3.93%	355	328	3.93%	354	327
5.375% GBP notes
2034	5.6%	350	343	–	–	–
Overdrafts	n/a	–	–	n/a	3	3
		955	918		614	582

The market values stated above are based on clean market prices at the year end or, where these

are not available, on the quoted market prices of comparable debt issued by other companies. The

effective interest rates above relate to the underlying debt instruments.

The carrying amounts of the Group’s borrowings before the effect of derivatives (see notes 16 and

19 for further information on the impact of derivatives) are denominated in the following currencies:

All figures in £ millions	2024	2023
US dollar	187	217
Sterling	1,013	667
Euro	253	261
Other	19	16
	1,472	1,161

The Group had $1bn (£0.8bn) of undrawn capacity on its committed borrowing facilities as at

31 December 2024 (2023: $1bn (£0.8bn) undrawn). For this facility, the two main covenants require

net debt to EBITDA to be a maximum of four times and interest cover to be at least three times.

The Group reports against these criteria twice a year and has had significant headroom against

both criteria throughout the reporting period. Based on current projections, the covenants will not

be breached when they are next tested at the 2025 interim reporting date. There are no additional

significant covenants attached to any of the GBP or Euro denominated notes.

In addition, there are a number of short-term facilities that are utilised in the normal course of

business. All of the Group’s borrowings are unsecured. In respect of lease obligations, the rights to

the leased asset revert to the lessor in the event of default.

19. Financial risk management

The Group’s approach to the management of financial risks, together with sensitivity analyses of its

financial instruments, is set out below.

Treasury policy

Pearson’s treasury policies set out the Group’s principles for addressing key financial risks including

capital risk, liquidity risk, foreign exchange risk and interest rate risk, and sets out measurable targets

for each. The Audit Committee receives quarterly reports incorporating compliance with measurable

targets and reviews and approves any changes to treasury policies annually.

The treasury function is permitted to use derivatives where their use reduces a risk or allows a

transaction to be undertaken more cost effectively. Derivatives permitted include swaps, forwards

and collars to manage foreign exchange and interest rate risk, with foreign exchange swap and

forward contracts the most commonly executed. Speculative transactions are not permitted.

Capital risk

The Group’s objectives when managing capital are:

— To maintain a strong balance sheet and a solid investment grade rating;

— To continue to invest in the business organically and through acquisitions; and

— To have a sustainable and progressive dividend policy.

At 31 December 2024, the Group and its bonds were rated BBB (stable outlook) with Fitch Ratings

Limited and Baa2 (stable outlook) with Moody’s Investor Services.

Net debt

The Group’s net debt position is set out below:

All figures in £ millions	2024	2023
Cash and cash equivalents	543	312
Overdrafts	–	(3)
Derivative financial instruments	(7)	5
Bonds	(955)	(611)
Investment in finance lease receivable	83	100
Lease liabilities	(517)	(547)
Net debt	(853)	(744)

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 188

Interest and foreign exchange rate management

The Group’s principal currency exposure is to the US dollar which represents 69% of the

Group’s sales.

The Group’s long-term debt is primarily held in US dollars to provide a natural hedge of this

exposure, which is achieved through issued US dollar debt or converting euro debt to US dollars

using cross-currency swaps, forwards and collars. As at 31 December 2024 and 2023, the Group’s

debt of £1,472m (2023: £1,161m) is all issued at fixed rates.

See note 16 for details of the Group’s hedging programme which addresses interest rate risk and

foreign currency risk.

Overseas profits are converted to sterling to satisfy sterling cash outflows such as dividends at the

prevailing spot rate at the time of the transaction. To the extent the Group has sufficient sterling,

US dollars may be held as dollar cash to provide a natural offset to the Group’s debt or to satisfy

future US dollar cash outflows.

The Group does not have significant cross-border foreign exchange transactional exposures.

As at 31 December 2024, the sensitivity of the carrying value of the Group’s financial instruments to

fluctuations in interest rates and exchange rates is as follows:

					2024
		Impact of	Impact of		Impact
		1% increase	1% decrease	Impact of 10%	of 10%
	Carrying	in interest	in interest	strengthening	weakening in
All figures in £ millions	value	rates	rates	in sterling	sterling
Investments in listed and unlisted
securities	141	–	–	(10)	12
Other receivable	12	–	–	(1)	1
Cash and cash equivalents	543	–	–	(32)	40
Derivative financial instruments	(7)	4	(4)	22	(24)
Bonds	(955)	–	–	23	(28)
Other borrowings	(517)	–	–	19	(23)
Investment in finance lease
receivable	83	–	–	(8)	9
Deferred and contingent
consideration	(22)	–	–	2	(2)
Other net financial assets	412	–	–	(32)	40
Total	(310)	4	(4)	(17)	25

					2023
		Impact of 1%	Impact of 1%	Impact of 10%	Impact of 10%
	Carrying	increase in	decrease in	strengthening	weakening in
All figures in £ millions	value	interest rates	interest rates	in sterling	sterling
Investments in unlisted securities	143	–	–	(10)	12
Other receivable	12	–	–	(1)	1
Cash and cash equivalents	312	–	–	(24)	30
Derivative financial instruments	5	15	(15)	(5)	19
Bonds	(611)	2	(2)	24	(29)
Other borrowings	(550)	–	–	21	(26)
Investment in finance lease
receivable	100	–	–	(9)	11
Deferred and contingent
consideration	(57)	–	–	3	(4)
Other net financial assets	378	–	–	(31)	38
Total	(268)	17	(17)	(32)	52

The table above shows the sensitivities of the values of each class of financial instrument to an

isolated change in either interest rates or foreign exchange rates. Other net financial assets

comprise trade receivables less trade payables. When calculating the impact of the sensitivity of each

class of financial instrument to foreign exchange rates, with the exception of net debt (including

cash balances), the Group is mainly exposed to translational risk rather than transactional risk

as transactions are mainly carried out in the currency that they are recorded in. The calculation

excludes the impact of unhedged intercompany positions. As a result, a significant proportion of the

movements shown above would impact equity rather than the income statement due to the location

and functional currency of the entities in which they arise and the availability of net investment

hedging.

Liquidity and refinancing risk management

The Group regularly reviews the level of cash and debt facilities required to fund its activities. This

involves preparing a prudent cash flow forecast for the next three to five years, determining the level

of debt facilities required to fund the business, planning for shareholder returns and repayments

of maturing debt, and identifying an appropriate amount of headroom to provide a reserve against

unexpected outflows.

At 31 December 2024, the Group had cash of £0.5bn (2023: £0.3bn), and no outstanding drawings

(2023: £nil) on the US dollar denominated revolving credit facility due 2028 of $1bn (2023: $1bn).

The $1bn facility contains interest cover and leverage covenants which the Group has complied with

for the year ended 31 December 2024. The maturity of the carrying values of the Group’s borrowings

and trade payables are set out in notes 18 and 24 respectively.

In 2024, the Group issued a new £350m 5.375% GBP denominated Education Bond.

At the end of 2024, the currency split of the Group’s trade payables was US dollar £191m (2023:

£228m), sterling £51m (2023: £64m) and other currencies £31m (2023: £25m). Trade payables are all

due within one year (2023: all due within one year).

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Annual report and accounts 2024 Pearson plc 189

19. Financial risk management continued

The table below analyses the Group’s bonds and derivative assets and liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.

Short dated derivative instruments have not been included in this table. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest) and as such may differ from the

amounts disclosed on the balance sheet.

Any cash flows based on a floating rate are calculated using interest rates as set at the date of the last rate reset. Where this is not possible, floating rates are based on interest rates prevailing at 31 December

in the relevant year.

			Analysed by maturity			Analysed by currency
	Greater than one	Later than one
	month and less	year but less	Five years
All figures in £ millions	than one year	than five years	or more	Total	USD	GBP	Other	Total
At 31 December 2024
Bonds	250	–	705	955	–	705	250	955
Rate derivatives – inflows	(394)	(3)	(17)	(414)	(2)	(163)	(249)	(414)
Rate derivatives – outflows	408	1	3	412	176	235	1	412
FX forwards – inflows	(1,034)	–	–	(1,034)	–	(1,034)	–	(1,034)
FX forwards – outflows	1,049	–	–	1,049	1,049	–	–	1,049
Total	279	(2)	691	968	1,223	(257)	2	968
At 31 December 2023
Bonds	–	257	354	611	–	354	257	611
Rate derivatives – inflows	(13)	(262)	–	(275)	(6)	(9)	(260)	(275)
Rate derivatives – outflows	5	268	–	273	178	89	6	273
FX forwards – inflows	(428)	–	–	(428)	–	(428)	–	(428)
FX forwards – outflows	421	–	–	421	421	–	–	421
Total	(15)	263	354	602	593	6	3	602

Financial counterparty and credit risk management

Financial counterparty and credit risk arises from cash and cash equivalents, favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to

customers, including outstanding receivables. Counterparty credit limits, which take published credit rating and other factors into account, are set to cover the Group’s total aggregate exposure to a single

financial institution. The limits applicable to published credit rating bands are approved by the Chief Financial Officer within guidelines approved by the Board. Exposures and limits applicable to each financial

institution are reviewed on a regular basis.

Cash deposits and derivative transactions are made with approved counterparties up to pre-agreed limits. To manage counterparty risk associated with cash and cash equivalents, the Group uses a mixture of

money market funds as well as bank deposits. As at 31 December 2024, 86% (2023: 75%) of cash and cash equivalents was held with investment grade bank counterparties, 12% (2023: 10%) with AAA money

market funds and 2% (2023: 15%) with non-investment grade bank counterparties.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 190

For trade receivables and contract assets, the Group’s exposure to credit risk is influenced mainly

by the individual characteristics of each customer. However, risk associated with the industry

and country in which customers operate may also influence the credit risk. The credit quality of

customers is assessed by taking into account financial position, past experience and other relevant

factors. Individual credit limits are set for each customer based on internal ratings. The compliance

with credit limits is regularly monitored by the Group. A default on a trade receivable is when the

counterparty fails to make contractual payments within the stated payment terms. Trade receivables

and contract assets are written off when there is no reasonable expectation of recovery.

The carrying amounts of financial assets, trade receivables and contract assets represent the

maximum credit exposure.

Trade receivables and contract assets are subject to impairment using the expected credit loss

model. The Group applies the IFRS 9 simplified approach to measuring expected credit losses

which uses a lifetime expected credit loss allowance for all trade receivables and contract assets. To

measure the expected credit losses, trade receivables and contract assets have been grouped based

on shared credit risk characteristics and the days past due. See note 22 for further details about

trade receivables and contract assets including movements in provisions for bad and doubtful debts.

20. Intangible assets – product development

All figures in £ millions	2024	2023
Cost
At 1 January	2,517	2,918
Exchange differences	17	(121)
Additions	284	300
Disposals and retirements	(309)	(550)
Disposal of businesses (note 31)	–	(29)
Transfers	5	(1)
At 31 December	2,514	2,517
Amortisation
At 1 January	(1,570)	(1,943)
Exchange differences	(14)	92
Charge for the year	(287)	(280)
Impairment	(4)	(4)
Disposals and retirements	309	550
Disposal of businesses (note 31)	–	14
Transfers	(1)	1
At 31 December	(1,567)	(1,570)
Carrying amounts at 31 December	947	947

Product development assets are assessed for impairment triggers on an annual basis or when

triggering events occur. In 2024, of the £4m (2023: £4m; 2022: £15m) impairment charges, £nil

(2023: £nil; 2022: £13m) have been recognised as a result of asset write-offs related to the major

reorganisation programme.

21. Inventories

All figures in £ millions	2024	2023
Raw materials	5	4
Work in progress	2	1
Finished goods	63	81
Returns asset	4	5
	74	91

The cost of inventories recognised as an expense and included in the income statement in cost of

goods sold amounted to £129m (2023: £155m; 2022: £166m) including £7m (2023: £19m; 2022:

£16m) of inventory provisions. None of the inventory is pledged as security. Included within the

inventory balance is the estimation of the right to receive goods from contracts with customers via

returns. The value of the returns asset is measured at the carrying amount of the assets at the time

of sale aligned to the Group’s normal inventory valuation methodology less any expected costs to

recover the asset and any expected reduction in value. Impairment charges against the inventory

returns asset are £nil in 2024 (2023: £nil; 2022: £nil). The returns asset all relates to finished

goods. The year-on-year reduction in inventories is due to the Group’s digital-first strategy and the

increasing shift towards print on demand.

22. Trade and other receivables

All figures in £ millions	2024	2023
Current
Trade receivables	605	694
Contract assets - unbilled 1	71	–
Investment in finance lease receivable	19	18
Prepayments and other receivables	335	338
	1,030	1,050
Non-current
Trade receivables	9	1
Contract assets - unbilled 1	–	–
Investment in finance lease receivable	64	82
Prepayments and other receivables	52	52
	125	135

1. In 2024, contract assets - unbilled have been shown separately from trade receivables. The 2023 comparative

has not been restated on the grounds of materiality.

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Annual report and accounts 2024 Pearson plc 191

22. Trade and other receivables continued

Contract assets - unbilled represents contract assets which are unbilled amounts generally resulting

from US assessments where the performance obligations are yet to be fully delivered and therefore

the revenue to be recognised over time has been recognised in excess of customer billings to date.

Impairment charges on these contract assets are £nil (2023: £nil). Where performance obligations

have been fully delivered but the amounts have not yet been billed, these are included within trade

receivables. Contract assets arising from costs incurred to obtain a contract are included in other

receivables. The carrying value of the Group’s trade and other receivables approximates its fair value.

Trade receivables are stated net of provisions for bad and doubtful debts.

The movements in the provision for bad and doubtful debts are as follows:

All figures in £ millions	2024	2023
At 1 January	(51)	(69)
Exchange differences	2	2
Income statement movements	(4)	3
Utilised	13	9
Disposal of businesses	–	4
At 31 December	(40)	(51)

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large

number of customers, who are internationally dispersed.

The ageing of the Group’s gross trade receivables is as follows:

All figures in £ millions	2024	2023
Contract assets - unbilled 1	71	–
Within due date and one month past due date	488	564
One to three months past due date	53	83
Three to six months past due date	22	25
Six to nine months past due date	24	12
Nine to 12 months past due date	13	8
More than 12 months past due date	54	54
Gross trade receivables	725	746

1. In 2024, contract assets - unbilled have been shown separately from trade receivables. The 2023 comparative

has not been restated on the grounds of materiality.

The Group reviews its bad debt provision at least twice a year following a detailed review of

receivable balances, historical payment profiles, and assessment of relevant forward-looking risk

factors including macroeconomic trends. Management believes all the remaining receivable balances

are fully recoverable.

23. Provisions for other liabilities and charges

		Legal
All figures in £ millions	Property	and other	Total
At 1 January 2024	24	16	40
Provisions made during the year	1	23	24
Provisions reversed during the year	(9)	(2)	(11)
Provisions used during the year	(1)	(16)	(17)
At 31 December 2024	15	21	36

Analysis of provisions:

			2024
		Legal
All figures in £ millions	Property	and other	Total
Current	3	20	23
Non-current	12	1	13
	15	21	36
			2023
Current	11	14	25
Non-current	13	2	15
	24	16	40

Legal and other includes legal claims, contract disputes and potential contract losses with the

provisions utilised as the cases are settled. Also included in legal and other are other restructuring

provisions that are generally utilised within one year.

The year on year decrease in provisions is mainly due to the utilisation and release of reorganisation

and property provisions in the year, partially offset by an increase in provisions for ongoing legal

matters.

Notes to the consolidated financial statements continued

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 192

24. Trade and other liabilities

All figures in £ millions	2024	2023
Current
Trade payables	273	317
Sales return liability	27	31
Deferred income	329	295
Interest payable	12	4
Accruals and other liabilities	413	628
	1,054	1,275
Non-current
Deferred income	62	73
Accruals and other liabilities	21	25
	83	98

The carrying value of the Group’s trade and other liabilities approximates its fair value. The deferred

income balance comprises contract liabilities in respect of advance payments in assessment, testing

and training businesses; subscription income in school and college businesses; and obligations to

deliver digital content in future periods. The decrease in trade and other liabilities held by the Group

is driven primarily by the reduction in the accrual for share buyback programmes, the payment of

deferred consideration in relation to previous acquisitions as well as the timing of certain working

capital payments.

25. Retirement benefit and other post-retirement obligations

Background

The Group operates a number of defined benefit and defined contribution retirement plans

throughout the world.

The largest plan is the Pearson Pension Plan (UK Group plan) in the UK, which is sectionalised to

provide both defined benefit and defined contribution pension benefits. The defined benefit section

was largely closed to new members from 1 November 2006. The defined contribution section,

opened in 2003, is open to new and existing employees. Finally, there is a separate section within the

UK Group plan set up for auto-enrolment.

The defined benefit section of the UK Group plan is a final salary pension plan which provides

benefits to members in the form of a guaranteed level of pension payable for life. The level of

benefits depends on the length of service and final pensionable pay.

Key judgements

— Whether the Group will be eligible to receive the surplus associated with the UK Group

Pension Plan in recognising a pension asset.

Key areas of estimation

— The determination of the pension cost and defined benefit obligation of the Group’s

defined benefit pension schemes depends on the selection of certain assumptions, which

include the discount rate, inflation rate, salary growth and longevity.

The defined contribution section of the UK Group plan operates a Reference Scheme Test (RST)

pension underpin for its members. Where a member’s fund value is insufficient to purchase the RST

pension upon retirement, the UK Group plan is liable for the shortfall to cover the member’s RST

pension. In addition, in recent years, the scheme rules were amended to enable members who have

sufficient funds to purchase an RST pension the ability to convert their fund value into a pension in

the UK Group plan as an alternative to purchasing an annuity with an insurer. The Group recognises

any assets and liabilities relating to these features of the defined contribution section as part of

the overall UK Group plan obligation. The Group also recognises the assets and liabilities for all

members of the defined contribution section of the UK Group plan, accounting for the whole defined

contribution section as a defined benefit scheme under IAS 19 ‘Employee Benefits’ as there is a risk

the underpin will require the Group to pay further contributions to the scheme.

The UK Group plan is funded with benefit payments from trustee-administered funds. The UK Group

plan is administered in accordance with the Trust Deed and Rules in the interests of its beneficiaries

by Pearson Pension Trustee Limited.

At 31 December 2024, the UK Group plan had approximately 25,900 members, analysed in the

following table:

All figures in %	Active	Deferred	Pensioners	Total
Defined benefit	–	13	34	47
Defined contribution	11	42	–	53
Total	11	55	34	100

The other major defined benefit plans are based in the US. These are also final salary pension plans

which provide benefits to members in the form of a guaranteed pension payable for life, with the

level of benefits dependent on length of service and final pensionable pay. The majority of the US

plans are fully funded.

The Group also has several post-retirement medical benefit plans (PRMBs), principally in the US.

PRMBs are unfunded but are accounted for and valued similarly to defined benefit pension plans.

The defined benefit schemes expose the Group to actuarial risks, such as life expectancy, inflation

risks and investment risk including asset volatility and changes in bond yields. The Group is not

exposed to any unusual, entity-specific or plan-specific risks.

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 193

25. Retirement benefit and other post-retirement obligations

continued

Assumptions

The principal assumptions used for the UK Group plan and the US PRMB are shown below.

Weighted average assumptions have been shown for the other plans, which primarily relate to

US pension plans.

			2024			2023			2022
	UK
	Group	Other		UK Group	Other		UK Group	Other
All figures in %	plan	plans	PRMB	plan	plans	PRMB	plan	plans	PRMB
Inflation	3.1	2.0	–	3.0	2.0	–	3.4	2.0	–
Rate used to discount plan
liabilities	5.5	5.1	5.4	4.6	4.9	5.0	4.9	5.3	5.3
Expected rate
of increase in salaries	3.6	2.5	–	3.5	2.5	–	3.9	2.9	–
Expected rate
of increase
for pensions
in payment
and deferred	1.85 to			1.75 to			1.95 to
pensions	5.15	–	–	5.10	–	–	5.20	–	–
Initial rate of increase in healthcare rate	–	–	7.0	–	–	6.5	–	–	6.5
Ultimate rate
of increase in healthcare rate	–	–	5.0	–	–	5.0	–	–	5.0

The UK discount rate is based on corporate bond yields adjusted to reflect the duration of liabilities.

The inflation rate for the UK Group plan of 3.1% (2023: 3.0%) reflects the RPI rate. In line with

changes to legislation in 2010, certain benefits have been calculated with reference to CPI as the

inflationary measure and in these instances a rate of 2.5% (2023: 2.3%) has been used. The CPI

rate is determined as a weighted average deduction from the RPI rate, and allows for the expected

change to the formula for calculating RPI to be in line with CPIH from 2030 onwards.

For the UK Group plan, the mortality base table assumptions are derived from the SAPS S4 for males

and females, adjusted to reflect the observed experience of the plan, with CMI model improvement

factors. A 1.5% long-term rate improvement on the CMI 2023 model is applied for both males and

females, with a weighting to 2022 and 2023 mortality experience in the CMI model of 20% to reflect

current trends in life expectancy. Life expectancy remains uncertain in the current environment and

is an area of judgement.

For the US plans, a mortality table (Pri – 2012) and 2021 improvement scale (MP – 2021) with

generational projection for male and female annuitants has been adopted.

Using the above tables, the remaining average life expectancy in years of a pensioner retiring at age

65 on the balance sheet date for the UK Group plan and US plans is as follows:

			UK			US
All figures in years	2024	2023	2022	2024	2023	2022
Male	21.3	21.8	22.5	20.7	20.7	20.6
Female	24.5	24.1	24.7	22.7	22.6	22.6

The remaining average life expectancy in years of a pensioner retiring at age 65, 20 years after the

balance sheet date, for the UK and US Group plans is as follows:

			UK			US
All figures in years	2024	2023	2022	2024	2023	2022
Male	22.9	23.4	24.1	22.2	22.2	22.1
Female	26.2	25.8	26.4	24.1	24.1	24.0

Although the Group anticipates that plan surpluses will be utilised during the life of the plan to

address member benefits, the Group recognises its pension surplus in full in respect of the UK

Group plan on the basis that it is management’s judgement that there are no substantive restrictions

on the return of residual plan assets in the event of a winding up of the plan after all member

obligations have been met.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 194

Financial statement information

The amounts recognised in the income statement are as follows:

						2024
		Defined
	UK Group	benefit		Defined
All figures in £ millions	plan	other	Sub-total	contribution	PRMB	Total
Current service cost	17	2	19	41	–	60
Past service cost	13	–	13	–	–	13
Settlements	–	–	–	–	–	–
Administration expenses	8	–	8	–	–	8
Total operating expense	38	2	40	41	–	81
Interest on plan assets	(138)	(5)	(143)	–	–	(143)
Interest on plan liabilities	116	5	121	–	1	122
Net finance
(income)/expense	(22)	–	(22)	–	1	(21)
Net income
statement charge	16	2	18	41	1	60

						2023
		Defined
	UK Group	benefit		Defined
All figures in £ millions	plan	other	Sub-total	contribution	PRMB	Total
Current service cost	16	2	18	45	–	63
Past service cost	–	–	–	–	–	–
Settlements	–	–	–	–	–	–
Administration expenses	8	–	8	–	–	8
Total operating expense	24	2	26	45	–	71
Interest on plan assets	(148)	(5)	(153)	–	–	(153)
Interest on plan liabilities	121	6	127	–	–	127
Net finance
(income)/expense	(27)	1	(26)	–	–	(26)
Net income
statement charge	(3)	3	–	45	–	45

						2022
		Defined
	UK Group	benefit		Defined
All figures in £ millions	plan	other	Sub-total	contribution	PRMB	Total
Current service cost	17	2	19	46	–	65
Past service cost	3	–	3	–	–	3
Settlements	–	–	–	–	–	–
Administration expenses	7	–	7	–	–	7
Total operating
expense	27	2	29	46	–	75
Interest on plan assets	(77)	(3)	(80)	–	–	(80)
Interest on plan liabilities	67	3	70	–	1	71
Net finance
(income)/expense	(10)	–	(10)	–	1	(9)
Net income
statement charge	17	2	19	46	1	66

The amounts recognised in the balance sheet are as follows:

				2024				2023
		Other	Other			Other	Other
	UK Group	funded	unfunded		UK Group	funded	unfunded
All figures in £ millions	plan	plans	plans	Total	plan	plans	plans	Total
Fair value of plan assets	2,927	84	–	3,011	3,060	107	–	3,167
Present value of defined
benefit obligation	(2,443)	(77)	(14)	(2,534)	(2,569)	(99)	(15)	(2,683)
Net pension asset/
(liability)	484	7	(14)	477	491	8	(15)	484
Other post-retirement
medical benefit obligation				(19)				(21)
Other pension accruals				(8)				(8)
Net retirement
benefit asset				450				455
Analysed as:
Retirement benefit assets				491				499
Retirement benefit
obligations				(41)				(44)

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Annual report and accounts 2024 Pearson plc 195

25. Retirement benefit and other post-retirement obligations

continued

The following gains/(losses) have been recognised in other comprehensive income:

All figures in £ millions	2024	2023	2022
Amounts recognised for defined benefit plans	4	(86)	44
Amounts recognised for post-retirement medical benefit
plans	1	1	10
Total recognised in year	5	(85)	54

The fair value of plan assets comprises the following:

			2024			2023
	UK Group	Other		UK Group	Other
All figures in %	plan	funded plans	Total	plan	funded plans	Total
Insurance	31	–	31	33	–	33
Equities	17	1	18	15	1	16
Fixed interest
securities	7	2	9	6	2	8
Property	5	–	5	5	–	5
Pooled asset
investment funds
(including LDI)	22	–	22	24	–	24
Infrastructure	11	–	11	11	–	11
Cash and cash
equivalents	2	–	2	1	–	1
Other	2	–	2	2	–	2

The plan assets do not include any of the Group’s own financial instruments, or any property

occupied by the Group. The table below further disaggregates the plan assets into those assets

which have a quoted market price in an active market and those that do not:

		2024		2023
	Quoted	No quoted	Quoted	No quoted
All figures in %	market price	market price	market price	market price
Insurance	–	31	–	33
Equities	18	–	16	–
Fixed-interest securities	9	–	8	–
Property	–	5	–	5
Pooled asset investment funds (including LDI)	22	–	24	–
Infrastructure	–	11	–	11
Cash and cash equivalents	–	2	–	1
Other	–	2	–	2
Total	49	51	48	52

The liquidity profile of the UK Group plan assets is as follows:

All figures in %	2024	2023
Liquid – call <1 month	50	48
Less liquid – call 1–3 months	2	2
Illiquid – call >3 months	48	50

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 196

Changes in the values of plan assets and liabilities of the retirement benefit plans are as follows:

			2024			2023
	UK Group	Other		UK Group	Other
All figures in £ millions	plan	plans	Total	plan	plans	Total
Fair value of plan assets
Opening fair value of plan assets	3,060	107	3,167	3,088	104	3,192
Exchange differences	–	(2)	(2)	–	(6)	(6)
Interest on plan assets	138	5	143	148	5	153
Return on plan assets excluding interest	(144)	1	(143)	(48)	5	(43)
Contributions by employer	8	1	9	–	15	15
Contributions by employees	7	–	7	7	–	7
Benefits paid	(142)	(12)	(154)	(135)	(14)	(149)
Settlements	–	(16)	(16)	–	(2)	(2)
Closing fair value of plan assets	2,927	84	3,011	3,060	107	3,167
Present value of defined
benefit obligation
Opening defined benefit obligation	(2,569)	(114)	(2,683)	(2,514)	(123)	(2,637)
Exchange differences	–	–	–	–	6	6
Current service cost	(17)	(2)	(19)	(16)	(2)	(18)
Past service cost	(13)	–	(13)	–	–	–
Administration expenses	(8)	–	(8)	(8)	–	(8)
Interest on plan liabilities	(116)	(5)	(121)	(121)	(6)	(127)
Actuarial losses – experience	(53)	–	(53)	(61)	(2)	(63)
Actuarial gains – demographic	38	–	38	52	–	52
Actuarial gains/(losses) – financial	160	2	162	(29)	(3)	(32)
Contributions by employees	(7)	–	(7)	(7)	–	(7)
Benefits paid	142	12	154	135	14	149
Settlements	–	16	16	–	2	2
Closing defined benefit obligation	(2,443)	(91)	(2,534)	(2,569)	(114)	(2,683)

The weighted average duration of the defined benefit obligation is 11 years for the UK and six years

for the US.

Changes in the value of the US PRMB are as follows:

All figures in £ millions	2024	2023
Opening defined benefit obligation	(21)	(25)
Exchange differences	–	1
Interest on plan liabilities	(1)	–
Actuarial gains – experience	1	2
Actuarial losses – financial	–	(1)
Benefits paid	2	2
Closing defined benefit obligation	(19)	(21)

Funding

The UK Group plan is self-administered with the plan’s assets being held independently of the

Group in trust. The trustee of the UK Group plan is required to act in the best interest of the plan’s

beneficiaries. The most recent triennial actuarial valuation for funding purposes is being completed

as at 1 January 2024. It has not yet been finalised but it is expected to be completed in the first half

of 2025. We do not expect the finalisation of the triennial actuarial valuation to have any impact

on the IAS 19 actuarial valuation. The UK Group plan expects to be able to provide benefits (in

accordance with the plan rules) with a very low level of reliance on future funding from the Group.

Assets of the final salary section of the UK Group plan are divided into two main elements: liability

matching assets and return seeking assets. The UK Group plan’s investment strategy for the final

salary section allocates approximately 95% to matching assets and 5% to return-seeking assets.

Liability matching assets are assets that produce cash flows that can be expected to match the cash

flows for a proportion of the membership, and include a liability-driven investment mandate (LDI)

for which a Qualifying Investor Alternative Investment Fund (QIAIF) was established, managed by

a subsidiary of Legal & General Investment Management. The QIAIF invests in UK bonds, interest

rate/inflation swaps and other derivative instruments in order to reduce interest rate and inflation

risks using accurate cash flow matching and risk control. Other liability matching assets include

pensioner buy-in insurance policies, bonds and inflation-linked property and infrastructure.

Following the purchase of buy-in policies with Legal & General and Aviva in 2017 and 2019, 95% of

the UK Group plan’s pensioner liabilities were matched with buy-in policies. These transfer significant

longevity risk to Aviva and Legal & General, reducing the pension risks being underwritten by the

Group and providing additional security for members. Due to deferred members retiring since 2019

and becoming pensioner members the buy-in policies now cover approximately 75% of the UK

Group Plan's pensioner liabilities.

Return-seeking assets are assets invested with a longer-term horizon to generate the returns

needed to provide the remaining expected cash flows for the beneficiaries, and include diversified

growth funds, property and alternative asset classes. Continued economic and geopolitical

uncertainty has led to continued uncertainty and volatility in the valuation of certain assets, in

particular the LDI and insurance contracts.

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Annual report and accounts 2024 Pearson plc 197

26. Share-based payments

The Group recognised the following charges in the income statement in respect of its equity-settled

share-based payment plans:

All figures in £ millions	2024	2023	2022
Pearson plans	44	40	38

The Group operates the following equity-settled employee option and share plans:

Worldwide Save for Shares Plan – The Group has a Worldwide Save for Shares Plan. Under this plan,

employees can save a portion of their monthly salary over a period of three years. At the end of this

period, the employee has the option to purchase ordinary shares with the accumulated funds at a

purchase price equal to 80% of the market price prevailing at the time of the commencement of the

employee’s participation in the plan. Options that are not exercised within six months of the end of

the savings period lapse unconditionally.

Employee Stock Purchase Plan – In 2000, the Group established an Employee Stock Purchase

Plan which allows all employees in the US to save a portion of their monthly salary over six-month

periods. At the end of the period, the employee has the option to purchase American Depositary

Receipts (ADRs) with their accumulated funds at a purchase price equal to 85% of the lower of the

market prices prevailing at the beginning or end of the period.

Long-Term Incentive Plan – The plan was first introduced in 2001 and from time to time the plan

rules are renewed. The plan consists of restricted shares. The vesting of restricted shares is normally

dependent on continuing service over a three to five-year period, and in the case of Executive

Directors and senior management, upon the satisfaction of corporate performance targets over a

three-year period. These targets may be based on market and/or non-market performance criteria.

Restricted shares awarded to Executive Directors in May 2022 vest dependent on relative total

shareholder return (FTSE 100), net return on invested capital and adjusted earnings per share, and

the May 2024 and May 2023 awards vest based on relative total shareholder return (FTSE 100 and

S&P 500, excluding certain sectors), return on capital, adjusted earnings per share and strategic

measures. These awards are in addition to the share buy-out for Omar Abbosh for his forfeited

Microsoft shares which vests annually in three equal tranches. Other restricted shares awarded

in 2024, 2023, and 2022 generally vest depending on continuing service over periods of up to five

years. Included within the total share-based payments charge in 2024 was £2m (2023: £3m; 2022:

£3m) in respect of remuneration for post-acquisition services for recent acquisitions, which was

included within other net gains and losses in the income statement.

25. Retirement benefit and other post-retirement obligations

continued

Movements in the LDI and insurance contracts tend to be offset by equivalent movements in the

defined benefit obligation. The UK Group plan divides its assets between a number of investment

managers and across different types of assets, as such there is no significant concentration of risk.

Regular employer contributions to the UK Group plan in respect of the defined benefit sections are

estimated to be £1m for 2025.

Sensitivities

The effect of a one percentage point increase and decrease in the discount rate on the defined

benefit obligation and the total pension expense is as follows:

		2024
All figures in £ millions	1% increase	1% decrease
Effect:
(Decrease)/increase in defined benefit obligation – UK Group plan	(158)	190
(Decrease)/increase in defined benefit obligation – US plan	(4)	4

The effect of members living one year more or one year less on the defined benefit obligation is as

follows:

		2024
	One year	One year
All figures in £ millions	increase	decrease
Effect:
Increase/(decrease) in defined benefit obligation – UK Group plan	44	(43)
Increase/(decrease) in defined benefit obligation – US plan	2	(2)

The effect of a half percentage point increase and decrease in the inflation rate is as follows:

		2024
All figures in £ millions	0.5% increase	0.5% decrease
Effect:
Increase/(decrease) in defined benefit obligation – UK Group plan	36	(36)
Increase/(decrease) in defined benefit obligation – US plan	–	–

The above sensitivity analyses are based on a change in an assumption while holding all other

assumptions constant, although in practice this is unlikely to occur and changes in some

assumptions may be correlated. When calculating these sensitivities, the same method has been

applied to calculate the defined benefit obligation as has been applied when calculating the liability

recognised in the balance sheet. This methodology is the same as prior periods.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 198

The following shares were granted under restricted share arrangements:

		2024		2023
	Number of	Weighted average	Number of	Weighted average
	shares	fair value	shares	fair value
	000s	£	000s	£
Long-Term
Incentive Plan	6,262	8.96	5,572	6.99

In 2024, £36m (2023: £23m) of shares vested across the Worldwide Save for Shares Plan and the

Long-Term Incentive Plan.

The fair value of shares granted under the Long-Term Incentive Plan that vest unconditionally is

determined using the share price at the date of grant. Participants under the plans are entitled to

dividends during the vesting period and therefore the share price is not discounted.

Restricted shares with a market performance condition were valued by an independent actuary

using a Monte Carlo model. Restricted shares with a non-market performance condition were fair

valued based on the share price at the date of grant. Non-market performance conditions are taken

into consideration by adjusting the number of shares expected to vest based on the most likely

outcome of the relevant performance criteria.

27. Share capital and share premium

	Number of	Share	Share
	shares	capital	premium
	000s	£m	£m
At 31 December 2022	715,733	179	2,633
Issue of ordinary shares – share option schemes	1,809	–	9
Buyback of equity	(20,243)	(5)	–
At 31 December 2023	697,299	174	2,642
Issue of ordinary shares – share option schemes	955	–	7
Buyback of equity	(31,989)	(8)	–
At 31 December 2024	666,265	166	2,649

The ordinary shares have a par value of 25p per share (2023: 25p per share). All issued shares are

fully paid. All shareholders are entitled to receive dividends and vote at general meetings of the

company. All shares have the same rights.

On 20 September 2023, the Board approved a £300m share buyback programme in order to return

capital to shareholders, with a £200m extension being announced by the Group on 1 March 2024.

This programme and the extension completed in 2024. During 2024, approximately 32m (2023:

20m) shares were bought back and cancelled at a cost of £318m (2023: £186m). The nominal value

of these shares, £8m (2023: £5m), was transferred to the capital redemption reserve, and the

remainder of the purchase price was recorded within retained earnings. At 31 December 2024, no

further liability remains (2023: £118m) for any shares contracted to be repurchased but where the

repurchases are still outstanding.

The Group manages its capital to ensure that entities in the Group will be able to continue as a going

concern while maximising the return to shareholders through the optimisation of the debt and

equity balance.

The capital structure of the Group consists of debt (see note 18), cash and cash equivalents (see

note 17) and equity attributable to equity holders of the parent, comprising issued capital, reserves

and retained earnings.

The Group reviews its capital structure on a regular basis and will balance its overall capital structure

through payments of dividends and new share issues as well as the issue of new debt or the

redemption of existing debt in line with the financial risk policies outlined in note 19.

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Annual report and accounts 2024 Pearson plc 199

28. Treasury shares

	Number of
	shares
	000s	£m
At 1 January 2022	1,864	15
Purchase of treasury shares	3,991	35
Release of treasury shares	(3,695)	(31)
At 31 December 2023	2,160	19
Purchase of treasury shares	3,273	33
Release of treasury shares	(4,754)	(45)
At 31 December 2024	679	7

The Group holds Pearson plc shares in trust to satisfy its obligations under its restricted share plans (see note 26). These shares, representing 0.1% (2023: 0.3%) of called-up share capital, are treated as

treasury shares for accounting purposes and have a par value of 25p per share.

The nominal value of Pearson plc treasury shares amounts to £0.2m (2023: £0.5m). Dividends on treasury shares are waived.

At 31 December 2024, the market value of Pearson plc treasury shares was £9m (2023: £21m). The gross book value of the shares at 31 December 2024 amounts to £7m (2023: £19m).

29. Other comprehensive income

						2024
				Attributable to equity holders of the company
					Non-
	Fair value	Translation	Retained		controlling
All figures in £ millions	reserve	reserve	earnings	Total	interest	Total
Items that may be reclassified to the income statement
Net exchange differences on translation of foreign operations	–	(35)	–	(35)	–	(35)
Currency translation adjustment disposed	–	–	–	–	–	–
Attributable tax	–	–	2	2	–	2
Items that are not reclassified to the income statement
Fair value losses on other financial assets	(2)	–	–	(2)	–	(2)
Attributable tax	–	–	–	–	–	–
Remeasurement of retirement benefit obligations	–	–	5	5	–	5
Attributable tax	–	–	(2)	(2)	–	(2)
Other comprehensive income/(expense) for the year	(2)	(35)	5	(32)	–	(32)

Notes to the consolidated financial statements continued

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 200

						2023
		Attributable to equity holders of the company
					Non-
	Fair value	Translation	Retained		controlling
All figures in £ millions	reserve	reserve	earnings	Total	interest	Total
Items that may be reclassified to the income statement
Net exchange differences on translation of foreign operations	–	(176)	–	(176)	(1)	(177)
Currency translation adjustment disposed	–	(122)	–	(122)	–	(122)
Attributable tax	–	–	–	–	–	–
Items that are not reclassified to the income statement
Fair value gain on other financial assets	1	–	–	1	–	1
Attributable tax	–	–	–	–	–	–
Remeasurement of retirement benefit obligations	–	–	(85)	(85)	–	(85)
Attributable tax	–	–	20	20	–	20
Other comprehensive income/(expense) for the year	1	(298)	(65)	(362)	(1)	(363)

						2022
		Attributable to equity holders of the company
					Non-
	Fair value	Translation	Retained		controlling
All figures in £ millions	reserve	reserve	earnings	Total	interest	Total
Items that may be reclassified to the income statement
Net exchange differences on translation of foreign operations	–	328	–	328	2	330
Currency translation adjustment disposed	–	(5)	–	(5)	–	(5)
Attributable tax	–	–	4	4	–	4
Items that are not reclassified to the income statement
Fair value gain on other financial assets	18	–	–	18	–	18
Attributable tax	–	–	1	1	–	1
Remeasurement of retirement benefit obligations	–	–	54	54	–	54
Attributable tax	–	–	(12)	(12)	–	(12)
Other comprehensive income/(expense) for the year	18	323	47	388	2	390

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 201

30. Business combinations

On 21 October 2024, NCS Pearson, Inc. acquired the trade and assets of Revibe Technologies, Inc.

for total consideration of £2m, which comprises £1m cash and contingent consideration of £1m. The

contingent consideration is determined based on gross profit from sales of certain product over the

next 8 years from the acquisition date. The acquired assets comprise mainly technology assets and

goodwill. The acquired business will form part of the Assessments & Qualifications business unit,

and is a provider of digital wearable software therapy for children and adults with attention-deficit/

hyperactivity disorder.

On 22 March 2023, the Group acquired 100% of the share capital of Personnel Decisions Research

Institutes, LLC (PDRI) for cash consideration of £152m ($187m). PDRI is a provider of workforce

assessment services and has significant expertise in providing recruitment assessment solutions to

the US federal government. It forms part of the Assessment & Qualifications business unit. There

was no contingent or deferred consideration. Net assets acquired of £91m were recognised on the

Group’s balance sheet including £117m of acquired intangible assets. This transaction resulted in the

recognition of £61m of goodwill.

On 28 January 2022, the Group acquired 100% of the share capital in Credly Inc (Credly), having

previously held a 19.9% interest in the company. Credly is a digital credential service provider

whose platform enables customers to design, create, issue and manage digital credentials. It forms

part of the Workforce Skills business unit. Total consideration was £149m comprising upfront

cash consideration of £107m, Pearson’s existing interest valued at £31m and £11m of deferred

consideration. The deferred consideration was payable two years from the acquisition date, and has

since been settled.

On 28 April 2022, the Group acquired 100% of the share capital of ATI STUDIOS A.P.P.S S.R.L

(Mondly), a global online learning platform offering customers learning in English and 40 other

languages via its app, website, virtual reality and augmented reality products. It forms part of the

English Language Learning business unit. Total consideration was £135m comprising upfront cash

consideration of £105m, and deferred consideration of £30m. The deferred consideration was

payable over two years from the acquisition date, with no performance conditions attached, and

has since been settled. In addition, a further £13m of cash and £7m in shares was incurred but was

dependent on continuing employment and therefore these amounts were expensed and not treated

as consideration. These will be paid out in the first half of 2025.

In 2022, these transactions resulted in the recognition of £202m of goodwill and £99m of intangibles.

In 2022, the Group also made three smaller acquisitions in the period for total consideration

of £11m.

The Group’s transactions regarding investments in associates are detailed in note 12, and are not

included below.

Details of the fair values of the assets and liabilities recognised at the acquisition date and the

related consideration is shown in the following table:

	2024	2023	2022
All figures in £ millions	Total	Total	Total
Intangible assets	1	117	110
Deferred tax asset	–	–	8
Trade and other receivables	–	8	8
Cash and cash equivalents	–	4	13
Trade and other liabilities	–	(7)	(26)
Deferred tax liabilities	–	(31)	(22)
Net assets acquired	1	91	91
Goodwill	1	61	204
Total	2	152	295
Satisfied by:
Cash consideration	1	152	223
Contingent or deferred consideration	1	–	41
Fair value of existing investment	–	–	31
Total consideration	2	152	295

If the acquisition of Revibe Technologies, Inc. had occurred on 1 January 2024, the Group’s revenue

and profit after tax would not have been significantly higher.

Total acquisition related costs of £5m (2023: £12m; 2022: £20m) were recognised within other net

gains and losses.

In 2023 and 2022, there were gains of £5m and £8m respectively, arising on decreases in the

deferred consideration payable on prior year acquisitions. No such items arose in 2024.

The net cash outflows related to the acquisitions are set out in the table below. In addition to

the current year acquisitions, the other net cash outflows on acquisition of subsidiaries relate to

deferred payments for prior year acquisitions.

	2024	2023	2022
All figures in £ millions	Total	Total	Total
Cash flow on acquisitions
Cash – current year acquisitions	(1)	(152)	(223)
Cash and cash equivalents acquired	–	4	13
Deferred payments for prior year acquisitions and other items	(38)	(23)	(18)
Net cash outflow	(39)	(171)	(228)

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 202

31. Disposals and business closures

There were no disposals in 2024.

On 30 June 2023, the Group disposed of its interests in its POLS businesses in the US, UK, Australia

and India. The businesses disposed excluded Pearson’s contract with ASU. The consideration to be

received was deferred and comprised a 27.5% share of positive adjusted EBITDA in each calendar

year for six years from the date of acquisition and 27.5% of the proceeds received by the purchaser

in relation to any future monetisation event. In 2023, the consideration was valued at £12m and a

pre-tax gain on disposal of £13m was recognised. In addition, in 2023, a gain of £9m was recognised

arising from the release of a provision related to a historical disposal, £19m of losses arose from the

disposals of Pearson College and the international courseware local publishing business in India and

£12m of costs related to previous disposals were recognised.

In 2022, the Group disposed of its interests in the Canadian educational publisher (ERPI), Pearson

Italia S.p.A, Stark Verlag GmbH, Austin Education (Hong Kong) Limited, Pearson South Africa (Pty) Ltd

and various other South African companies. Total cash consideration received was £287m resulting

in a pre-tax gain on disposal of £42m. All entities disposed of were previously in the Strategic Review

segment. £5m of losses arose from other immaterial disposals and costs related to the wind-down

of certain businesses.

Deferred proceeds relating to the K12 sale were received in 2022.

None of the 2023 or 2022 disposals met the criteria to be considered a discontinued operation on

the basis that they did not represent major lines of business or geographical areas of operations.

The table below shows a summary of the assets and liabilities disposed of:

All figures in £ millions	2024	2023	2022
Disposal of subsidiaries and associates
Intangible assets, including goodwill	–	(53)	(77)
Property, plant and equipment	–	(5)	(11)
Intangible assets – product development	–	(15)	(39)
Inventories	–	(1)	(33)
Trade and other receivables	–	(65)	(106)
Deferred tax	–	8	(12)
Current tax receivable	–	(2)	–
Cash and cash equivalents (excluding overdrafts)	–	(12)	(21)
Provisions for other liabilities and charges	–	–	1
Retirement benefit obligations	–	–	2
Trade and other liabilities	–	31	52
Financial liabilities – borrowings	–	–	8
Net assets disposed	–	(114)	(236)
Cumulative currency translation adjustment	–	122	5
Cash proceeds	–	1	291
Deferred proceeds	–	12	2
Costs of disposal	(5)	(30)	(25)
(Loss)/gain on disposal	(5)	(9)	37

All figures in £ millions	2024	2023	2022
Cash flow from disposals
Proceeds – current year disposals	–	1	291
Proceeds – prior year disposals	–	–	86
Cash and cash equivalents disposed	–	(12)	(21)
Costs and other disposal liabilities paid	(7)	(27)	(23)
Net cash (outflow)/inflow	(7)	(38)	333

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Annual report and accounts 2024 Pearson plc 203

32. Held for sale

At 31 December 2024, the Group has classified a property (2023: two), with a total carrying value of

£nil (2023: £2m), as held for sale.

33. Additional cash flow information

In the cash flow statement, proceeds from sale of property, plant and equipment, including assets

classified as held for sale, comprise:

All figures in £ millions	2024	2023
Net book amount	4	6
Profit/(loss) on sale of property, plant and equipment	2	(1)
Proceeds from sale of property, plant and equipment	6	5

The movements in the Group’s current and non-current borrowings are as follows:

					Transfer
		Fair value	Foreign		from non-	New leases/
		and other	exchange	Financing	current to	disposal of
All figures in £ millions	2023	movements	movements	cash flows	current	leases	2024
Financial liabilities
Non-current
borrowings	1,100	(8)	3	344	(344)	46	1,141
Current borrowings	53	8	11	(78)	344	–	338
Total	1,153	–	14	266	–	46	1,479

					Transfer
		Fair value	Foreign		from non-	New leases/
		and other	exchange	Financing	current to	disposal of
All figures in £ millions	2022	movements	movements	cash flows	current	leases	2023
Financial liabilities
Non-current
borrowings	1,155	(2)	(15)	–	(80)	42	1,100
Current borrowings	66	10	(18)	(84)	80	(1)	53
Total	1,221	8	(33)	(84)	–	41	1,153

Non-current borrowings include bonds, derivative financial instruments and leases. Current

borrowings include loans repayable within one year, derivative financial instruments and leases, but

exclude overdrafts classified within cash and cash equivalents.

34. Contingencies, tax uncertainties and commitments

Key judgements

— The application of tax legislation in relation to provisions for uncertain tax positions.

Key areas of estimation

— The level of provisions required in relation to uncertain tax positions is complex and each

matter is separately assessed. The estimation of future settlement amounts is based on a

number of factors including the status of the unresolved matter, clarity of legislation, range

of possible outcomes and the statute of limitations.

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 is 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 1,314m (£169m) up to 31 December 2024, with additional potential exposure of BRL 46m (£6m)

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.

At the balance sheet date there were no commitments for capital expenditure contracted for but not

yet incurred. Commitments in respect of leases are shown in note 35.

Notes to the consolidated financial statements continued

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Annual report and accounts 2024 Pearson plc 204

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 205

35. Leases

The Group’s lease portfolio consists of approximately 700 property leases, mainly offices and test

centres, together with a number of vehicle and equipment leases. The Group has elected not to

recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12

months or less and leases of low-value assets. The Group recognises the lease payments associated

with these leases as an expense on a straight-line basis over the lease term.

As a lessee:

The amounts recognised in the income statement are as follows:

All figures in £ millions	Note	2024	2023	2022
Interest on lease liabilities		(22)	(23)	(25)
Expenses relating to short-term leases		–	–	–
Depreciation of right-of-use assets	10	(35)	(39)	(45)
Impairment of right-of-use assets	10	–	(2)	(34)

Lease liabilities are included within financial liabilities – borrowings in the balance sheet, see note 18.

The maturities of the Group’s lease liabilities are as follows:

All figures in £ millions	2024	2023
Less than one year	85	84
One to five years	270	286
More than five years	276	301
Total undiscounted lease liabilities	631	671
Lease liabilities included in the balance sheet	517	547
Analysed as:
Current	65	64
Non-current	452	483

The amounts recognised in the cash flow statement are as follows:

All figures in £ millions	2024	2023	2022
Total cash outflow for leases as a lessee	100	107	118

At 31 December 2024, commitments for capital leases contracted for but not yet incurred were

£14m (2023: £8m). Extension and termination options and variable lease payments are not

significant within the lease portfolio. Short-term leases to which the Group is committed at the

balance sheet date are similar to the portfolio of short-term leases to which the short-term lease

expense is disclosed above.

As a lessor:

In the event that the Group has excess capacity in its leased offices and warehouses, the Group

subleases some of its properties under operating and finance leases.

The amounts recognised in the income statement are as follows:

All figures in £ millions	2024	2023	2022
Interest on lease receivables	4	4	5
Income from subleasing right-of-use assets
(within other income)	9	6	4

The amounts recognised in the cash flow statement are as follows:

All figures in £ millions	2024	2023	2022
Total cash inflow for leases as a lessor	22	19	23

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 206

Notes to the consolidated financial statements continued

35. Leases continued

The following table sets out the maturity analysis of lease payments receivable for subleases

classified as operating leases, showing the undiscounted lease payments to be received after the

reporting date, and subleases classified as finance leases showing the undiscounted lease payments

to be received after the reporting date and the net investment in the finance lease receivable. During

the year, the investment in finance lease receivable decreased by £17m (2023: decreased £21m),

primarily due to payments received.

	Operating	Finance	2024	2023	2022
All figures in £ millions	leases	leases	Total	Total	Total
Less than one year	9	22	31	31	24
One to two years	10	23	33	33	28
Two to three years	10	23	33	34	28
Three to four years	10	16	26	34	28
Four to five years	10	4	14	27	29
More than five years	34	2	36	54	44
Total undiscounted lease
payments receivable	83	90	173	213	181
Unearned finance income		(7)
Net investment in finance
lease receivable		83

36. Related party transactions

Joint ventures and associates

There are no material related transactions with joint ventures or associates in 2024.

At 31 December 2022, the Group had a current liability payable to Academy of Pop of £5m, which

related to the Group’s initial capital contribution that had not yet been paid. This balance was paid in

early 2023.

Key management personnel

Key management personnel are deemed to be the members of the Pearson Executive Management

team (see pages 74-76). It is this Committee which had responsibility for planning, directing and

controlling the activities of the Group in 2024. Key management personnel compensation is

disclosed below:

All figures in £ millions	2024	2023	2022
Short-term employee benefits	10	9	7
Retirement benefits	1	1	1
Share-based payment costs	19	11	9
Total	30	21	17

Short-term employee benefits and retirement benefits exclude Executive Directors which are shown

on page 127 of the Directors Remuneration Report.

There were no other material related party transactions. No guarantees have been provided to

related parties.

37. Events after the balance sheet date

On 27 February 2025, the Board approved a £350m share buyback programme in order to return

capital to shareholders. The programme will commence as soon as is practicable.

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Annual report and accounts 2024 Pearson plc 207

38. Accounts and audit exemptions

The Pearson plc subsidiary companies listed below are exempt from the requirements of the Companies Act 2006 relating to the audit of individual financial statements by virtue of section 479A.

Company number

Aldwych Finance Limited 04720439

Faethm Limited 11842984

Longman Group (Overseas Holdings) Limited 00690236

Pearson Australia Finance Unlimited 05578463

Pearson Dollar Finance Limited 05111013

Pearson Dollar Finance Two Limited 06507766

Pearson Education Holdings Limited 00210859

Pearson Education Investments Limited 08444933

Pearson Education Limited 00872828

Pearson International Finance Limited 02496206

Pearson Loan Finance No. 3 Limited 05052661

Company number

Pearson Loan Finance Unlimited 05144467

Pearson Management Services Limited 00096263

Pearson Overseas Holdings Limited 00145205

Pearson Professional Assessments Limited 04904325

Pearson Strand Limited 08561316

Pearson Services Limited 01341060

Pearson Shared Services Limited 04623186

Pearson Strand Finance Limited 11091691

PVNT Limited 08038068

TQ Global Limited 07802458

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 208

Company balance sheet

As at 31 December 2024

All figures in £ millions Notes 2024 2023

Assets

Non-current assets

Investments in subsidiaries 2 6,695 6,702

Amounts due from subsidiaries 3 2,074

Deferred income tax assets 33 35

Financial assets – derivative financial instruments 4 12 32

6,743 8,843

Current assets

Amounts due from subsidiaries 2,439 277

Current income tax assets 53 22

Cash and cash equivalents (excluding overdrafts) 3 129 5

Financial assets – derivative financial instruments 4 31 15

Other assets 1 1

2,653 320

Total assets 9,396 9,163

Liabilities

Non-current liabilities

Amounts due to subsidiaries (1,179) (3,287)

Financial liabilities – derivative financial instruments 4 (3) (38)

(1,182) (3,325)

Current liabilities

Amounts due to subsidiaries (2,508) (1,240)

Other liabilities (8) (121)

Financial liabilities – derivative financial instruments 4 (51) (5)

(2,567) (1,366)

Total liabilities (3,749) (4,691)

Net assets 5,647 4,472

All figures in £ millions Notes 2024 2023

Equity

Share capital 5 166 174

Share premium 5 2,649 2,642

Treasury shares 6 (7) (19)

Capital redemption reserve 41 33

Special reserve 447 447

Retained earnings – including profit for the year of £1,517m

(2023: £467m) 2,351 1,195

Total equity attributable to equity holders

of the company 5,647 4,472

These financial statements have been approved for issue by the Board of Directors on

13 March 2025 and signed on its behalf by

Sally Johnson

Chief Financial Officer

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 209

Company statement of changes in equity

Year ended 31 December 2024

All figures in £ millions

Equity attributable to equity holders of the company

capital

premium

Treasury

Capital

redemption

reserve

Special

reserve

Retained

earnings Total

At 1 January 2024 174 2,642 (19) 33 447 1,195 4,472

Profit for the year – – – – – 1,517 1,517

Equity-settled transactions

– – – – – 44 44

Issue of ordinary shares under share option schemes

– 7 – – – – 7

Purchase of treasury shares – – (33) – – – (33)

Release of treasury shares – – 45 – – (45) –

Buyback of equity (8) – – 8 – (204) (204)

Dividends – – – – – (156) (156)

At 31 December 2024 166 2,649 (7) 41 447 2,351 5,647

All figures in £ millions

Equity attributable to equity holders of the company

capital

premium

Treasury

Capital

redemption

reserve

Special

reserve

Retained

earnings Total

At 1 January 2023 179 2,633 (15) 28 447 1,178 4,450

Profit for the year – – – – – 467 467

Equity-settled transactions

– – – – – 40 40

Issue of ordinary shares under share option schemes

– 9 – – – – 9

Purchase of treasury shares – – (35) – – – (35)

Release of treasury shares – – 31 – – (31) –

Buyback of equity (5) – – 5 – (304) (304)

Dividends – – – – – (155) (155)

At 31 December 2023 174 2,642 (19) 33 447 1,195 4,472

The capital redemption reserve reflects the nominal value of shares cancelled in the Group’s share buyback programme. The special reserve represents the cumulative effect of cancellation of the company’s

share premium account.

1. Full details of the share-based payment plans are disclosed in note 26 to the consolidated financial statements.

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 210

Notes to the company financial statements

1. Accounting policies

The financial statements on pages 208-216 comprise the separate financial statements of Pearson plc.

These company financial statements have been prepared on the going concern basis and in accordance

with Financial Reporting Standard 101 Reduced Disclosure Framework and with the requirements of the

Companies Act 2006.

The company financial statements have been prepared under the historical cost convention as modified by

the revaluation of financial assets and liabilities (including derivative financial instruments) at fair value.

As permitted by section 408 of the Companies Act 2006, the company income statement and statement of

comprehensive income have not been presented.

During the year, the company transitioned from IFRS accounting standards to FRS 101 Reduced Disclosure

Framework. The following exemptions from the requirements of IFRS have been applied in the preparation of

these financial statements, in accordance with FRS 101. Where required, equivalent disclosures are given in

the group financial statements of Pearson plc :

— IFRS 7 ‘Financial Instruments: Disclosures’;

— Paragraphs 91-99 of IFRS 13 ‘Fair Value Measurement’;

— Paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect

of: paragraph 79(a)(iv) of IAS 1;

— The following paragraphs of IAS 1 Presentation of Financial Statements;

— paragraph 10(d)

— paragraph 10(f)

— paragraph 16

— paragraph 38A

— paragraph 40

— paragraph 111

— paragraphs 134-136;

— IAS 7 ‘Statement of Cash Flows’;

— Paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’;

— The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into

between two or more members of a group, provided that any subsidiary which is a party to the transaction

is wholly owned by such a member; and

— paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payments.

The company has no employees (2023: nil).

A key judgement in the preparation of these financial statements is the trigger for the reversal of historical

impairments of investments in subsidiaries. See note 2 for further details. No critical accounting estimates

have been made in the preparation of these separate financial statements.

The basis of preparation and accounting policies applied in the preparation of these company financial

statements are the same as those set out in note 1a to the consolidated financial statements with the addition

of the following:

Investments

Investments in subsidiaries are stated at cost less provision for impairment, with the exception of certain

hedged investments that are held in a foreign currency and revalued at each balance sheet date.

The recoverability of investments is tested annually for impairment in accordance with IAS 36 ‘Impairment of

Assets’. The carrying value is compared to the asset’s recoverable amount which is generally assessed on a

value in use basis. Significant estimation is required to determine the recoverable amount. The value in use of

the assets is calculated using a discounted cash flow methodology using financial information related to the

subsidiaries including cash flow projections in conjunction with the goodwill impairment analysis performed by

the Group. The key assumptions used in the cash flow projections are discount rates, perpetuity growth rates,

forecast sales growth rates and forecast operating profits.

Amounts owed to/by subsidiaries

Amounts owed to or by subsidiaries are measured at amortised cost. They generally mature within five

years, but can be called upon at short notice, or are repayable on demand. Amounts owed by subsidiaries

are classified as current if they mature within one year of the balance sheet date or, in the case of loans

repayable on demand, if the company intends to call the loan within one year of the balance sheet date. All

other amounts are classified as non-current. Interest is charged on all intercompany loans at a rate based

on a benchmark rate plus a margin. The company has assessed and concluded that the amounts owed by

subsidiaries will be fully recovered. Therefore credit losses are considered to beimmaterial.

Parent company guarantees

The Company has guaranteed the repayment of bonds and certain other liabilities due by subsidiary

undertakings primarily to third parties. Such guarantees are accounted for by the Company under IFRS 9.

They are initially measured at fair value. Subsequently, they are measured at the higher of (i) the amount

initially recognised less the cumulative amount of revenue recognised in accordance with IFRS 15, and (ii) the

expected credit losses under IFRS 9. The Company has also entered into performance guarantees whereby

in respect of contracts entered into by subsidiary undertakings, the Company will settle any claims for non-

performance under the contract in the event that the subsidiary does not perform its responsibilities under

the contract, and it does not pay out any amounts due to the third party in the event of non-performance.

Such performance guarantees are accounted for as loan commitments under IFRS 9.

Going concern

In assessing the Company’s ability to continue as a going concern for the period to 30 June 2026, the Board

reviewed management’s five-year plan, which was used as the base case.

The review included available liquidity throughout the period and headroom against the Group’s two main

covenants, which require net debt to EBITDA to be a maximum of four times and interest cover to be at least

three times.

At 31 December 2024, the Group had available liquidity of c.£1.2bn, comprising central cash balances and

its undrawn $1bn Revolving Credit Facility (RCF). In both the base case and severe but plausible scenario, the

business has sufficient liquidity to repay this amount and does not rely on this refinancing in order to remain a

going concern. Significant liquidity and covenant headroom was observed throughout the assessment period

in this base model.

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 211

A severe but plausible scenario was analysed, where the Group is impacted by all principal risks in both

2025 and 2026, adjusted for probability weighting as well as other significant risks. The net impact of the

risks modelled was to reduce free cash flow by around 30% per year. Even under a severe downside case,

the company 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 if these downside risks were to crystalise.

A reverse stress test was performed to identify the reduction in profit required to cease to be a going concern

at or before 30 June 2026. The model showed that significant profit declines in excess of the severe but

plausible were required in both 2025 and 2026 to exhaust liquidity.

The Directors have confirmed that there are no material uncertainties that cast doubt on the Company’s going

concern status and that they have a reasonable expectation that the Company has adequate resources to

continue in operational existence beyond 30June 2026. The Company financial statements have therefore

been prepared on a going concern basis.

2. Investments in subsidiaries

All figures in £ millions 2024 2023

At beginning of year 6,702 6,738

Impairment (1,369) –

Impairment reversal 1,312 40

Capital contribution 44 –

Currency revaluations 6 (76)

At end of year 6,695 6,702

In 2024, the impairment in Pearson Plc’s investment in its subsidiary, Pearson Overseas Holdings Limited,

which was first impaired in 2016, was reversed in full, resulting in a £1.3bn gain in the income statement. The

timing of the impairment reversal is an area of significant judgement. In making the judgement, management

considered the recoverable amount of the investment (as determined by an internally generated value in use

model – see note 11 of the Consolidated Group Financial Statements for details of assumptions used including

the discount rates), as well as external factors such as the share price and market capitalisation. Management’s

judgement was that there was sufficient evidence in 2024 to demonstrate that there has been a stable and

permanent return to value in relation to the previously impaired investment and as such the impairment was

reversed. After reversing the impairment, the recoverable amount of the investment continues to exceed the

carrying value and the headroom is not sensitive to any reasonably possible changes in assumptions.

In 2024, the company settled a loan with its subsidiary, Pearson Dollar Finance Limited, and received dividend

income of the same amount. This resulted in an impairment of the company’s investment in Pearson Dollar

Finance Limited of £1.4bn. There were no impairments in 2023.

3. Cash and cash equivalents (excluding overdrafts)

All figures in £ millions 2024 2023

Cash at bank and in hand 129 5

129 5

At the end of 2024, the currency split of cash and cash equivalents was US dollar 19% (2023: 0%),

sterling 78% (2023: 44%) and other 3% (2023: 56%). Cash and cash equivalents have fair values that

approximate their carrying amounts due to their short-term nature.

In 2024, £1m of interest income on these cash balances was recognised within net finance costs

(2023: £4m).

4. Derivative financial instruments

The company’s outstanding derivative financial instruments are comprised of interest rate

derivatives, cross-currency rate derivatives and FX derivatives. The outstanding derivative balances at

31 December are as follows:

All figures in £ millions

2024 2023

Assets Liabilities Assets Liabilities

Current 31 (51) 15 (5)

Non-current 12 (3) 32 (38)

Total 43 (54) 47 (43)

The carrying value of the above derivative financial instruments equals their fair value. Derivatives are

categorised as level 2 on the fair value hierarchy.Fair values are determined by using market data

and the use of established estimation techniques such as discounted cash flow and option valuation

models. As at 31 December 2024, the outstanding contracts all mature within ten years. In 2024,

£7m of fair value gains were recognised within net finance costs (2023: £10m loss).

Fair value hedge accounting

A foreign currency exposure arises from foreign exchange fluctuations on translation of the

company’s investments in subsidiaries denominated in USD into GBP. The hedged risk is the risk of

changes in the GBP:USD spot rate that will result in changes in the value of the USD investments

when translated into GBP. The hedged items are a portion of the company’s equity investments

in subsidiaries denominated in USD. The hedging instruments are a portion of the company’s

intercompany loans due from subsidiaries which are denominated in USD.

It is expected that the change in value of each of these items will offset each other as there is a

clear and direct economic relationship between the hedge and the hedged item in the hedge

relationship. Hedge ineffectiveness would arise if the value of the hedged items fell below the

value of the hedging instruments.

In 2024, the portion of the company’s equity investments in subsidiaries denominated in USD was

reduced to £nil. As at 31 December 2024, the fair value hedge is no longer in place.

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 212

Notes to the company financial statements continued

4. Derivative financial instruments continued

The value of the hedged items and the hedging instruments is £nil at 31 December 2024 (2023:

£1.4bn) and the change in value during the year which was used to assess hedge ineffectiveness was

£6m (2023: £76m). There was no hedge ineffectiveness.

Cash flows from the €300m EUR 2025 bond were received by the company from its subsidiary

creating a foreign currency exposure upon the translation from EUR to GBP. Changes in the

GBP:EUR spot rate will result in changes to the value of amounts due from subsidiaries when

translated into GBP. The hedged item is €100m of this amount due from subsidiaries denominated

in EUR. The hedging instrument is a €100m 2025 cross-currency swap. It is expected that the change

in value of these items will move in the opposite direction as a result of movements in the EUR:GBP

exchange rate.

5. Share capital and share premium

Number of

000s

capital

£m

premium

£m

At 1 January 2024 697,299 174 2,642

Issue of ordinary shares – share option schemes 955 – 7

Buyback of equity (31,989) (8) –

At 31 December 2024 666,265 166 2,649

The ordinary shares have a par value of 25p per share (2023: 25p per share). All issued shares are

fully paid. All shareholders are entitled to receive dividends and vote at general meetings of the

company. All shares have the same rights.

On 20 September 2023, the Board approved a £300m share buyback programme in order to return

capital to shareholders, with a £200m extension being announced by the Group on 1 March 2024.

This programme and the extension completed in 2024. During 2024, approximately 32m (2023:

20m) shares were bought back and cancelled at a cost of £318m (2023: £186m). The nominal value

of these shares, £8m (2023: £5m), was transferred to the capital redemption reserve, and the

remainder of the purchase price was recorded within retained earnings. At 31 December 2024, no

further liability remains (2023: £118m) for any shares contracted to be repurchased but where the

repurchases are still outstanding.

6. Treasury shares

Number of

000s £m

At 1 January 2024 2,160 19

Purchase of treasury shares 3,273 33

Release of treasury shares (4,754) (45)

At 31 December 2024 679 7

The company holds its own shares in trust to satisfy its obligations under its restricted share plans.

These shares are treated as treasury shares for accounting purposes and have a par value of 25p

per share.

The nominal value of the company’s treasury shares amounts to £0.2m (2023: £0.5m). Dividends on

treasury shares are waived.

At 31 December 2024, the market value of the company’s treasury shares was £9m (2023: £21m).

The gross book value of the shares at 31 December2024 amounts to £7m (2023: £19m).

7. Dividends

The amounts recognised as distributions to equity shareholders in the year and the proposed final

dividend per equity share are disclosed in note 9 to the consolidated financial statements.

8. Contingencies

There are 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. The total value of guarantees made by the company in relation to its subsidiaries

is£1.2bn (2023: £0.9bn). In addition, there are contingent liabilities in respect of legal claims. None of

these claims is expected to result in a material gain or loss to the company.

9. Audit fees

Statutory audit fees relating to the company were £42,000 (2023: £40,700).

10. Related party transactions

Subsidiaries

The company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose

transactions with fellow wholly owned subsidiaries.

Associates

There were no related party transactions with associates in 2024 or 2023.

Key management personnel

Key management personnel are deemed to be the members of the Pearson Executive

Management team.

It is this Committee which had responsibility for planning, directing and controlling the activities

of the company in 2024. Key management personnel compensation is disclosed in note 36 to the

consolidated financial statements.

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 213

11. Group companies

In accordance with section 409 of the Companies Act 2006, a full list of subsidiaries, partnerships, associates, joint ventures and joint arrangements, the country of incorporation, the registered address and

the effective percentage of equity owned, as at 31 December 2024, is disclosed below. Unless otherwise stated, the shares are all indirectly held by Pearson plc. Unless otherwise stated, all wholly-owned and

partly-owned subsidiaries are included in the consolidation and all associated undertakings are included in the Group’s financial statements using the equity method of accounting. Principal Group companies

are identified in bold.

Wholly-owned subsidiaries

Registered company name

Country

ofIncorp.

Reg

office

Addison Wesley Longman, Inc. US 3

Addison-Wesley Educational Publishers Inc. US 4

AEL (S) PTE Limited SG 73

Aldwych Finance Limited UK 1

ATI Professional Development LLC US 4

ATI Studios A.P.P.S. SRL RO 78

Camsaw, Inc. US 4

CamsawUSA, Inc. US 11

Century Consultants Ltd. US 13

Certiport China Holding, LLC US 4

Certiport, Inc. US 4

Clutch Learning, Inc. US 4

Cogmed Systems AB SE 14

Connections Academy of Florida, LLC US 20

Connections Academy of Iowa, LLC US 24

Connections Academy of Maine, LLC US 28

Connections Academy of Maryland, LLC US 29

Connections Academy of Nevada, LLC US 31

Connections Academy of New Mexico, LLC US 32

Connections Academy of Oregon, LLC US 37

Connections Academy of Pennsylvania LLC US 38

Connections Academy of Tennessee, LLC US 40

Connections Academy of Texas LLC US 41

Connections Education LLC US 4

Connections Education of Florida, LLC US 20

Connections Education, Inc. US 4

Credly, Inc. US 4

Dominie Press, Inc. US 17

Dorian Finance Limited IE 7

eCollege.com US 4

Education Development International Plc

†

UK 1

Education Resources (Cyprus) Limited CY 51

Registered company name

Country

ofIncorp.

Reg

office

Educational Management Group, Inc. US 52

English Language Learning and Instruction System, Inc. US 54

Faethm Holdings Pty. Limited AU 48

Faethm IP Pty. Limited AU 48

Faethm Ltd UK 1

Faethm Pty. Limited AU 48

Faethm USA LLC US 6

Falstaff Holdco Inc. US 4

Falstaff Inc. US 55

FBH, Inc. US 4

George (Shanghai) Commercial Information Consulting Co., Ltd CN 21

Globe Fearon Inc. US 17

Heinemann Educational Botswana (Publishers) Proprietary Limited BW 8

IndiaCan Education Private Limited IN 2

Integral 7, Inc. US 4

Intellipro, INC. US 13

Knowledge Analysis Technologies, LLC US 18

LCCIEB Training Consultancy., Ltd CN 64

LessonLab, Inc. US 17

Lignum Oil Company US 4

Lion SG Pte. Ltd.

SG 23

Longman (Malawi) Limited MW 65

Longman Group(Overseas Holdings) Limited UK 1

Longman Indochina Acquisition, L.L.C. US 4

Longman Tanzania Limited TZ 68

Longman Zambia Educational Publishers Limited ZM 69

Longman Zimbabwe (Private) Ltd ZW 47

Longmaned Ecuador S.A. EC 71

Lumerit Education, LLC US 41

MeasureUp of Delaware, LLC US 4

Modern Curriculum Inc. US 17

Multi Treinamento e Editora Ltda BR 60

Registered company name

Country

ofIncorp.

Reg

office

MZ Development Inc. US 4

National Computer Systems Japan Co. Ltd JP 74

Navvy Education, LLC US 22

NCS Information Technology Services (Beijing) Co Ltd CN 75

NCS Pearson Pty Ltd AU 48

NCS Pearson Puerto Rico, Inc. PR 76

NCS Pearson, Inc. US 30

Opinion Interactive LLC US 16

Ordinate Corporation US 17

Pearson (Beijing) Management Consulting Co., Ltd. CN 77

Pearson America LLC US 4

Pearson Amsterdam B.V. NL 79

Pearson Australia Finance Unlimited UK 1

Pearson Australia Group Pty Ltd AU 48

Pearson Australia Holdings Pty Ltd AU 48

Pearson Benelux B.V. NL 79

Pearson Business Services Inc. US 4

Pearson Canada Assessment Inc. CA 80

Pearson Canada Finance Unlimited UK 1

Pearson Canada Holdings Inc. CA 80

Pearson Canada Inc. CA 80

Pearson Central Europe Spółka z ograniczoną odpowiedzialnością PL 39

Pearson DBC Holdings Inc. US 4

Pearson Desarrollo y Capacitación Profesional Chile Limitada CL 81

Pearson Digital Learning Puerto Rico, Inc. PR 76

Pearson Dollar Finance Limited

†

UK 1

Pearson Dollar Finance Two Limited UK 1

Pearson Educacion de Chile Limitada CL 81

Pearson Educacion de Colombia S.A.S. CO 84

Pearson Educacion de Mexico, S.A. de C.V. MX 85

Pearson Educacion de Panama SA PA 86

Pearson Educacion de Peru S.A. PE 87

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 214

Notes to the company financial statements continued

Registered company name

Country

ofIncorp.

Reg

office

Pearson Educacion SA ES 88

Pearson Education Achievement Solutions (RF) (Pty) Ltd ZA 62

Pearson Education Africa (Pty) Ltd ZA 62

Pearson Education Asia Limited HK 53

Pearson Education Botswana (Proprietary) Limited BW 8

Pearson Education do Brasil Ltda BR 60

Pearson Education Hellas SA GR 26

Pearson Education Holdings Limited

†

UK 1

Pearson Education Indochina Limited TH 89

Pearson Education Investments Limited UK 1

Pearson Education Korea Limited KR 90

Pearson Education Limited UK 1

Pearson Education Namibia (Pty) Limited NA 58

Pearson Education Publishing Limited NG 44

Pearson Education S.A. UY 5

Pearson Education SA AR 67

Pearson Education South Africa (Pty) Ltd ZA 62

Pearson Education South Asia Pte. Ltd. SG 73

Pearson Education Taiwan Ltd TW 9

Pearson Education, Inc. US 4

Pearson Educational Measurement Canada, Inc. CA 36

Pearson Educational Publishers, LLC US 4

Pearson Eğitim Çözümleri Tikaret Limited Şirketi TR 61

Pearson Falstaff (Holdings) Inc. US 4

Pearson Falstaff Holdco LLC US 4

Pearson Federal Holding Company, LLC US 4

Pearson France FR 70

Pearson Funding plc

†

UK 1

Pearson Holdings Inc. US 4

Pearson Holdings Southern Africa (Pty) Limited ZA 62

Pearson Hungary LLC HU 25

Pearson India Education Services Private Limited IN 2

Pearson International Finance Limited

†

UK 1

Pearson Investment Holdings, Inc. US 4

Pearson Israel (P.I.) Ltd IL 66

Pearson Japan K.K. JP 49

Pearson Lanka (Private) Limited LK 63

Registered company name

Country

ofIncorp.

Reg

office

Pearson Lanka Support Services (Private) Limited LK 12

Pearson Lesotho (Pty) Ltd LS 62

Pearson Loan Finance No. 3 Limited UK 1

Pearson Loan Finance No. 5 Limited UK 1

Pearson Loan Finance No. 6 Limited UK 1

Pearson Loan Finance Unlimited UK 1

Pearson Longman Uganda Limited UG 43

Pearson Malaysia Sdn. Bhd. MY 59

Pearson Management Services Limited

†

UK 1

Pearson Management Services Philippines Inc. PH 33

Pearson Maryland, Inc. US 11

Pearson Moçambique, Limitada* MZ 42

Pearson Netherlands B.V. NL 79

Pearson Netherlands Holdings B.V. NL 79

Pearson Nominees Limited

†

UK 1

Pearson Online Tutoring LLC US 4

Pearson Overseas Holdings Limited

†

UK 1

Pearson Pakistan Services (Private) Limited PK 50

Pearson PEM P.R., Inc. PR 19

Pearson Phoenix Pty Ltd AU 48

Pearson Professional Assessments Limited UK 1

Pearson Real Estate Holdings Inc. US 4

Pearson Regional Headquarters Arabia SA 57

Pearson Schweiz AG CH 34

Pearson Services Limited

†

UK 1

Pearson Shared Services Limited

†

UK 1

Pearson Strand Finance Limited

†

UK 1

Pearson Strand Limited UK 1

Pearson Sweden AB SE 14

Pearson VUE Europe B.V. NL 79

Pearson VUE Philippines, Inc. PH 27

Pearson Vue Testing Services Kenya Limited KE 15

Penguin Capital, LLC US 4

Personnel Decisions Research Institutes, LLC US 30

PN Holdings Inc. US 4

ProctorCam, Inc. US 4

PT Efficient English Services ID 83

Registered company name

Country

ofIncorp.

Reg

office

PVNT Limited UK 1

Reading Property Holdings LLC US 3

Rebus Planning Associates, Inc. US 10

Reston Publishing Co, Inc. US 4

Rycade Capital Corporation US 4

Shanghai AWL Education Software Ltd

CN 72

Silver Burdett Ginn Inc. US 4

Skylight Training and Publishing Inc. US 52

Smarthinking, Inc. US 4

Sound Holdings Inc. US 4

Sparrow Phoenix Pty Ltd AU 48

Spear Insurance Company Limited

†

BM 45

The Waite Group, Inc. US 17

TQ Education and Training Limited UK 1

TQ Education and Training Limited SA 56

TQ Global Limited UK 1

TQ Group Limited UK 1

TQ Holdings Limited UK 1

Vue Testing Services Israel Ltd IL 46

Vue Testing Services Korea Limited KR 35

Williams Education GmbH DE 82

* In liquidation.

† Directly owned by Pearson plc.

11. Group companies continued

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 215

Subsidiary addresses

The following list includes all Pearson registered offices worldwide.

Registered office address

1 80 Strand, London, WC2R 0RL, England

2 Featherlite, ‘The Address’, 5th Floor, Survey No 203/10B, 200 Ft MMRD Road, Zamin,

Pallavaram, Chennai, TN 600044, India

3 C T Corporation System, 155 Federal St., Suite 700, Boston, MA, 02110, United States

4 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,

Wilmington, New Castle, DE, 19801, United States

5 Juan Benito Blanco 780 – Plaza Business Center, Montevideo, Uruguay

6 340 Halsa Dr, Chattahoochee Hills, GA, GA 30268, United States

7 1

Floor The Liffey Trust Centre, 117-126 Sheriff Street Upper, Dublin 1, Ireland

8 Plot 28892, Twin Towers, West Wing, First Floor Fairground, PO Box 1453, Gaborone,

Botswana

9 10F, No 209, Sec. 1, Civic Blvd., Datong District, Taipei City, 10351, Taiwan

(ProvinceofChina)

10 The Corporation Company, 40600 Ann Arbor Rd, E Suite 201, Plymouth, MI, 48170,

United States

11 The Corporation Trust Incorporated, Suite 201, 2405 York Road, Lutherville Timonium,

MD, 21093, United States

12 #1, 3, 5

Floor, East Tower, World Trade Centre, Echelon Square, Colombo, 01,

SriLanka

13 C T Corporation System, 820, Bear Tavern Road, West Trenton, Mercer, NJ, 08628,

United States

14 Gustavslundsvägen 137, 167 51 Bromma, Stockholm, Sweden

15 3, 2nd Floor, Plaza 2000, Mombasa Road, Embakasi, PO Box 0721175878, 00200

Nairobi

16 105 E Street #2A, Davis, CA, CA 95616, United States

17 C T Corporation System, 330 N Brand Blvd., Glendale, CA, 91203-2336

18 The Corporation Company, 7700 E Arapahoe Rd, Suite 220, Centennial, CO, 80112-

1268, United States

19 500, 401, Calle de la Tanca Edificio Ochoa, San Juan, 00901-1969, Puerto Rico

20 C T Corporation System, 1200, South Pine Island Road, Plantation, FL, 33324,

UnitedStates

21 Suite A7b, 3/F, No. 586 Longchang Road, Yangpu District, Shanghai, China

22 CT Corportion System, 289 S Culver St, Lawrenceville, GA, 30046-4805, United States

23 Kroll Pte. Limited, One Raffles Place, Tower 2, #10-62, Singapore, 048616, Singapore

24 C T Corporation System, 400 E Court Ave, Des Moines, IA, 50309, United States

25 22 B, 13 em, Népfürdő utca, Budapest, 1138, Hungary

26 4 Zalogou Str., 15343 Agia Paraskevi, Athens, Greece

27 27/F Trident Tower, 312 Sen. Gil Puyat Avenue, Makati City, Metro Manila, Philippines

28 C T Corporation System, 3 Chase Avenue, Augusta, ME, United States

29 CSC - Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore,

MD, 21202, United States

30 C T Corporation System Inc., 1010 Dale Street North, Saint Paul, MN, 55117-5603,

UnitedStates

Registered office address

31 The Corporation Trust Company of Nevada, 701 S Carson St, Suite 200, Carson City,

NV, 89701, United States

32 C T Corporation System, 206 S Coronado Ave, Espanola, NM, 87532-2792,

UnitedStates

33 7/F North Tower, Rockwell Business Center COR. Sheridan & United Street, Brgy.

Highway Hills, Mandaluyong, Philippines

34 10 Gewerbestrasse, Cham, 6330, Switzerland

35 21, Mugyo-ro Jung-gu, Seoul, Korea (the Republic of)

36 199 Bay Street, Commerce Court West, Suite 2800, Toronto, ON, M5L1A9, Canada

37 C T Corporation System, 780 Commercial Street SE, STE 100, Salem, OR, OR 97301,

United States

38 C T Corporation System, 600 N. 2

Street, Suite 401, Harrisburg, PA, 17101-1071,

United States

39 Ulica Szamocka 8 01-748, Warszawa, Poland

40 C T Corporation System, 300 Montvue Rd, Knoxville, TN, 37919-5546, United States

41 CT Corporation System, 1999 Bryan Street, Suite 900, Dallas, TX, 75201, United States

42 Numero 776, Avenida 24 de Julho, Maputo, Mozambique

43 Plot 8, Berkley Road, Old Kampala, Uganda

44 8, Secretariat Road, Obafemi Awolowo Way, Alausa, Ikeja, Lagos State, Nigeria

45 Power House, 7 Par-la-ville Road, PO Box 1826, Hamilton, HM 11, Bermuda

46 Derech Ben Gurion 2, BSR Building 9

Floor, Ramat Gan, 5257334, Israel

47 4

Floor, Corner Hertzog Boulevard and Heerengracht, Cape Town, South Africa

48 459-471 Church Street, Richmond, Melbourne, VIC, 3121, Australia

49 11F Kanda Square, 2-2-1 Kanda-Nishikicho, Chiyoda-ku, Tokyo, 101-0054, Japan

50 Office #13, First Floor, Mall of Lahore, Lahore, Pakistan

51 195, Archbishop Makarios III Avenue, Neocleous House, Limassol, 3030, Cyprus

52 Illinois Corporation Service Company, 700 S 2

Street, Springfield, IL, 62703,

UnitedStates

53 18/F, 1063 King’s Road, Quarry Bay, Hong Kong

54 251, Little Falls Drive, Corporation Service Company, Wilmington, DE, 19808,

UnitedStates

55 C T Corporation System, 28 Liberty Street, New York, NY, 10005, United States

56 King Fayad Road, Olaya, Riyadh, 58774, 11515, Saudi Arabia

57 Al Tawuniyya Towers, King Fahd Road, North Block, 2nd floor, Riyadh, Saudi Arabia

58 Bougain Villas, 78 Sam NJJOMA Drive, Windhoek, Postal address PO Box 21683

Windhoek, Namibia

59 Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No 8,

Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia

60 Avenida José Luiz Mazzali, nº 450, Sala H, Setor Módulo 03B, GLP Louveira I, Santo

Antônio, Louveira, SP, CEP 13.290-000, Brazil

61 İçerenköy Mah. Umut Sk. Quick Tower Sitesi No: 10-12 İç Kapı No: 77 Ataşehir, Istanbul,

34742, Turkey

Registered office address

62 The Towers, 21st Floor, Unit 21B, 2 Heerengracht Cnr, Hertzog Boulevard, Foreshore

Cape Town, WC, 8001, South Africa

63 MAGA ONE-Level 8, No. 200, Nawala Road, Narahenpita, Colombo 05, 00500, SriLanka

64 Room 305, Building 2, 6555 Shangchuan Road, Pudong District, Shanghai, China

65 Alliance House, PO Box 30698, Blantyre, Malawi

66 Meitar Law Offices, 16 Abba Hillel Rd., Ramat Gan, 5250608, Israel

67 498, Libertador Ave, City of Buenos Aires, 3rd floor, Buenos Aires, Argentina

68 Plot No 108, Makuyuni Road, Mikocheni Block”B” Kinondoni District, PO Box 10801, Dar

es Salaam, Tanzania

69 Plot 1281, Lungwebungu Road, Rhodes Park, Lusaka, Zambia

70 8 Rue des Pirogues de Bercy, Paris 75012, France

71 Andalucía y cordero E12-35. Edificio CYEDE piso 1, Oficina 11, Sector “La Floresta”,

Quito, Pichincha, Ecuador

72 Suite 302-9,Block 3, No. 333 Weining Road, Changning District, Shanghai, China

73 3 Temasek Avenue, #21-23 Centennial Tower, 039190, Singapore

74 Shiodome City Center 18F, 1-5-2, Higashi Shimbashi, Minato-Ku, Tokyo,

105-7118, Japan

75 Suite 1201, Tower 2, No. 36 North Third Ring East Road, Dongcheng District,

Beijing,China

76 268 Munoz Rivera Avenue, Suite 1400, San Juan, 00918, Puerto Rico

77 Room 902, Tower W2, Oriental Plaza, No. 1 East Chang’an Street, Dongcheng District,

Beijing, 11, 100738, China

78 3 Politehnicii St., Braşov, Municipality, Braşov County, Romania

79 Kabelweg 37, Amsterdam, 1014 BA, Netherlands

80 357 Bay Street, 3rd Floor, Toronto, ON, M5H 4A6, Canada

81 Oficina N° 117, edificio Casa Colorada, calle Merced N°838-A Santiago Centro,

Santiago,Chile

82 Williams Education GmbH c/o Pearson Benelux B.V. (Zweignl. Deutschland), St.-Martin-

Str. 82, Munich, 81541, Germany

83 30th Floor, Ratu Plaza Office Tower, Jl. Jend. Sudirman Kav 9, Jakarta, 10270, Indonesia

84 Carrera 7 Nro 156 – 68, Piso 26, Bogota, Colombia

85 Avenida Javier Barros Sierra, número 495, piso 3, oficina 138, Santa Fe, Alcaldía Álvaro

Obregón, Cuidad de México, C.P. 01219, Mexico

86 Punta Pacifica, Torres de las Americas, Torre A Piso 15 Ofic. 1517, Panama,

0832-0588, Panama

87 Cal. Los Halcones, no. 275, Urb. Limatombo, Lima, Peru

88 85, Paseo de la Castellana, Planta 8, Madrid, 28046, Spain

89 87/1 Capital Tower Building, All Seasons Place unit 1604 – 6 16th floor, Wireless Road,

Lumpini, Pathumwan, Bangkok, Thailand

90 #512, 5th Floor, 12, Mapo-daero 10-gil, Mapo-gu, Seoul, Korea (the Republic of)

Strategic report Governance report Financial statements Other information

Annual report and accounts 2024 Pearson plc 216

11. Group companies continued

Partly-owned subsidiaries

Registered company Name

Country

ofIncorp. % Owned Reg office

Certiport China Co Ltd CN 50.69 1

Educational Publishers LLP UK 85 2

GED Domains LLC US 70 3

GED Testing Service LLC US 70 4

Associated undertakings

Registered company Name

Country

ofIncorp. % Owned Reg office

Learn Capital Special Opportunities Fund I, L.P.

‡

US 99.59 8

Learn Capital Venture Partners II, L.P.

‡

US 72.93 8

Learn Capital Venture Partners IIIA, L.P.

‡

KY 99 9

Learn Capital Venture Partners, L.P.

‡

US 99.15 8

Pearson Pension Nominees Limited UK 50 2

Pearson Pension Property Fund Limited UK 50 2

Pearson Pension Trustee Limited UK 50 2

Pearson Pension Trustee Services Limited UK 50 2

Peking University Pearson (Beijing) Cultural Development Co., Ltd CN 45 10

Prepona Sistemas de Testagem e Avaliação S.A. BR 22.2 7

Pui Man Publishing Limited MO 49 11

Smashcut, Inc. US 25.93 6

The Egyptian International Publishing Company-Longman EG 49 5

* In liquidation.

‡ Accounted for as an ‘Other financial asset’ within non-current assets.

Partly-owned subsidiaries and associated undertakings

companyaddresses

Registered office address

1 Suite 1804, No.99 Huichuan Road, Changning District, Shanghai City, China

2 80 Strand, London, WC2R 0RL, England

3 C T Corporation System, 4701 Cox Road, Suite 285, Glen Allen, Henrico, VA, 23060-0000, United States

4 The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle, DE, 19801, United States

5 9 Rashdan St., Messaha Square, Dokki, Giza City, Egypt

6 C/o Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, UnitedStates

7 SIS 1107A1112, 35 Rua Pedro Lessa, Centro, Rio de Janeiro, RJ, 20030-030, Brazil

8 Incorporating Services, Ltd. 3500 S Dupont Way, Dover, Kent, DE, 19901, United States

9 Campbells Corporate Services Limited, Floor 4, Willow House, Cricket Square, GrandCayman, KY1-9010, Cayman Islands

10 Suite 216, No. 127-1 Zhongguancun North Street, Haidian District, Beijing, China

11 Rua de Pequim No. 230–246 17-L, Macau Finance Centre, Macau, China

Notes to the company financial statements continued

Annual report and accounts 2024 Pearson plc 217

Strategic report Governance report Financial statements Other information

Five-year summary

All figures in £ millions 2024 2023 2022 2021 2020

Sales: By operating segment

Assessment & Qualifications 1,591 1,559 1,444 1,238 1,118

Virtual Learning 489 616 820 713 692

English Language Learning 420 415 321 238 218

Workforce Skills 226 220 204 172 163

Higher Education 826 855 898 849 956

Strategic review – 9 154 218 250

Total sales 3,552 3,674 3,841 3,428 3,397

Adjusted operating profit: By operating segment

Assessment & Qualifications 368 350 258 219 147

Virtual Learning 66 76 70 32 29

English Language Learning 50 47 25 15 1

Workforce Skills 8 (8) (3) 27 26

Higher Education 108 110 91 73 93

Strategic review – (2) 15 19 16

Penguin Random House – – – – 1

Total adjusted operating profit 600 573 456 385 313

Operating margin – continuing 16.9% 15.6% 11.9% 11.2% 9.2%

Adjusted earnings

Total adjusted operating profit 600 573 456 385 313

Net finance costs (45) (33) (1) (57) (61)

Income tax (136) (124) (71) (64) (35)

Non-controlling interest (1) (2) (2) (1) –

Adjusted earnings 418 414 382 263 217

Weighted average number of shares (millions) 673.0 711.5 738.1 754.1 755.4

Adjusted earnings per share 62.1p 58.2p 51.8p 34.9p 28.7p

Annual report and accounts 2024 Pearson plc 218

Strategic report Governance report Financial statements Other information

All figures in £ millions 2024 2023 2022 2021 2020

Cash flow

Operating cash flow 662 587 401 388 315

Operating cash conversion 110% 102% 88% 101% 101%

Free cash flow 490 387 222 133 229

Free cash flow per share 72.8p 54.4p 30.0p 17.6p 30.3p

Net assets 4,053 3,988 4,415 4,280 4,134

Net debt 853 744 557 350 463

Return on invested capital

Total adjusted operating profit 600 573 456 385 313

Operating tax paid (119) (96) (95) (60) (10)

Return 481 477 361 325 303

Net basis:

Average invested capital 7,358 7,711 7,896 7,161 7,708

Return on invested capital 6.5% 6.2% 4.6% 4.5% 3.9%

Return on capital

Total adjusted operating profit 600 573 456 385 313

Adjusted income tax charge (136) (124) (71) (64) (35)

Return 464 449 385 321 278

Capital 4,433 4,380 4,439 4,086 4,196

Return on capital 10.5% 10.3% 8.7% 7.9% 6.6%

Dividend per share 24.0p 22.7p 21.5p 20.5p 19.5p

Five-year summary continued

Annual report and accounts 2024 Pearson plc 219

Strategic report Governance report Financial statements Other information

Financial key performance indicators

The following tables and narrative provide further analysis of the financial key performance

indicators which are described in the financial review of the annual report on pages 26-32, shown

within the key performance indicators on page 25 of the annual report and shown in note 2 of the

notes to the consolidated financial statements.

Adjusted performance measures

The annual report and accounts reports results and performance on a headline basis which

compares the reported results both on a statutory and ona non-GAAP (non-statutory) basis.

The Group’s adjusted performance measures are non-GAAP (non-statutory) financial measures

and are also included in the annual report as they are key financial measures used by management

to evaluate performance. The measures also enable investors to more easily, and consistently,

track the underlying operational performance of the Group and its business segments 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.

The Group’s definition of adjusted performance measures may not be comparable to other similarly

titled measures reported by other companies. Areconciliation of the adjusted measures to their

corresponding statutory measures is shown within this section.

Sales

Underlying sales movements exclude the effect of exchange, the impact of portfolio changes arising

from acquisitions and disposals and the impact ofadopting new accounting standards that are not

retrospectively applied. Portfolio changes are calculated by taking account of the additional sales

(atconstant exchange rates) from acquisitions made in both the current year and the prior year. For

acquisitions made in the prior year, the additional sales excluded is calculated as the sales made in

the period of the current year that corresponds to the pre-acquisition period in the prior year. Sales

made by businesses disposed in either the current year or the prior year are also excluded. Constant

exchange rates are calculated by assuming the average exchange rates in the prior year prevailed

throughout the current year. These non-GAAP measures enable management and investors to track

more easily, and consistently, the underlying sales performance of the Group.

All figures in £ millions

Assessment &

Qualifications

Virtual

Learning

English

Language

Learning

Workforce

Skills

Higher

Education

Strategic

Review Total

Statutory sales 2024 1,591 489 420 226 826 – 3,552

Statutory sales 2023 1,559 616 415 220 855 9 3,674

Statutory sales

increase/(decrease) 32 (127) 5 6 (29) (9) (122)

Comprising:

Portfolio changes 13 (92) – (4) (10) (4) (97)

Exchange differences (35) (13) (30) (2) (24) – (104)

Underlying

increase/(decrease) 54 (22) 35 12 5 (5) 79

Remove OPM and Strategic

Review from underlying – 19 – – – 5 24

Underlying increase/

(decrease) excluding OPM

and Strategic Review 54 (3) 35 12 5 – 103

Statutory sales increase/

(decrease) 2% (21)% 1% 3% (3)% (100)% (3)%

Constant exchange rate

increase/(decrease) 4% (19)% 8% 4% (1)% (100)% –%

Underlying

increase/(decrease) 3% (4)% 8% 6% 1% (100)% 2%

Underlying increase/

(decrease) excluding OPM

and Strategic Review 3% (1)% 8% 6% 1% –% 3%

Adjusted operating profit

Adjusted operating profit excludes the cost of major reorganisation, certain property charges, other

net gains and losses on the sale or closure of subsidiaries, joint ventures, associates and other

financial assets, and intangible charges, including impairment, relating only to goodwill and intangible

assets acquired through business combinations or relating to associates. Other net gains and losses

also includes costs related to business closures and acquisitions. Further details are given below

under ‘Adjusted earnings per share’. Underlying adjusted operating profit movements exclude the

effect of exchange, the impact of portfolio changes arising from acquisitions and disposals and the

impact of adopting new accounting standards that are not retrospectively applied. Portfolio changes

are calculated by taking account of the additional contribution (at constant exchange rates) from

acquisitions made in both the current year and the prior year.

Annual report and accounts 2024 Pearson plc 220

Strategic report Governance report Financial statements Other information

Adjusted operating profit continued

For acquisitions made in the prior year, the additional contribution excluded is calculated as the

operating profit made in the period of the current year that corresponds to the pre-acquisition

period in the prior year. Operating profit made by businesses disposed in either the current year

or the prior year is also excluded. Constant exchange rates are calculated by assuming the average

exchange rates in the prior year prevailed throughout the current year. This non-GAAP measure

enables management and investors to track more easily, and consistently, the underlying operating

profit performance of the Group.

All figures in £ millions 2024 2023 2022

Operating profit 541 498 271

Cost of major reorganisation (2) – 150

Property charges – 11 –

Other net gains and losses 7 16 (24)

Intangible charges 41 48 56

UK pension discretionary increase 13 – 3

Adjusted operating profit 600 573 456

All figures in £ millions

Assessment &

Qualifications

Virtual

Learning

English

Language

Learning

Workforce

Skills

Higher

Education

Strategic

Review Total

Adjusted operating

profit increase/

(decrease) 18 (10) 3 16 (2) 2 27

Comprising:

Exchange differences (9) (3) (11) 1 (4) – (26)

Portfolio changes 4 – – 1 (10) (1) (6)

Underlying

increase/(decrease) 23 (7) 14 14 12 3 59

Constant exchange

rate increase/

(decrease) 8% (9)% 30% 188% 2% 100% 9%

Underlying

increase/(decrease) 7% (9)% 30% 200% 12% 100% 10%

Adjusted operating profit translated at year-end closing rates would be £7m higher (2023: £10m

lower) than the reported figure of £600m (2023: £573m) at £607m (2023: £563m).

Adjusted earnings

Adjusted earnings includes adjusted operating profit and adjusted finance and tax charges. Adjusted

earnings is included as a non-GAAP measure as it is used by management to evaluate performance

and by investors to more easily, and consistently, track the underlying operational performance of

the Group over time.

All figures in £ millions 2024 2023 2022

Profit for the year 435 380 244

Non-controlling interest (1) (2) (2)

Cost of major reorganisation (2) – 150

Property charges – 11 –

Other net gains and losses 7 16 (24)

Intangible charges 41 48 56

UK pension discretionary increase 13 – 3

Other net finance income (14) (28) (53)

Income tax (61) (11) 8

Adjusted earnings 418 414 382

The following items are excluded from adjusted earnings:

Cost of major reorganisation – In 2024, there is a release of £2m relating to amounts previously

accrued. In 2023, there were no costs of major reorganisation. In 2022, the reorganisation costs of

£150m mainly related to staff redundancies and impairment of right of use property assets. The

2022 charge includes the impact of updated assumptions related to the recoverability of right-of-

use assets made in 2021. The costs of these reorganisation programmes are significant enough

to exclude from the adjusted operating profit measure so as to better highlight the underlying

performance (see note 4).

Property charges – In 2024, there were no property charges. In 2023, charges of £11m related to

impairments of property assets arising from the impact of updates in 2023 to assumptions initially

made during the 2022 and 2021 reorganisation programmes.

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 2024 relate to costs related to prior year acquisitions and disposals, partially offset

by a gain on the partial disposal of our investment in an associate. Other net gains and losses in

2023 relate to the gain on the disposal of the POLS business and gains related to the release of

accruals and a provision related to historical acquisitions, offset by losses on the disposal of Pearson

College and costs related to current and previous year disposals and acquisitions. In 2022, they

related to the gains on the disposal of our international courseware local publishing businesses in

Europe, French-speaking Canada and Hong Kong and a gain arising on a decrease in the deferred

consideration payable on prior year acquisitions, offset by a loss on disposal of our international

courseware local publishing businesses in South Africa due to recycling of currency translation

adjustments and costs related to disposals and acquisitions.

Financial key performance indicators continued

Annual report and accounts 2024 Pearson plc 221

Strategic report Governance report Financial statements Other information

UK pension discretionary increases – Charges in 2024 and 2022 relate to one-off pension increases

awarded to certain cohorts of pensioners in response to the cost of living crisis. There were no such

awards in 2023.

Intangible charges – These represent amortisation relating to intangibles acquired through business

combinations. These amortisation charges are excluded as they reflect past acquisition activity

and do not necessarily reflect the current year performance of the Group. Intangible amortisation

charges in 2024 were £41m compared to a charge of £48m in 2023. This is due to decreased

amortisation from disposals partially offset by additional amortisation from recent acquisitions.

In2022, intangible charges were £56m. In all three years, there were no impairment charges.

Other net finance income/costs – These include finance costs in respect of retirement benefits,

finance costs of deferred consideration, fair value movements in relation to financial assets held at

fair value through profit and loss and foreign exchange and other gains and losses. Finance income

relating to retirement benefits is excluded as management does not believe that the consolidated

income statement presentation under IAS 19 reflects the economic substance of the underlying

assets and liabilities. Finance costs relating to acquisition transactions are excluded as these relate

to future earn-outs or acquisition expenses and are not part of the underlying financing. Foreign

exchange and other gains and losses are excluded 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.

All figures in £ millions 2024 2023 2022

Net finance (costs)/income (31) (5) 52

Net finance income in respect of retirement benefits (21) (26) (9)

Interest on deferred and contingent consideration 2 4 5

Fair value movements on investments 11 (13) (28)

Net foreign exchange losses/(gains) 3 (3) (1)

Fair value movement on derivatives (7) 10 (25)

Interest on provisions for uncertain tax positions (2) – 5

Net interest payable in adjusted earnings (45) (33) (1)

Tax – Tax on the above items is excluded from adjusted earnings. Where relevant the Group also

excludes the benefit from recognising previously unrecognised pre-acquisition and capital losses.

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 tax rate reflected in adjusted earnings is calculated as follows:

All figures in £ millions 2024 2023 2022

Profit before tax 510 493 323

Adjustments:

Cost of major reorganisation (2) – 150

Property charges – 11 –

Other net gains and losses 7 16 (24)

Intangible charges 41 48 56

UK Pension discretionary increases 13 – 3

Other net finance income (14) (28) (53)

Adjusted profit before tax 555 540 455

Total tax charge (75) (113) (79)

Adjustments:

Tax on cost of major reorganisation 1 – (37)

Tax on property charges – (3) –

Tax on other net gains and losses – (10) 10

Tax on intangible charges (10) (11) (11)

Tax on UK pensions discretionary increases (3) – (1)

Tax on other net finance costs 5 7 13

Tax on goodwill and intangibles 4 4 16

Tax benefit on UK tax rate change – 1 (1)

State Aid provision release (63) – –

Movement in provision for tax uncertainties 6 – –

Other tax items (1) 1 19

Adjusted tax charge (136) (124) (71)

Tax rate reflected in adjusted earnings 24.4% 23.0% 15.6%

Annual report and accounts 2024 Pearson plc 222

Strategic report Governance report Financial statements Other information

Adjusted earnings per share

Adjusted earnings per share is calculated as adjusted earnings divided by the weighted average

number of shares in issue on an undiluted basis.

All figures in £ millions 2024 2023 2022

Adjusted operating profit 600 573 456

Adjusted net finance costs (45) (33) (1)

Adjusted profit before tax 555 540 455

Adjusted income tax (136) (124) (71)

Adjusted profit for the year 419 416 384

Non-controlling interest (1) (2) (2)

Adjusted earnings 418 414 382

Weighted average number of shares (millions) 673.0 711.5 738.1

Weighted average number of shares (millions)

for diluted earnings 684.0 717.3 742.0

Adjusted earnings per share

Basic 62.1p 58.2p 51.8p

Diluted 61.1p 57.7p 51.5p

Financial key performance indicators continued

Return on invested capital

Return on invested capital (ROIC) is included as a non-GAAP measure as it is used by management to

help inform capital allocation decisions within the business. ROIC is calculated as adjusted operating

profit less operating cash tax paid expressed as a percentage of average invested capital. Invested

capital includes the original unamortised goodwill and intangibles. Average values for total invested

capital are calculated as the average monthly balance for the year. ROIC is also presented on a net

basis after removing impaired goodwill from the invested capital balance. The net approach assumes

that goodwill which has been impaired is treated consistently to goodwill disposed as it is no longer

being used to generate returns. We have removed the gross measure as it is no longer used in

managing the business.

All figures in £ millions

2024

Gross

2024

Net

2023

Net

Adjusted operating profit 600 573

Operating tax paid (119) (96)

Return 481 477

Average goodwill 3,432 3,530

Average other non-current intangibles 1,635 1,826

Average intangible assets – product development 937 967

Average tangible fixed assets and working capital 1,354 1,388

Average invested capital 7,358 7,711

Return on invested capital 6.5% 6.2%

Annual report and accounts 2024 Pearson plc 223

Strategic report Governance report Financial statements Other information

Return on capital

Return on capital (ROC) is included as a non-GAAP measure of how efficiently we are generating

returns from our asset base. ROC is calculated as adjusted operating profit less adjusted income tax

as a proportion of capital, where capital adjusts net statutory assets for net debt, retirement benefit

assets, other post-retirement medical obligations and other non-operating items. The other non-

operating items in 2023 include the liability recorded for the remainder of the 2023 share buyback

scheme. These adjustments to net statutory assets have been made to better reflect the asset base

that generates returns.

All figures in £ millions 2024 2023

Adjusted operating profit 600 573

Adjusted income tax charge (136) (124)

Return 464 449

Net statutory assets 4,053 3,988

Adjustments for:

Net debt 853 744

Retirement benefit assets (491) (499)

Other post-retirement medical benefit obligation 19 21

Other non-operating assets (1) 126

Capital 4,433 4,380

Return on capital 10.5% 10.3%

Subsequent to the release of the 2024 unaudited preliminary results, an adjustment has been made

which reduces net statutory assets by £10m. As a result of this adjustment, ROC has increased from

10.4% to 10.5%.

Operating cash flow

Operating cash flow is calculated as net cash generated from operations before the impact of items

excluded from the adjusted income statement plus dividends from joint ventures and associates

(less the re-capitalisation dividends from Penguin Random House); less capital expenditure on

property, plant and equipment (including additions to right-of-use assets) and intangible software

assets; plus proceeds from the sale of property, plant and equipment (including the impacts of

transfers to/from investment in finance lease receivable) and intangible software assets; plus special

pension contributions paid; and plus costs of major reorganisation paid. Operating cash flow is

included as a non-GAAP measure in order to align the cash flows with the corresponding adjusted

operating profit measures.

All figures in £ millions 2024 2023

Net cash generated from operations 811 682

Dividends received 2 –

Purchase/disposal of PPE and software (118) (121)

Net addition of right-of-use assets (46) (41)

Net costs paid for major reorganisation 8 63

Other net gains and losses 5 4

Operating cash flow 662 587

Cash conversion, calculated as operating cash flow as a percentage of adjusted operating profit, is

also shown as a non-GAAP measure as this is used by management and investors to measure cash

generation by the Group.

All figures in £ millions 2024 2023

Adjusted operating profit 600 573

Operating cash flow 662 587

Cash conversion 110% 102%

Annual report and accounts 2024 Pearson plc 224

Strategic report Governance report Financial statements Other information

Operating cash flow continued

Operating cash flow, operating free cash flow and total free cash flow, which are non-GAAP

measures, are commonly used by investors to measure the cash performance of the Group.

The table below reconciles operating cash flow to net debt:

All figures in £ millions 2024 2023 2022

Operating cash flow 662 587 401

Tax paid (119) (97) (109)

Net finance costs paid (45) (40) (35)

Net costs paid for major reorganisation (8) (63) (35)

Free cash flow 490 387 222

Dividends paid (including to non-controlling interests) (156) (154) (157)

Net movement of funds from operations 334 233 65

Acquisitions and disposals (58) (219) 105

Disposal of lease liabilities – – 8

Net equity transactions (351) (212) (383)

Other movements on financial instruments (34) 11 (2)

Movement in net debt (109) (187) (207)

Opening net debt (744) (557) (350)

Closing net debt (853) (744) (557)

Net cash generated from operations is translated at an exchange rate approximating the rate at

the dateof cash flow. The difference between this rate and the average rate used to translate profit

gives riseto a currency adjustment in the reconciliation between net profit and net cash generated

from operations. Thisadjustment reflects the timing difference between recognition of profit and the

related cash receipts or payments.

Financial key performance indicators continued

Net debt and adjusted earnings before interest, tax, depreciation

and amortisation (EBITDA)

For information, the net debt/adjusted EBITDA ratio is shown as a non-GAAP measure as it is

commonly used by investors to measure balance sheet strength. Adjusted EBITDA is calculated as

adjusted operating profit less depreciation on property, plant and equipment, and amortisation on

intangible software assets.

All figures in £ millions 2024 2023

Adjusted operating profit 600 573

Depreciation (excluding items included in ‘cost of major reorganisation’

and ‘property charges’) 76 79

Amortisation on intangible software assets (excluding items included in

‘cost of major reorganisation’) 117 123

Adjusted EBITDA 793 775

Cash and cash equivalents 543 312

Overdrafts – (3)

Investment in finance lease receivable 83 100

Derivative financial instruments (7) 5

Bonds (955) (611)

Lease liabilities (517) (547)

Net debt (853) (744)

Net debt/adjusted EBITDA ratio 1.1x 1.0x

Adjusted EBITDA translated at year-end closing rates would be £10m higher (2023: £13m lower) than

the reported figure of £793m (2023: £775m) at £803m (2023: £762m).

Cross Reference Table:

Item Form 20-F Caption Location in this Document

Page

Reference

Item 1 Identity of Directors, Senior

Management and Advisers

Not applicable n/a

Item 2 Offer Statistics and

Expected Timetable

Not applicable n/a

Item 3 Key Information

A. Reserved Not applicable n/a

B. Capitalisation and

indebtedness

Not applicable n/a

C. Reasons for the offer and

use of proceeds

Not applicable n/a

D. Risk factors Additional Information: Risk factors

Strategic Report: Risk management

228-233

57-67

Item 4 Information on the Company

A. History and development of

the Company

Strategic Report: At a Glance

Information on the Company

Shareholder Information

Strategic Review: Financial Review

Note 18: Borrowings

Note 19: Financial Risk Management

Note 30: Business Combinations

Note 31: Disposals

Note 35: Leases

233

245-246

26-32

187-188

188-191

202

203

205-206

B. Business overview Strategic Report

Note 2: Segmental Information

Additional Information: Certain

additional information on

the Company

2-67

164-166

233-235

C. Organisational structure Parent Company Note 11 213-216

Item Form 20-F Caption Location in this Document

Page

Reference

D. Property, plant and equipment Note 10: Property, plant and

Equipment and Investment Property

Additional Information: Property, plant

and equipment

Strategic Report: Sustainability

Additional Information: Risk Factors

177-178

235

33-56

228-233

Item 4A Unresolved staff comments None n/a

Item 5 Operating and Financial

Review and Prospects

A. Operating results Additional Information:

Operating and Financial Review

Strategic Report:

Key performance indicators

Strategic Report: Financial review

Strategic Report: Risk management

(including Viability Statement)

Financial Statements

235

24-25

26-32

57-67

150-216

B. Liquidity and capital resources Strategic Report: Financial review

Note 16: Derivatives and

Hedge Accounting

Note 18: Borrowings

Note 19: Financial Risk Management

Note 35: Leases

26-32

185-187

187-188

188-191

205-206

C. Research and development,

patents and licenses etc

Not applicable n/a

D. Trend information Strategic Report: Key

performance indicators

Strategic Report: Financial review

24-25

26-32

E. Critical Accounting Estimates Note 1: Accounting Policies 156-164

Additional information for US listing purposes

Annual report and accounts 2024 Pearson plc 225

Strategic report Governance report Financial statements Other information

(unaudited)

Item Form 20-F Caption Location in this Document

Page

Reference

Item 6 Directors, Senior Management

and Employees

A. Directors and senior

management

Corporate Governance:

Board of Directors

Corporate Governance:

Pearson Executive Management

70-72

74-76

B. Compensation Directors’ Remuneration Report 113-136

C. Board practices Corporate Governance:

Board of Directors

Directors’ Remuneration Report

Corporate Governance:

Audit Committee report

70-72

113-136

99-112

D. Employees Note 5: Employee Information 174

E. Share ownership Directors’ Remuneration Report

Note 26: Share Based Payments

113-136

198-199

F. Disclosure of a registrant’s

action to recover erroneously

awarded compensation

None n/a

Item 7 Major Shareholders and

Related Party Transactions

A. Major shareholders Additional Disclosures 137

B. Related party transactions Note 12: Investments in Joint Ventures

and Associates

Note 36: Related Party Transactions

181

206

C. Interests of experts and

counsel

Not applicable n/a

Item 8 Financial Information

A. Consolidated statements and

other financial information

Financial Statements 150-216

B. Significant changes None n/a

C. Interests of experts and

counsel

Not applicable n/a

Item Form 20-F Caption Location in this Document

Page

Reference

Item 9 The Offer and Listing

A. Offer and listing details Additional Information: Listing 235

B. Plan of distribution Not applicable n/a

C. Markets Additional Information: Listing 235

D. Selling shareholders Not applicable n/a

E. Dilution Not applicable n/a

F. Expenses of the issue Not applicable n/a

Item 10 Additional Information

A. Share capital Not applicable n/a

B. Articles of association Additional Information:

Articles of Association

236-239

C. Material contracts Additional Information:

Material Contracts

239

D. Exchange controls Additional Information:

Exchange Controls

239

E. Taxation Additional Information:

Tax Considerations

239-241

F. Dividends and paying agents Not applicable n/a

G. Statement by experts Not applicable n/a

H. Documents on display Additional Information: Documents

on Display

241

I. Subsidiary information Parent company Note 11:

Group Companies

213-216

J. Annual report to Security

Holders

Not applicable n/a

Item 11 Quantitative and Qualitative

Disclosures about Market Risk

Note 19: Financial Risk Management

Note 14: Classification of

Financial Instruments

Note 16: Derivative Financial

Instruments and Hedge Accounting

188-191

183-184

185-187

Additional information for US listing purposes continued

Annual report and accounts 2024 Pearson plc 226

Strategic report Governance report Financial statements Other information

(unaudited)

Item Form 20-F Caption Location in this Document

Page

Reference

Item 12 Description of Securities other

than Equity Securities

A. Description of debt securities Not applicable n/a

B. Description of warrants

and rights

Not applicable n/a

C. Description of other securities Not applicable n/a

D. American Depository Shares Additional Information: Description of

Securities Other than Equity Securities

241-242

D. 1 Name of depositary

and address of principal

executive office

Not applicable n/a

D. 2 Title of ADRs and brief

description of provisions

Not applicable n/a

D. 3 Depositary fees and charges Additional Information: Description of

Securities Other than Equity Securities

241-242

D. 4 Depositary payments Additional Information: Description of

Securities Other than Equity Securities

241-242

Item 13 Defaults, Dividend Arrearages

and Delinquencies

Not applicable n/a

Item 14 Material Modifications to the

Rights of Security Holders and

Use of Proceeds

Not applicable n/a

Item 15 Controls and Procedures Additional Information: Controls and

Procedures

242-243

Item 16 Reserved

A. Audit Committee

Financial Expert

Additional Information: Audit

Committee Financial Expert

243

B. Code of Ethics Additional Information: Code of Ethics 243

C. Principal Accountant Fees Note 4: Operating Expenses

Principal accountant fees and services

173-174

243

D. Exemptions from The Listing

Standards for Audit Committees

Not applicable n/a

Item Form 20-F Caption Location in this Document

Page

Reference

E. Purchases of Equity

Securities by the Issuer and

Affiliated Purchasers

Additional Information: Purchases of

Equity Securities by the Issuer and

Affiliated Purchases

243

F. Change in Registrants

Certifying Accountant

Not applicable n/a

G. Corporate Governance Additional Information: Corporate

Governance

68-140

H. Mine Safety Disclosures Not applicable n/a

I. Disclosure regarding

foreign jurisdiction that

prevent inspections

Not applicable n/a

J. Insider Trading Policies Additional Information: Insider

Trading Policies

243

K. Cyber security Additional Information: Cyber security;

Strategic Report: Data privacy and

cyber security

244, 37, 50

Item 17 Financial Statements Not applicable n/a

Item 18 Financial Statements Financial Statements 150-216

Item 19 Exhibits Refer to Exhibits list immediately

following the signature page for this

document as filed with the SEC

n/a

Annual report and accounts 2024 Pearson plc 227

Strategic report Governance report Financial statements Other information

(unaudited)

Risk Factors

You should carefully consider the risk factors described below, as well as the other information

included in the rest of this document. The Group’s business, financial condition or results from

operations could be materially adversely affected by any or all of these risks, or by other risks that it

presently cannot identify. Any forward-looking statements are made subject to the Forward-Looking

Statement section located on page 247.

Risks relating to regulation, including accreditation

Changes in government policy and/or regulations have the potential to affect the Group’s business model

and/or decisions across all markets.

The Group’s educational services, assessment and qualifications businesses may be affected

by shifts in government funding and regulation due to external factors beyond its control,

including general economic conditions, changes in education funding, policy decisions, legislation,

or procurement processes. This also includes potential amendments to, or suspensions, or

cancellations of high-stakes testing, which could affect our assessments businesses, including

but not limited to our Pearson Test of English business or our UK or International qualifications

businesses, or result in the loss of schools and/or a decrease in the number of students engaged in

our Virtual Learning business.

In 2025, a large number of contracts are up for renewal, especially within US Student Assessment,

with the financial plan assuming successful renewals. The loss of any of these contracts, whether

or not as a result of changes in policy or processes described above, would lead to lower sales and

profits in the future unless replaced by other contract wins.

The performance and growth of the Group’s US educational services and assessment businesses

rely on federal and state education funding, which depends on state financial health and budget

allocations for education. Pressures on state and local funding, competition from low-cost or

disruptive new business models, and the promotion of open-source materials to cut costs may

impact the Group’s sales. Additionally, changes in state leadership and education policy can alter

funding priorities, while shifts in procurement processes, curriculum changes, and delays in textbook

adoptions or testing procedures may also affect the size of the market. Any of these factors could

negatively impact the Group’s financial results and growth prospects in the US education sector.

The Group has businesses in a variety of geographies globally and is subject to numerous different

regulatory regimes and uncertain international environments and regulatory changes which could impact

the Group’s operations and financial condition.

The Group faces risks related to government restrictions on market access for non-local companies

and limitations on profit repatriation. Operating across multiple geographies also exposes the

Group to regulatory hurdles and tariffs including in respect of trade tensions, changes to foreign

trade policies, and evolving sentiment towards multinational companies following changes in the

governments of the countries in which we operate or trade. The Group has a central compliance

team and a network of local compliance representatives within the legal function to ensure that the

Group meets its obligations. However, we are subject to evolving laws, international accords and

policies or the changing of their interpretation or application, including those on environmental

sustainability, human capital and governance topics.

Additional information for US listing purposes continued

The political, regulatory, economic, and currency risks, along with the risk of compliance failures (e.g.,

fraud, sanctions, bribery), or conflicting legislation or regulation across countries and states, including

its interpretation or application, have in the past, and could in the future, affect the realisation or

the results of our objectives, as well as possibly reducing investment returns and impact the Group’s

ability to reinvest or distribute profits.

Sanctions against specific countries or entities may require the Group to exit certain markets.

Regulatory investigations related to sanctions have in the past and could in the future be costly,

consume management resources, harm the Group’s reputation, and lead to legal and financial

consequences. We have in the past, and could in the future, face scrutiny from stakeholders,

including from multiple domestic or international governmental authorities who may have different

or conflicting views on our business practices and activities, which could lead to fines or other costs,

reputational damage, legal issues, enforcement actions, or operational changes and, which could

therefore have an adverse effect on our business, operations and financial condition.

Risks relating to Artificial Intelligence, Content & Channel

The Group could face additional cost and diversion of personnel (i) to meet any new regulation or law

applicable to its use of Artificial Intelligence (AI) in its products and services and/or (ii) to protect any

ofitsintellectual property developed using AI.

The Group has a history of utilising AI in its products and services, and incorporation is expected

only to increase as AI technologies (including generative AI) continue to develop. Our ability to do

this successfully depends in part on the public willingness to use AI in the learning sector. If the

content that AI applications assist us in producing are or are perceived or alleged to be deficient

or inaccurate, our reputation may be adversely affected, and/or the effectiveness of the Group’s

products may be undermined.

In 2024, there was development of AI features in many products, for example, the embedding

of AI study tools into Virtual Learning content and the development of an AI-powered tool

designed to assist educators in generating lesson content and activities in English Language

Learning. Although these developments have shown encouraging signs, an inability to sustain

the positive momentum would result in lower sales and profit. In addition, if our competitors

incorporate AI into their products more quickly or more successfully than us, our ability to compete

effectively could be impaired.

The increasing interest in AI by governments and regulators around the world and the different

approaches they are taking continue to bring a level of regulatory uncertainty which may increase

costs and liabilities in a manner that is beyond the Group’s control and could result in conflicting

legal requirements, potentially further increasing costs and/or adversely impacting the Group’s ability

to operate.

In addition, there remains uncertainty regarding existing or evolving legal protections that are

afforded to the Group’s intellectual property developed (in whole or in part) with the use of AI (or

software including any AI).

Annual report and accounts 2024 Pearson plc 228

Strategic report Governance report Financial statements Other information

(unaudited)

If the Group fails to successfully invest in and deliver the right products and services and to respond

togovernment concerns and/or competitive threats, its sales and profits could be adversely impacted.

A common trend facing all the Group’s businesses is the digitisation of content and proliferation

ofdistribution channels, either over the internet, or via other electronic means, replacing traditional

print formats. The digital migration has led to changes in consumers’ perception of value and the

publisher’s position between consumers, retailers, and authors, and has required the Group to

makechanges in product and content distribution.

A proliferation of available supply routes for content, in addition to buying or subscribing to the

Group’s content, means that the Group is not guaranteed to be rewarded for its investment in

developing and distributing this content. Alternatives such as second hand and rental copies, open

educational resources, online discounters, file sharing and use of pirated copies all offer either lower

or no financial returns to the Group. Where the purchaser is a school or institution, they will typically

use educational funding to purchase our materials or assessments.

However, there are multiple competing demands for educational funds and there is no guarantee

that new courseware or testing or training programmes will be funded, or that the Group will win or

retain this business.

If the Group does not adapt rapidly to such and other market trends, it may lose business to

‘faster’ and more ‘agile’ competitors, who increasingly are non-traditional competitors, making their

identification all the more difficult. The Group may be required to invest significant resources to

further adapt to the changing competitive environment, which requires continued development of

both content and the method of delivery to be able to provide differentiated products and services

and can result incompetitive disadvantage and missed opportunity for sales and growth.

An example of this is where the Group’s products and services may potentially face competition

fromthose developed by non-traditional competitors using advanced Generative AI tools. Generative

AI in particular offers new ways of creating content which could disrupt the sectors in which the

Group focuses and failure to adapt could in the future lead to adverse impact for its businesses.

Failure to use the Group’s data effectively to enhance the quality and scope of current products and

services in order to improve learning outcomes could adversely affect the Group’s business.

The Group seeks to maximise data to enhance the quality and scope of current products and

services to improve learning outcomes while managing associated risks. The Group’s ability to

continue to do so may be subject to factors beyond the Group’s control. In addition, the lack of

availability of timely, complete, and accurate data, limits informed decision-making and increases

the risk of non-compliance with legal, regulatory, and reporting requirements. Business change

and transformation success is dependent on migration of a significant number of datasets and

ourinability to effectively accomplish this could adversely affect the Group’s results.

If the Group does not adequately protect its intellectual property and proprietary rights, its competitive

position and results may be adversely affected and its ability to grow restricted.

Some of the Group’s products and services comprise intellectual property delivered through a

variety of print and digital media, online software applications and platforms. The Group relies

on trademark, patent, copyright and other intellectual property laws to establish and protect

its proprietary rights in these products and services. Reference is made to the section above

regarding the risk of the evolving AI legal and regulatory framework globally and the applicability

and interpretation of the existing legal protection of intellectual property. The Group also faces

uncertainty on its ability toadequately protect its content from its unauthorised use in training Large

Language Models and other AI Models, for example, those on which generative AI Tools are built.

Failure, or an inability, to adequately manage, procure, register or protect intellectual property

rights(including trademarks, patents, trade secrets and copyright) in the Group’s brands, content

and technology, may (1) prevent the Group from enforcing its rights, and (2) increase the risk that

others will infringe the Group’s rights (print and digital counterfeit, digital piracy), which may reduce

sales and/or erode sales.

The Group’s intellectual property rights (IPR) in brands and content – historically its core assets – are

generally well established in key markets. As technology and digital delivery of content have become

an increasingly critical component of the Group’s business strategy, the Group has grownitspatent

portfolio to expand its protection of high value technology in the US and key international markets.

Online copying and security circumvention have become increasingly sophisticated and resistant

to available countermeasures. Advancements in technology, including advancements in generative

AI technology, have made unauthorised copying and wide dissemination of unlicensed content

more accessible. At the same time, detection of unauthorised use of our intellectual property and

enforcement of our intellectual property rights has become more challenging, in part due to the

increasing volume and sophistication of attempts at unauthorised use of our intellectual property

through the use of generative AI. Notably, in recent years ‘digital counterfeit’ websites have offered

or attempted to offer unprotected PDF files of many of Pearson’s titles, at scale, using modern and

sophisticated ecommerce methods, with a professional or legitimate appearance. Additionally, such

websites may have acted as potential sources of data for Large Language Models. From an IPR

perspective, increasing the Group’s digital business continues to expose it to evolving trademark,

The Group’s forward-looking IPR strategy includes efforts to maintain a broad footprint of

intellectual property rights in key markets outside the US. However, the Group also conducts

business in other countries where its intellectual property protection efforts have been limited or

where legal protection for intellectual property may be uncertain and these limitations could affect

futuregrowth.

Where the Group has registered or otherwise established its IPR, it cannot guarantee that such

rights will provide competitive advantages due to: the challenges and costs of monitoring and

enforcement in jurisdictions where competition may be intense; the limited and/or ineffective IPR

protection and enforcement mechanisms available to it in many countries; the potential that its IPR

may lapse, be invalidated, circumvented, challenged, or abandoned, or that it may otherwise lose the

ability to assert its intellectual property rights against others. The loss or diminution in value of these

proprietary rights or the Group’s intellectual property could have a material adverse effect on the

Group’s business and financial performance.

Annual report and accounts 2024 Pearson plc 229

Strategic report Governance report Financial statements Other information

(unaudited)

Additional information for US listing purposes continued

Risks relating to Capability

The Group’s strategy involves significant change, including moving into new markets. This increases the

risk of failure to realise anticipated benefits or of costs being higher than anticipated, or that the Group’s

business as usual activities are adversely impacted.

The Group’s strategy aims, among other things, to achieve significant growth in markets in which

Pearson has less experience, including enterprise sales. The Group’s financial plan assumes that

the costs associated with such new market strategies will be successfully managed in all business

units, but should this cost management not be successful, theGroup is likely to report lower than

anticipated profits.

If the Group fails to attract, retain and develop appropriately skilled employees, it may limit its ability

toachieve its strategic and operational goals and its business may be harmed.

The Group’s success depends on the skill, experience and engagement of its employees. Their

expertise has allowed the Group to demonstrate agility, notably in how the Group has been able

to develop and deploy beta tests of products using large language models (including, in the areas

of AI and machine learning). Training and development of staff is a focus area for managers

throughout the organisation, but there is no guarantee that workers will continue to have the

required skills prospectively.

The Group has a key dependency on the Chief Executive and certain other key employees. If it

is unable to attract, retain and develop sufficiently experienced and capable staff, especially in

technology, product development, sales and leadership, its business and financial results may suffer.

When talented employees leave, the Group may have difficulty replacing those skills, and its business

may suffer. There can be no assurance that the Group will be able to successfully attract and retain

the skills that it needs.

Failure to develop robust go-to-market strategies could negatively impact the Group's financial

performance.

In October, Higher Education began to directly distribute our proprietary Advanced Placement (AP®),

Dual Enrolment, and Career and Technical Education (CTE) materials into states and school districts,

which were previously distributed by a third party, investing in an in-house dedicated sales team. Our

performance is contingent on how our existing customers respond to the shift from the third party

and our ability to establish a robust go-to-market strategy and high-quality customer service. Failure

of this new distribution model to succeed could negatively impact the Group’s sales, financial results

and prospects.

All the Group’s businesses depend on Information Technology (IT) systems and technological change.

Failure to maintain and support customer facing services, systems, and platforms, including addressing

quality issues and execution on time of new products and enhancements, could negatively impact the

Group’s sales and reputation.

All the Group’s businesses, to a greater or lesser extent, are dependent on IT. It either provides

software and/or internet services to its customers or uses complex IT systems and products to

support its business activities, including customer-facing systems, back-office processing and

infrastructure. The Group migrated several key data centres to the cloud during the year and further

migrations are scheduled in 2025.

Nevertheless, the Group faces several technological risks associated with such migration as well as

software product development (including risks associated with the use of AI in the Group’s products

and services) and service delivery, information technology security (including viruses and cyber-

attacks), e-commerce, enterprise resource planning system implementation and upgrades. Although

plans and procedures are in place to reduce such risks, as well as training and security measures

with further progress made during 2024 in this area, from time to time the Group has experienced

and could in future experience verifiable impact or disruption on the Group services, including

by attacks on its systems by unauthorised parties. To date, such impacts and disruptions have

not resulted in any material damage, but the Group’s businesses could be adversely affected if its

systems and infrastructure experience a significant failure or interruption.

Operational disruption to its business, including that caused by third-party providers and partners, a

major disaster, and/or external threats, could restrict the Group’s ability to supply products and services

to its customers.

Across all its businesses, the Group manages complex operational and logistical arrangements

including, but not limited to, distribution centres, data centres, cloud computing, and educational

and office facilities, as well as relationships with third-party print sites and with other third-party

partners. It has outsourced some support functions, including elements of information technology,

warehousing and logistics to third-party providers, and it has also partnered with third-parties

including in relation to joint go-to-market models or otherwise.

The failure of the partnerships, third parties to whom it has outsourced business functions or who

manage directly or indirectly the Group’s information and operations, could adversely affect its

reputation or financial condition. Failure to recover from a major disaster, (e.g., fire, flood, etc.) at a

key facility and/or a major failure of a key facility, system or platform, such as a data centre outage

or cloud computing or the disruption of supply from a key third-party vendor or partner (e.g. due

to bankruptcy) could restrict the Group’s ability to service its customers and meet the terms of

its contractual relationships with both government agencies and commercial customers. Penalty

clauses and/or the failure to retain these contracts at the end of thecontract term could adversely

impact future sales and/or operations.

Risks Related to the Competitive Marketplace

Global economy and cyclical market factors may adversely impact the Group’s financial performance.

With continued pressure and uncertainty in worldwide economies, particularly in the Group’s major

markets in the US and UK, there is a risk of a weakening in trading conditions, which could adversely

impact the Group’s future financial performance. The effect of continued deterioration or lack of

recovery in the global economy will vary across different businesses and will depend on the depth,

length and severity of any economic downturn. The education market can be affected by cyclical

factors which, although they can have a positive impact for some of the Group’s businesses, could

for others lead to a reduction in demand for the Group’s products and services.

Increased competitive pressure, reduced demand due to changing consumer learning preferences,

structural market headwinds due to demographic decline, and limits on international study, mayadversely

impact the Group’s financial performance and reduce the expected return on investment.

The Group faces a number of large value contract renewals each year and the long-range plan

assumes that these are successfully retained. The loss of any of these contracts would lead to lower

sales and profits in the future unless replaced by other contract wins.

Annual report and accounts 2024 Pearson plc 230

Strategic report Governance report Financial statements Other information

(unaudited)

The Group competes in a highly competitive market that is subject to rapid change in some

areas. The Group also faces competitive threats both from large media players and from smaller

businesses, online and mobile portals and operators in the digital arena that provide alternative

sources of content. The content space continues to face the risk of price compression, driven by the

growing prevalence of open educational resources, particularly those enhanced by large language

models and generative AI technologies. Alternative distribution channels, such as digital format, the

internet, online retailers, and growing delivery platforms, pose both threats to and opportunities for

traditional publishing business models, potentially impacting both sales volumes and pricing.

In addition, new competitive entrants, increased price competition or shifts in learners away from

educational institutions (as seen previously in reduced Higher Education enrolments) as well as

demographic decline and limits on international study may lead to lower profitability and cash flow

performance. The level of competition is placing financial strain on some of Higher Education’s

channel partners and the failure of one of these companies would risk the loss of any outstanding

debtor balances.

Despite sales declines in the Higher Education International business, particularly in Canada,

Australia, and New Zealand, enhanced product offerings and improvements in sales capabilities have

stabilised market share in the Higher Education US market and led to a return to growth.

In Virtual Learning, we expect positive trends in retention, driven by operational improvements and

investments in initiatives such as career and technical curriculum for schools.

Notwithstanding the above, there is no guarantee that these measures will be sufficient in the future

to prevent loss of sales and profit in any of those businesses, which could negatively impact the

Group’s financial performance and prospects.

The Group’s investment in new markets may deliver returns that are lower than anticipated.

The Group has invested in, and has plans to continue to invest in, new markets such as workforce

and enterprise learning experiences, of which the Group has less experience, and which is a very

competitive market. Failure to achieve our planned outcomes may lead to lower than expected sales

and profitability.

A significant deterioration in the Group’s profitability and/or cash flows caused by prolonged economic

instability or recession could reduce its liquidity and/or impair its financial ratios and trigger a need to raise

additional funds from the capital markets and/or renegotiate its banking covenants.

A significant deterioration in the Group’s profitability and/or cash flows caused by prolonged

economic instability or recession could reduce its liquidity and/or impair its financial ratios

and trigger a need to raiseadditional funds from the capital markets and/or renegotiate its

banking covenants.

To the extent that worldwide economic conditions materially deteriorate, the Group’s sales,

profitability and cash flows could be significantly reduced as customers could be unable to purchase

products and services in the expected quantities and/or pay for them within normal agreed terms.

Disruption in capital markets or potential concerns about the Group’s credit rating, for instance

manifested in downgrades or negative outlooks by the credit rating agencies, may mean that this

capital may not be available on favourable terms or may not be available at all.

Risks Related to Customer Expectations

Failure to meet our customers’ rapidly changing expectations in our products and services and not

beingable to anticipate new customer demands could result in reduced market share, profitability,

andbrand erosion.

We continue to adjust our business model in an effort to keep a pace with the increasing end user

demands. The Group may not be able to adapt, change and succeed in a rapidly changing and

uncertain environment, resulting in competitive disadvantage, higher costs and brand erosion.

Thiscould result from failing to identify changes in learner preferences or from failing to create

products and services which meet these revised expectations.

With the launch of new products, we risk that the customer experience expectations which

increasingly vary from country to country are not met with regard to how the products and services

aredelivered e.g. quality and timeliness, impacting the customer’s brand loyalty and propensity

topurchase; resulting in customer complaints, less favourable social media sentiment, bad reviews,

lowrecommendations, and/or customer attrition.

There is also the risk that our technology and data dependent products and services do not meet

accessibility requirements in respect of customers’ and prospective customers’ ability to access

theproducts and services, and this could result in increased costs, restrictions, fines and/or legal

claims.

Risks Related to the Group’s Portfolio of Businesses

The Group’s failure to generate anticipated sales growth, synergies and/or cost savings from acquisitions,

mergers and other business combinations, could lead to goodwill and intangible asset impairments.

The Group periodically acquires and disposes of businesses to achieve its strategic objectives, and

will continue to consider both as a means to pursue its strategic priorities.

Acquisitions may involve significant risks and uncertainties, including difficulties in integrating

acquired businesses to realise anticipated sales growth, synergies and/or cost savings; diversion of

management attention from other business concerns or resources; and diversion of resources that

are needed in other parts of our business. If these risks are not managed, acquisitions could result

ingoodwill and intangible asset impairments.

Divestitures also involve risks and uncertainties that could adversely affect our business, results of

operations and financial condition including, among others, the inability to find potential buyers on

favourable terms, disruption to our business and/or diversion of management attention from other

business concerns, loss of key employees and possible retention of certain liabilities related to the

divested business.

Risks Related to the Group’s Responsibility & Reputation

The Group’s business depends on a strong brand, and any failure to maintain, protect and enhance its

brand would hurt its ability to retain or expand its business.

Protecting the Group’s brands and reputation is critical to maintaining and expanding the Group’s

business and willdepend largely on its ability to maintain its customers’ trust in its solutions and in

the quality andintegrity of its products and services, including how it protects the data and privacy of

customers and users.

Annual report and accounts 2024 Pearson plc 231

Strategic report Governance report Financial statements Other information

(unaudited)

Additional information for US listing purposes continued

The Group must also navigate the increasing divergence of stakeholder perspectives in some of our

largest markets and ensure that our brand continues to reflect shifting views on certain matters,

while maintaining our key values and objectives. If the Group does not successfully maintain a strong

brand, its business could be harmed. Beyond protection, strengthening the Pearson brand will

enable the Group to engage with governments, administrators, teachers, learners, and influencers

more effectively.

Security breaches involving our information technology systems could harm our ability to run our business

and expose us to potential liability and loss of sales.

While we believe the monitoring and security measures we have in place are robust, the Group still

faces some risks from malicious attacks on its systems. These attacks have, in the past, and could in

the future, lead to temporary loss of system availability or breaches of sensitive information. Such

incidents have previously impacted customer experience and the Group’s reputation and could

result in financial loss. Despite our best efforts, unauthorised disclosures of personal information

have occurred and may happen again, often due to software malfunctions affecting IT controls.

Information security and cyber risk are constantly evolving, influenced by factors such as increasing

customer demand for strong security, compliance requirements, the digital revolution, greater use

of the cloud, larger data volumes, and more sophisticated attack strategies, which among others

also use generative AI in an effort to defeat security measures. The Group manages large volumes

of personal data, including that of employees, customers, students, and citizens, as well as other

sensitive business-critical data like financial information and intellectual property. Despite our

security measures, threat actors, including individuals, criminal organisations and state-sponsored

operatives, have occasionally gained unauthorised access to the Group’s data and may do so in

the future.

Any perceived or actual unauthorised disclosure of personal data or confidential information,

whether through a breach of the Group’s network, a third-party partner, unauthorised access,

employee theft, misuse, or error, could harm the Group’s reputation, affect its ability to attract and

retain customers, disrupt business operations, or lead to regulatory investigations and/or claims or

litigation. Additionally, the Group could incur significant costs in complying with relevant laws and

regulations regarding the protection of personal data and confidential information, payments due to

cyber extortion, or responding to regulatory investigations.

Changes to data privacy legislation must also be monitored and acted upon to ensure the Group

remains in compliance across different markets, many of which are taking increasingly divergent

approaches to the protection of personal information in the age of AI. This will require the Group

to adapt further to accommodate jurisdictional variations, including by developing our products

in a more flexible way to meet such requirements, which may result in additional cost and/or

investments Countries where the Group operates or serves customers continue to adopt data

protection legislation, with enforcement increasingly emphasising transparency and customer

choice. This includes AI-driven personalised services and data breach management, reflecting

customers’ growing awareness and sophistication regarding data protection.

Failure to provide the appropriate level of transparency and control in the Group’s products could

increase the regulatory, commercial and/or reputational risks that the Group faces with any or all

ofits various stakeholders.

A control breakdown or service failure in the Group’s testing businesses could result in financial loss and

reputational damage.

The Group’s testing businesses, including those in Assessment & Qualifications, Workforce and

English Language Learning involve complex contractual relationships with both government agencies

and commercial customers for the provision of various testing services. The Group’s financial results,

growth prospects and/or reputation may be adversely affected if these contracts and relationships

are poorly managed or face increased competitive pressures.

There are inherent risks associated with the Group’s testing businesses, both in the US and the UK.

A service failure caused by a breakdown in testing and assessment processes could lead to a mis-

grading of student tests and/or late delivery of test results to students and their schools. The failure

to meet expected service standards and/or a late or erroneous delivery of qualification results have

in the past and/or could in the future leave the Group subject to regulatory sanctions (including

fines), legal claims, penalty charges under contracts, non-renewal of contracts and/or suspension or

withdrawal of its accreditation to conduct tests. It is possible that any such events described above

would result in adverse publicity, which may affect the Group’s ability to retain existing contracts and/

or obtain new customers.

Risks associated with identity verification could lead to financial losses.

The Group is often contractually required to take measures to validate the identity of learners,

especially those completing assessments. In certain jurisdictions, companies, including Pearson,

have faced legal claims for the collection of or use of information obtained, particularly in relation

to biometric information, which have resulted and could in the future result in settlements. The

Group takes steps to comply with evolving legal requirements but there is no guarantee that its

efforts will be sufficient to protect the Group from all potential issues, which could result in potential

fines, penalties, judgements or settlements for the Group, especially if not covered by the Group’s

insurance cover.

Failure to effectively manage risks associated with compliance with global and local anti-bribery and

corruption (ABC) legislation could result in costly legal investigations and/or adversely impact the

Group’sreputation.

The Group is committed to an effective compliance programme in keeping with changing regulatory

expectations, and it is also committed to conducting business in a legal and ethical manner in

compliance with local and international statutory requirements and standards applicable to its

business. Despite those commitments, there is a risk that the Group’s management, employees or

representatives may take actions that violate applicable laws and regulations, including regarding

accurate keeping of books and records or prohibiting the making of improper payments for the

purposes of obtaining or keeping business, including laws such as the US Foreign Corrupt Practices

Act or the UK Bribery Act. Any regulatory inquiry or investigations could be costly, require a

significant amount of management’s time and attention, adversely impact the Group’s reputation,

orlead to litigation and financial impacts.

Annual report and accounts 2024 Pearson plc 232

Strategic report Governance report Financial statements Other information

(unaudited)

Inflation – High levels of global inflation could increase costs and adversely impact the Group’s profits and

financial performance.

High ongoing global inflation factors have increased and could further increase the cost of

production for Pearson, particularly through wage inflation. There is no guarantee that the Group

would be able to manage cost or generate sales successfully to mitigate the effects of inflation, which

could lead to reduced earnings and ability to invest in future growth.

Geopolitical conflict – Conflict could negatively affect Pearson’s operations.

Pearson has staff and offices globally, which could be impacted by conflict or blockades as a result

of geopolitical issues. Notably, Pearson has offices in Israel which support Pearson’s digital products,

which if affected by conflict could negatively impact the pace of innovation or the quality of Pearson’s

products and thereby adversely impact the Group’s operations, sales and financial performance.

Certain additional information on the Company

Information on the Company

Pearson was incorporated and registered in 1897 under the laws of England and Wales as a limited

company and re-registered under the UK Companies Act as a public limited company in 1981. The

Group conducts its operations primarily through its subsidiaries and other affiliates. Its principal

executive offices are located at 80 Strand, London WC2R 0RL, United Kingdom (telephone: +44

20 7010 2000) and its website address is https://plc.pearson.com/. The Company is registered in

England and Wales under the company number 00053723. The SEC maintains an Internet site that

contains reports, proxy and information statements, and other information regarding issuers that file

electronically with the SEC. The address of that site is http://www.sec.gov.

Operating cycles

The Group determines a normal operating cycle separately for each entity/cash generating unit with

distinct economic characteristics. The ‘normal operating cycle’ for each of the Group’s businesses

is primarily based on the expected period over which content or services will generate cash flows.

The Higher Education courseware market is primarily driven by an adoption cycle, with colleges and

professors typically refreshing their courses and selecting revised programs on a regular basis, often

in line with the release of new content or new technology offerings. The Company renews its product

development assets to reflect new content and capabilities which enhance the attractiveness of its

offering to both educators and learners.

Analysis of historical data shows that the typical life cycle of Higher Education content is up to five

years but varies by product. In addition to content, the Group also develops technology platforms

for products and the life cycle for these platforms can be in excess of the five years cycle for content.

Again, the operating cycle for content and platforms mirrors the market cycle.

Historically for a major content refresh a development phase of typically 12 to 18 months for Higher

Education precedes the period during which the Company receives and delivers against orders for

the products it has developed for the programme.

The operating cycles in respect of the Group’s professional and clinical content are more specialised

in nature as they relate to educational or heavy reference products released into smaller markets

(e.g. the financial training and IT sectors).

Failure to comply with antitrust and competition legislation and/or legal or regulatory proceedings could

result in substantial financial cost and/or adversely impact the Group’s reputation.

The Group is subject to global and local antitrust and competition law and although it is

committedto conducting business in compliance with local and international laws, there is a risk that

management, employees or representatives may act in a way that violates applicable antitrust or

competition laws. Further, the Group and its subsidiaries have been and may in the future be subject

to legal and regulatory investigation and proceedings in the countries in which the Group operates.

These proceedings could result in greater scrutiny of the Group’s operations in other countries for

anti-competitive behaviour and, in the worst case, incur a substantial financial cost. This would also

have an adverse impact on the Group’s reputation.

Failure to adequately protect the health, safety and well-being of the Group’s employees, learners and other

stakeholders could adversely impact the Group’s reputation, profitability, and future growth.

Although the Group has invested in global policies, procedures and controls to safeguard the health,

safety and wellbeing of its employees, learners and other stakeholders, accidents or incidents have

occurred and could still occur due to unforeseen risks, causing injury or harm to individuals and

impacting the Group’s business operations. This has the potential to lead to legal impact, including

criminal and civil litigation, reputational impact and/or business disruption leading to operational loss

for, and reduction in the profitability of the Group.

Failure to ensure security for the Group’s staff, learners, and assets, due to increasing numbers of,

and variety of, local and global threats, could impact the Group’s operations, financial performance

and reputation.

Pearson is a global business with locations in diverse, sometimes high-risk, locations worldwide.

Although it has protective measures in place to secure its staff, learners and assets, the Group could

still be impacted by external threats, such as localised incidents, terrorist attacks, strikes or extreme

weather. Future occurrences could cause harm to individuals and/or disrupt business operations.

These have the potential to lead to operational loss, a reduction in profitability and impact on the

Group’s global reputation.

Other Significant Near-term and Emerging Risks

Sustainability risks may adversely impact the Group’s business, if not managed appropriately

The Group considers sustainability risks no differently to the way it manages any other business

risk. Expectations around climate commitments and measurements change on a regular basis.

A failure to comply with relevant standards, or other sustainability-related laws or regulations,

whether in the UK or elsewhere, could adversely affect the Group’s reputation and have a negative

impact on its relations with employees, customers and/or business partners. Costs associated

with climate-transition which cannot be fully managed by decarbonisation activities may lead to

decreased margins.

Financial markets disruption – A lack of sufficient capital resources could adversely impact the Group’s

ability to operate.

Financial crises impact financial markets periodically, which could result in bank failures and loss of

capital for the Group, or an inability to access debt capital markets as planned.

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Nevertheless, in these markets, there is still a regular cycle of product renewal, in line with demand

which management monitor. Typically, the life cycle is five years for Professional content and seven

years for Clinical content. Elsewhere in the Group, operating cycles are typically less than one year.

Competition

The Group’s businesses operate in highly competitive markets. The Group faces competitive

threats both from large media players and from smaller businesses, online and mobile portals and

operators in the digital arena that provide alternative sources of content. Alternative distribution

channels, e.g. digital format, the internet, online retailers, growing delivery platforms (e.g. e-readers

or tablets), pose both threats and opportunities to traditional publishing business models, potentially

impacting both sales volumes and pricing.

In Assessment & Qualifications, the Group competes with other companies offering test

development and administration including Cambium, Data Recognition Corp (DRC), Educational

Testing Service (ETS), and NWEA, and others. The Professional Certification business competes with

companies such as Prometric PSI and Meazure Learning, as well as a number of other modular

players. The Clinical Assessment business competes with companies such as MHS and WPS. The

UK and International qualifications business competes with companies such as AQA, Cambridge

Assessment and OCR, as well as a number of specialisedplayers.

In Virtual Learning, the Group competes with companies such as Stride in virtual schools, alongside

players that specialise in a particular academic discipline or focus on a learning technology.

In Institutional English Language Learning, the Group competes with Oxford University Press,

Macmillan and other publishers. In English High Stakes Assessments, Pearson Test of English

competes with alternative tests including iELTS and TOEFL. In the online language learning market,

the Group competes with businesses such as Duolingo, Babbel and Busuu, as well as a number of

smaller players.

In Enterprise Learning and Skills (formerly Workforce Skills), the vocational qualifications business

competes with companies such as City & Guilds, alongside other niche and local market providers

and the assessments businesses compete with companies such as HiSET in high school equivalency

and SHL in skills and ability testing. In addition, the business of content/courseware creation for

enterprises competes with providers such as Skillsoft, and the enterprise data, technology and

learning businesses compete with Learning platforms such as Guild in education-as-a-benefit,

credential platforms such as Accredible, talent management platforms such as Eightfold.ai, and data

services such as Emsi.

In Higher Education, the Group competes with other publishers and creators of educational

materials and services. These companies include publishers such as Cengage Learning and

McGraw-Hill Education, as well as non-mainstream publishers.

Competition is based on the ability to deliver quality products and services that address the specified

curriculum needs and appeal to the student, organisations, school boards, educators, employers

and government officials making purchasing decisions.

Intellectual property

The Group’s principal intellectual property assets consist of its:

• trademarks and other rights via its brands (including corporate and business unit brands and

imprints, as well as product and service brands);

• copyrights for its textbook and related educational content and software code; and

• patents and trade secrets related to the innovative methods deployed in its key technologies.

The Group believes it has taken reasonable legal steps to protect its key brands in its major markets

and copyright in its content and has taken appropriate steps to develop a comprehensive patent

programme to ensure appropriate protection of emerging inventions that are critical to its new

business strategies.

Licenses, patents and contracts

The Group is not dependent upon any particular licenses, patents or new manufacturing processes

that are material to its business or profitability. Notwithstanding the foregoing, the Group’s

education business is dependent upon licensed rights since most textbooks and digital learning

tools include content and/or software that is licensed to it by third parties (or assigned subject to

royalty arrangements). In addition, some software products in various business lines rely upon

patents licensed from third parties.

The Group is not materially dependent upon any particular contracts with suppliers or customers,

including contracts of an industrial, commercial or financial nature. The Group’s sales are diversified,

no individual customer comprised more than 5% of sales in 2024.

Raw materials

Paper remains the principal raw material used by the Group although its use is declining given the

shift to digital products. The bulk of the paper used by Pearson is supplied by its printers. The Group

has not experienced and does not anticipate difficulty in obtaining adequate supplies of paper for

its operations, with sourcing available from numerous suppliers. While prices fluctuate depending

upon local market conditions, the Group has not experienced extensive volatility in fulfilling paper

requirements. In the event of a sharp increase in paper prices, including those driven by tariffs, the

Group has a number of alternatives to minimise the impact on its operating margins, which include

modifying the grades of paper used in production.

Government regulation

The manufacture of certain products in various markets is subject to governmental regulation

relating to the discharge of materials into the environment. Operations are also subject to the risks

and uncertainties attendant to doing business in numerous countries. Some of the countries in

which the Group conducts these operations maintain controls on the repatriation of earnings and

capital and restrict the means available for hedging potential currency fluctuation risks.

The operations that are affected by these controls, however, are not material. Accordingly, these

controls have not significantly affected the Group’s international operations. Regulatory authorities

may have enforcement powers that could have an impact. The Group believes, however, that in light

of the nature of its business the risk of these sanctions does not represent a material threat.

Legal proceedings

The Group and its subsidiaries are from time to time the subject of legal proceedings incidental

to the nature of its and their operations, including private litigation or arbitrations, governmental

proceedings and investigations by regulatory bodies.

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Property, plant and equipment

The Group’s headquarters are located at leasehold premises in London, England. As at 31 December

2024, it owned or leased approximately 700 properties, including approximately 534 testing/teaching

centres in over 55 countries worldwide, the majority of which are located in the United Kingdom and

the United States. The other properties owned and leased by the Group consist mainly of offices and

distribution centres. In some cases properties leased by the Group are then sublet to third parties.

The vast majority of printing is carried out by third-party suppliers. The Group operates a small digital

print operation as part of its Pearson Assessment & Testing businesses which provides short-run

and print-on-demand products, typically custom client applications.

The Group owns the following principal properties at 31 December 2024:

General use of property Location Area in square feet

Office Iowa City, Iowa, USA* 314,538

Warehouse/office Cedar Rapids, Iowa, USA 205,000

Testing Owatonna, Minnesota, USA 126,450

* Property is recorded as held for sale at 31 December 2024.

The Group leased the following principal properties at 31 December 2024:

General use of property Location Area in square feet

Office Hudson, New York, USA* 313,285

Office Westminster, London, UK* 274,488

Office Hoboken, New Jersey, USA* 216,273

Office Bloomington, Minnesota, USA* 147,159

Warehouse/office Cedar Rapids, Iowa, USA* 119,682

* Properties have either been fully or partially sublet or are being marketed for sublet.

Off-balance sheet arrangements

The Group does not have any off-balance sheet arrangements, as defined by the SEC for the

purposes of the Form 20-F, that have or are reasonably likely to have a material current or future

effect on the Group’s financial position or results of operations.

Operating and financial review

The financial review for the year ended 31 December 2024 compared to the year ended

31 December 2023 can be found on pages 26-32 of the Strategic report. The financial review for

the year ended 31 December 2023 compared to the year ended 31 December 2022 can be found

on pages 26-33 of our 2023 Annual Report and Accounts on Form 20-F filed with the United States

Securities and Exchange Commission on 14 March 2023.

Directors, senior management and employees

Board practices

As at 28 February 2025, the Group’s Board comprises the Chair, two Executive Directors and seven

Non-Executive Directors. The Articles of Association (as defined below) provide that all the Directors

at the date of the notice convening the Annual General Meeting (AGM) shall retire from office at the

meeting. A retiring Director shall, if willing to act, be eligible for re-appointment. If they are not re-

appointed, they shall retain office until the meeting appoints someone in their place, or if it does not

do so, until the end of the meeting or, if the meeting is adjourned, the end of the adjourned meeting.

The Articles of Association also provide that every Director appointed by the Board be subject to re-

appointment by shareholders at the next AGM following their appointment.

On 7 March 2025, the company announced the appointment of an independent Non-Executive

Director with effect from 1 June 2025.

Pearson is listed on the New York Stock Exchange (NYSE). As a listed non-US issuer, the Group is not

required to comply with some of the NYSE’s corporate governance rules, but must disclose on its

website any significant ways in which its corporate governance practices differ from those followed

by US companies under the NYSE listing standards. At this time, the Group believes that it is in

compliance in all material respects with all the NYSE rules except that the Nomination & Governance

Committee is not composed entirely of independent Directors as the Chair, who is not considered

independent under NYSE rules, is a member of this Committee in addition to independent Directors.

Employees

Through its subsidiaries, the Group has entered into collective bargaining agreements with

employees in various locations. The Group’s management has no reason to believe that it would

not be able to renegotiate any such agreements on satisfactory terms. The Group encourages

employees to contribute actively to the business in the context of their particular job roles and

believes that the relations with its employees are generally good.

Significant changes

Other than those events described in note 37 in the consolidated financial statements, and seasonal

fluctuations in borrowings, there has been no significant change to the Group’s financial condition

or results of operations since 31 December 2024. The Group’s borrowings fluctuate by season

due to the effect of the school year on working capital requirements. Assuming no share buyback

programmes, acquisitions or disposals, the maximum level of net debt normally occurs in the third

quarter, and the minimum level of net debt normally occurs in December.

Listing

The principal trading market for the Group’s ordinary shares is the London Stock Exchange which

trade under the symbol ‘PSON’. Its ordinary shares also trade in the United States in the form of

ADSs evidenced by ADRs under a sponsored ADR facility with JPMorgan Chase Bank, as depositary.

The Group established this facility in March 1995 and amended it in August 2014 in connection with

its NYSE listing, and in January 2025 in connection with the appointment of JPMorgan Chase Bank as

depositary thereunder. Each ADS represents one ordinary share.

The ADSs trade on the New York Stock Exchange under the symbol ‘PSO’.

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Articles of Association

The Group summarises below the material provisions of its articles of association, as amended

(the ‘Articles of Association’), which have been filed as an exhibit to this annual report on Form 20-F

for the year ended 31 December 2024. The summary below is qualified entirely by reference to

the Articles of Association. In conformity with the UK Companies Act 2006 (the Act), the Group has

multiple business objectives and purposes and is authorised to do such things as the Board may

consider fit to further its interests or incidental or conducive to the attainment of its objectives

and purposes.

Directors’ powers

The Group’s business shall be managed by the Board of Directors and the Board may exercise all

such of its powers as are not required by law or by the Articles of Association or by any directions

given by the Company by special resolution, to be exercised in a general meeting.

Interested Directors

For the purposes of section 175 of the Act, the Board may authorise any matter proposed to it which

would, if not so authorised, involve a breach of duty by a Director under that section, including,

without limitation, any matter which relates to a situation in which a Director has, or can have,

an interest which conflicts, or possibly may conflict, with the interests of the Company. Any such

authorisation will be effective only if:

a. any requirement as to quorum at the meeting at which the matter is considered is met without

counting the Director in question or any other interested Director; and

b. the matter was agreed to without their voting or would have been agreed to if their votes had not

been counted.

The Board may (whether at the time of the giving of the authorisation or subsequently) make any

such authorisation subject to any limits or conditions it expressly imposes but such authorisation

is otherwise given to the fullest extent permitted. The Board may vary or terminate any such

authorisation at any time.

Provided that he or she has disclosed to the Board the nature and extent of his or her interest (or

else that the Director is not aware of the interest or not aware of the transaction or arrangement in

question, or else that the interest cannot be reasonably regarded to give rise to a conflict of interest),

a Director notwithstanding his or her office:

a. may be a party to, or otherwise interested in, any transaction or arrangement with the Company

or in which the Company is otherwise (directly or indirectly) interested;

b. may act by himself or herself or his or her firm in a professional capacity for the Company

(otherwise than as auditor) and he or she or his or her firm shall be entitled to remuneration for

professional services as if he or she were not a Director;

c. may be a Director or other officer of, or employed by, or a party to a transaction or arrangement

with, or otherwise interested in, any body corporate in which the Company is otherwise (directly

or indirectly) interested.

A Director shall not, by reason of his or her office, be accountable to the Company for any

remuneration or other benefit which he or she derives from any office or employment or from any

transaction or arrangement or from any interest in any body corporate:

a. the acceptance, entry into or existence of which has been approved by the Board (subject, in any

such case, to any limits or conditions to which such approval was subject); or

b. which he or she is permitted to hold or enter into by virtue of paragraph (a), (b) or (c) above;

nor shall the receipt of any such remuneration or other benefit constitute a breach of his or her duty

under section 176 of the Act.A Director shall be under no duty to the Company with respect to any

information which he or she obtains or has obtained otherwise than as a Director of the Company

and in respect of which he or she owes a duty of confidentiality to another person. However, to

the extent that his or her relationship with that other person gives rise to a conflict of interest or

possible conflict of interest, the preceding sentence only applies if the existence of such relationship

has been approved by the Board. In such circumstances, the Director shall not be in breach of the

general duties he or she owes to the Company by virtue of sections 171 to 177 of the Act because

he or she fails:

a. to disclose any such information to the Board or to any Director or other officer or employee of

the Company; and/or

b. to use or apply any such information in performing his or her duties as a Director of

the Company.

Where the existence of a Director’s relationship with another person has been approved by the

Board and his or her relationship with that person gives rise to a conflict of interest or possible

conflict of interest, the Director shall not be in breach of the general duties he or she owes to the

Company by virtue of sections 171 to 177 of the Act because he or she:

a. absents himself or herself from meetings of the Board at which any matter relating to the conflict

of interest or possible conflict of interest will or may be discussed or from the discussion of any

such matter at a meeting or otherwise; and/or

b. makes arrangements not to receive documents and information relating to any matter which

gives rise to the conflict of interest or possible conflict of interest sent or supplied by the

Company and/or for such documents and information to be received and read by a professional

adviser, for so long as he or she reasonably believes such conflict of interest or possible conflict

of interest subsists.

Except as stated below, a Director shall not vote in respect of any contract or arrangement or any

other proposal whatsoever in which he or she has an interest which is, to his or her knowledge, a

material interest, otherwise than by virtue of his or her interests in shares or debentures or other

securities of or otherwise in or through the Company. A Director shall not be counted in the quorum

at a meeting of the Board in relation to any resolution on which he or she is debarred from voting.

Notwithstanding the foregoing, a Director will be entitled to vote, and be counted in the quorum, on

any resolution concerning any of the following matters:

• the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred

by him or her or by any other person at the request of or for the benefit of the Company or any of

its subsidiaries;

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• the giving of any guarantee, security or indemnity to a third party in respect of a debt or obligation

of the Company or any of its subsidiaries for which he himself or she herself has assumed

responsibility in whole or in part and whether alone or jointly with others under a guarantee or

indemnity or by the giving of security;

• any proposal relating to the Company or any of its subsidiary undertakings where it is offering

securities in which offer a Director is or may be entitled to participate as a holder of securities or

in the underwriting or sub-underwriting of which a Director is to participate;

• any proposal relating to another Company in which he or she and any persons connected with

him or her do not to his or her knowledge hold an interest in shares (as that term is used in

sections 820 to 825 of the Act) representing one percent or more of either any class of the equity

share capital, or the voting rights, in such Company;

• any proposal relating to an arrangement for the benefit of the employees of the Company or

any of its subsidiary undertakings which does not award him or her any privilege or benefit not

generally awarded to the employees to whom such arrangement relates; and

• any proposal concerning insurance that the Company proposes to maintain or purchase for the

benefit of Directors or for the benefit of persons, including Directors.

Where proposals are under consideration concerning the appointment of two or more Directors to

offices or employment with us or any Company in which the Group is interested, these proposals

may be divided and considered separately and each of these Directors, if not prohibited from voting

under the provisions of the eighth paragraph before this one, will be entitled to vote and be counted

in the quorum with respect to each resolution except that concerning his or her own appointment.

Retirement and re-appointment of Directors

At every AGM, all the Directors at the date of the notice convening the AGM shall retire from office. A

retiring Director shall, if willing to act, be eligible for re-appointment. If he or she is not re-appointed,

he or she shall retain office until the meeting appoints someone in his or her place, or if it does not

do so, until of the end of the meeting, or until the end of the adjourned meeting if the meeting is

adjourned.

Where a Director has been reappointed after notice of the AGM has been given, that Director shall

retire at the next AGM of which notice is first given after his or her appointment as Director.

If there is an insufficient number of appointed or re-appointed Directors at any of the Company’s

AGMs rendering the Board inquorate, all Directors shall be automatically re-appointed only for the

purposes of filling vacancies and convening general meetings of the Company and to perform such

duties as are appropriate to maintain the Company as a going concern and to enable it to comply

with its legal and regulatory obligations. The Directors are required to convene a further general

meeting of the Company as soon as reasonably practicable to allow new Directors to be appointed,

and such Directors who were not appointed at the original general meeting shall subsequently retire.

Borrowing powers

The Board of Directors may exercise all powers to borrow money and to mortgage or charge the

Group’s undertaking, property and uncalled capital and to issue debentures and other securities,

whether outright or as collateral security for any of its or any third party’s debts, liabilities or

obligations.

The Board of Directors must restrict the borrowings in order to secure that the aggregate amount of

undischarged monies borrowed by the Group (and any of its subsidiaries), but excluding any intra-

group debts, shall not at any time (without the previous sanction of the Company in the form of an

ordinary resolution) exceed a sum equal to twice the aggregate of the adjusted capital and reserves.

Other provisions relating to Directors

Under the Articles of Association, Directors are paid out of the Group’s funds for their services as it

may from time to time determine by ordinary resolution and, in the case of Non-Executive Directors,

up to an aggregate of £1,000,000 per year or such other amounts as resolved by the shareholders

at a general meeting. Any Director who is not an Executive Director and who performs special

services which in the opinion of the Board are outside the scope of the ordinary duties of a Director,

may be paid such extra remuneration by way of additional fee, salary, commission or otherwise as

the Board may determine in accordance with the Group’s remuneration policy. Under the Articles

of Association, Directors currently are not required to hold any share qualification. However, the

remuneration policy mandates a shareholding guideline for Executive Directors which they are

expected to build towards over a specified period.

General meetings

Pursuant to the Act, the Company must hold an AGM (within six months beginning with the day

following its accounting reference date) at a place and time determined by the Board. The following

matters are usually considered at an AGM:

• approval of final dividend;

• consideration of the Company’s annual accounts together with associated reports of the Board of

Directors and auditors;

• appointment or re-appointment of Directors;

• appointment or re-appointment of the auditors, and authorisation for the Audit Committee to

determine and fix the remuneration of the auditors; and

• renewal, limitation, extension, variation or grant of any authority to the Board in relation to the

allotment and repurchase of securities.

The Board may call a general meeting whenever it thinks fit. If at any time there are not within the

United Kingdom sufficient Directors capable of acting to form a quorum, any Director or any two

members may convene a general meeting in the same manner as nearly as possible as that in which

meetings may be convened by the Board.

No business shall be dealt with at any general meeting unless a quorum is present when the meeting

proceeds to business. Three members present in person or by proxy and entitled to vote shall be a

quorum for all purposes. A corporation being a member shall be deemed to be personally present if

represented by its duly authorised representative.

If a quorum for a meeting convened at the request of shareholders is not present within 15 minutes

of the appointed time (or if during a meeting such a quorum ceases to be present), the meeting

will be dissolved. In any other case, the general meeting will be adjourned to such time and with

such means of attendance and participation as the Chair of the meeting may determine. If at that

rescheduled meeting a quorum is not present within fifteen minutes from the time appointed for

holding the meeting, the shareholders present in person or by proxy will be a quorum.

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The Chair or, in his or her absence, the Deputy Chair or any other Director nominated by the Board,

will preside as Chair at every general meeting. If no Director is present at the general meeting or no

Director consents to act as Chair, the shareholders present shall elect one of their number to be

Chair of the meeting.

The Board may resolve to enable persons entitled to attend and participate in a general meeting

to do so by simultaneous attendance and participation by means of electronic facility or facilities

and determine the means, or all different means, of attendance and participation used in relation

to a general meeting. The members present in person or by proxy by means of electronic facility

or facilities shall be counted in the quorum for, and entitled to participate in the general meeting in

question. That meeting shall be duly constituted and its proceedings valid if the Chair of the meeting

is satisfied that adequate facilities are available throughout the meeting to ensure that members

attending the meeting by all means (including by means of electronic facility or facilities) are able to:

c. participate in the business for which the meeting has been convened;

d. hear all persons who speak at the meeting; and

e. be heard by all persons present at the meeting.

A member seeking to be present in person or by proxy at a general meeting by means of electronic

facility or facilities is responsible for ensuring they have access to and can use the facility or facilities.

The meeting shall be duly constituted and its proceedings valid notwithstanding the inability of the

member to gain access to use the facility or facilities, or the loss of access to or use of the facility or

facilities during the meeting.

Share certificates

Every person whose name is entered as a member in the Company’s Register of Members shall

be entitled to one certificate in respect of each class of shares held (the law regarding this does

not apply to stock exchange nominees). Subject to the terms of issue of the shares, certificates are

issued following allotment or receipt of the relevant transfer by the Group’s registrar, Computershare

Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, United Kingdom.

Share capital

Any share may be issued with such preferred, deferred or other special rights or other restrictions

as may be determined by way of a shareholders’ vote in a general meeting. Subject to the Act, any

shares may be issued which are to be redeemed or are liable to be redeemed at the option of the

Company or the shareholders.

There are no provisions in the Articles of Association which discriminate against any existing or

prospective shareholder as a result of such shareholder owning a substantial number of shares.

Subject to the terms of the shares which have been issued, the Directors may from time to time

make calls upon the shareholders in respect of any moneys unpaid on their shares, provided that

(subject to the terms of the shares so issued) no call on any share shall be payable at less than 14

clear days from the last call. The Directors may, if they see fit, receive from any shareholder willing to

advance the same, all and any part of the moneys uncalled and unpaid upon any shares held by him

or her.

Changes in capital

The Group may, from time to time by ordinary resolution subject to the Act:

• consolidate and divide all or any of its share capital into shares of a larger nominal amount than its

existing shares; or

• sub-divide all of or any of its existing shares into shares of smaller nominal amounts.

The Group may, from time to time, increase its share capital by allotting new shares in accordance

with the prescribed threshold authorised by shareholders at the last AGM and subject to the

consents and procedures required by the Act. The Group may also, by special resolution, reduce its

share capital.

Voting rights

Every holder of ordinary shares present in person or by proxy at a meeting of shareholders has one

vote on a vote taken by a show of hands. On a poll, every holder of ordinary shares who is present

in person or by proxy has one vote for every 25 pence of nominal share capital (being one ordinary

share) of which he or she is the holder. Voting at any meeting of shareholders is usually on a poll

rather than by show of hands. Voting on a poll is more transparent and equitable because it includes

the votes of all shareholders, including those cast by proxies, rather than just the votes of those

shareholders who attend the meeting. A poll may also be demanded by:

• the Chair of the meeting;

• at least three shareholders present in person or by proxy and entitled to vote;

• any shareholder or shareholders present in person or by proxy representing not less than one-

tenth of the total voting rights of all shareholders having the right to vote at the meeting; or

• any shareholder or shareholders present in person or by proxy holding shares conferring a right

to vote at the meeting being shares on which the aggregate sum paid up is equal to not less than

one-tenth of the total sum paid up on all shares conferring that right.

Dividends

Holders of ordinary shares are entitled to receive dividends out of Group profits that are available by

law for distribution, as the Group may declare by ordinary resolution, subject to the terms of issue

thereof.

However, no dividends may be declared in excess of an amount recommended by the Board of

Directors. The Board may pay interim dividends on the shares of any class as it deems fit. It may

invest or otherwise use all dividends left unclaimed for six months after having been declared for its

benefit, until claimed. All dividends unclaimed for a period of eight years after having been declared

will be forfeited and revert to the Group.

The Directors may, with the sanction of an ordinary resolution of the shareholders, offer any holders

of ordinary shares the right to elect to receive ordinary shares credited as fully paid, in whole or in

part, instead of cash in respect of such dividend.

The Directors may deduct from any dividend payable to any shareholder all sums of money (if any)

presently payable by that shareholder to the Group on account of calls or otherwise in relation to its

shares.

Annual report and accounts 2024 Pearson plc 238

Strategic report Governance report Financial statements Other information

(unaudited)

Dividends may be paid by such method or combination of methods as the Board, in its absolute

discretion, may decide. Different methods of payment may apply to different holders or groups

of holders.

Liquidation rights

In the event of the Group’s liquidation, after payment of all liabilities, its remaining assets would

be used to repay the holders of ordinary shares the amount they paid for their ordinary shares.

Any balance would be divided among the holders of ordinary shares in proportion to the nominal

amount of the ordinary shares held by them.

Other provisions of the Articles of Association

Whenever the Group’s capital is divided into different classes of shares, the special rights attached

to any class may, unless otherwise provided by the terms of the issue of the shares of that class,

be varied or abrogated, either with the written consent of the holders of 75% of the issued shares

of theclass (excluding any issued as treasury shares) or with the sanction of a special resolution

passed at a separate meeting of these holders. Conditions set out in the Articles of Association

with respect to the variation of rights are subject to the provisions of the Act. In the event that a

shareholder or other person appearing to the Board of Directors to be interested in ordinary shares

fails to comply with a notice requiring him or her to provide information with respect to their interest

in voting shares pursuant to section 793 of the Act, the Board may serve that shareholder with a

notice ofdefault. After service of a default notice, that shareholder shall not be entitled to attend or

vote atany general meeting or at a separate meeting of holders of a class of shares or on a poll until

heor she has complied in full with the Group’s information request.

If the shares described in the default notice represent at least a quarter of 1% in nominal value

of the issued ordinary shares, then the default notice may additionally direct that in respect of

those shares:

• the Group will not pay dividends (or issue shares in lieu of dividends); and

• the Group will not register transfers of shares unless (i) the shareholder is not itself in default as

regards supplying the information requested and the transfer, when presented for registration,

is accompanied by a certificate from the shareholder in such form as the Board of Directors may

require to the effect that, after due and careful inquiry, the shareholder is satisfied that no person

in default is interested in any of the ordinary shares which are being transferred; (ii) the transfer

is an approved transfer, as defined in the Articles of Association; or (iii) the registration of the

transfer is required by the Uncertificated Securities Regulations 2001.

No provision of the Articles of Association expressly governs the ordinary share ownership

thresholdabove which shareholder ownership must be disclosed. Under the Disclosure Guidance

and Transparency Rules of the Financial Conduct Authority, any person who acquires, either alone

or, in specified circumstances, with others an interest in the Company’s voting share capital equal

to or in excess of 3% comes under an obligation to disclose prescribed particulars to the Company

in respect of those ordinary shares. A disclosure obligation also arises where a person’s notifiable

interests fall below 3%, or where, at or above 3%, the percentage of the Company’s voting share

capital in which a person has a notifiable interest reaches, exceeds or falls below 3%, 4%, 5%, 6%,

7%, 8%, 9%, 10%, and each 1% threshold thereafter up to 100%.

Limitations affecting holders of ordinary shares or ADSs

Under English law and Articles of Association, persons who are neither UK residents nor UK nationals

may freely hold, vote and transfer ordinary shares in the same manner as UK residents or nationals.

Material contracts

The Group is not currently party to any contracts outside the ordinary course of business,

other than the Trust Deed entered into with respect to the (i) €300.0 million aggregate principal

amount of 1.375% guaranteed notes due 2025, (ii) £350.0 million aggregate principal amount of

3.750% guaranteed notes due 2030 and (iii) £350.0 million aggregate principal amount of 5.375%

guaranteed notes due 2034, in each case issued by a subsidiary of, and guaranteed by, Pearson,

which are filed as Exhibit 2.1, Exhibit 2.2 and Exhibit 2.3 to the annual report on Form 20-F for the

year ended 31 December 2024, respectively.

Executive employment contracts

The Group has entered into agreements with each of its Executive Directors pursuant to which

such Executive Director is employed by the Group. These agreements describe the duties of such

Executive Director and the compensation to be paid by us.

It is the Group’s policy that it may terminate the Executive Directors’ service agreements by giving

no more than 12 months’ notice. As an alternative, the Group may at its discretion pay in lieu of

that notice. Payment-in-lieu of notice may be made in equal monthly instalments from the date

of termination to the end of any unexpired notice period. In the case of Executive Directors,

payment-in-lieu of notice in instalments may also be subject to mitigation and reduced, taking

into account earnings from alternative employment. For Executive Directors, pay in lieu of notice

comprises 100% of the annual salary at the date of termination and the annual cost to the Company

of providing pension and all other benefits. The Group may, depending on the circumstances

of thetermination, determine that it will not pay the Director in lieu of notice and may instead

terminate a Director’s contract in breach and make a damages payment, taking into account as

appropriate the Director’s ability to mitigate their loss.

Exchange controls

There are no UK Government laws, decrees, regulations or other legislation which restrict or which

may affect the import or export of capital, including the availability of cash and cash equivalents for

use by us or the remittance of dividends, interest or other payments to non-resident holders of the

Group’s securities, except as otherwise described under ‘Tax Considerations’ below.

Tax considerations

The following is a discussion of the material US federal income tax considerations and UK tax

considerations arising from the acquisition, ownership and disposition of ordinary shares and ADSs

by a US holder. A US holder is:

• an individual citizen or resident of the US, or

• a corporation created or organised in or under the laws of the US or any of its political

subdivisions, or

• an estate or trust the income of which is subject to US federal income taxation regardless

ofitssource.

Annual report and accounts 2024 Pearson plc 239

Strategic report Governance report Financial statements Other information

(unaudited)

Additional information for US listing purposes continued

This discussion deals only with ordinary shares and ADSs that are held as capital assets by a US

holder, and does not address tax considerations applicable to US holders that may be subject to

special tax rules, such as:

• dealers or traders in securities or currencies,

• financial institutions or other US holders that treat income in respect of the ordinary shares or

ADSs as financial services income,

• insurance companies,

• tax-exempt entities,

• persons acquiring shares or ADSs in connection with employment,

• US holders that hold the ordinary shares or ADSs as a part of a straddle or conversion transaction

or other arrangement involving more than one position,

• US holders that own, or are deemed for US tax purposes to own, 10% or more of the total

combined voting power of all classes of the Group’s voting stock,

• US holders that have a principal place of business or ‘tax home’ outside the United States, or

• US holders whose ‘functional currency’ is not the US dollar.

For US federal income tax purposes, holders of ADSs will be treated as the owners of the ordinary

shares represented by those ADSs. In practice, HM Revenue & Customs (HMRC) will also regard

holders of ADSs as the beneficial owners of the ordinary shares represented by those ADSs,

although case law has cast some doubt on this. The discussion below assumes that HMRC’s position

is followed.

In addition, the following discussion assumes that JP Morgan Chase Bank will perform its obligations as

depositary in accordance with the terms of the depositary agreement and any related agreements.

Because US and UK tax consequences may differ from one holder to the next, the discussion set

out below does not purport to describe all of the tax considerations that may be relevant to you

and your particular situation. Accordingly, you are advised to consult your own tax adviser as to the

US federal, state and local, UK and other, including foreign, tax consequences of investing in the

ordinary shares or ADSs. Except where otherwise indicated, the statements of US and UK tax law

set out below are based on the laws, interpretations and tax authority practice in force or applicable

as of 28 February 2025 and are subject to any changes occurring after that date, possibly with

retroactive effect.

UK income taxation of distributions

The UK does not impose dividend withholding tax on dividends paid by the Company.

A US holder that is not resident in the UK for UK tax purposes and does not carry on a trade,

profession or vocation in the UK through a branch or agency (or in the case of a company a

permanent establishment) to which the ordinary shares or ADSs are attributable will not generally be

liable to pay UK tax on dividends paid by the Company.

US income taxation of distributions

Distributions that the Group makes with respect to the ordinary shares or ADSs, other than

distributions in liquidation and distributions in redemption of stock that are treated as exchanges,

will be taxed to US holders as ordinary dividend income to the extent that the distributions do not

exceed the Group’s current and accumulated earnings and profits. The amount of any distribution

will equal the amount of the cash distribution. Distributions, if any, in excess of the Group’s current

and accumulated earnings and profits will constitute a non-taxable return of capital to a US holder

and will be applied against and reduce the US holder’s tax basis in its ordinary shares or ADSs. To

the extent that these distributions exceed the tax basis of the US holder in its ordinary shares or

ADSs, the excess generally will be treated as capital gain.

Dividends that the Group pays will not be eligible for the dividends received deduction generally

allowed to US corporations under Section 243 of the Code.

In the case of distributions in pounds sterling, the amount of the distributions generally will equal

the US dollar value of the pounds sterling distributed, determined by reference to the spot currency

exchange rate on the date of receipt of the distribution by the US holder in the case of shares or by

JP Morgan Chase Bank in the case of ADSs, regardless of whether the US holder reports income on a

cash basis or an accrual basis. The US holder will realise separate foreign currency gain or loss only

to the extent that this gain or loss arises on the actual disposition of pounds sterling received. For US

holders claiming tax credits on a cash basis, taxes withheld from the distribution are translated into

US dollars at the spot rate on the date of the distribution; for US holders claiming tax credits on an

accrual basis, taxes withheld from the distribution are translated into US dollars at the average rate

for the taxable year.

A distribution by the Company to non-corporate shareholders will be taxed as net capital gain at a

maximum rate of 20%, provided certain holding periods are met, to the extent such distribution is

treated as a dividend under US federal income tax principles. In addition, a 3.8% Medicare tax will

generally be imposed on the net investment income, which generally would include distributions

treated as dividends under US federal income tax principles, of non-corporate taxpayers whose

adjusted gross income exceeds a threshold amount.

UK taxation of capital gains

A US holder that is not resident in the UK for UK tax purposes and does not carry on a trade,

profession or vocation in the UK through a branch or agency (or in the case of a company a

permanent establishment) to which the ordinary shares or ADSs are attributable will not generally be

liable for UK taxation on capital gains or eligible for relief for allowable losses, realised on the sale or

other disposal of the ordinary shares or ADSs.

A US holder who is an individual who has been resident for tax purposes in the UK but who ceases

to be so resident or becomes regarded as resident outside the UK for the purposes of any double

tax treaty (‘Treaty Non-resident’) and continues to not be resident in the UK, or continues to be

Treaty Non-resident, for a period of five years or less and who disposes of his ordinary shares or

ADSs during that period may also be liable on his return to the UK to UK tax on capital gains, subject

to any available exemption or relief, even though he or she is not resident in the UK, or is Treaty

Non-resident, at the time of the disposal.

Annual report and accounts 2024 Pearson plc 240

Strategic report Governance report Financial statements Other information

(unaudited)

US income taxation of capital gains

Upon a sale or exchange of ordinary shares or ADSs to a person other than Pearson, a US holder

will recognise gain or loss in an amount equal to the difference between the amount realised on the

sale or exchange and the US holder’s adjusted tax basis in the ordinary shares or ADSs. Any gain or

loss recognised will be capital gain or loss and will be long-term capital gain or loss if the US holder

has held the ordinary shares or ADSs for more than one year. Long-term capital gain of a non-

corporate US holder is generally taxed at a maximum rate of 20%. In addition, a 3.8% Medicare tax

will generally be imposed on the net investment income, which generally would include capital gains,

of non-corporate taxpayers whose adjusted gross income exceeds a threshold amount.

The gain or loss realised by a US holder on the sale or exchange of ordinary shares or ADSs generally

will be treated as US-source gain or loss for US foreign tax credit purposes.

Estate and gift tax

The current Estate and Gift Tax Convention (referred to in this paragraph as the ‘Convention’),

between the US and the UK generally relieves from UK inheritance tax (the equivalent of US estate

and gift tax) the transfer of ordinary shares or of ADSs where the transferor is domiciled in the US

for the purposes of the Convention. This relief will not apply if the ordinary shares or ADSs are part

of the business property of an individual’s permanent establishment in the UK or pertain to the fixed

base in the UK of a person providing independent personal services. If no relief is given under the

Convention, inheritance tax may be charged on death and also on the amount by which the value of

an individual’s estate is reduced as a result of any transfer made by way of gift or other gratuitous

or undervalue transfer, in general within seven years of death, and in certain other circumstances.

In the unusual case where ordinary shares or ADSs are subject to both UK inheritance tax and US

estate or gift tax, the Convention generally provides for tax paid in the UK to be credited against tax

payable in the US or for tax paid in the US to be credited against tax payable in the UK based on

priority rules set forth in the Convention.

Stamp duty

No stamp duty or stamp duty reserve tax (SDRT) will generally be payable in the UK on the purchase

or transfer of an ADS, provided that the ADS, and any separate instrument or written agreement of

transfer, remain at all times outside the UK and that the instrument or written agreement of transfer

is not executed in the UK.

There is, however, a charge to SDRT or stamp duty at the rate of 1.5% of the amount or value of the

consideration or, in some circumstances, the value of the ordinary shares (rounded up to the next

multiple of £5 in the case of stamp duty), where ordinary shares are transferred to a person whose

business is or includes issuing depositary receipts (or to a nominee or agent for such a person), or

to a person whose business is or includes the provision of clearance services (or to a nominee or

agent for such a person). Such 1.5% charge is subject to exceptions, including for (i) transfers which

are made in the course of ‘capital-raising arrangements’ (as defined in sections 72ZA and 97AB of the

Finance Act 1986), and (ii) transfers which are made in the course of ‘qualifying listing arrangements’

(as defined in sections 72ZB and 97AC of the Finance Act 1986) and which do not affect the

beneficial ownership of the ordinary shares in question. Specific professional advice should be

sought in any case where the 1.5% SDRT or stamp duty charge may be applicable.

A transfer for value of the underlying ordinary shares will generally be subject to either stamp duty

or SDRT, normally at the rate of 0.5% of the amount or value of the consideration (rounded up to

the next multiple of £5 in the case of stamp duty). A transfer of ordinary shares from a nominee to

its beneficial owner, including the transfer of underlying ordinary shares from the depositary to an

ADS holder, under which no beneficial interest passes will not be subject to stamp duty or SDRT.

Close company status

The Group believes that the close company provisions of the UK Corporation Tax Act 2010 do not

apply to it.

Documents on display

Copies of the Group’s Memorandum and Articles of Association are filed as exhibits to its annual

report on Form 20-F for the year ended 31 December 2024. We also file reports and other

information with the SEC. These materials, including this annual report and the accompanying

exhibits, are available on the Investors page of the Company’s website at pearsonplc.com (the

contents of which are not incorporated by reference herein). In addition, shareholders may request a

copy of certain documents referred to in this annual report by writing to us at the following address:

Pearson plc, c/o the Company Secretary, 80 Strand, London WC2R 0RL.

Description of securities other than equity securities

American Depositary Shares

The Group’s ordinary shares trade in the form of ADSs evidenced by ADRs under a sponsored ADR

facility with JPMorgan Chase Bank, as depositary. Each ADS represents one ordinary share.

The principal executive office of JPMorgan Chase Bank is located at 383 Madison Avenue, Floor 11,

New York, New York 10179.

Annual report and accounts 2024 Pearson plc 241

Strategic report Governance report Financial statements Other information

(unaudited)

Additional information for US listing purposes continued

Fees paid by ADR holders

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing

shares or surrendering ADSs for the purpose of withdrawal, or from intermediaries acting for them.

The depositary collects fees for making distributions to investors by deducting those fees from the

amounts distributed or by selling a portion of distributable property to pay the fees. The depositary

may collect its annual fee for depositary services by deductions from cash distributions or by directly

billing investors or by charging the book-entry system accounts of participants acting for them. The

depositary may generally refuse to provide fee-attracting services until its fees for those services are

paid.

The following table summarises various fees currently charged by JPMorgan Chase Bank:

Person depositing or withdrawing shares must pay to the

depositary: For:

$5.00 (or less) per 100 ADSs (or portion of 100

ADSs)

• Issuance of ADSs, including issuances

resulting from a distribution of shares or

rights or other property

• Cancellation of ADSs for the purpose

of withdrawal, including if the deposit

agreement terminates

$.05 (or less) per ADS • Any cash distribution to ADS registered

holders

A fee equivalent to the fee that would be payable

if securities distributed had been shares and the

shares had been deposited for issuance of ADSs

• Distribution of securities by the depositary

to ADS registered holders of deposited

securities

$.05 (or less) per ADS per calendar year • Depositary services

Registration of transfer fees • Transfer and registration of shares on the

share register to or from the name of the

depositary or its agent when shares are

deposited or withdrawn

Expenses of the depositary • Cable, telex and facsimile transmissions

(when expressly provided in the deposit

agreement)

• Converting foreign currency to US dollars

Taxes and other governmental charges the

depositary or the custodian have to pay on any

ADS or share underlying an ADS, for example,

stock transfer taxes, stamp duty or withholding

taxes

• As necessary

Any charges incurred by the depositary or its

agents for servicing the deposited securities

• As necessary

Fees incurred in past annual period and fees to be paid in the future

The depositary reimburses the Company for certain expenses it incurs in relation to the ADS

programme. The depositary also pays the standard out-of-pocket maintenance costs for the

registered ADSs, which consist of the expenses for the mailing and printing of proxy materials,

distributing dividend cheques, electronic filing of US federal tax information, mailing required tax

forms, stationery, postage, facsimile and telephone calls. It also reimburses the Company for certain

investor relationship programmes or special investor relations promotional activities. There are

limits on the amount of expenses for which the depositary will reimburse the Company, but the

amount ofreimbursement is not necessarily tied to the amount of fees the depositary collects from

investors. The Company received $50,000 as reimbursement from the depositary, The Bank of New

York Mellon, for 2024.

Controls and procedures

Disclosure controls and procedures

An evaluation of the effectiveness of the Group’s disclosure controls and procedures as

of31 December 2024 was carried out by management, under the supervision and with the

participation of the Chief Executive Officer and Chief Financial Officer. Based on that evaluation,

the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure

controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange

Act of 1934, as amended) were effective as at 31 December 2024 at a reasonable assurance level.

Acontrols system, no matter how well designed and operated, cannot provide absolute assurance

toachieve its objectives.

Management’s annual report on internal control over

financial reporting

Management is responsible for establishing and maintaining adequate internal control over

financial reporting for the Company. Internal control over financial reporting is a process designed

by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, or persons

performing similar functions, and effected by the Company’s Board of Directors, management and

other personnel to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles. Management has assessed the effectiveness of internal control

over financial reporting as of 31 December 2024 based on the framework in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway

Commission (COSO). Based on this evaluation, management has concluded that the Company’s

internal control over financial reporting was effective as of 31 December 2024 based on criteria in

Internal Control – Integrated Framework (2013) issued by the COSO.

Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness

of the Company’s internal control over financial reporting as of 31 December 2024, as stated in

their report.

Annual report and accounts 2024 Pearson plc 242

Strategic report Governance report Financial statements Other information

(unaudited)

Change in internal control over financial reporting

There have been no significant changes in our internal control over financial reporting during the

year ended 31 December 2024 that have materially affected, or are reasonably likely to materially

affect, the Company’s internal control over financial reporting.

Audit Committee financial expert

The members of the Board of Directors of Pearson plc have determined that Graeme Pitkethly is

an Audit Committee financial expert within the meaning of the applicable rules and regulations of

the SEC.

Code of ethics

Pearson has adopted a code of ethics (the Pearson Code of Conduct) which applies to all employees

including the Chief Executive Officer and Chief Financial Officer and other senior financial

management. This code of ethics is available on the Group’s website (www.pearson.com/corporate/

code-of-conduct.html). The information on this website is not incorporated by reference into this

report.

Principal accountant fees and services

In line with best practice, the Group’s relationship with Ernst & Young LLP (EY) is governed by its

external auditor policy, which is reviewed and approved annually by the Audit Committee. The policy

establishes procedures to ensure the auditors’ independence is not compromised as well as defining

those non-audit services that EY may or may not provide to Pearson. These allowable services are in

accordance with relevant UK and US legislation.

The Audit Committee approves all audit and non-audit services provided by EY, unless clearly trivial.

Where appropriate, services will be tendered prior to awarding this work to the auditor.

No fees were incurred in relation to taxation, including tax compliance, tax advice and tax planning.

Purchases of equity securities by the issuer and affiliated purchases

Period

Total number

of shares

purchased

Average price

paid per share

Total number of

units purchased

as part of publicly

announced plans

or programmes

Approximate

maximum value of

shares that may

yet be purchased

under the plans or

programmes

1 April 2022 – 30 April 2022 11,176,349 £ 7.77 9,885,524 £ 275m

1 May 2022 – 31 May 2022 4,518,993 £ 7.55 4,518,993 £ 241m

1 June 2022 – 30 June 2022 7,203,444 £ 7.52 5,363,132 £ 201m

1 July 2022 – 31 July 2022 2,897,074 £ 7.57 2,897,074 £ 179m

1 August 2022 – 31 August 2022 2,567,366 £ 8.75 2,567,366 £ 156m

1 September 2022 – 30 September 2022 5,496,817 £ 8.91 5,496,817 £ 107m

1 October 2022 – 31 October 2022 6,315,733 £ 9.03 6,315,733 £ 50m

1 November 2022 – 30 November 2022 3,017,726 £ 9.72 3,017,726 £ 21m

1 December 2022 – 31 December 2022 3,587,362 £ 9.46 2,205,695 –

1 March 2023 – 31 March 2023 1,757,098 £8.54 – £301m

Period

Total number

of shares

purchased

Average price

paid per share

Total number of

units purchased

as part of publicly

announced plans

or programmes

Approximate

maximum value of

shares that may

yet be purchased

under the plans or

programmes

1 May 2023 – 31 May 2023 1,191,462 £8.39 – £301m

1 September 2023 – 30 September 2023 2,459,066 £8.69 2,459,066 £280m

1 October 2023 – 31 October 2023 11,239,824 £9.03 11,239,824 £178m

1 November 2023 – 30 November 2023 3,108,579 £9.48 3,108,579 £149m

1 December 2023 – 31 December 2023 4,479,186 £9.44 3,436,047 £117m

1 January 2024 – 31 January 2024 4,522,458 £10.48 4,522,458 £69m

1 February 2024 – 29 February 2024 5,115,720 £9.56 5,115,720 £20m

1 March 2024 – 31 March 2024 4,622,468 £10.22 4,622,468 £173m

1 April 2024 – 30 April 2024 9,172,818 £10.10 6,810,586 £105m

1 May 2024 – 31 May 2024 6,472,448 £9.71 6,472,448 £42m

1 June 2024 – 30 June 2024 811,773 £9.62 241,083 £39m

1 July 2024 – 31 July 2024 2,128,176 £10.08 2,128,176 £18m

1 August 2024 – 31 August 2024 1,706,435 £10.46 1,706,435 –

1 November 2024 - 30 November 2024 330,409 £12.11 – –

On 20 September 2023, the Board approved a £300m share buyback programme in order to

return capital to shareholders, with a £200m extension being announced by the Group on 1 March

2024. This programme and the extension completed in 2024. During 2024, approximately 32m

(2023: 20m) shares were bought back and cancelled at a cost of £318m (2023: £186m). The nominal

value of these shares, £8m (2023: £5m), was transferred to the capital redemption reserve, and the

remainder of the purchase price was recorded within retained earnings. At 31 December 2024, no

further liability remains (2023: £118m) for any shares contracted to be repurchased but where the

repurchases are still outstanding.

On 24 February 2022, the Board approved a £350m share buyback programme in order to return

capital to shareholders. During the year, all of the shares were bought back and cancelled at a cost

of £353m. The nominal value of these shares, £10m, was transferred to the capital redemption

reserve, and the remainder of the cost is recorded within retained earnings.

Shares were also purchased and held in Trust for the satisfaction of employee share schemes. All

purchases were made in open-market transactions in London in accordance with applicable law.

Pearson did not structure such purchases to fall within the safe harbour provisions of the US SEC’s

Rule 10b-18.

Insider trading policies

We have adopted an Insider Trading Policy, which, among other things, governs the purchase, sale

and other dispositions of Pearson securities by our Directors, executive officers and employees. Our

Insider Trading Policy aims to promote compliance with applicable insider trading laws, rules and

regulations and the NYSE listing standards. A copy of our Insider Trading Policy is filed as Exhibit 11.1

and 11.2 to the annual report on Form 20-F for the year ended 31 December 2024.

Annual report and accounts 2024 Pearson plc 243

Strategic report Governance report Financial statements Other information

(unaudited)

Additional information for US listing purposes continued

Cyber security

We believe cyber security is of critical importance to our success. We are susceptible to a number

of significant, persistent and evolving cyber security threats, including those common to most

industries as well as those we face as a worldwide learning company with principal operations in

the education, assessment and certifications markets. The Group holds large volumes of personal

data on individuals worldwide, including that of employees, customers, students, teachers and

learners in the workforce, as well as other highly sensitive business critical data such as financial

data, internal sensitive information, and intellectual property. Despite our implementation of security

measures, threat actors of all types, including individuals, criminal organisations and state sponsored

operatives, have from time to time gained access, and may in the future gain access to the Group’s

data through unauthorised means in order to misappropriate such information for fraudulent or

other purposes. Failure to prevent or detect a malicious attack on the Group’s systems has in the

past and could in future result in loss of system availability, breach of confidentiality, integrity and/

or availability of sensitive information, and damage to the customer experience and the Group’s

reputation and financial loss. Accordingly, we continuously evaluate the impact of cyber security

threats, and are committed to the highest standards of data management and these will naturally

evolve with our business as we continue our digital transformation.

Pearson’s Executive team has overall responsibility for data privacy and security. Our reporting and

risk management structure feeds upwards from individual businesses to Board level. Under the

oversight of our Board of Directors, and the Audit Committee, our management has established

comprehensive processes for identifying, assessing and managing material risks from cyber

security threats, and these processes are integrated into our overall enterprise risk management

programme. We have established lines of accountability and reporting procedures designed to

enable senior management executives and business unit privacy owners to have greater visibility

over managing data privacy and security risks. Our approach is proactive and adaptive, featuring

regular security assessments, third-party audits and continuous improvement of our cyber security

infrastructure. We also provide all colleagues with training on our updated and strengthened data

privacy and cyber security principles and processes. We work to align our practices with industry

best practices and regulatory standards. Our processes include detailed response procedures

to be followed in the event of a cybersecurity incident, which outline steps to be followed from

detection to assessment and escalation to notification and recovery, including internal notifications

to management, the Audit Committee and the Board, as appropriate.

The Audit Committee of our Board is primarily responsible for oversight of risks, including those

from cyber security threats, and is currently chaired by a Director with functional expertise in

cyber security matters. Members of management, including our Chief Information Officer provide

the Executive Team and the Trust & Safety committees that have been established with updates

on cyber security risk matters on a quarterly basis and more frequently if circumstances dictate.

In these updates, members of the committees are apprised of cyber security incidents that

are deemed to have had a moderate or higher impact even if immaterial to us. In addition, the

committees review and actively discusses with management and among themselves the risks related

to cyber security and critical systems in order to provide input on the appropriate level of risk for

our Company and reviews management’s strategies for adequately mitigating and managing the

identified risks. The Audit Committee and management regularly update our full Board with respect

to cyber security matters.

Our Chief Information Officer is primarily responsible for managing material risks from cyber security

threats, and is supported by a dedicated team of internal cyber security specialists led by a Chief

Information Security Officer. Both our Chief Information Officer and Chief Information Security

Officer have extensive information technology and cybersecurity experience respectively, and many

of our internal team hold cyber security certifications such as Certified Information Systems Security

Professional or Certified Information Security Manager. We also engage specialised cyber security

consultants and leverage third-party expertise to bolster our cyber security defences.

In addition, our third-party vendors and service providers play a role in our cyber security. These

third parties are integral to our operations but pose cyber security challenges due to their access

to our data and our reliance for various aspects of our operations, including our supply chain. We

have developed a third-party vendor risk management programme to assess and manage the

risks associated with third-party partnerships, particularly in data security and cyber security. We

conduct due diligence before onboarding new vendors and maintain ongoing evaluations to ensure

compliance with our security standards.

As of the date of this report, no cyber security incidents have had, either individually or in the

aggregate, a material adverse effect on our business, financial condition or results of operations.

Notwithstanding the extensive approach we take to cyber security, we may not be successful in

preventing or mitigating a cyber security incident that could have a material adverse effect on us.

While we maintain cyber risk insurance, the costs relating to certain kinds of security incidents could

be substantial, and our insurance may not be sufficient to cover all losses related to any future

incidents involving our data or systems.

See ‘Risk Factors’ on pages 228-233 for a discussion of cyber security risks that may materially

impact us.

Annual report and accounts 2024 Pearson plc 244

Strategic report Governance report Financial statements Other information

(unaudited)

Shareholder Information

Shareholder information

Pearson ordinary shares are listed on the London Stock Exchange and on the New York Stock

Exchange in the form of American Depositary Receipts.

Corporate website

The investors’ section of our corporate website www.pearsonplc.com/investors provides a wealth

of information for shareholders. It is also possible to sign up to receive email alerts for reports and

press releases relating to Pearson at www.pearsonplc.com.

Shareholder information online

Shareholder information can be found on our website at www.pearsonplc.com/investors.

Our registrar, Computershare, also provides a range of shareholder information online. You can

check your holding and find practical help on transferring shares or updating your details at

www.investorcentre.co.uk. For more information, please contact our registrar, Computershare,

The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ. Telephone 0370 889 3250*.

Information about the Pearson share price

The company’s share price can be found on our website at www.pearsonplc.com/investors/

performance/share-price-dividend. It also appears in the financial columns of the national press.

2024 dividends

Payment Date Amount per share

Interim 16 September 2024 7.4 pence

Final

9 May 2025 16.6 pence

1. Subject to approval by shareholders at the 2025 Annual General Meeting.

2025 financial calendar

Ex-dividend date 20 March 2025

Record date 21 March 2025

Last date for dividend reinvestment election 15 April 2025

Annual General Meeting 2 May 2025

Payment date for dividend and share purchase date for dividend reinvestment 9 May 2025

Payment of dividends to mandated accounts

Should you elect to have your dividends paid through BACS, this can be done directly into a bank or

building society account, with the dividend confirmation voucher sent to the shareholder’s registered

address. Computershare can be contacted for information on 0370 889 3250*.

Dividend reinvestment plan (DRIP)

The DRIP gives shareholders the right to buy the company’s shares on the London stock market with

their cash dividend. For further information, please contact Computershare on 0370 889 3250*.

Individual Savings Accounts (ISAs)

Computershare offers a Flexible Stocks and Shares ISA (other providers are available). For more

information, please visit www.investorcentre.co.uk or call customer services on 0370 889 3250*.

Share dealing facilities

Computershare offers telephone and internet services for dealing in Pearson shares (other providers

are available). For further information, please contact their telephone dealing helpline on 0370 889

3250* or, for online dealing, log on to www.investorcentre.co.uk. You will need your shareholder

reference number as shown on your share certificate.

A postal dealing service is also available through Computershare. Please telephone 0370 889 3250*

for details or log on to www.investorcentre.co.uk to download a form.

ShareGift

Shareholders with small holdings of shares, whose value makes them uneconomic to sell, may wish

to donate them to ShareGift, the share donation charity (registered charity number 1052686).

Further information about ShareGift and the charities it has supported may be obtained from their

website, www.ShareGift.org, or by contacting them at ShareGift, 6

Floor, 2 London Wall Place,

London, EC2Y 5AU.

American Depositary Receipts (ADRs)

Pearson’s ADRs are listed on the New York Stock Exchange and traded under the symbol PSO.

Each ADR represents one ordinary share. For enquiries regarding registered ADR holder accounts

and dividends, please contact JP Morgan via their Transfer Agent, EQ Shareowner Services, P.O.

Box 64504, St. Paul, MN 55164-0504, telephone 1 (800) 990 1135 (toll free within the US) or 001

651 453 2128 (outside the US). Alternatively, you may email via www.shareowneronline.com/

informational/contact-us/.

Voting rights for registered ADR holders can be exercised through JP Morgan, and for beneficial ADR

holders (and/or nominee accounts) through your US brokerage institution. Pearson will file with the

Securities and Exchange Commission a Form 20-F.

* Lines open 8.30 am to 5.30 pm Monday to Friday (excluding UK public holidays).

Annual report and accounts 2024 Pearson plc 245

Strategic report Governance report Financial statements Other information

Shareholder Information continued

Share register fraud: protecting your investment

Pearson does not contact its shareholders directly to provide recommendations or investment

advice and neither does it appoint third parties to do so. As required by law, our shareholder

persons inspecting the register. Please treat any approaches purporting to originate from Pearson

with caution.

For more information, please log on to our website at www.pearsonplc.com/en-GB/investors/

shareholders/shares-shareholding

Tips on protecting your shares

• Keep any documentation that contains your shareholder reference number in a safe place and

shred any unwanted documentation.

• Inform our registrar, Computershare, promptly when you change address.

• Be aware of dividend payment dates and contact the registrar if you do not receive your

dividend cheque or, better still, make arrangements to have the dividend paid directly into

your bank account.

• Consider holding your shares electronically in a CREST account via a nominee.

Annual report and accounts 2024 Pearson plc 246

Strategic report Governance report Financial statements Other information

Reliance on this document

The intention of this document is to provide information to shareholders and is not designed to be

relied upon by any other party or for any other purpose.

Forward-looking statements

This document includes forward-looking statements concerning Pearson’s financial condition,

business and operations and its strategy, plans and objectives, including but not limited to the way in

which forward-looking statements are defined under Section 27A of the U.S. Securities Act of 1933,

as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are

cautioned not to place undue reliance on such forward-looking statements. In some cases, you can

identify forward-looking statements by terms such as “may”, “will”, “should”, “expect”, “intend”, “plan”,

“anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or

other comparable terminology.

By their nature, forward-looking statements involve known and unknown risks and uncertainties and

other factors that may cause Pearson or its industry’s actual results, levels of activity, performance

or achievements to be materially different from any future results, levels of activity, performance or

achievements expressed or implied by the forward-looking statements. This is because they relate

to events and depend on circumstances that may occur in the future. They are based on numerous

expectations, assumptions and beliefs regarding Pearson’s present and future business strategies

and the environment in which it will operate in the future. Pearson believes that the expectations

reflected in the forward-looking statements are reasonable, although it cannot guarantee future

results, levels of activity, performance or achievements.

There are various factors which could cause Pearson’s actual financial condition, results and

development to differ materially from the plans, goals, objectives and expectations expressed or

implied by these forward-looking statements, many of which are outside Pearson’s control. These

include international, national and local conditions, as well as the impact of competition. Such

risks and other risks and uncertainties are detailed from time to time in Pearson’s publicly-filed

documents and, in particular, the risk factors set out in this document, which you are advised

toread.

Any forward-looking statements speak only as of the date they are made and, except as required

by law, Pearson gives no undertaking to update any forward-looking statements in this document,

whether as a result of new information, future developments, changes in its expectations or otherwise.

Finally, as an example, all statements that express forecasts, expectations and projections, 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. The forward-looking statements,

specifically the margin target, financial expectations, 2025 outlook and 2026 ambition information,

included on page 27 of this document have been prepared by, and is the responsibility of, Pearson’s

management. Ernst & Young LLP has not audited, reviewed, examined, compiled nor applied agreed-

upon procedures with respect to these forward-looking statements and, accordingly, Ernst & Young

LLP does not express an opinion or any other form of assurance with respect thereto.

Annual report and accounts 2024 Pearson plc 247

Strategic report Governance report Financial statements Other information

This Report is printed on Edixion Off set which has been independently

certified according to the rules of the Forest Stewardship Council

(FSC

Printed in the UK by Pureprint, a CarbonNeutral

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Principal offices

80 Strand,

London WC2R 0RL, UK

T +44 (0)20 7010 2000

221 River Street,

Hoboken, NJ 07030, USA

T +1 201 236 7000

Pearson plc

Registered number 53723 (England)

Pearson plc Annual report and accounts 2024