international education: a world of opportunity...uk occupational trends, 1982-2012 (‘000s of...

International Education:A world of opportunity

17 November 2008

Forward-looking statements

Except for the historical information contained herein, the matters discussed in this presentation include forward-looking statements. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated costs savings and synergies and the execution of Pearson's strategy, are forward looking statements. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in future. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward looking statements, including a number of factors outside Pearson's control. These include international, national and local conditions, as well as competition. They also include other risks detailed from time to time in the company's publicly-filed documents. Any forward looking statements speak only as of the date they are made, and Pearson gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based.


17 November 2008

Agenda

Overview John Fallon

Global English Bill Anderson

The UK Rod Bristow & Jerry Jarvis

Southern Africa Fathima Dada

Q&A

“Every country that sustained high growth

for long periods put substantial effort into schooling its citizens

and deepening its human capital.”

Commission on Growth & Development

Our power and promise

Scale and leadership

Global capabilities and local presence

Favourable global trends

Sales (£m) Operating profit (£m)

International Education

Margin 2.8% 5.6% 9.1% 11.4% 12.5%

CAGR: 14% CAGR: 66%

431484

559

640

735

2003 2004 2005 2006 2007

12

27

51

73

92

2003 2004 2005 2006 2007

Sustained investment

Bolt-on acquisitionsOrganic investment

The leading international education company

Cengage Learning

Sanoma WSOY

Infinitas Learning

McGraw-Hill

Prisa

Lagardere

Pearson*

0.3

0.4

0.4

0.7

0.8

1.6

0.2

#1 in Intl education publishing & servicesLargest education publisher ex-US (US$ revenue in billions, 2007)

Source: Pearson, Company Accounts, Analyst estimates * Pro forma including Harcourt International

The Vision

Personalised learning and effective education

+Content Assessment Technology+

Global trends in education

Participation and investment

Effectiveness

English

Technology

Global trends: Participation Number of pupils (m)

Source: UNESCO, World Bank

Primary

Secondary

Tertiary

317

50368

132

598 687

1991 2004

Global trends: Participation

Education enrolments and participation rates in China

240

250

260

270

280

290

300

310

2003 2004 2005 2006 2007 2008E19%

20%

20%

21%

21%

22%

22%

23%Education enrolments, m (LHS) Participation rates, % (RHS)

Source: National Statistical Bureau of China; Pearson estimates

Global trends: Participation Enrolments in India (millions)

Source: UNESCO

Primary

Secondary

Tertiary

71

92

139114

9

13

2000 2006

Shift from unskilled to skilledUK occupational trends, 1982-2012 (‘000s of employees)

1,000

2,000

3,000

4,000

5,000

6,000

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Managers Professionals Assoc. Profs.Personal Servs. Sales Occs Admin, Clerical, SecSkilled Trades Trans & Machine Ops Elementary Occs

Source: DFES, Working Futures, National Report 2003-04

Global trends: Investment

Increase in public expenditure on education, 1991 - 2005 (1991=100)

118152 153 169

214253

320

547

UnitedStates

UnitedKingdom

UnitedArab

Emirates

India SouthKorea

Mexico Poland Indonesia

Source: World Bank

427

507

701

2006 2007 2008


5

17

4551

6571

8190

103

118

136

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

E

2008

E

China: Private education expenditure & related services in urban areas($bn)

China: expenditure on Private Language Schools*($m)

Source: National Statistical Bureau of China; Pearson estimates* Top 36 schools


87%

77%

71%

66%

93%

95%

93%

99%

93%

% parents in China willing to pay extra for:

% thinking essential/important

69%

Source: CLT, BDA

Teacher quality

Results

Ongoing assessment

Homework

Classroom technology

Global trends: Effective education

“One place to start is measurement.The abilities of students – their literacy and

numeracy – need to be gauged far more widely around the world.”



Percentage of students at each proficiency level in science

Note: Countries are ranked in descending order of percentage of 15-year-old at Levels 2, 3, 4, 5, and 6. Above the zero line one finds the proportion of students in the country that has higher ratings than level 1. Below the zero line, one finds the proportion of students with level 1 and below.Source: PISA, 2007


“Our education system must be reformed.

One size fits all, government-led, uniform curriculums and an education system that is

locked only into the college entrance examination are not acceptable.

We must accept global standards and instil a spirit of self discipline, and then let the fresh

wind of creativity into our classrooms.”

President Lee Myung-bak, President of the Republic of Korea

Growth of vocational education

171 202 257 293 309619

66

157246

94

114

141

71852931

34

38

46

19

1513

28

33

2004 2005 2006 2007 2008

BTEC FE BTEC Schools NVQ

BTEC Employers BTEC International

Number of students taking BTEC qualifications, ’000

Source: Pearson

Global trends: English

Projected number of English learners (m)

970

1,300

2,000

1995 2005 2010

Source: British Council

Global trends: Technology

MyLab registrations (outside North America)

26,000

130,000

194,000

20,000

2005 2006 2007 YTD 2008

Source: Pearson

Broad geographic spread

UK

EuropeMiddle East

Asia

Latin America

Pro forma sales including full year impact of 2008 transactions

Revenue by geography

Africa

Other

Our strategic priorities

To be the world leader in:

Helping people learn English

Applying technology to enhance learning

Measuring student performance

Providing educational solutions

Agenda

Overview John Fallon

Global English Bill Anderson

The UK Rod Bristow & Jerry Jarvis

Southern Africa Fathima Dada

Q&A

English Language Teaching

Bill AndersonPresident

Global English Language Teaching

The world’s leading English Language Teaching company

Cambridge

Professional development

Technology

Assessment

Content

ETSMacmillanOUPPearsonMarket presence

970

1,300

2,000

1995 2005 2010

Global trends: English

Projected number of English learners (m)

Source: British Council

Our global reach

New opportunities: Assessment

Academic tests of English taken worldwide (m)

1.7 1.81.6

2006 2007 2008

Source: Pearson

China

Korea SE Asia

North America

India

ROW

Middle East/Africa

Japan

Australia/NZ

Academic test volumes by country

The influence of European Enlightenment ideals on American political institutions may have dwindled

in the nineteenth and twentieth centuries. However, a more general respect for the secular, liberal

humanism of the founding fathers - and for the spirit of scientific enquiry __ ___ by

Benjamin Franklin, who was extravagantly _____ by the French Enlightenment philosopher

Turgot as a liberating hero who “__ fire from the heavens and the sceptre from the

tyrant's hand”- __ __ far beyond the lifetime of Thomas Jefferson.

In the text below some words are missing. Drag words from the box below to the appropriate place in the text. To undo an answer choice, drag the word back to the box below the text.

depicted

suggested realisedendured

believed

seized

embodied

Pearson Test of English: Sample Test Question

The text boxes in the left panel have been placed in a random order. Restore the original order by dragging the text boxes from the left panel to the right panel.

Modern usage of the term is much broader.

However, in the contemporary English-speaking academic world, the term refers implicitly to analytic philosophy and, in non-English speaking countries, it often refers to a European strain, continental philosophy.

The concept of philosophy encompasses all of knowledge and all that can be known, including the means by which such knowledge can be acquired.

Both as a subject matter and an activity, philosophy has almost as many definitions as there have been philosophers yet no simple definition can do it justice.

The word is derived from the ancient Greek words philo-, to love or to befriend, and -sophia, wisdom.

Pearson Test of English: Sample Test Question

Look at the map above. In 25 seconds, please speak into the microphone and describe in detail what the map is showing. You will have 40 seconds to give your response.

25242322212019181716151413121110090807060504030201Recording

Pearson Test of English:Sample Candidate Performance

The world leader in English language education

Strong growth trends

Unique global/ local publishing model

Unrivalled scale, investment, geographic reach

New opportunities in technology, assessment, solutions

United Kingdom

Rod BristowPresident

School, Higher Education & Professional EMEA

Jerry JarvisManaging Director

Edexcel

UK trends: Investment

91.586.181.9

76.270.767.562.959.0

52.949.744.440.838.737.4

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08B

2008-09B

2009-10B

2010-11B

Expenditure on education in England, £bn

Source: HM Treasury

UK trends: Technology

741

611594540

409

249199

2001 2002 2003 2004 2005 2006 2007

Government funding for ICT in schools, £m

Source: BECTA


7.9 7.36.5

5.4 4.94.1 3.6

6.26.77.57.9

10.111.8

12.6

2000 2001 2002 2003 2004 2005 2006

Primary Secondary

Number of pupils per computer used for learning and teaching

Source: BECTA


6055

52 50 49 49

4138

34 3430 28

UK NL Slovenia Poland Norway Denmark Germany EU av. Italy Finland Ireland Sweden

% of teachers with access, competence and motivationto use the internet and computers in classroom situations

Source: BECTA

UK trends: Focus on Outcomes

8%

29%25%

23%

School HigherEducation

Assessment

3%

28%

School HigherEducation

Assessment

2002 2007Source: Pearson

Pearson Education UK: Harcourt and Edexcel transform strength and breadth

The UK’s leading education company

High Stakes assessment

Professional development

RM

Formative assessment

Curriculum content

Learning management

School enterprise software

Infrastructure

Capita

Publishers e.g.Nelson

ThornesPearsonMarket presence

Harcourt on track to deliver Benefits

Source: Management estimates

Full integration brings significant savings

As market leader we

1. Are applying our technology lead on a much larger scale

2. Are building assessment for learning solutions with Edexcel

3. Have unrivalled sales and marketing reach

NorthernIreland

Wales

UnitedKingdom

Vocational education

171 202 257 293 309619

66157

246

7185

94

114

14138

46

2931

34

33

28

19

1513

2004 2005 2006 2007 2008

BTEC FE BTEC Schools NVQ

BTEC Employers BTEC International

Number of students taking BTEC qualifications, ’000

Source: Pearson

“We have a 21st century, internationally celebrated qualification - the A-Level -

underpinned by a 19th century cottage industry in which workers are paid piece rates and24 million scripts move about the country

at the whim of the Post Office."

Ken Boston, Chief Executive of the QCA (2002)

“A Victorian Cottage Industry”

On-screen marking in the UK

24%

66% 69%76%

87%

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

% of scripts marked online

Source: Edexcel

“…the English system now has some of the most sophisticated technology in the world…

I would suggest that it was Pearson’s acquisition of Edexcel… that has had the most powerful

effect in terms of driving modernisation.”

Simon Lebus, Group Chief Executive,Cambridge Assessment (2007)

“A Victorian Cottage Industry”…transformed

New opportunities:Diagnostics

3,588

5,431

8,541

11,785

Feb '08 May '08 Aug '08 Nov '08

No of teachers using ResultsPlus (ytd)

Source: Pearson

New opportunities:Assessment for Learning

Source: Pearson

89,150

38,166

19,803

2006 2007 2008

Student Registrations

The UK’s leading education company

UK is a leader in education technology; highly focussed on learning outcomes

Our business transformed through acquisitions of Edexceland Heinemann UK

Unique opportunity to improve attainment across school, further and higher education

Leader in work-related training; opportunities for international expansion

Southern Africa

Fathima DadaPresident

Maskew Miller Longman, South Africa

Morocco, Algeria, Tunisia, Libya, Egypt are part of Pearson’s Middle East Division

Teacher training and professional development

Full solutions and support

Assessment and testing

Academic textbooks

Vocational qualifications

Vocational textbooks

Home learning

School elearning product

School textbooks

CompetitorsPearson

SA

Southern Africa’s leading education company

Africa trends: Millennium development goals

54 5871

80 83 8898 97 96

1991 2000 2006

Sub-Saharan Africa Developing regions Developed regions

Total net enrolment ratio in primary education * 1990/91, 1999/2000, 2000/06 (%)

Source:UNESCO

Africa trends: Participation

Enrolments in Sub Saharan Africa (m)

Source: UNESCO

80.8109.7

21.3

33.1

8.35.1

2.1

3.5

1999 2005

Early childhood

Tertiary

Secondary

Primary

32.8m

42.4m

1999 2005

Africa trends: Participation

Out-of-school children (primary), Sub Saharan Africa

Source: UNESCO

Africa trends: Class sizes

Teacher/student ratio in Sub Saharan Africa

41

25

45

28

primary secondary

1999 2005

Source: UNESCO

Africa trends: Investment

105.0

92.084.0

76.071.0

62.056.051.047.046.045.0

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Expenditure on education & training in South AfricaRbn

Source: Stats SA

Africa trends: Effective education

International TIMSS and PIRLS studyOutstanding 4%

Achieved 8% Not achieved 81%Partly achieved 7%

Mathematics

Outstanding 14%

Achieved 14%Not achieved

63%

Partly achieved 9%

Literacy

Source: Department of Education findings : RSA

4045Total Participants

46%4041%45South Africa

50%3960%40Morocco

62%3663%34Indonesia

77%72%International AV

83%1776%20New Zealand

83%1277%18England

83%1178%15United States

87%178%12Russian Fed

87%290%3Hong Kong

--91%2Korea, Republic

86%393%1Singapore

%Rank%RankCountry

LiteracyNumeracyResults

Pearson Southern Africa

Majority ownership of SA’s leading education company

Integrate Maskew Miller Longman, Heinemann & Edexcel

Integrate Higher Ed, Vocational Publishing and back office

Maintain two distinct School publishing operations

Invest in assessment and school improvement

Create continental Centre of Excellence for educational services and solutions

US

60%

New opportunities: Job creation and vocational education

Southern Africa’s leading education company

Significant growth in enrolments and investment; urgent need for more effective education

Successful record of growth in publishing

Transformed by acquisitions of Heinemann SA & MML minority; launch of Edexcel

Creation of regional hub for assessment, technology, teacher development, solutions

Model for Pearson’s emerging market strategy

Driving profitability and cash

Improving the gross marginShare global platforms / content / best practicePublish more for less, more quicklyInstil greater rigour in our pricingUse our scale in purchasing

Managing overheadsStreamline management and organisationCentralise back office functionsBenchmark key activities

Maximising cash generationGrow subscription/registration activitiesEngage more directly with customersModernise distribution/customer serviceManage plant and inventory more tightly

Diverse product mix

School

Higher EducationEnglish Language Teaching (ELT)

Academic Assessment

& Testing

Vocational Assessment &

Testing

Source: Pearson

Revenue by channel

Pro forma sales including full year impact of 2008 transactions

Sales (£m) Operating profit (£m)

Our financial goals

Margin 2.8% 5.6% 9.1% 11.4% 12.5%

CAGR: 14% CAGR: 66%

431484

559

640

735

2003 2004 2005 2006 2007

12

27

51

73

92

2003 2004 2005 2006 2007

“Every country that sustained high growth

for long periods put substantial effort into schooling its citizens

and deepening its human capital.”


international education: a world of opportunity...uk occupational trends, 1982-2012 (‘000s of...

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