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Pearson Pearson Communacopia XII Communacopia XII
1 October, 20031 October, 2003
School 27%
Higher Education 18%
Professional 19%FT Group 17%
Penguin 19%
Financial priorities Financial priorities
Deliver steady earnings growthDeliver steady earnings growth
Improve cash generationImprove cash generation
Improve return on invested capitalImprove return on invested capital
Outlook 2003 Outlook 2003
Steady growth at Penguin, Higher Ed, IDCSteady growth at Penguin, Higher Ed, IDC
Strong competitive performance in flat US School marketStrong competitive performance in flat US School market
Professional affected by TSA; underlying business Professional affected by TSA; underlying business growinggrowing
Advertising and technology markets still tough; Advertising and technology markets still tough; further cost actionsfurther cost actions
Looking ahead . . . Looking ahead . . .
Steady growth in Penguin, Higher Ed, IDCSteady growth in Penguin, Higher Ed, IDC
Slow adoption year in ’04; strong rebound in ’05 / ’06Slow adoption year in ’04; strong rebound in ’05 / ’06
School operations benefit from No Child Left BehindSchool operations benefit from No Child Left Behind
Business newspapers highly geared to ad recoveryBusiness newspapers highly geared to ad recovery
Our agendaOur agenda
Attractive marketsAttractive markets
Leading positionsLeading positions
Efficiency gainsEfficiency gains
IDC counters ad cycle in business information IDC counters ad cycle in business information
0-3% growth in consumer publishing0-3% growth in consumer publishing– Faster growth in niche categoriesFaster growth in niche categories
5-7% growth in K-16 publishing5-7% growth in K-16 publishing– Faster growth in testing, software, ELTFaster growth in testing, software, ELT
Attractive markets Attractive markets
FY ’03FY ’03 FY ’04FY ’04
TestingTesting $384m$384m $390m$390m
Data analysisData analysis $384m$384m $385m$385m
Reading FirstReading First $994m$994m $1,005m$1,005m
Teacher professional developmentTeacher professional development $2,930m$2,930m $2,850m$2,850m
US School: No Child Left BehindUS School: No Child Left Behind
Attractive markets Attractive markets
Rising demand for English as a 2Rising demand for English as a 2ndnd language language
Surge in Federal government testing and trainingSurge in Federal government testing and training
Trend to customisation Trend to customisation
Growth in children’s publishingGrowth in children’s publishing
18
35
45
62
85
1998 1999 2000 2001 2002
18
35
45
62
85
1998 1999 2000 2001 2002
Higher Education: growth in custom Higher Education: growth in custom Sales $mSales $m
Our agendaOur agenda
Attractive marketsAttractive markets
Leading positionsLeading positions
Efficiency gainsEfficiency gains
Leading positionsLeading positions
#1 in K-16 education publishing#1 in K-16 education publishing
#1 or #2 in English language markets #1 or #2 in English language markets worldwideworldwide
#1 in education testing & software#1 in education testing & software
#1 in international education#1 in international education
The leading international and national The leading international and national business newspapersbusiness newspapers
US School: #1 in new adoptionsUS School: #1 in new adoptions
SubjectSubjectOpportunity Opportunity
(est)(est)Market share Market share
(est)(est)
Secondary social studiesSecondary social studies $200m$200m 23%23%
Secondary literatureSecondary literature $110m$110m 40% +40% +
Elementary social studiesElementary social studies $100m$100m 58%58%
Elementary readingElementary reading $80m$80m 30% +30% +
Total competed forTotal competed for $585m$585m 35%35%
Total – all adoptionsTotal – all adoptions $690m$690m 30%30%
0%
2%
4%
6%
8%
10%
12%
14%
1999 2000 2001 2002 H1 2003
Pearson Education
Rest of industry
% change in Higher Ed gross sales vs. prior year% change in Higher Ed gross sales vs. prior year
US College: still beating the marketUS College: still beating the market
SOURCE: MANAGEMENT PRACTICE DATASOURCE: MANAGEMENT PRACTICE DATA
+8.6%+8.6%
+0.3%+0.3%
1996 1997 1998 1999 2000 2001 2002
UKUK
EuropeEurope
AsiaAsia
USAUSA
The FT’s international expansionThe FT’s international expansionCirculation ’000sCirculation ’000s
332332353353
414414
467467 478478459459
302302
Our agendaOur agenda
Attractive marketsAttractive markets
Leading positionsLeading positions
Efficiency gainsEfficiency gains
Managing costs aggressivelyManaging costs aggressively
Driving down working capitalDriving down working capital
Integrating Pearson Education and PenguinIntegrating Pearson Education and Penguin
Efficiency gains Efficiency gains
The world’s largest book companyThe world’s largest book company
Source: annual reports, analyst reportsSource: annual reports, analyst reportsNote: 2001 median GBP / USD exchange rate = 1.45Note: 2001 median GBP / USD exchange rate = 1.45
Estimated 2001 book revenues ($m)Estimated 2001 book revenues ($m)
869
959
988
1,000
1,828
1,858
2,322
4,188
Harcourt / Reed Harcourt / Reed
News CorpNews Corp(Harper(HarperCollins)Collins)
HoltzbrinckHoltzbrinck
ScholasticScholastic
BertelsmannBertelsmann
McGraw HillMcGraw Hill
PearsonPearson
Houghton MifflinHoughton Mifflin
Attractive marketsAttractive markets
Leading positionsLeading positions
Efficiency gainsEfficiency gains
. . . to deliver steady annual progress . . . to deliver steady annual progress in earnings, cash and returnsin earnings, cash and returns
Pearson Pearson Communacopia XII Communacopia XII