Pearson Aktie

Good morning, everyone, and welcome to Pearson's 2026 Interim Results. Today, we will host a presentation followed by a Q&A session. [Operator Instructions]

And with that, I'll hand over to Omar.

Thank you, Alex.

Good morning. It's a pleasure to be with you again today. I've really been looking forward to it. I'm pleased to be joined by Simon Robson, our great new CFO. Simon will run you through our financial results for the first half, alongside his initial reflections following early engagement with the Pearson teams and many of you in the investment community as well.

And as usual, we'll be joined by our colleagues Art, Tom, Vishaal and Sharon for Q&A.

Let me start with the key takeaways from today's presentation. First, we have delivered a good H1 financial result with revenue up 4%, profit up 14% and EPS up 19%, alongside continued strong cash flow strength, strong cash flow. Second, we are on track to deliver our guidance for the year. And third, we continue to be excited about the future for Pearson. Our relationship with a leading AI lab reinforces our conviction that advances in technology are driving major demand for the validation of new skills with Pearson uniquely placed to benefit.

Before we go into the results, let me begin with reminding you Pearson's unique characteristics and enduring strengths that drive resilient profit and cash flow and that helped deliver our encouraging financial results in H1.

90% of our profit comes from Assessments & Verification, virtual schools and print. These businesses are driven by human-led services were complex, interconnected physical and digital workflows enable large-scale delivery, often within highly regulated markets. Our services act as verification infrastructure for skills globally, spanning companies, industry associations, states and government agencies.

The remaining 10% of Pearson's profit comes from digital courseware, predominantly in U.S. Higher Ed where we are deeply embedded in critical workflows of decision-makers, delivering solutions that enable educators to deliver courses end-to-end.

These characteristics, alongside our competitive strengths underpinned by trust, deliver a clear value proposition for our customers, powering our financial performance.

Let me come next to our guidance for this year. As we have showed you several times before, this is the framework by which we operate. Execution against this framework is already translating into delivery. We grew revenue by 4% in H1 and remain on track for our full year guidance. Our confidence in driving consistent mid-digit top line growth and margin expansion over the medium term is underpinned by continued execution against this framework.

This includes core business improvements, unlocking execution synergies and driving our medium-term growth vectors.

Let me pick out a few highlights across each of those areas.

Firstly, we continue to drive performance across our core businesses. In Assessments & Qualifications, we are delivering continued enterprise growth with our Google Cloud certification program launching in H1 and securing a new contract with a leading AI lab, which I'll talk more about shortly. Our Clinical business delivered strong growth benefiting from international demand and digital expansion. In U.K. and International Qualifications, we delivered the first large-scale testing cycle for U.K. primary schools, marking approximately 2 million papers.

As some of you may have seen, technical issues with the new platform led to a short delay in the delivery of results. We apologize for the disruption and move quickly to support schools and strengthen delivery for future cycles. Moving to Virtual Learning. This business unit is clearly having a standout year, underpinned by a positive market environment, recent share gains, investment and ongoing strong execution.

We were successful in all 10 long-term contract renewals this year and are on track to open 5 new schools for the upcoming academic year. We continue to feel confident about the sustainability of strong growth for this business into the medium term.

In Higher Education, inclusive access continues to be a key priority, and we're seeing improved performance here, reflecting go-to-market changes implemented in H1, including revised incentives and better market intelligence for our sales teams. Inclusive access growth accelerated to 23% in Q2 and now represents 50% of our U.S. core courseware business. In Enterprise Learning & Skills, Enterprise solutions continue to be a key driver of growth through powering enterprise AI up-skilling at scale, including delivering a suite of AI learning programs to our strategic partners.

For example, we delivered a strategic AI fluency program for Cognizant's global sales and consulting teams, enabling them to become more effective individually, while also supporting high stakes technical sales conversations. In vocational qualifications, we continue to execute strongly, including in international markets, where we extended our contract with the Jordanian Ministry of Education and successfully launched a vocational skilling program for construction in Saudi Arabia. Lastly, in English Language Learning, Institutional performed well with continued enterprise growth, although the backdrop for international mobility has become more difficult since we last spoke, with softer study abroad trend continued tight migration policies and the geopolitical disruption weighing on demand.

With this backdrop, I'm I'm pleased that our teams are outperforming the market and executing well, showing clear operational resilience. Although we expect market headwinds to persist in the near term, we do remain confident in the long-term attractiveness of this business given demographic factors.

Now let me touch upon progress in unlocking value through our execution synergies. We continue to identify areas of opportunity to break down silos, fix fragmented approaches and drive operational effectiveness.

First, let me pick out a few examples across the implementation of Pearson-wide operational systems.

Our work to date on content development processes has identified nearly 150 distinct content tools and over 140 different approaches to describe tag and structure content assets across Pearson.

We're systematically working through to standardize our approach here, moving towards Pearson-wide workflows supported by agentic Technologies.

We continue to make AI-enabled process improvements. For example, included in customer services, where AI self-service is now in -- is handling 40% of customer interactions across voice, chat and e-mail in our initial rollout phases. Our new revenue operation team is driving a more consistent disciplined approach to forecasting and sales incentives. We're consolidating more than 130 individual sales incentive plans across Pearson into about 30 streamlined, role-based plans aligned to a common set of principles.

Second, we're continuing to drive product innovation and leverage benefits from our modern software approach, combining new technologies alongside our data, quality IP and core assessment capabilities. We have launched new products in ambient assessment like Communication Coach and have been pleased with early feedback from customers. We're also expanding our Clinical business with AI-enabled functionality that enhances our platform offering, supporting our continued digital strength. And we're leveraging our data and applying our learning science to drive improved learner outcomes. For example, at Higher Ed, where our latest research shows that by using our AI adaptive products, students were 90% more likely to reach initial mastery in the topic versus legacy education tools.

And lastly, we're leveraging our strategic partners to unlock value and improve operational effectiveness. Our latest strategic partnership announcement is with Adobe, who we're supporting -- who are supporting our efforts to rebuild and upgrade our digital estate, enabling easier selling and purchasing.

To shine a light on where we are today, we manage 4,500 web domains, of which over 300 are product-focused. We're simplifying this web estate and redesigning it to fit core customer personas and journeys. In parallel, we're upgrading our e-commerce capabilities to improve performance, ensuring our customer platforms are ready for LLM discoverability and agent-driven experiences. As you can hear, there are a lot of activities ongoing across the group to drive execution synergies.

We're investing in these changes because we are very confident that they will continue to deliver cost efficiencies, underpinning our 40 basis point medium-term guide as well as increasing our operational agility and supporting an improved and more consistent top line performance.

Finally, I want to share an update on our progress with our medium-term growth vectors. Firstly, with enterprise skilling.

The first half results demonstrate growing momentum across our key enterprise offerings. Pearson Professional Assessments grew well. Enterprise Solutions delivered strong double-digit growth, and we're seeing continued enterprise opportunities for our English offerings. We are delivering continued success in strategic account growth, increasing our network to 10 during the first half.

These new long-term relationships secure incremental joint go-to-market and the monetization opportunities for Pearson. I now want to spend a few moments on AI skills verification.

We've spoken before about the widening gap between the pace of AI innovation, people's ability to use it effectively and the returns enterprises are seeking from AI. Our agreement with a leading AI Lab to deliver their global certification program reinforces our leadership in skills verification and our conviction that AI adoption increases demand for trusted, validated new skills. I'm particularly proud of how quickly our team moved from initial discussion to global launch across our Pearson Professional Assessment network in just a matter of months. This speed reflects both the pace and the technology industry expects and Pearson's agility in delivering at global scale.

Overall, this agreement is a clear signal of the demand we expect to see as organizations scale AI adoption and Pearson is uniquely positioned to help meet that need. In Early Careers, we continue to make progress in unlocking this large adjacent market opportunity. The eDynamic Learning integration is progressing well. We're pleased with performance and we continue to expect this deal to be supportive of our medium-term guidance. We've also successfully brought together our sales teams and capabilities across our early career assets that we first signaled at prelims, including eDynamic Learning, Certiport and career and technical education, meaning Pearson now offers a complete explore, learn, practice and certification continuum. This revised go-to-market approach is unlocking near-term cross-sell revenue synergies and initial school district customer feedback has been encouraging, meaning we feel confident in our value prop and our ability to address this large market opportunity.

Now let me hand over to Simon for a deeper look at our first half financials.

Thanks, Omar. Great to be with you all and good morning. Before I add on to the first half results and full year outlook, let me take a couple of minutes to reflect on my first 3 months in this role. I've been spending most of the time engaging with Omar and the executive team, going deep on the business and our offerings and connecting with colleagues from across Pearson. I've also met and listened to many of you across the investor and analyst community, which has been an important investment of my time. .

And everything I've seen so far has reinforced my conviction that Pearson combines leading positions in attractive markets, structural growth opportunities and resilient cash generation. The speed that Omar and the leadership team are moving at to unlock these opportunities is impressive. My role is to work closely with Omar to continue this momentum, deliver sustained growth and consequently drive shareholder value. Three areas I've identified to be my early priorities are continued disciplined investments, operational excellence and simplification and transparency.

So just quickly on each of those. Driving sustainable growth requires thoughtful and disciplined investment, making choices about where to back growth, where to improve returns, where to reallocate internally as markets and technology evolve. Our capital allocation priorities have served us well and will remain unchanged. My focus will be on improving our processes, reinforcing our investment discipline and ensuring our approach facilitates the optimal return for Pearson as a group.

With regard to operational excellence, I see opportunity to get Pearson working more effectively across the business units. And this matters because the growth opportunities in front of us will require us to move quickly, share capabilities and put the end customer at the center of our efforts.

I will take a fresh look at resource allocation and how we develop the capabilities to be more agile, whilst keeping decision making close to the business. And lastly, on simplification and transparency. I've heard from many of you that Pearson can still feel complex when looked at from the outside. There is an opportunity to make the business easier to understand, including by continuing to improve how we explain our growth drivers, our investment choices and the link between operating progress and financial outcomes.

Now on to our financial performance. We have delivered a good financial performance in the first half. Group revenue is up 4% on an underlying basis, in line with our expectations. Group adjusted operating profit is up 14%,underlying to GBP 226 million, with 140 basis points of margin expansion to 15.5%.

Profit performance is driven by operating leverage and cost efficiencies, partially offset by investment and inflation. In addition, profit benefited from the one-off impairment of legacy product development assets announced at the full year, alongside investment phasing.

Adjusted earnings per share increased 19% at constant exchange rates and 18% on a headline basis to 28.9p, reflecting the increase in adjusted operating profit and a reduction in share count due to the share buyback, partially offset by interest -- increased interest costs.

Our balance sheet remains robust, driven by another strong cash performance, enabling further investment in the business and increased shareholder returns, including our accelerated GBP 350 million share buyback. Reflecting our performance and confidence in the outlook, we are proposing a 5% increase in our interim dividend to 8.2p.

Walking through the key elements of business unit performance. Assessment & Qualifications returned to growth in Q2, as expected, with H1 revenue increasing 2%. This was driven by strong performance in Clinical Assessment. Growth in U.K. and International Qualifications and Pearson Professional Assessments, partially offset by a decline in U.S. student assessment, which was impacted by the previously disclosed loss of the New Jersey contract. Margin declined 20% as trading performance was more than offset by sales mix and delivery costs.

Virtual Learning grew 19%, reflecting strong enrollment momentum in the 2025, 2026 academic year, with enrollment growth accelerating to 15% in the spring semester alongside funding and favorable mix. Margin increased to 18%, driven by strong revenue growth and operating leverage.

Higher Education revenue grew 2% driven by continued solid performance in our core U.S. courseware business and the return to growth in the K-12 channel.

This was partially offset by a decline in International, reflecting challenging trading conditions in mature markets, although the business is stabilizing as our turnaround plan progresses.

Margin increased to 6% due to operational leverage, continued cost efficiencies and the lower amortization costs following the 2025 product development impairment.

English Language Learning revenue declined 3%, with growth in institutional, more than offset by declines in Pearson Test of English. Margin improved slightly with cost efficiencies offsetting trading performance.

And Enterprise Learning & Skills revenue grew 7% with another solid performance from vocational qualifications and continued strong growth in Enterprise Solutions, supported by the monetization of our strategic partnerships. Margin increased to 28% with operational leverage from revenue growth, partially offset by investment in the business.

Free cash flow was again strong, up GBP 103 million from last year to GBP 259 million. Operating cash performance was driven by disciplined working capital management and benefited from payables timing and one-off proceeds from the settlement of a U.S. insurance policy. Cash interest and tax payments returned to more normalized trends following the GBP 114 million one-off benefit received last year due to the state aid refund.

Our balance sheet remains robust, enabling further investment in the business and increased shareholder returns. Net debt increased by GBP 0.3 billion to GBP 1.3 billion at June 2026, reflecting strong free cash flow generation more than offset by share buybacks, acquisition spend and dividends.

So turning now to the outlook for the remainder of the year. We are where we expected to be at the half year point, and we are on track to deliver on the guidance we set out at prelims in February. Specifically, group underlying revenue growth of mid-single digit Group adjusted operating profit within the range of GBP 640 million to GBP 685 million at FX rates as at the end of last year, and we expect free cash conversion of 90% to 100%.

We continue to expect growth to improve in H2 supported by new business products and pricing in A&Q and continued progress in inclusive access pricing and the K-12 channel in Higher Education.

Virtual Learning had a standout H1 and demonstrates continued momentum, and we expect this business to grow well in H2 despite the tough comparable, supported by strong market trends. We expect group growth to be weighted to Q3 given the shape of last year and known business unit dynamics.

Turning now to business unit expectations for the full year. We have updated guidance for English Language Learning, where growth this year is less certain given first half trading and market conditions. However, there is clear resilience in the Pearson portfolio. as evidenced by our first half results, and we remain confident in delivering our guidance for 2026.

Let me step through business unit considerations as a reminder. Assessment & Qualifications to grow low to mid-single digit in 2026, driven by new contracts, products and pricing. Virtual Learning to deliver stronger growth than 2025, driven by a full year enrollment growth. Higher Education to grow more than 2025, supported by continued product and platform innovation, pricing and inclusive access in our U.S. -- core U.S. courseware business with improvement in the K-12 channel.

English Language Learning performance to be driven by market share gains and pricing in institutional, with Pearson Test of English expected to decline given the challenging market backdrop.

Enterprise Learning & Skills growth to be driven by a solid performance in vocational qualifications and strategic account growth in Enterprise Solutions.

So let me repeat my key takeaway. My first 3 months have reinforced my confidence in Pearson position and prospects. We have strong foundations, resilient cash generation and clear opportunities to drive sustained growth and shareholder value. I'm excited for the road ahead and look forward to keeping you all updated.

And with that, I'll hand back to Omar.

Thank you, Simon. So as you've heard, we've delivered a good H1 financial result. We are on track to deliver our guidance for the year, and we continue to be excited about the future for Pearson. And with that, Simon and I along with Art, Tom, Vishaal and Sharon, we'll be happy take your questions.

Operator, over to you.

[Operator Instructions]

Our first question comes from the line of Ciaran Donnelly from Citi.

A couple of questions from me. Firstly, -- just in terms of the divisional guidance for the full year, obviously, the only material changes is on ELL. And I was just wanted to ask incrementally, is there any of the other divisions that you're positive on? because clearly, ELL is slight negative, you've reiterated the guide for the full year. So it'd just be good to get any kind of insight into any incremental positivity on any of the other divisions vis-a-vis this time at the start of the year.

And number two, just on A&Q margin, could you just talk us through the recoverability in H2? And just help us think about maybe full year margins versus last year?

So let me sort of make a couple of little comments here. You mentioned ELL. The institutional part of ELL is performing really well. So we feel very good about that. But you're right, we're sending a little message saying that the migration market still remains a tough backdrop. It's still declining relative to last year, but at a slower rate, just to be very clear. So last year, it was down 15% in 2025. This year, it's declining but at a much slower rate than that. But we just want people to know that it's still a bit of a tough backdrop for that market.

As you saw in H1, I'm really delighted with how ELS performed both in vocational qualifications and in Enterprise Solutions. Enterprise Solutions now has had several quarters of really excellent strong growth. We feel very good about that looking forward as well. So that's a good one. Simon mentioned with Virtual Schools, despite the tough comp, for H2. Virtual Schools are going to grow faster than it grew last year. So we feel very good about how that business is performing.

And again, as you've heard, Higher Ed is also going -- is on a stronger track than last year. Last year, Higher Ed had some switch over in the sales team for the core K-12 assets. That business is back in growth now. So we feel good about Higher Ed overall for this year as well. So that's like just some thoughts there for you.

On the A&Q margin, I'm going to bring Simon in to just comment on how we're thinking about that.

Hi, Ciaran, thanks for the question. I want to note, Ciaran, you are the first asker of a question to me as CFO of Pearson, so thank you for the special moment.

So on A&Q margin, so a few things to understand that happened in Q1. So I called out sales mix, and I should have called out when I mentioned delivery costs, onetime delivery costs. So a couple of things that weighed down the margin in H1. On the sales mix, we obviously ended the New Jersey contract. That was a very -- by the point we exit, obviously, a very mature contract. The shape of all of our contracts tends to be that they are less -- they're lower margin at the start and then they mature and we increase the margin over time.

So New Jersey one exited at a good margin rate, and we started the U.K. SATs contract, which, given it was the first year of the U.K. SATs contract, then at a lower margin. So that weighed down on margin, but that will normalize out over time.

And then the onetime delivery costs that I mentioned were in relation to the SATs contract. And obviously, we don't expect those to be here this time next year. So that's what's weighing down and gives us growth in the margin going into H2 and obviously contributes to my confidence in the full year guidance for the GBP 640 million to GBP 685 million overall group profit.

Our next question comes from James Tate from Goldman Sachs.

James Tate from Goldman. I've got 3 questions, please. I guess, firstly, on the new certification contract with an AI Lab. Could you just provide a bit more detail on this contract? I guess, in particular, could you help us understand how to think about the scale of the contract in terms of volumes and revenues as well as the timing? Will this contract roll out later this year?

And secondly, on A&Q growth, growth accelerated to around 5% in Q2, I think, benefited from a number of new contract launches. Could you help us unpack some of the moving pieces in H2? Is this 5% level of growth sustainable, particularly as you lap the New Jersey contract loss? And thirdly, on capital allocation and the share buyback program completed in May and given leverage remains below the 2x maximum you saw set out. Could you explain the rationale to not expand the buyback? Does that mean you're looking more actively at M&A?

Thank you very much, James. Good to hear you. I'm going to take the first question, and then I'll go to Art for the next one, and then I'll ask Simon to comment on capital allocation.

So as you know, James, Pearson is already very strongly established in the technology vertical as a learning content provider and assessment provider of credentialing and digital badging partner. And so -- and I've been saying for a while, AI is a tailwind for reskilling because companies all around the world know that AI is going to reconfigure the nature of jobs and work over the next 10 years, and they want to bring their workforce with them. They want to help figure out how to equip workers to do really well, no matter what their task and roles are with AI. And so that's essentially what the ask is.

And so for me, the AI lab signing us up is just great news because this is like one of the world's leading companies that's seen unbelievably explosive growth, you know all about it. And they're saying that the demand that they're seeing for people wanting to be skilled and qualified in their assets, in their tools is very high. And so they've come to us as Pearson as one of the world's unique providers with a large global network that can scale that delivery across the globe.

And so the work that we're doing with them is essentially assessments and certifications and as I mentioned in the script, normally in that business historically, it would have been 18 to 24 months from start to finish to just launch a program. This one is in a handful of single-digit months that we've gone from start to launching. It is launched. The first tens of thousands of people have come through the doors. But of course, their ambition is much, much higher than that. So it's early days. I don't want to overstate it. But of course, we're excited about that because when some of the world's best companies come to you and say, we want to use your assets and your capability to help verify people and assess people and qualify them in our new technologies. That's a good thing. And so I'm very happy with what Vishaal and the team have done in the Enterprise business building out those relationships. And yes, we expect that to continue to be a strong focus area for us going forward for a long while to come.

On the second question on A&Q and what the dynamics are in terms of growth, we told you that at the end of H1 that we expected to see growth in Q2, that happened. And now you're asking about what happens next. So Art, over to you, please.

Thanks, Omar, and good to have you with us today, James. We're very happy that we did deliver that return to growth in Q2 and also happy to reaffirm our guidance for the year of low to mid-single. And let me talk a little bit about the drivers of that.

First off, in our Professional Assessment business, we're going to see the full year impact of contracts that launched in the second half of last year, and I'll draw particular attention to Salesforce and ServiceNow.

In 2026, we've launched a Google Cloud contract and then the one that you were asking about just a moment ago. with the AI lab. And I'm happy to report as we are sitting here speaking right now, there are test takers around the world sitting that exam.

We also will show this year the revenue from the first year of the delivery of the SATs contract. And again, the clinical portfolio just continues to perform extremely well. We're injecting AI capabilities into a number of those products throughout the year and expect to see the financial pull-through on that. And then lastly, in the second half of the year, the comp effect of PDRI year-over-year diminishes. So those are the factors that have us feeling very, very good about the A&Q outlook for H2.

Thank you, Art. And then Simon, on capital allocation, please.

James, nothing to second question, I'm afraid. So on capital allocation, as you can imagine, I've spent a lot of time looking at that since I arrived here. I mentioned in my remarks earlier that the -- our approach to capital allocation remains unchanged. We assess it regularly. Our priorities are very clear, and I absolutely do not want an inefficient balance sheet.

So let me just touch on the GBP 350 million share buyback that we've done for 2026. So we announced that earlier in the year and then actually Omar and Sally, I can't take any credit for this, responded well to the conditions in the market and the weakness in the price and they started earlier and accelerated that and I think that proved a really good return for shareholders.

But as I say, my capital allocation priorities are invest in the business, always looking at where we can invest and drive great returns. Looking at M&A opportunities, again, we'll be very, very disciplined about how we do that. Omar's laid out the criteria before I won't go through those again, but I'll let you touch on it if you want to, but we'll always be scouring and looking for good opportunities to invest and grow the business.

We announced today a 5% increase in the dividend and then we'll also -- beyond that, we'll distribute any excess capital. But for now, our capital allocation policy unchanged.

Thanks, Simon. I mean, James, if I could just sort of emphasize what Simon is saying. I think over the last few years, we've demonstrated that we're always going to think about shareholders' interest in protecting them and making sure we run an efficient balance sheet. So you can expect us to continue to do that going forward.

Next question, please.

Our next question comes from Nick Dempsey from Barclays.

Got two, please. So first of all, we noticed that ETS bought the ACT qualification recently. I believe that ACT runs on Pearson's platforms and ETS. I know has a lot of experience of being a key service provider to test just like this.

So -- can you tell us, first of all, whether the ACT business is a relevant part of your U.S. Student Assessment subdivision? And whether you have a contract that means you keep that business until a particular date?

Second question, just maybe update us on your latest thinking on college enrollments for fall 2026.

And third question, Simon flagged that the group organic revenue growth is expected to be weighted to Q3. Can you just remind us what the dynamics are that means that weighting will occur?

Sure. I am going to bring in Art for the first question and then Tom, on the second question, and then probably I'll make a comment about the third one.

But just one little intro. You asked was ACT an important customer for us? Every customer is important for us. Just to be very clear, like that is the mindset that we want to have across the business at all times.

But anyway, it's a great question. So Art, over to you regarding ETS's acquisition of ACT.

Absolutely. Nick, good to have you with us today. And yes, you are right. We are a provider via our U.S. school assessment business of a exam -- paper preparation and delivery services for ACT. We've had that relationship for years and that relationship continues through this year, and we expect it to continue beyond that. It's early days post the acquisition, and we're in discussions with ACT management, but we will continue to be providing those services to ACT, and that is reflected in the guidance that we're sharing today.

Thank you, Art. And then, Tom, any thoughts on college enrollments for 2026. This is a long-term favorite with our sell-side friends. So over to you, Tom.

Nick, great to hear you again. So from -- can you hear me okay? Good.

So from a college enrollment perspective, we're seeing slight enrollment headwinds, which is exactly what we said we would expect to see at prelims. That said, we still feel very confident in a strong H2 performance. As Omar mentioned, inclusive access has been an increasing area of focus for us. We've also seen significant improvements in the K-12 market and what we're doing there with the sales team. And then lastly, from an international perspective in higher education, we're very much focused on executing the turnaround there and delivering a strong H2 in that space as well.

So overall, a slight decline in enrollments. I don't think there's any particular surprise there, but very much focused on growing the business despite that.

Thank you, Tom. And then, Nick, on the last question, I don't think there's anything new here for you. So you know that Pearson, there's always some level of seasonality baked into how the business units perform depending on their customer base. And so traditionally, the main back-to-school period for Higher Ed in the U.S., but also parts of national tend to be Q3. And so that's a little bit of that little peaky thing that you see there. Q4 has always been a bit of a bigger one, for example, for English courseware and English institutional.

But on balance, the back weighting in the year is much less this year than we've seen in past years, and we feel good about that as we drive our strategy.

Nick, there's also the Q4 last year, Q4 2025 was very strong. So I think I mentioned that, that obviously means growth in this Q4 will be less.

Good point. The comparable.

The comp.

Our next question comes from David Nolan from Morgan Stanley.

The first one for me is just kind of on the medium-term margin potential. So if we look across the divisions, there kind of appears to be kind of significant tailwinds, especially within Higher Ed, kind of medium-term guidance is only for around 40 bps of annual margin expansion. Could you maybe just help us reconcile the two and explain how you kind of think between the trade-off between growth and margin more broadly? And then my second question is just on the Virtual Learning momentum. So obviously, the announcement of the 5 new school openings is a significant positive. But it would be great to get more color on same school momentum and whether you kind of continue to take market share in the space. And then also, any color on how the Career Learning offering kind of improving your overall competitive advantage in the space as well?

Sorry, Dave, I just want to make sure I heard that correctly. So the second question you're asking is about virtual school momentum with the new schools and market share. And the third one was you said career learning, you mean the early career stuff, is that what you're asking about?

No, just within virtual learning itself. The career learning.

Oh, the career path, okay Career pathways with virtual schools. So question 2 and 3, I'll come to Tom. Let me take the first one directly. So I mean what we've been trying to say for a little while is Pearson, if I go back in history, ran itself a little bit like a holding company with a lot of separate units each doing their own thing. And the separate units were not 5 business units. It was like the next click down. It was too many like more than 20 smaller units.

And what we've said is, no, we're going to run the company more as a unified operating company. We simply don't need to run it so fragmented. As you defragment, you create productivity and performance opportunities. And it happens at every level. If you look at go-to-market, if you look at product, if you look at technology infrastructure, if you look at vendors, there's just an opportunity to do things more effectively and efficiently, and that's what we're doing. So the journey we're on is constantly improving our margin performance.

And the reason we're so confident about the 40 bps is, yes, you're right, Dave. I mean, last year, I think Sally said this, is when we drop 30 bps to the bottom line in 2025, actually, the investment capacity we created was about 200 bps because we want to reinvest in the business for future growth.

And so that is exactly the formula you should expect us to continue to drive. We will constantly work out to improve our fitness. So even when we're fit, we'll go back to the gym and work out some more, that's the gig and we'll expand the investment capacity and will drop at least 40 bps on average over time over the medium term, and that's the promise from us to the market.

So I hope that makes sense. I'm going to go to Tom now on virtual learning.

Tom, and you heard there were 2 bits there in terms of how do we feel about the current growth potential and market share market -- excuse me, I'm choking -- and then career pathways and how we see our growth opportunity there.

Well, I better make sure you don't shake on the answer. So look, I mean, a great question. And look, I think in this space, we feel very pleased with our first half performance. And as you take a step back, I think the overall market for virtual learning continues to be really, really strong.

We don't see any signs of that abating. And that's fundamentally being driven by the U.S. school choice movement and parents taking like a more active role in education decisions.

So that's kind of the market backdrop, and we see that market growing high single digits on an enrollment basis in '25, '26, and we see that we're doing better from a share perspective there. We're doing that as a result of being really, really forensic in our marketing funnel and being really, really disciplined in terms of understanding where we can improve funnel conversion where we can see opportunities to improve operationally and continuing to do that. That's fantastic, and that will continue to be an important driver for us against that market backdrop.

In the context of thinking about sort of -- and that applies obviously both to the same schools and then the new schools we're excited about because some of those are in some states where demand has been a little constrained in the past few years.

So we're super excited about the new schools over the medium term as well as the sort of the same-store momentum. In terms of the career offering, I think the way to think about this is twofold. Firstly, parents and kids are increasingly thinking about what their career options are, and they're doing that earlier and earlier as low as eighth grade. So that then means that the world is sort of high school, higher education and work are blurring.

And so this is giving kids the opportunities to do fantastic things. So for example, micro internships with IBM. And that then means that we have an opportunity not only to engage students in their career choices earlier, but also this helps drive retention because as students enter the high school, they're thinking about what to do. The things that we're doing here are really helping them think about what they want to do next in their career.

And so we're excited about what we're doing with the career education part of PVS. We think it's a great part of the value proposition to parents and to students. And we're really, really pleased with the performance of the business.

Thank you, Tom. Any other questions? .

We currently have no further questions online. So I'd like to hand back to the room.

Charlie, thank you for your question. I'm afraid I think they've already been answered. So we have no further questions from the platform.

Okay. Well, all of you who are with us today, thank you so much for your interest. We really appreciate it. We know you could be doing something else. We appreciate your interest in Pearson. And we hope you enjoyed the session today, and we look forward to seeing you soon. Take care, everyone.

All right. Good morning, everyone. On behalf of the Pearson Board, I would like to welcome all those online and in the room to our Annual General Meeting. There's a quorum present, and we can start the meeting. I'm Omid Kordestani, the Chair of Pearson. I'm pleased to have opened the meeting with a video telling the powerful story of Savannah. She is the embodiment of millions of learners who rely on Pearson to help them adapt and thrive. Savannah was a Connections Academy student challenged by the loss of a parent and by bullying in her brick-and-mortar school. Her experience at Connections Academy propelled her to NYU. Her story also captures something more profound about the world of learning today. There is no longer a single path. People are thriving in virtual classrooms, earning micro credentials and retraining mid-career, all to keep pace with the world being reshaped by AI.

We have anticipated that shift and have positioned ourselves at the center of this transformation. You'll hear more about that today. I would like to welcome those who are attending in person to our London offices at 80 Strand. For those of you in the room, please place your phones on silent mode. Shareholders joining us virtually through the Computershare platform will be able to participate in the meeting by watching us live on the webcast. They will also be able to vote on the resolutions and ask their questions. When we get to the formal part of the meeting, there will be an opportunity for all shareholders present in the room and online to ask questions.

Shareholders on the Computershare platform can submit questions at any point using the message platform on the left-hand side of the screen. We will endeavor to address any unanswered questions on your website as soon as possible after the AGM.

I'm joined today by Omar Abbosh, our Chief Executive; Sally Johnson, Chief Financial Officer; Graeme Pitkethly, our Deputy Chair and Senior Independent Director and Chair of our Audit Committee; Sherry Coutu, Chair of our Remuneration Committee; Annette Thomas, Chair of our Reputation and Responsibility Committee, along with our other Non-executive Directors, Alex Hardiman, Alison Dolan, Arden Hoffman and Costis Maglaras. Welcome. Esther Lee is not able to join us today. Also with us in the front row is our incoming Chief Financial Officer, Simon Robson.

At last year's AGM, we welcomed Arden, and she joined the Board in June. Arden is the Chief People Officer at General Motors and brings strong expertise in the area of workforce and talent development in the era of AI. Costis joined the Pearson Board last November and is here for his first AGM. Costis is Dean of Columbia University Business School and brings with him significant expertise in academia, AI and tech-driven enterprises. He also has extensive experience in finance, having worked with financial institutions, including Goldman Sachs, Bank of America and Mismi.

In February, we announced that Simon Robson will succeed Sally Johnson as Chief Financial Officer and joined the Board as an Executive Director on 8th of May. Simon brings extensive financial leadership experience from Sky. We're thrilled to welcome them to the Board. Along with welcoming them, we're also saying farewell to our CFO, Sally Johnson, who is with us for her last AGM. In her 26 years at Pearson, she played a central role in strengthening our financial performance and advancing our business and financial transformation. Sally has been a valued member of our Board and a close friend and colleague to many of us. She's leaving to take the role of CFO at a privately held company, and I, along with the Board, wish her all the best in her next chapter. Thank you, Sally.

I'm delighted to join you again and host our Annual General Meeting. It's been another successful and transformational year for Pearson. As AI and demographic change reshapes learning and work, Pearson's purpose to help people realize the life they imagine through learning has never been more relevant. We're evolving to better support learners, institutions and employers as workforce needs shift. Thanks to Omar's clear strategic leadership, the company's disciplined financial management and the focus of our people, Pearson executed against its strategy in 2025 to deliver growth and sustainable returns. Our commitment to innovation and impact is reflected in the continued application of new technologies across our products and services.

Our investments in AI are translating into differentiated offerings, improved customer service, faster routes to market and improved data capabilities. Pearson's focus on moving faster and more effectively is also reflected in the 9 multiyear enterprise partnerships we have signed with leading players such as Microsoft, AWS and Google Cloud. These partnerships will strengthen Pearson's position in bridging skills gaps and helping learners and enterprises adapt in an AI-enabled world.

As AI innovation continues to accelerate, the demand for learning and the validation of skills is increasing. Pearson's deeply embedded position within the global learning ecosystems, strong and trusted relationships and operational scale position us well to navigate the evolving landscape. Leaders are under greater pressure than ever to adopt AI while demonstrating return on investment and engaging employees. The biggest obstacle is a lack of human skills to work effectively alongside these new technologies. Learning and upskilling will augment workers while driving productivity.

In fact, research we published earlier this year showed that if we can augment jobs with AI, we could add up to $6.6 trillion to the U.S. economy alone by 2034. Sitting at the intersection of education, skills and workforce development, Pearson is uniquely placed to help address the needs of an evolving job landscape. Pearson also recognizes the need to encourage upskilling among our own people. Last year, we expanded our learning opportunities for our people, set up professional communities and launched our Pearson lab here at 80 Strand. This will help us encourage a culture of curiosity and collaboration to support faster innovation and execution. We remain uniquely positioned to meet the demands of a changing world. And while there is still much to be done to meet the needs of learners, we see clear momentum as we drive further growth for you, our shareholders.

Our significant strategic progress is evident in our 2025 financial performance, which I will turn to now. Pearson delivered another year of good financial performance. We achieved underlying sales growth of 4% and adjusted operating profit grew 6% on an underlying basis to GBP 614 million. Cash performance continues to be strong with free cash flow conversion of 125%. 2025 also saw margin expansion from 16.9% in 2024 to 17.2%. As a result of our performance in 2025 and strong cash position, combined with our balance sheet strength, the Board recommends a 5% increase in the full year dividend to 25.2p.

Today, we released our Q1 trading update. We have made an encouraging start to 2026 with underlying sales growth of 4%. It demonstrates the continued momentum of the business and the strong execution of our teams in delivering against our strategic priorities. I'll now turn it over to Omar to tell you more about what we achieved in 2025 and talk to our 2026 priorities. Thank you, Omar.

Thank you, Omid, and good morning to everyone here in person and online. It's great to be with you today. I'd like to start by expressing my gratitude to Omid and our whole Board for their incredible support of our strategy and our management team over the past year. I also want to thank our Pearson people for their hard work and valued contributions to another year of good financial and strategic progress. You'll remember, we set out 3 priorities for 2025, and I'm pleased to say that we successfully delivered on all 3.

First, we again delivered a financial performance in line with expectations. Second, we continue to embed AI-based innovation across our products and services, allowing us to deliver more engaging and personalized learning experiences. And third, we're making great progress on our enterprise relationships with the enterprise business now on a journey towards delivering meaningful shareholder value. We continue to be very excited about the future of Pearson, thanks to the megatrends driving strong demand for what Pearson offers and because of the unique characteristics and enduring competitive strengths of our business.

In Assessments and Qualifications, we delivered a solid performance with all sub-business units contributing to growth. Pearson Professional Assessments secured several new contracts, while U.S. Student Assessments announced a partnership with McGraw-Hill. Clinical Assessment grew through strong demand for our digital products together with an expanding customer base. We also launched Revibe, an AI-enabled wearable designed to support focus and self-regulation.

In U.K. and international qualifications, we introduced the GCSE exam Practice Assistant, an AI-powered tool for personalized revision. Virtual learning delivered a strong performance, particularly in the second half of the year with underlying sales up 18%. We opened 2 new schools, bringing our total to 41 schools across 31 states and embedded our career program across the whole network. We're also already seeing that our AI tools are contributing to improved student outcomes with higher grades and pass rates.

The Higher Education business improved as expected versus 2024, driven by a solid performance in our core U.S. courseware business. Our performance has been supported by the expansion of AI features in our offering. And as our AI tools scale and become more embedded in the student learning process, we're seeing learners deepening their cognitive ability and engagement. We'll now show you a short video, which captures the breadth of our AI offering in higher education and how we're improving student outcomes.

[Presentation]

In English Language Learning, we executed strongly with continued growth in the institutional business and customer wins in key markets such as Latin America. Pearson Test of English performed well despite a tough market backdrop, demonstrating its resilience. We advanced our offering with the launch of PTE Express test and the launch of our AI product communication coach developed in collaboration with Microsoft and our ELS business to improve workplace communication skills of both native and non-native speakers within the flow of work. Let's introduce you the communication coach. Please roll the video.

[Presentation]

In Enterprise Learning and Skills, we established our global enterprise sales team and signed multiyear long-term strategic partnerships with a range of key hyperscalers and leading professional services firms. Communication Coach, which you've just heard about, is one of the first examples of many joint go-to-market products that we'll be collaborating on with our new partners. Our achievements in 2025, driven by the agility, ambition and strong execution focus of our teams across Pearson position us well in 2026 and for the future.

Before I talk more about those unique strengths, I want to acknowledge the broader AI-related market uncertainty that we've seen. This uncertainty has affected many companies across media, software and technology. Pearson has felt that, too, but we don't fit neatly into any of those sectoral buckets. We are truly diversified, and we're uniquely positioned. A core part of Pearson is built around trusted human-led services, which I'll describe in more detail.

Additionally, the accelerating demand for reskilling and skills validation plays directly to our strengths. In an AI-driven world, this combination positions Pearson well for the long run. So let's take a step back and remind ourselves of what Pearson does and why we're such a resilient business. Over 80% of Pearson's profit comes from assessments and virtual schools. These businesses are driven by human-led services where complex physical and digital workflows enable large-scale delivery in highly regulated markets. Our services must meet a very high bar for accreditation, authorities and regulators, meaning that strength and operational delivery really matters. Together, our services act as verification infrastructure for companies, industry associations, states and government agencies.

Even in today's AI world, some countries or customers are not ready for digital at any scale, so there will continue to be a need for print-based products for the foreseeable future. That means that about 90% of Pearson's profit stream is coming from operationally complex, interconnected hybrid physical and digital services alongside print. The remaining about 10% of our profits comes from primarily digital courseware, for example, in our Higher Ed business. Here, once again, we have deep relationships built on a foundation of quality and trust. Our digital products are not just content, they're designed to manage a course end-to-end and are tightly aligned with educator and student needs as well as course curriculum and assessments.

Our unique, deeply embedded position in the learning ecosystem gives us petabytes of proprietary data, and we hold leading positions across almost all of our businesses. We have a breadth of offerings that are unmatched globally, and this diversity makes our business model really robust. Trust underpins the strength and breadth of our offerings. And this has been gained through a long track record of operational excellence high-quality IP and our expertise in how people learn with evidence of how we can drive better learning outcomes. This kind of trust and verified skills is even more important in the era of AI.

As the world's lifelong learning company, we're perfectly positioned to benefit from the demand for skilling and the validation of skills. Our unique characteristics of trust, infrastructure level quality, operational strength and breadth of services enable us to deliver strong, durable cash flows and profitability and our deep and enduring competitive advantages provide a unique platform for future growth. I've just talked to the unique strengths and positioning of our business and the progress we're making against our strategy and the opportunities that lie ahead.

For 2026, our strategic priorities are simply an evolution of those that we had in 2025, and they're serving the business very well. First, once again, we will deliver our financial targets. Second, we will continue to lead in the application of innovative technologies, including AI across all our products and services. And third, we will deliver against our core business and enterprise power metrics. Everything that you've heard today highlights how we continue to be very excited about the future of Pearson.

And with that, I'll hand it back to Omid for Q&A.

Many thanks, Omar. Before I ask you to vote on the resolutions, we will be pleased to answer your questions on the business or any of the resolutions. We have encouraged participants to pre-submit questions, and these have been prioritized in terms of responses and will be answered in order of submission. We'll start with these. But as a reminder, you can also ask questions in the room at any time, and you can submit questions at any point using the online messaging function. Any person wishing to ask a question should raise their hand and one of our stewards will make a microphone available to you. For those attending the meeting via the Computershare meeting platform, please submit your questions via the Computershare meeting platform. You can do so by clicking the Q&A icon on top of your screen, type your question into the box and click the send button. We have no pre-submitted questions, so we will take questions from shareholders in the room.

Nick Steiner private shareholder I have 2 questions. The first one, I've been trying to work out how to actually ask it to do with the English language learning. And that obviously has great scope. I don't say which countries you're in, India and China would obviously be that. The second part, as you teach the language, you're also getting expertise in the language of the mother tongue of the learner. So it seems that this is something you could do a reciprocal learning for, say, an English speaker to learn minority language, and it hasn't really been mentioned.

You talk about the AI use, and that obviously makes much sense. Omid sort of mentioned human skills and that sort of thing. And you talk about a Communication Coach. Is that a human or an AI? Or should tutors be involved in this learning? And if that's the case, that would suggest that there's an increasing demand for tutors who can actually sort of speak the necessary languages. I probably better stop there on that. Do you want the second question now?

Let's answer your first one, but thanks for your creativity. I'll have maybe Omar address this.

Pleasure. Thank you so much for being here and for being a shareholder and for your questions. I mean so on English language learning, there are about 1.5 billion people every year learning English. It's by far the biggest language that people are trying to learn around the world. And there's a ton of evidence that when people learn English, it helps them with their careers and with the money that they can earn in their jobs. And so there's a big demand for it.

Our English language learning business serves that need, and it's focused essentially on 2 areas. You have folks who live in a particular market like in Australia, who want to improve their English to improve the jobs that they have access to, and we serve that need. And then you have folks who may live in a country like India who may want to migrate, but need to meet certain visa requirements for language, and we support those learners as well. And so the markets that we're primarily serving that you'll hear us talk about are U.K., Australia, Canada for migration purposes and then in some of those core countries like India and China, the way you mentioned. And so that's our big focus.

Some of the properties inside Pearson have focused on language to language learning. And so you may have heard us a few years ago talk about a product called Mondly. That is in that zone. But for now, I really want the team to focus on the biggest market by far, which is English. The next biggest would be Spanish. And indeed, we've got capabilities and can help in that space. But I quite like focus because it helps us perform better, and that's where we're at. With how Communication Coach works, I mean, Communication Coach is indeed an AI engine running in the background that interprets your speech, for example, in a team's call.

What we found with when you use AI in private with a person, people really like it because they can ask dumb questions. And we also have a ton of evidence that shows when people are effective communicators at work, they have a much better career. Sometimes you can have genius people at work who are poor at communicating and they're genuinely impeded because they can't get their thoughts across. And so Comms Coach is a private tutor using AI that reasons over your speech and then it gives you direct feedback just to yourself in terms of how to improve your communication skills.

And we originally built it for non-native speakers to help people with grammar and pronunciation. And we were very surprised to find it was extremely effective with native English speakers and helping them get their point across better. And it generally helps slightly more introverted people, shy people, et cetera. And it just helps them enunciate what they're trying to say more clearly, and that just helps works at work. And that one, as you know, is in partnership with Microsoft. And so for all the companies in the world that have Microsoft products on their desktop like Copilot or Teams, Comms Coach is a plug-in that appears there and can help people.

Your second question...

The second question really picks up on your strategic partnerships, which seems a sensible way to go. Are we a junior partner in these partnerships? Or do we have a say in it? Or are we sort of much bigger or a senior partner? What are the -- how strong are these partnerships? Are they just for the next year, next 10 years? Or how are they evolving?

I can address at a high level and then Omar can add. But basically, they are very much reliant on strong relationship with these customers and partners, highly negotiated. They're typically multiyear agreements, lots of financial commitments on both sides, lots of product road map work that's committed to. So it's not just an agreement and a relationship. It's also a very tight relationship that builds as we deliver on our commitments and as the partner delivers on theirs to us. So we look forward to delivering these wonderful services from Pearson to them, integrating with their products and services and then ultimately, hopefully delight the ultimate customers of those products and continue to expand these relationships and renew them. That's our goal.

Thank you, Omid. I mean just adding a couple of little points. I mean, so as you know, in any relationship, if you are invested in one another's success, you have -- you're more likely to have good outcomes. I mean, so just to pick on a subset. So we mentioned the professional services firm. So we signed 5 big deals with big professional services companies. Pearson had more than 60 arrangements with professional services companies. But those are all not partnerships. They were simply master vendor type contracts where you're buying time. We wanted to focus on a strategic much smaller number, 5 of partnerships and go deep with one another.

And exactly as Omid said, those are multiyear contracts where we are bringing their expertise to help us with things we need help on and our expertise to help them. A partnership only works if you each bring something. They don't -- they're not trying to be the world's leading learning company. That's where we bring skills. But they may have invested heavily in cloud or frontier models or have a giant distribution workforce in enterprise around the world. And so each of us brings things that we're good at, and you put that together so that 1 plus 1 can be 3 in service of the end customer.

Mic is coming right behind you.

Phil Clarke, a very long-term shareholder. I've actually got 4 questions. So -- but some are easier than others. So can I just give you the first two to start with. First of all, on Page 27 of the accounts in the reconciliation between operating profit and adjusted operating profit, there's a write-off for GBP 87 million for product development impairment. Can you tell us a bit more about that, please?

We're very lucky today, we have two CFOs in the room.

You going to ask the second one?

Let me give you the second one as well. Note 30, Page 221, the acquisition of eDynamic Holdings, we paid GBP 168 million for that, but their turnover is only GBP 18 million, and they're kind of a breakeven sort of business. how will we ever get the money back for our GBP 160 million?

Good question. Thank you.

I think those are both for me. I've forgotten the first one -- it was the write-off. So we made a write-off last year of some of our platform systems within our higher education business. The reason for that is because we are undergoing a project at the moment to converge 3 platforms into 1. That's going to benefit our customers because it's going to make those platforms easier to deal with as a customer. It's also going to reduce costs because then the support cost for those platforms is going to be less. So that's going to be good for us on a go-forward basis, but it does mean that the platforms that we've got at the moment aren't needed, and therefore, we've taken a write-off.

And then on EDL, there's actually an accounting thing. I don't get asked about accounting very often. There's actually an accounting thing that goes on when you buy a company. And effectively, what you have to do is the revenues that you've deferred within that company, you actually have to write down to 0 in terms of the acquisition accounting. And therefore, you don't have that deferred revenue to recognize for about the first 18 months of that acquisition. So that means that the revenues and profits for EDL look much smaller than they actually would if we were recognizing that deferred revenue. Actually, what we've shared is the multiple that we paid on that acquisition was about 13, 14x. And therefore, you'll be able to see that actually once that accounting has worked through, it's a really nicely profitable company with great margins, great growth, and it also releases a lot of cash as well. So you'll see the returns on that in about 18 months when that accounting unwinds. Thanks for your question. 3 and 4...

I misspoke. We actually have 3 great CFOs. We also have my colleague on the Board. I'm so sorry. Sorry. So my jet lag coming from California. So we're well covered.

This is for the collection of CFOs as well, I think. On the consolidated statements of comprehensive income, we took a whopping write-off due to exchange differences of GBP 193 million. which kind of wiped out the profit for the year pretty much, the net profit. And obviously, that -- I'm guessing, but I suspect that's down to the exchange differences because of the weakening of the U.S. dollar, which raised...

We've got 5 CFOs in the room. You've answered your own question.

All right. Maybe this one is more for Simon for you. But 2/3 of our sales are in the U.S.A., 2/3 of our noncurrent assets are in the U.S.A. Surely, this is a U.S. dollar-denominated business, and we should prepare accounts in dollars, and that would avoid these bonkers write-offs through the comprehensive statement. And a second point, I guess part A of the question is, can we convert to dollar accounting. The second part would be our debt is denominated in sterling and euros. Why on earth isn't denominated in dollars to match the income. So I think we've got a currency problem, and it's not quite right. So that's question 3.

So I'll answer that because I forgot the other question before, and then you can ask question 4 afterwards. Great question. And actually something that we've been thinking about in terms of the dollar reporting question. And we've got a project underway at the moment to look at whether it's the right thing to do or not. Obviously, these things aren't simple and you can just switch flip a switch and you can report in dollars, but it's a point well made. And then in terms of our sterling debt, we do actually use derivatives to swap that debt into dollar debt. So the debt matches our revenue profile. The reason that we issue in pounds is because we have great liquidity for debt in the U.K. market. In fact, we issued a bond very recently, and we were 6x oversubscribed. If you want to issue debt in the U.S. market, you tend to have to do it in bigger chunks. And so it's better for us to issue in pounds and then use derivatives to swap it into dollars.

That's very good. And the last question, I think, is more philosophical then because although you've made good steady progress in the results and you -- quite clearly, you're working very hard to drive the business forward. The market didn't love you last year, and it marked you down, but it also marked down heroes such as RELX because of the skepticism about whether or not AI is a good thing or a bad thing and whether you'll be winners or losers. So I don't know if there's anything you'd like to say. I'm sure there's a ton you'd like to say, but it'd be good to have your take on whether you're going to be winners from AI or as the market suspect losers.

Great questions.

I'm happy to talk to that one. We're absolutely going to be winners from AI because AI will force a reconfiguration of occupations across every industry where -- which means that every workflow, every process in every company will evolve. which means that people are going to have to learn new skills of how to work with AI agents in their refined roles, their evolved roles. And we're already seeing that demand most heavily in the tech sector who are already deepest with applying AI. So I'm absolutely certain about that.

Now obviously, I'm not going to speak to the financial markets at large, but as you know very well, it was the whole media sector tanked, the whole advertising sector tanked. Software-as-a-Service sector tanked, information services tanked. At some point, it was wealth managers and freight and logistics truckers as people were running around saying, Anthropic have released a new plug-in and what's that going to cause a drama. So you know markets better than me, they swing, et cetera. But I think in the medium term, markets look at, as Mr. Buffett said, like it's -- in the medium term, they're a weighing machine. So we're going to keep focusing on executing our business. We'll keep driving revenue growth. We'll keep driving cash flows. We'll keep driving profitability. And at some point in the future, people will look at how our EPS has improved over time, and we know that, that will play out because on average, the market is sensible over the medium term, and that's how it will be.

A shareholder and former Pearson employee. Also on AI, I wanted to ask whether you have made arrangements with any AI companies to license content for LLM training. And if so, whether you've consulted your authors to get agreement to those arrangements?

The short answer is no. I don't -- I mean, when I joined the company, people were already making offers to buy Pearson's historic content for sums of money. And my view and obviously, in discussion with the leadership team is that, that is not a strategy. That is like a short-term blip that doesn't particularly help. We're still being barraged by the AI companies who want to use our things. In reality, they have used pirated versions of Pearson copyrighted material. That, as you probably know, is subject to a whole range of lawsuits in the U.S. Anthropic are busy settling one right now. And Pearson Authors will be a beneficiary of that. So in general, I'm not a fan of licensing content as a strategy. I am a fan of allowing third-party organizations to use Pearson learning experiences that may leverage content, but in which case, of course, they would need to be a proper commercial construct underpinning that.

[indiscernible] private shareholder. Pearson is doing very well in advancing its AI capabilities. But unfortunately, this will lead to job losses in Pearsons. What sort of scale of job losses are you anticipating in the next couple of years amongst Pearson staff, please?

So the focus that we have on applying AI is on making our products better for learners. And I mean, as I said earlier, I do think that AI will cause a reconfiguration of roles and jobs across all industries. I don't think Pearson will be immune from that. But our focus is not on using AI to drive job or headcount reductions. That is not the focus. We have said that we think as we adopt modern technologies like AI, we will find tens of millions of pounds of cost savings in our cost base over time. And that's just the normal evolution of business as we go. But we're not looking for anything drastic on this front.

We will, of course, act in shareholders' interest over the medium term. So for example, let's say that it took 3 years in the past to create a piece of content with all the different stages and steps of that. What you find when you go and look at that process is that QAing the content is a core part of the thing, and it takes a long time. You can use AI to accelerate that. Translation, you can use AI to accelerate that. Copy editing, you can use AI to accelerate that. So of course, we will apply the techniques to improve the efficacy and the productivity in the business. But my ambition, and I think what we really want to do is turn this towards growth because actually Pearson can produce much more material and more learning and assessment experiences to address more markets and more quickly with AI than we could without it. And that should be a growth driver, and that's the main focus.

Okay. As there are no more questions in the room, I'll now hand over to Laura Gamble, Executive Partner, Corporate. Is that the actual title?

Yes.

Sorry in our Corporate Communications department, who will help with the virtual Q&A. Thank you, Laura.

Thank you. So we do have three questions, and they come from Sheryl Cuisia. Sheryl is a private investor, and she's a representative of the Engagement Appeal. Sheryl's first question is, what more can Pearson do to harness a more diverse customer shareholder-centric base? And she'd also like to know when can we expect a collab between Mr. Abbosh and Will.i.am.

So yes, I mean, so Will is a wonderful chap, as you know. And I think we last saw him -- Danny and I met with him at ASU+GSV, which is a big education conference in San Diego just how long ago, 2 weeks ago, 2, 3 weeks ago. Will actually is talking about investing in skills. I mean he's incredibly focused on STEM and helping people in local communities in the U.S., particularly disadvantaged communities. And so who knows? Perhaps there'll be room for another collaboration with him. For those of you wondering what this question is all about is Will and I did a couple of series of podcasts together on essentially applying technology to the world in a good way, and he's just a great guy to work with. And then the first part of the question was about our shareholder register being more diverse.

More diverse, customer-centric and more shareholder-centric, so mostly in regard to younger shareholders.

I mean -- so Pearson, obviously, completely following all the normal corporate governance codes and things that we need to pursue. We have a very high institutional shareholder base. I'd love to see a bigger retail shareholder base in the company. And perhaps our friend who just asked the question can spread the word amongst her colleagues to say that this is a company going places, and it's a great valuable opportunity to buy into.

Okay. Sheryl's second question. She says, I'd note that you've consulted extensively with shareholders on your remuneration policy and report. Please could the Chair of the Remuneration Committee run us through the steps that Pearson is undertaking to ensure that its remuneration practices align with those required of a socially responsible employer.

Yes. Thank you, Sheryl. So we've got our strategic -- the strategic priorities. We've got the earnings and the others, which are in the LTIP and the bonus. Those are important. And on the strategic side, we are oriented towards making sure that we get more customers and that we retain those customers. We monitor throughout the company a number of social and sustainability things, and those take place in other -- in some of the other committees. And in fact, I might not trying to bounce the question over to colleagues, but I might tee you up for adding on to some of the things that we do at Pearson around those really important issues.

The targets and the incentives are really focused on driving the growth of the company so that we can achieve our objectives for our learners, and we do that in a responsible way. And you can see that on our -- throughout the company, we're well diversified in a number of different ways on pay and both ethnicity and gender. And that's important. And these individuals produce the learning materials, which we want to get into billions of more people's hands. But on some of those other things, there's some people doing some extraordinary work, not just on the Remuneration Committee that we work with, and you're also on the Remuneration Committee.

We have a very well-developed sustainability program focused on 3 pillars: people, product and planet. product, as Omar has talked about extensively, is really focused on demonstrating how what Pearson does has impact on people's lives and increasingly linking those learning outcomes to that impact. In terms of planet, we have a very well-developed sustainability strategy focused primarily on reducing our greenhouse gas emissions. We are well ahead of our target for doing that both in terms of our target for 2030 and also 2050. So people, product and planet.

And then with regards to people, Sherry spoke a bit about our approach overall. And it really is at its core is ensuring that there's opportunities for all of our people to grow and develop within their careers in Pearson using our own approaches in Pearson that we also share with other companies, but also promoting activities outside of Pearson for example, spending time volunteering for causes, which our employees hold dear.

And Sheryl's final question is, as the war in Iran continues, does the Board foresee any impact this may have on performance? And if some, how can this be managed effectively?

So let me comment on that one briefly. So obviously, the first and foremost thing that we're focused on is the safety of our people. And I think we took some actions to get some folks out of there in the heat of the situation early on in the crisis. Since then, what we've seen is that some of the countries that are closest to Iran, so UAE, Qatar, Bahrain, have shut schools. And so the protocols that we've had to put into place are the ones like the ones that we learned during the COVID era. So how do you manage remote learning? How do you help kids get exam results if they don't want to defer when they haven't actually set the final exam.

So you're using all their class work and their mocks results to put that together. And so our teams are doing that. We feel good about where we're at so far from the year, and we don't see a material impact on our financial performance. Just to put it in context, those countries plus some of the nearer ones like Pakistan and Turkey, add up to about 2% of Pearson's revenues between A&Q and ELL. And so for now, we feel good about it. But obviously, we're watching how that goes. And from a humanitarian point of view, we hope it is over quickly.

We have no further online questions. So back over to you, Omid.

As there are no further questions, I'll now hand over to our Company Secretary, Graeme Baldwin, to oversee the formal part of the meeting.

Good morning, everyone. Thank you. The Notice of Meeting was published on the 26th of March, and copies are also available here today. Unless anyone objects, the Notice of Meeting will be taken as read. For the voting procedure today, the Chair is calling for a poll on the resolutions as this meeting is being held partly by means of electronic facility. On a poll, every member, whether an individual or a corporation, present in person by means of electronic facility or by proxy is entitled to one vote for every ordinary share of which they are a holder.

If you would like to vote for or against the resolutions or would like to withhold your vote, you must either fill in the poll card, which you will have been given when you registered in person or click on the voting icon on the online meeting platform and follow the instructions on the screen. I'll ask you to complete that in a moment.

If you submitted your vote before the meeting, you do not need to complete a poll card or vote online now unless you wish to change your vote or if you did not originally appoint the Chair as proxy and the person you appointed as your proxy is not present in person or online. If you are attending as a proxy, you should vote now. If you are entitled to vote as a shareholder, proxy or corporate representative, but do not have a poll card, please raise your hand and one of our stewards will provide you with a card. A separate poll card should be used for each separate holding. So if you are representing more than one holding, please ask for additional cards as necessary.

It is now formally proposed that each of the resolutions as set out in the Notice of Meeting is put to the meeting. There are 23 resolutions to be voted on, of which 1 to 19 are ordinary resolutions and 20 to 23 are special resolutions. With your permission, each resolution will be taken as read.

Over the next few minutes, you will be able to see the results of all the proxy votes that were received ahead of the meeting. These will be displayed on our presentation slides. Please would you now complete your poll card or vote online via the Computershare meeting platform. In order to complete your poll card, please enter your full name in block capitals. You should cast your votes on each separate resolution by putting a cross in one of the boxes marked for, against or vote withheld. If you're not voting your total holding in Pearson shares, please also write down the number of shares you wish to vote. Please then sign your poll card and hand it to a member of the registrars as you leave the room.

To vote online via the Computershare meeting platform, please follow the instructions on the screen. You will be able to vote while the poll remains open. The poll will close in 10 minutes. The final results of the voting will be announced to the markets and posted on the Pearson website as soon as possible following the conclusion of this meeting. Now back to you, Omid.

Thank you, Graeme. That concludes the business of the Annual General Meeting. Thank you very much for attending today. I declare the meeting closed. For those attending in person, my colleagues and I will be pleased to meet you outside. Thank you very much.

Good morning, everyone, and welcome to Pearson's 2026 Q1 Trading Update. We will begin with a brief update on our first quarter performance, followed by an open Q&A session.

[Operator Instructions] And with that, I'll hand over to Omar.

Thank you, Alex. Good morning, everyone, and thank you for joining us today. I'm here in London with our CFO, Sally Johnson. Many of you will already have seen our Q1 results announcement this morning, and so I'll just pick out a few key points, and then we'll open it up for Q&A.

First, we're encouraged by the good start to 2026, reporting revenue growth of 4%. I'm pleased with the momentum that we're seeing in our business, driven by continued strong execution from all our teams. We remain confident in achieving our guidance for 2026, and we reconfirm our medium-term outlook.

Looking at performance by business unit. Assessment & Qualifications declined 1%, as we had expected, and this is on track to return to growth in Q2 and beyond, supported by new business such as the Standards and Testing Agency in the U.K. and recently extended or awarded contracts, including ACCA and Google Cloud.

Virtual Learning delivered another standout result with 21% revenue growth, driven by another excellent enrollment performance, which accelerated from the fourth semester. We're further encouraged by preliminary market share data, which indicates that we're gaining share in the market.

Higher Education delivered 2% growth with another solid performance in our core U.S. Courseware business, which continues to deliver sustained growth. We expect Higher Education revenue growth for the year to be higher than 2025 with improvements in the K-12 channel and international markets.

English Language Learning was up 2%, reflecting growth in the institutional business, driven by China and our enterprise offerings. We continue to expect PTE to return to growth this year, driven by share gains in pricing, although the market remains pressured, including in the Middle East, which I'll touch on in a moment.

And lastly, Enterprise Learning & Skills grew 8%, supported by good growth in Vocational Qualifications and continued momentum in Enterprise Solutions. The strength of our Q1 results illustrates the message we gave at the prelims. Pearson is successful, thanks to our unique characteristics and enduring competitive strengths.

You'll remember that about 90% of our profit comes from operationally complex, interconnected hybrid physical and digital services, which comprise assessments, virtual schools and print. And these demand uncompromising quality levels and trust.

The remaining approximately 10% of profit comes from primary digital courseware where we're deeply integrated in the critical workflows that decision-makers use to perform their roles. We're seeing the benefits of these characteristics and strength in our Q1 performance, and they underpin our confidence in delivering attractive long-term growth.

Second, we've made good strategic progress against the priorities we set out for 2026. Let me share a couple of examples. We continue to expand our AI learning and skilling programs through the launch of our Foundations of AI course for U.S. school teachers. And together with Adobe, we launched the first professional certification for Adobe Firefly. These reflect our opportunity in helping learners and workers upskill in the AI era.

In enterprise skilling, our teams have been further developing the strategic relationships across our 9 partners, including recently with Salesforce as reflected in our Q1 results. We are just at the beginning of what we can achieve with these partners. And we're working with these companies that are amongst the world's leading technology players to shape the approach, tools and solutions for reskilling in the AI era.

This is why they have committed hundreds of millions of dollars of incremental revenues up to 2030 to Pearson. We're using Pearson's proprietary content, data and assessment capabilities with their scale to serve their skilling needs, those of their partner ecosystems and those of their customers. Communication Coach developed alongside Microsoft is just one example in this area.

Third, we wanted to acknowledge the conflict in the Middle East. Our first priority is and always will be the safety of our people, and we're committed to doing everything we can to support them. This region, including near adjacent countries such as Turkey and Pakistan, represents approximately 2% of our revenues, mainly across A&Q and ELL.

We do not expect the conflict to impact full year group growth in any meaningful way, but our teams are dealing with operational considerations such as the announced changes to school exam delivery this year, where we're leveraging well-established contingency arrangements to support schools and students.

And we are seeing early signs of possible disruption to the migration and study abroad market relevant for our PTE business. However, both of these factors are small in the context of Pearson's overall performance. And thanks to our very resilient business model, we remain confident in our 2026 guidance.

Lastly, as you know, this is our wonderful and lovely Sally's last set of results. So I wanted to say, thank you again, what a fantastic partner she is and a friend she's been to me and the whole Pearson executive team.

Sally has been working very closely with Simon, Simon Robson, our new CFO, to ensure a very smooth transition, and we look forward to introducing you to Simon at our interim results this summer.

And with that, Sally and I are pleased to answer your questions.

[Operator Instructions] Our first question is from Ciaran Donnelly with Citi.

Just on A&Q, could you just remind us of the dynamics going into Q2 around any impact from the New Jersey contract loss, PDRI and just trying to help us understand the return to growth comments in Q2 within A&Q?

And then just in Virtual Learning, those enrollment growth numbers are very strong versus some peers that have reported recently. Can you just help us understand any dynamics around the enrollment growth trends in there?

Thanks, Ciaran. So A&Q in Q1, you will remember, has the comp for PDRI because the federal impact happened in Q2 last year, Q1 hadn't got that. So that's part of the dynamic in Q1, along with New Jersey. The New Jersey impact is across Q1 and Q2. So it's still relevant in Q2, but the PDRI piece isn't so relevant in Q2.

And then we have growth coming from the underlying businesses, but also some new contracts that we've had. So the new contracts like Salesforce and ServiceNow that started in the second half of last year. And also in our qualifications business, we have our NCT contract, so that is the delivery of exams for primary school kids in the U.K.

And of course, if you've got primary school kids in the U.K., you will know that they take those exams in the summer term. So that will also be part of the growth that we see in A&Q for Q2. So very confident in A&Q growth in Q2.

And then Virtual Learning enrollments are up 15% for Pearson. I know one of our competitors reported earlier with a lower enrollment number. There are some specific dynamics in that business that I will let you go and look at that are relevant to them. I'm not going to necessarily talk to a competitor's numbers, but really good performance in Virtual Learning.

It's the dynamics there are a market with a tailwind, the kind of drive for parental choice is meaning that people are turning to the Virtual Learning environment. And then we've been really pleased with what we've been doing in terms of our enrollment processes and improvements there as well as how we have driven marketing.

I think one thing that is worth pointing out is that we talked about 13% for fall back-to-school. So the 15% is demonstrating that we've actually added enrollments in the year, which has been partly a factor of how we've done our marketing this year in terms of when we put marketing spend into the funnel. So really pleased with Virtual Learning.

Next question is from James Tate with Goldman Sachs.

James at Goldman. Three questions, please. I guess, firstly, just on the U.S. Student Assessment business in A&Q. So you recently won or expanded contracts in Maryland and Wyoming. So do these have a financial benefit in calendar 2026? Or is this delivery in the first half of '27? And then I guess are there any other upcoming tenders you'd flag either to win or retain over the next few quarters?

And secondly, on ELS, we're now 1/3 of the way through the year. Do you have any more visibility on growth for the division this year? Do you expect to see an acceleration from the 8% in Q1 given the current product road maps from some of the new partnerships?

And then lastly, on capital allocation, the accelerated share buyback is due to be completed by the end of May I think and leverage remains below the 2x maximum you've outlined. How should we think about the scope to increase this through the rest of '26 and the timing for such a decision?

So shall I take the first one and the third one, and I bet you can take the second one? So U.S. Student Assessment, yes, we've got the New Jersey impact in Q1 and Q2. You're quite right. We renewed many contracts last year.

38.

I think 38 was the number that we talked about at prelims, We'd also talked about the extension of the Maryland contract and the win in Wyoming. Both of those come through a small amount in the second half of 2026, but then also, there'll be the upside in 2027 as well when we have a full year. So I guess the answer to your question there, James, is both.

And then in terms of other tenders, it's very, very normal for there to be an RFP cycle in this business. So there are tenders that are coming up. I'd remind you of our track record in terms of our retention rate, so 96% last year, and that included New Jersey. So lots of confidence in our ability to retain those contracts going forward.

And then on the share buyback, obviously, we're amidst the share buyback at the moment. So there's no capital allocation for the Board to be making a decision on at the point that we then get into a next cycle where that decision is made, we will apply our capital allocation policy, which I think is quite clear to people from a go-forward basis.

Perfect. And let me just pick up the ELS comments, James. I mean, obviously, we're not sort of giving segmental guidance by quarter for each of these BUs. But we feel very good about where ELS is. I mean, the performance in Q1 was strong in Vocational Qualifications, which as you probably know, always has -- is biased somewhat to H1.

So that one has performed very well. We're very good with how it's tracking for the year. Enterprise Solutions, which is where a lot of our enterprise partnerships are inked, is trending in a very good way. So the way those contracts are designed, they're all, let's say, 5-year contracts and they ramp over time is essentially how they work.

And what our teams are doing is working alongside our partners to, of course, figure out like where do we apply very helpful engineering resources in terms of transforming and improving Pearson's business, how do we bring Pearson solutions and skilling capabilities into their business to help their people. And importantly, how do we work together on joint go-to-market?

The most obvious vector of activity in the short term that we're seeing is the tech companies are asking for help in skilling their salespeople on their own AI because the tech is moving so quickly, and that's providing an area of growth. Importantly, also for their partner organizations.

I mean, to give you a sense, an organization like IBM will have something like 30,000 partner organizations around it that help them implement their tech with their end customers. And so those partners also need help in skilling with the new tech that's coming out of IBM.

And then you have the actual end customers who also need help with using that AI in the most effective way. And that obviously, in order for these companies to derive ROI on their investments in the tech that they're building, they need their customers to be using it effectively.

And so that's where our teams are working together on shaping the products and services to meet that need. And that's why we're very confident in the future growth in that business.

Our next question is from Steve Liechti from Deutsche Numis.

Just a couple of phasing questions actually. First of all, just going back to Virtual Learning. It looks to me as though the second quarter comp is still relatively easy when we look back at next year and then it gets more difficult in the second half.

So is it fair to assume that the second quarter growth rate can be at a similar rate to the first quarter and then it starts slowing down? Is that the kind of way to think about it? So that's the first question.

And then I think I heard you refer in vocational, I know it's first half weighted, but there was some phasing benefits in the first quarter. Can you just clarify whether I was correct on that?

Yes, I'll take both of those, Steve. So on Virtual Learning, you're quite right. The comp for Q2 is "easy", the way the one in Q1 was because you think about this business semester by semester. So Q1 and Q2 generally would look very similar. And actually, H1 would look very similar to H2 of the previous year because the enrollments effectively that you're getting are mostly for that school year.

The one thing I would point out is that we've highlighted that we got a small amount of funding upside in Q1, which we would normally get in Q2. So whilst the growth in Q2 will be very good for virtual schools, it won't be quite as high as it was in Q1.

The way I would encourage you to think about it is that H1 will look very much like H2 last year. And I think H2 last year, we told you was 18%. And then on vocational, yes, I mean it's really small in pound terms, but we have had a very small phasing benefit in vocational in Q1 that normalizes in Q2, but it's really small from a pound million point of view.

[Operator Instructions] Okay, it looks like there are no further questions.

Yes, great. It looks like the update was comprehensive. So we've covered questions quite quickly. Thank you very much, everybody, for your interest in Pearson. And with that, goodbye.

Thank you, everyone, and thank you, Sally Johnson.

Thank you. This concludes today's conference call, and you may now disconnect your lines.

Good morning, everyone, and welcome to Pearson's 2025 Full Year Results. Today's session will consist of a presentation followed by a Q&A. [Operator Instructions]

And with that, I'll hand over to Omar.

Thank you, Alex. I've been looking forward to seeing you all. Welcome, and thank you for joining. We appreciate you being with us. Let me begin with the three things I want you to take away from today's presentation. First, we continue to be very excited for the future of Pearson, thanks to mega trends driving strong secular demand for exactly what Pearson offers and because of Pearson's unique characteristics and enduring competitive strengths. Second, 2025 was another good year of financial delivery and significant strategic progress. Third, we will continue to make progress on our strategy in 2026 with a financial profile that improves further on 2025. I will outline our business progress before handing over to Sally to provide an overview of our financial results for 2025 and expectations for 2026. And then we'll move to Q&A with Aarti, Tom, Sharon, Vishaal, Anthony alongside Sally and me.

For those of you in person, we have a series of product demos focused on our most recent releases that will be available after the main presentation just out there. Let me now tell you why I'm confident for the future of Pearson and why we are positioned to succeed. Two factors provide the foundation for our confidence. The first is that mega trends will continue to drive strong secular demand for exactly what Pearson offers. We've spoken before about the ongoing demographic shifts and the advance of AI. These mega trends are already driving major demand for skilling and the validation of skills. How do I know this?

Because we have valuable revenue commitments from 9 of the world's leading technology and services companies for exactly these services. And these trends will continue to reconfigure whole industries, occupations and educational systems. Enterprises will need to upskill workforces at pace to keep up with rapid technology changes and institutions will need to provide alternative skilling pathways for vocational and career and technical education. Pearson as the world's lifelong learning company is perfectly positioned to benefit from this massive wave of human skilling over the next several years. Second, we will succeed due to Pearson's unique characteristics and enduring competitive strengths. I feel the need to elaborate.

Over 80% of Pearson's profit comes from assessments and virtual schools. These businesses are driven by human-led services where complex interconnected physical and digital workflows enable large-scale delivery in highly regulated markets. Our services must meet a very high bar for accreditation authorities and regulators, meaning that strength and operational delivery matters. And together, our services act as verification infrastructure for companies, industry associations, states and government agencies. Examples of workflows include physical and biometric security, supply chain with secure custody of assessments materials and incident response, statistical proof of maintaining standards alongside capacity management to enable millions of tests to be taken through our network of 20,000 secure physical facilities.

Even in today's AI world, some countries or customers are not ready for digital at any scale. So there will continue to be need for print-based products for the foreseeable future. That means that about 90% of Pearson's profit stream is coming from operationally complex, interconnected hybrid physical and digital services alongside print, all demanding uncompromising quality levels and trust. The remaining 10% approximately comes from -- the remaining 10% about -- of our profits come from primarily digital courseware. For example, in higher ed, here, we're deeply integrated in the critical workflows that decision-makers use to perform their roles. These customer relationships have been nurtured over many years built on a foundation of quality, and that comes with high switching costs.

We love seeing the progress that AI labs and others are making in the tools that can benefit learners. And as you know, we're embedding much of their progress directly into our offerings, but our products are not just learning content. They're designed to manage a course end-to-end and are tightly integrated with the learning management and student information systems at the university level as well as the course curriculum and assessments at the individual professor level. These characteristics are very unique and are supported by enduring competitive strengths. Specifically, our unique deeply embedded position in the learning ecosystem gives us petabytes of proprietary data that we use to improve learning experiences and outcomes. We have data from billions of student engagements and submissions and hundreds of thousands of instances of instructive feedback occurring on our platforms every year, and that allows us to build ever more effective products.

Pearson holds leading positions across almost all our businesses. This leadership provides scale economics and strong operating leverage at an individual business level and a breadth of offerings that is unmatched globally. The diversity makes the business model robust. And our trust underpins all of these strengths. This has been gained through a long track record of operational excellence in our large-scale services businesses and through our quality IP, expertise in how people learn and how to deliver evidence of learning outcomes with formal education institutions. Trust is valuable and plays to our unique strengths because the closer you are to the teacher and the learner, the more trust you need to operate. And trust in verified skills is even more important in an AI era.

Taking a step back, what does this all add up to? The mega trends of demographics and AI will continue to be major demand drivers for skilling and the validation of skills and Pearson as the world's lifelong learning company is perfectly positioned to benefit. Our unique characteristics of trust, infrastructure level quality, operational strength and breadth of services that are embedded deep in the learning ecosystems, alongside our investments in AI-driven innovation delivers strong durable cash flows and profitability. And our deep and enduring competitive advantages provide us a unique platform for future growth. You'll remember that we set out three priorities in 2025, and I'm pleased to say that we successfully delivered on all of them. Thank you to the focus of our people, on our customers and on execution.

First, we have again delivered a financial performance in line with expectations with revenue growth increasing 4%, profit up 6% and strong free cash flow, demonstrating the attractiveness of Pearson's business model. Second, we continue to embed AI-based innovation across our products and services, allowing us to deliver more engaging, personalized learning experiences. Importantly, we're seeing continued tangible improvements in both learner engagement and outcomes. And third, we're making great progress on enterprise. Our new go-to-market strategy is delivering results, and we see clear financial momentum with a growing revenue backlog now totaling hundreds of millions of dollars of incremental sales to 2030. This means the enterprise business is on a journey towards delivering meaningful shareholder value, underpinning an acceleration in our growth over the medium term.

You'll remember our strategy outline, our why, what and how that we first shared in 2024, and that framework continues to guide us. We're motivated by our purpose to help people realize the life they imagine through learning. We'll show a video at the end of our presentation, which is part of a series highlighting the real-life impact learning has on real people, playing directly into the unique role of Pearson in the world. Next, our what. It remains clear. We're the global leader in assessments and verification. That is our core. And we're implementing our strategy to drive performance in our core businesses, realizing execution synergies while also investing in the faster-growing segments of early careers and enterprise skilling. And finally, our how consists of our internal capital allocation process, prioritizing innovation to deliver better learning outcomes and embedding a high-performance culture top to bottom.

Let me share some details on our progress in 2025, starting with driving performance in our core businesses. Here, our progress and execution focus gives us confidence that each business unit is on a clear path to improved growth, benefiting from strengthening our sales muscles and developing our product road maps to be ever more competitive. First, assessment and qualification growth increased in 2025, thanks to our team's clear focus on executing for our customers. Clinical Assessment and our Qualifications business performed strongly, benefiting from digital growth and international expansion. Pearson Professional Assessments secured scope extensions and new awards with enterprises such as Google, ACCA and others that we have won and will communicate in the year ahead, which will contribute to faster future growth.

U.S. Student Assessment made progress, unlocking adjacent market growth through our partnership with McGraw Hill, and we expect continued momentum in 2026 with ongoing growth in enterprise, international markets and new product innovation. Second, English Language Learning, Sharon and the team continue to execute strongly with customer wins in key institutional markets, for example, in Latin America and market share gain in PTE, where we maintained our revenue level even while global market volumes declined by about 15%. We will build on the momentum in upskilling enterprise talent with English skills and drive further market share gains contributing to higher growth in 2026. Next, in higher education, we delivered faster growth in 2025 despite the K-12 transition and trading conditions in international markets. We progressed our early career strategy, operationalizing our direct K-12 sales team to take advantage of the fast-growing career readiness opportunity.

Our core U.S. Higher Education business performed solidly with continued strength in inclusive access. And at the same time, we see value upside as we know we can do better, especially in channel execution to improve inclusive access growth and accelerating platform convergence and simplification in 2026.

Now turning to Enterprise Learning and skills. Vishaal and the team continue to lay the foundations for growth, building our global enterprise sales team, securing a series of long-term meaningful strategic relationships with blue-chip names, and I'm going to say a bit more about that in a few minutes. And then finally, Virtual Learning had a standout year. We're now seeing the benefits of the execution improvements that we told you about this time last year, including our new enrollment portal and targeted marketing investments to capture strong demand. We've enhanced our early careers offering with new industry partnerships, which are now embedded across the entire school network. And we're excited about the potential for this business in 2026 and beyond. We are a leader and gaining share in a market that has strong demand plus opportunities to add capacity to our school network.

And we can drive further business unit-specific improvements with execution synergies driving value to Pearson as a whole. We're driving synergies across our business units, supported by AI-enabled cost optimization opportunities and ongoing process improvements while enabling faster product innovation. These synergies are providing additional capacity to invest in the business, supporting future growth. In 2025, we generated about 200 basis points of margin through cost savings. which, of course, we are reinvesting. Expect us to continue to optimize our business, enabling ongoing investment and margin progression within our P&L envelope. Let me give you a little update on our progress across our key synergy areas.

First, we've consolidated our suppliers and deepened our relationships with a smaller number of key partners to create customer impact, drive efficiencies and grow our businesses. Our latest partnership with Salesforce provides all of these benefits. We've deepened our sales intelligence capabilities at an optimized cost while supporting Salesforce's own reskilling priorities with our suite of enterprise products. Second, we are improving our operational systems, leveraging new AI technologies to provide better customer service, faster routes to market and improved data capabilities to support our decision-making.

Teams using our AI content development tools saw content editing time reduced by at least 40%, translation costs reduced by nearly 1/3 and content alignment costs down by 1/4. Our AI customer services agents handled over 130,000 customer interactions, delivering an approximately 40% reduction in volumes where our agents have been deployed. And we'll unlock further value as we move from these pilot stages to wider internal scale and develop new workflows with agentic technologies. Through our newly established revenue operations function, we now have a single standardized sales pipeline across Pearson and a simplified sales incentive framework, improving forecast visibility and sales disciplines.

Now turning to brand. If you went online to look for all the Pearson properties and assets and products, you would have been met with this kind of brand soup. We are creating a more unified Pearson presence, allowing for a simplified and intuitive product portfolio, enabling easier selling and purchasing and, in my opinion, an improved signal-to-noise ratio. You will have seen this in the new Pearson branding that we launched last year as well as through our product portfolio, for instance, Pearson Learn and Pearson Career Ready. Finally, we're making progress on implementing a modern software development approach. These Pearson-wide set of tools and methods maximize the value of our sector-leading product and technology cash spend, which totaled approximately GBP 1 billion last year, which means we're investing in innovation for the future while building on our core competitive strengths.

Through our efforts, we're accelerating the rate of innovation across the company, leveraging shared capabilities to embed best-in-class AI-enabled tools and functionality across the business units, supporting their market position. As usage of our AI tools scale among end users, we continue to demonstrate clear benefits, including for educators who are freeing up time to spend on teaching and for students who are actually improving their learning outcomes. Let's now show the breadth of our AI offering in higher education and how we're improving student outcomes.

[Presentation]

And what this highlights is not just the pace at which we're innovating, but how deeply embedded AI now is in our capabilities to improve outcomes. Let me shift now to sharing our progress on our two medium-term growth vectors, starting with enterprise skilling. When I speak to CEOs, the message is consistent. AI is shortening the half-life of skills, and there is no positive outcome with AI transformation to be achieved without real investment in human learning. Therefore, there's increased urgency around reskilling, closing productivity gaps and preparing for the AI-driven reconfiguration of jobs. The scale of change is moving enterprises away from traditional learning and development approaches with discrete tools that show little or no ROI and towards partners who can co-develop learning experiences and connect skills, data and talent intelligence into a unified ecosystem. The strengths of Pearson play into this opportunity, and we're making good progress unlocking it.

Our newly established go-to-market approach has led to 9 important partnerships that you can see on the slide. The common thread across each of these logos is that these enterprises matter in the future of technology. They have large workforces with significant reskilling needs, and they share our conviction about the importance of skills in the AI era. And they chose Pearson because we're the world's lifelong learning company. Let me remind you of the scope of these long-term partnerships and then go on to tell you why these deals matter. First, they commit our partners to being Pearson customers. We've created significant sales opportunities already, such as the integration of our learning products to support Amazon's workforce development, English Language Assessments for TCS, certifications at scale for Google through Pearson Professional Assessments, Credly as a key credentialing partner to Microsoft's new skilling platform and sales skilling through a combination of assessments and personalized content for IBM and Cognizant. And there are clear parts and commitments with each partner to do more.

Second, Pearson is also a customer of their engineering skills and services, for instance, through the deployment of AI tools for content generation or the use of Azure and Bedrock capabilities in our AI-enabled products. And third, we're engaging in the joint innovation and go-to-market activity that unlocks new opportunities for instance through complementary solution models and access to industries or geographies. Examples of progress here, including partnering with HCLTech on a skilling initiative for a major U.S. retailer and embedding our enterprise product suite and assessments and learning content in the Deloitte Academy, which is Deloitte's comprehensive skills transformation offer that they offer to their clients globally. Microsoft was a key strategic partnership early on, and we've made significant progress in 2025. We're excited by the innovation alongside them, very excited. We now offer personalized adaptive learning experiences directly in the flow of work. Let's introduce you to communications approach. Please roll the video.

[Presentation]

We're just at the start of what we can do with our partners as we combine Pearson's proprietary content, data and assessment capabilities with their scale, enterprise selling and reach. Our enterprise business will contribute meaningful shareholder value over the medium term, and we're pleased by the progress so far. I know I have a finance audience in the room. So from a financial perspective, the contracts we signed in 2025 lock in revenues of hundreds of millions of dollars with existing customers, and they add incremental cumulative revenue commitments to Pearson of hundreds of millions of dollars through to 2030, with value being realized in AMQ, ELL and ELS.

Now let's turn to our second growth vector, early careers. In an AI-driven economy, concerns are particularly acute around entry-level roles. That makes job-ready and vocationally aligned skills more important than ever. We estimate the early careers market is about a $6 billion opportunity in the U.S. alone. It is fragmented with no clear winner and has been underserved historically, presenting a clear adjacent opportunity for Pearson given our strengths. We had an early presence through our career offerings within virtual schools and relevant IP in higher education and career-ready certifications in Certiport. We're augmenting these areas with significant investment. For example, we improved our channel access through a direct Salesforce to deepen and expand our relationships with U.S. school administrators. And we expanded our capabilities through the acquisition of eDynamic Learning, North America's largest provider of digital career and technical education. So by optimizing our model across these areas, we're driving new growth here and are energized by the progress in unlocking this attractive adjacent market.

I now want to shift gears a little and come back briefly to the topic of power metrics. These are a small number of metrics of leading indicators that we want to report to you on a go-forward basis. We chose these metrics because they signal clearly the future health of the business, and we want also Pearson's people to be laser-focused on these as part of their incentives as well.

First, our renewals metric. The renewal rate was strong at 96%, reflecting the competitive strength of our businesses. While Pearson Professional Assessment continued to drive near perfect retention, the metric was impacted by New Jersey and U.S. student assessment, although we were successful in another 38 competitive renewals in that business. And our renewals metric will be supported by our second growth metric, which shows the average annual new contract value signed across our core large-scale assessment businesses. In 2025, our metric was GBP 33 million, benefiting from large wins such as Google with Pearson Professional Assessment and our formative assessments contract with McGraw Hill. And given contracts in this space are long term in nature, you should think of this metric as cumulative over a 3- to 5-year period.

Lastly, we extended our major customer metric to 49 in 2025, reflecting both new customer wins and expansion within existing relationships, demonstrating our momentum in enterprise. As you can see, we have now made a lot of progress in our business while delivering on our commitments, which will contribute to an even stronger 2026. Our unique business model, continued progress against our strategy, plus our strong focus on execution means that we're guiding to a further improved financial profile in 2026. This builds on our track record of financial progression and meeting market expectations each year since COVID.

I'd like to now hand over to the wonderful Sally to break down in more detail our financial performance for '25 and the financial outlook for '26.

Thanks, Omar, and good morning, everybody. 2025 delivered another year of good financial performance. Sales grew 4% with a 6% increase in underlying profit and margin expansion from 16.9% to 17.2% despite currency headwinds. Adjusted EPS increased 4% to 64.5p, reflecting that solid trading performance and a reduced share count from the share buyback, partially offset by higher interest costs. It's worth noting that EPS grew 9% at constant FX rates. Cash performance continues to be strong with free cash flow conversion of 125%, including the state aid recovery, 98% without. This strong performance, combined with our balance sheet strength, supports a 5% increase in the dividend. We also recently commenced a further GBP 350 million share buyback, demonstrating proactive capital allocation to drive incremental shareholder value.

Before we get into the detail, we've updated the slide we shared last year, demonstrating historical financial progression for 2025 data. We have a track record of consistent progress with underlying sales, profit, free cash and return on capital growth. This demonstrates the momentum in the business and underpins our confidence in both our 2026 outlook, which I'll come to in a minute, and our medium-term guidance.

But first, a recap on our 2025 sales performance with group underlying growth of 4%. By business unit, Assessments and Qualifications delivered a solid performance with growth accelerating in H2, particularly in Q4 and all sub-business units contributing to that growth of 4%. Virtual Learning delivered a strong performance, particularly in H2 when sales were up 18%. Fall enrollments were up 13%, supported by enhancements to our enrollment platform, improved retention, the rollout of our career academies, targeted marketing and strong underlying market growth.

Higher Ed growth improved as expected versus 2024. Our core U.S. Higher Ed business delivered a solid performance with anticipated offsets from K-12 and international, both of which are expected to improve in 2026. English Language Learning continued to grow, driven by institutional, while PTE was flat year-on-year, outperforming a challenging market. And Enterprise Learning and Skills grew 6% with another solid performance from Vocational Qualifications and momentum in Enterprise Solutions, who grew 20% in Q4.

Group adjusted operating profit grew 6% on an underlying basis to GBP 614 million. This was driven by operating leverage from sales growth and continued cost savings, partially offset by investment and inflation. FX also impacted the headline movement. Adjusted operating profit margin increased to 17.2%. Again, by business unit, Assessments & Qualifications margins remained at 23% with margin benefits from sales growth offset by investment, inflation and currency movements. Virtual Learning margins increased to 16%, driven by operating leverage on strong sales growth. Higher Ed margins remained flat as sales growth was offset by investment, inflation and currency movements.

English Language Learning margins also remained flat with cost savings offset by inflation and currency movements. And Enterprise Learning and Skills margins increased to 10%, driven by margin on sales growth. Statutory profit declined 6%, predominantly due to a noncash one-off impairment relating to our Higher Ed platforms, partially offset by vacant property provision reversals following sublets in 80 Strand and Hoboken. As Omar mentioned, in 2026, we plan to accelerate the conversions of our Higher Ed platforms to streamline and modernize our courseware offering and reduce support costs. A consequence of this is an impairment of GBP 87 million in some of our assets, which is one-off and noncash in nature.

This write-off now generates a mechanical circa GBP 15 million per annum profit improvement in Higher Ed on average over the next 6 years. Free cash flow increased by 8% with a conversion of 125% due to the recovery of state aid taxes. Conversion, excluding that state aid recovery was still a strong 98%. Operating cash conversion was 93% with an increase in working capital in the year given high Q4 sales growth and slightly increased investment. Our balance sheet remains strong with a leverage at a comfortable 1.3x at the end of the year, below our medium-term cap of 2x EBITDA, maintaining optionality to make value-enhancing investments and/or shareholder returns. Net debt at the end of the year was GBP 1.1 billion, a GBP 0.2 billion year-on-year increase with free cash flow more than offset by the share buyback and acquisition of eDynamic Learning and dividends. Return on capital increased 80 basis points to 11.3%, more than 250 basis points ahead of post-tax WACC.

Turning to guidance for 2026 and beyond. As we've previously guided, in the medium term, you can expect mid-single-digit CAGR underlying sales growth, sustained margin improvement, equaling an average of 40 basis points per annum and strong free cash conversion in the region of 90% to 100% on average across the period. As you've heard from Omar, we have strong confidence in our ability to deliver in 2026. And therefore, we're laying out specific guidance. At a group level, you can expect mid-single-digit sales growth and adjusted operating profit in the range of GBP 640 million to GBP 685 million at FX rates as at the end of 2025. The mechanical improvement driven by that 2025 impairment I discussed earlier is included in this range, and free cash conversion will be 90% to 100%. The effective tax rate will be circa 25% and interest will be circa GBP 80 million following the commencement of our further GBP 350 million share buyback. Included within this guidance is new investment to support our strategy and drive growth, including higher-than-average transformation costs, which are weighted to H1. This investment is more than offset by the margin on sales growth and operational improvements, which drive the group's margin expansion and our GBP 0.01 equaling GBP 5 million FX profit guide still stands.

On a business unit basis, A&Q will grow low to mid-single digit, driven by new contracts, products and pricing. Virtual Learning will grow even more strongly than in 2025, given a full year of enrollment growth. Higher Education will grow more than 2025, supported by continued product and platform innovation, pricing and inclusive access in U.S. core as well as improvement in the K-12 channel. English growth will be higher than in 2025 with PTE returning to growth, market share gains and pricing. And Enterprise Learning and Skills growth will be driven by a solid performance in BQ and strategic account growth in Enterprise Solutions.

In terms of phasing growth is again H2 weighted, but not as markedly as in 2025. At a business unit level, A&Q will decline in Q1 given the loss of the New Jersey contract and PDRI headwinds, but will then turn to growth in subsequent quarters, supported by new business and recently awarded contracts. Virtual Learning will see strong growth, particularly in H1. English growth will again be Q4 weighted given the seasonality of the business and HE and ELS growth is expected to be relatively steady. Our disciplined capital allocation policy remains the same with a focus on maintaining a strong balance sheet, investing both organically and inorganically, paying a progressive and sustainable dividend and then returning surplus cash to shareholders. The slide you see now illustrates how consistently we've applied this policy over the past 6 years.

We continue to invest behind the business with meaningful organic cash investment during the year alongside inorganic investment through the $225 million acquisition of eDynamic Learning. Since 2020, we have returned GBP 1.4 billion to shareholders through share buybacks with a further GBP 350 million program commenced in January, underpinned by another year of strong cash performance in 2025 and our confidence in 2026 and beyond.

Going forward, we will continue to apply this disciplined approach. And through our strong cash generation, we'll continue to invest behind opportunities to drive further growth and create long-term value for all our stakeholders.

And with that, I'll hand back to Omar.

Thank you, Sally. Okay. So let me wrap up with a quick look at our 2026 priorities. These are simply an evolution of what we focused on in 2025. Firstly, once again, we will deliver on our financial targets. Second, we will continue to lead in the application of innovative technologies, including AI across our products and services. And third, we will deliver against our core business and enterprise power metrics. As I said at the beginning, there are three takeaways from today. First, we continue to be very excited about the future of Pearson because of these mega trends driving strong secular demand for exactly what Pearson offers and because of Pearson's unique characteristics and enduring competitive strengths. Second, we successfully met our goals in 2025, demonstrating another good year of financial delivery and significant strategic progress, thanks to our rigorous focus on execution. And finally, you can count on us to do even better in 2026.

Now let me say a few words about Sally Johnson. I want to congratulate Sally on her fantastic 26-year career at Pearson and the wonderful contributions she has made throughout her journey and for being a wonderful fantastic partner. I am also going to be very excited to introduce you to Simon Robson, previously Group CFO at Sky in the coming months.

Now let us play a little video that I mentioned earlier before Sally and I and the team here take your questions. We're going to hear from Savannah. She is a real Pearson Connections Academy graduate, who outlines in her own words the life she's realizing through learning, which plays directly into the unique role of Pearson in the world. Please roll the video.

[Presentation]

Neuroscience at NYU, pretty cool.

Alex?

It's James Tate from Goldman Sachs. I've got three questions, please. I guess, firstly, please, could you provide a bit more detail on the moving parts of A&Q growth in 2026? If you didn't have the New Jersey contract loss and PDRI was, say, stable, then would it be fair to assume the division would grow more mid- to high single digits, around 6% rather than the 4% you've broadly guided to? Is that the right way to think about it? And you've also announced a number of contract wins over the last year with major tech companies in professional assessments. Does there still remain a strong pipeline for potential new contracts going forward?

Secondly, on EOS, your guidance for 2026, I think, is somewhat vague in terms of you're clearly growing the number of large blue-chip logos you're working with in Enterprise Solutions. Should this not lead to improved revenue growth this year versus '25? Or are there some other dynamics offsetting this that we should be aware of?

And thirdly, I guess, Omar, building on your comments about the significant opportunities from generative AI for Pearson, what are the primary risks that you identify? For example, do you see any risk from evolving student learning behaviors impacting demand for Pearson's courseware content in Higher Ed?

Great. Thank you. This is just a very light collection there, James. We appreciate that. We appreciate that very much. I'm sure the other analysts are like Damn, and I wanted that question. But anyway, it's good. So I think on the A&Q dynamics and what's going on under the hood. I mean maybe, Sally, like say a little bit about how you think about the numbers, and now particularly James is asking ex PDRI, ex New Jersey, and maybe add a little bit to what you're seeing, the overall landscape of how that business is performing.

Yes. So I'm going to start and then I'll pass over to Aarti. So low to mid for A&Q in 2026, and you've called out the right pieces. So yes, you can see the impact of New Jersey from a retention point of view. I've called that out because it impacts Q1, and I want you to be ahead of Q1. But then through the rest of the quarters of the year, we bought new contracts online. You heard of Omar calling out the number of them. So we've got a new contracts in Maryville. We've got a new contract in other states. We've got a new contract with Google in Pearson Professional Assessment. And we've got some new contracts that we can't talk to you about yet because we haven't got the contracts signed, but which we've been verbally awarded. Alongside new products that we're bringing online, pricing and all those sorts of things as well. So we've got really good confidence in the A&Q performance for the year. To your point, I haven't done the math on what you say, but quite clearly, without the PBRI piece with the federal funding and without that New Jersey piece, then yes, it would be better than low to mid.

Art, do you want to just comment a little bit on how you're thinking about the business shape overall?

Yes, absolutely. And good to see you, James. And as Sally said, those two factors are real, particularly in the early part of the year in the course of New Jersey. But contract performance in the two large contract services business, Professional Assessments and School continues to be very strong. We won a competitive bid for Maryland. We won a competitive bid for Wyoming. We renewed close to 40 other competitive bids. We'll see the impact in 2026 of the full year of running the Salesforce and ServiceNow certification programs within the Professional Assessment business. Omar announced the extension of ACCA. That chartered accountants in the U.K. for those not familiar, that starts to show up in '26.

In our U.K. and international qualifications business, we're launching the Standards and Testing Agency primary school testing contract in '26. We came online with that in '25, but this is the first full year of implementation. We'll be delivering primary school examinations in 16,500 schools in the U.K. And our clinical assessment business continues to deliver strong digital innovation into the market. That business has performed well over the last few years. I encourage you to stay for the product demos afterwards, and you'll see some examples of more innovation that we're bringing to market, and that gives us confidence in strong performance in that business. So overall, we feel great about A&Q.

That's the summary. We feel great about A&Q. On the second question, Sally, I'm going to ask you to say like one word about why our growth guidance was slightly like thin. And then I'm going to ask Vishaal if he's sitting on his hunches having signed 9 deals and he's not building pipeline for the future. But over to you, Sally.

Yes. So really confident in ELS growth. But I think we know right now, it's one of the smaller divisions. It's not going to be for long because I know how competitive, apart from anything else, Vishaal is. And that just means that a few million pounds can make a couple of percentage points difference. And therefore, it didn't really seem to make sense when we're looking at it quarter-by-quarter to be too specific. But the BQ part of the business, we'll see solid growth. And I talked about that Enterprise Solutions part of the business and that 20% growth in Q4, it's relatively small now. But if it keeps growing at that rate, it's not going to be relatively small for very long.

So Vishaal, you're not going to do any more selling and like are we done now with...

Yes. So just to put a little bit more color to Sally's comments. So we have two businesses within ELS. VQ, we continue to be seeing a lot of robustness in that business. So part of that business or a large part of that business is very U.K.-centric, where we have the BTEC brand. We are also winning a lot of new contracts in the vocational space. So that continues to be driving growth. We are also expanding internationally to countries like Uzbekistan, Pakistan, Jordan and so on. And what is most exciting about that business, we also offer what we call as apprenticeship services. So a bunch of customers, we won a contract we announced last year with the British Army, which we are executing to now. We have something going on with NHS and more coming on -- coming up in Middle East that we will announce shortly.

So that part of the business is doing relatively well. The other piece, which I'm even more excited about is Enterprise Solutions, where you saw those 9 partnerships that we have signed. So my team is singularly focused on execution as we speak. There are many things that we need to put in place to get all of the revenue in all the way from putting together the right product co-innovation road maps with these partners to having the right go-to-market motions and working with them, and these are very big tech players, as you know, working with them globally across all of the regions that they operate in. So a lot to focus on. But in terms of momentum, we are getting into 2026 with much, much more momentum than we had last year as we got into 2025.

Thank you, Vishaal. So James, let me say a couple of things about the AI risk point. I mean, so this one, obviously, we could spend a long time talking about it. I think the market looks and says, "Hey, if I have a digital format product where the product is purely digital and if the user is the buyer, then what happens if someone puts out an AI tool that is free, like what's that going to do to that market? And I think indeed, that is problematic for some people. The thing is Pearson doesn't do that. The only bit of Pearson that you could say like a little bit -- had a bit of that and it was Mondly. Mondly, we pivoted that a year ago to be a pure institutional and enterprise package. It's like where it's going. That's where all our spend and delivery is going.

Pearson is actually -- you get a different outcome from AI. What -- when people are generating AI content at a rate of not, and there's an amazing amount of slop landing them in Internet. When you have deep fakes happening on the Internet and you have false identities on the Internet, we're seeing a giant flight to safety. People want trusted authoritative sources. They want verified identities. They want validated skills. I mean, as you know, James, today, it's tough for kids graduating or trying to get a job. They fire off 10,000 CVs with a bot and they're screening resumes at the other end by a bot. You've got bots with the bots. So the construct of how resume thing works is not really working. Companies are more and more saying, "Show me that you have a validated skill." That is what Pearson does. So actually, like I said, the AI thing is a giant tailwind for us. And I think whether we like it or not, and you all are much clever on this than I am. But when investors look -- particularly when it's sort of passive investing happening in bundles and Pearson is like wrapped up in media or wrapped up in EdTech, and we are not that.

So I think Laura is next. Next to you, Susie.

Three questions, please. First one is on the virtual learning margin. So it has improved significantly year-on-year. I understand it's coming mostly from operating leverage. Is there anything else that's driving the margin expansion? And is it reasonable to assume that it's going to continue expanding at the same pace?

Second question is on pricing. So you said you're generating a lot of efficiencies, thanks to AI. I'm curious to hear how are your conversations with clients? Do they expect you to pass on some of these savings? Or is your pricing power very strong, which means that you don't have to give away any of these cost savings that you're realizing? And if you could comment on how is pricing evolving across your business, that would be really helpful. And then lastly, on the Higher Ed business, one of your peers, McGraw Hill is growing very fast. Why do you think they're growing so quickly? And do you think you can bridge the gap to their growth rate? And Sally, all the best for the next step in your career.

Thank you, Laura. So on the Virtual Schools margin, I'm going to ask Tom to just say something there about what is it that you think has driven the success so far? And also, what are you thinking is -- how we're thinking about this going forward?

Yes, sure. So I mean, I think from a virtual schools perspective, last year, we obviously saw great growth driven by helping people like Savannah, which was lovely to see in that video. I think fundamentally, the margin characteristics of that business are great. The one thing you have to bear in mind is when you grow as quickly as we did last year, you have some teacher vacancies because you're struggling to recruit teachers. It's obviously kind of hard to recruit teachers in Q4 of the year. So I think you should expect to see sort of continued margin expansion driven by the top line leverage. But just recognize we may need to catch up and think a little bit differently about teacher hiring because fundamentally, I think we are seeing a very different opportunity in that space, which we're excited about. We just need to make sure we transform how we manage the business to support the ongoing demand.

And there was also that extra marketing spend that we put in to drive that growth as well. That's all covered in that margin movement too.

That was fully absorbed, yes. I mean, Laura, on pricing, I mean, I'll say like the headline is no. I mean, so Pearson, as you'd expect, is constantly investing in getting more efficient and more effective and more productive, and we will continue to do that. But that doesn't mean customers run around and say, "Hey, we've got to give us some of that savings." And the reason is very simple, and this is the point that I'm trying to make about the business model that I was talking about with James earlier. Pearson is one of two or three companies in the world that can do what we do because it's very hard to deliver that level of operational excellence in driving and assessing standards. And so that's where our gross margins come from. And so the short answer is no.

Now having said that, are we going to be complacent? Of course, not. Some of the RevOps things that I spoke about earlier is actually giving us much more fidelity and visibility into our own selling rates, pricing rates, discounting rates. And we're getting more control of that, which I think will allow us to get a bit more value upside. And Tom and the team did some great work in the IA space a little bit in that space recently, and I expect that to continue. So -- but the short answer is no, we're not having to negotiate prices at the moment. And then on Higher Ed, McGrow Hill, I mean, I love you asking that because, of course, you're pointing to our upside. There's nothing that they're doing that we cannot do. And Pearson is coming from a place where perhaps we were not so well organized a few years ago. And under Tom and the team's leadership, we're in a much better place that business is growing. And I think we should aspire to continue to drive performance because McGraw is a great company. We love them, and we can learn as well.

So over here and then over here.

It's Ciaran Donnelly from Citi. Two on enterprise and then one more. Just on your comments on the backlog in enterprise, could you just give us a sense of what it would have looked like 12 months ago, just to get a sense of how it's grown over the year in the context of the enterprise agreements you've signed? And then I guess, just on those partnerships, I'm just trying to get an understanding of pricing framework. Just in the context, I know there's a debate around AI displacement and unemployment levels. And I guess just in the context of potentially higher unemployment, how that would affect that business if pricing is based on headcount-led metrics? And then just on the medium-term plan and the average 40 basis point margin improvement per annum. Could you give us a sense of what's the contribution from, I guess, operating leverage and cost efficiencies just around your comments in terms of you've reinvested the cost efficiencies you've delivered over the last couple of years?

Yes. So if I go back a year ago, Ciaran, in the enterprise business and particularly looking -- I mean, so I'm not talking about vocational qualifications. I'm talking about just the small enterprise solutions thing that as Sally said, small numbers can make a difference. That business had already some partnerships. Other bits of Pearson like Pearson View, for example, would have had relationship with Microsoft and AWS, for example. And so when we looked at that, we were like, okay, how do we ensure that these customers are long-run customers for the business. That's part one. And secondly, how do we ensure meaningful growth upside. And that's what these contracts do. They lock in hundreds of millions of future revenues of pre-existing contracts and put us in a place where those companies want to invest in us and innovating to build the next generation of products, and we added incremental hundreds of millions on top of that, not just with those two, but all the others.

And so that is a big difference from where we were a year ago. But like I said, the difference spreads out across ELS and ELL and A&Q because when we set up the enterprise sales team, you'll remember me saying this is Pearson had a lot of what the market in enterprise needed. It just didn't sell to it. So we've created a single sales team to address that enterprise opportunity and Vishaal's team bring all of Pearson, and that's what you're seeing in the outcome there.

In terms of the pricing framework and the unemployment question, I'm not going to pretend to have a crystal ball on like the future of employment and AI impact. I think -- I do think there is some hysteria coming out of Silicon Valley because of actually how powerful 5.3 Codex and 4.6 Opus are, et cetera, on things like software engineering. So the software engineers are being very noisy about it, I think, for a good reason. And so that raises a lot of questions.

In the past, when you get these sorts of dislocations, you end up with people needing skills, needing new skills. And that's the demand that we're seeing. So actually, the tech companies are coming to us for skilling their people like their sellers on their AI, and they're coming to us to come and skill their customers on their new products because in order to justify the hundreds of billions of CapEx, you need people to use the product. And in order for them to use the products, they need to know how to use the products. And that's what we're being asked to help with. So that's the big drive that we're seeing today. And I think Sally would say, in the past when there were sort of downturns in the economy and so on, Pearson has also had an element of it that is countercyclical and shows up and helps people in those moments.

On the specific financial question you're asking, though, from a pricing point of view, it's not based on headcount with these partnerships. It's on hard commits and dollars.

Yes. I mean, Sally you've excellent point. Sally. I mean so when I say the hundreds of millions, I mean, Sally and I talked about like how are we going to explain this to the market because it's a bit involved because it's across several years and it's across the different business units. But as Sally said, that is legally contracted revenue backlog. That's what that is. And then on the last point that you're asking about the medium-term 40 bps, how we're thinking about that vis-a-vis operating leverage. So Sally?

I think I've talked before about the kind of the three components, operating leverage on our mid-single-digit sales growth. And then we've talked about tens of millions of pounds of cost savings. Actually, last year, that was the 200 basis points that Omar referred to. So that gives you an idea of the scale that we're talking about. If you do the math on that, you get to a lot more than 40 basis points. And then we're reinvesting part of that back into the business in order to drive that future growth. So I think from a scale perspective, you can take the 200 basis points, you can apply the mid-single digits to the top line. And then the balancing figure to get that to 40 basis points is investment. And you'll see that, that's a significant number because we're driving for future growth. We're innovating with our partners to bring new products to the market, and it's really exciting.

So first of all, digging back into A&Q in Q1. So you saw 8% organic in Q4. I think if the whole of the New Jersey loss landed in Q1, that would be something like a 6-point drag. So that would still leave you in positive territory. PDRI was already declining in Q4. So were there one-off benefits helping you in Q4? Or is there something else worse in Q1 to get us down to negative?

Also digging into Laura's question on Higher Ed a little bit more, Cengage was 10% up in U.S. Higher Ed and 25% McGraw Hill teens. Both of them say they won share of adoptions. They're also much bigger in Inclusive Access and growing faster in Inclusive Access. So this has been the case for a couple of years now. So what's going to make this turnaround and need to catch up when it isn't really happening so far?

And a third question, can you talk about what kind of enrollment growth for fall 2026 you're baking into your thinking on higher education?

Yes. I mean, Nick, I love seeing you. I'm so happy you're here, and I'm excited about the day when you don't ask me tons of questions about Higher Ed. But anyway, we will get into that because I mean it like it's 10% of our operating profit with the English part as well. So I mean, the other 80%, 90% is the rest. I just want to remind everyone. But we're going to absolutely answer those things. So on AMQ, was there anything funny going on in Q4, Sally, that gave us a one-off kicker in AMQ that we should be talking about?

No. I mean, of course, we're not a business where you can just go steady, steady, steady, because it's not a volume play. We've got these large long-term contracts and the revenue recognition is based on when you're delivering against those contracts. And if your exam falls in one quarter rather than another, it can mean that things move around. All that's going on in Q1 is the New Jersey contract and then the comp from PDRI is a tricky comp. In Q2, the comp gets easier for PDRI and then we bring these new contracts online. And then we've got the new contracts that we had in Q4 also helping that growth. So just simple as that.

Yes. Thank you. I'm going to say a couple of words about -- my thesis about the Cengage thing. And then Tom, maybe you'll pile on and also talk about enrollment. So I mean, I'm a simple person, Nick. There's only two things that matter. Like do you have a good product and can you sell it? Pearson historically -- and I'm going back years, like perhaps we didn't pay enough attention to those two things well enough in the Higher Ed space. That's why on the product side, we're busy converging our platforms into a single modern tech stack and that Tony and his team are doing a wonderful job on that.

So the product, I would say, was lagging, and now it's advancing really quickly. The feature functionality is incredibly rich and professors love our stuff. And some of the underlying tech stack was a bit older and like we're dealing with that. And so that's some of what you've heard about.

On the sales side, again, Tom and the team have modernized that, and I actually am very happy with how that performs. But perhaps we were a bit slow on the uptake on inclusive access. So I think we closed out the year at something like 44% of our revenues are in that space. I think the top -- the front run is at 60%. So for me, it's just all upside, like we know what to do. But Tom, if you can comment on that and then please, a little bit on the enrollments as well.

Yes, sure. So I mean, I think the old market share question is a chestnut that we're kind of expecting. It's very simple. We think about adoption market share and so we're not particularly focused on NPI for a couple of reasons. One, it only measures half the market. So you can miss kind of important things like OER and what's happening there. Two, it doesn't really measure what professors are actually doing on an underlying basis in terms of adoptions. So actually, we're focused on adoption share. And last year, we were up. This year, we were flat. And we'll tell you when we're up and we'll tell you when we're down and we'll tell you when we're flat. So we're kind of fairly straightforward there.

I think on Inclusive Access, as Omar touched on, there's more we can do. So we've been very focused on being more aggressive with our Inclusive Access strategy for 2026. We're looking forward to seeing how that plays out in the fall. And then I think we've also been fairly candid about some of the product areas of friction in the past, right? So when I think I joined, we had 170 different ways to integrate with an LMS. That's kind of difficult to manage if you're a sales team or if you're a customer support team. And so we've simplified that down to less than 10, and we're continuing to push on things like that.

They make a difference to the professor experience, which is why we've had some of those points of friction and challenge with things like inclusive access, but there's been a lot of focus there. And then on enrollments, I think for the year, we're broadly flat. We're expecting it to be up in the first half and slightly down in the second half. So if you put all of that together, that's how we get there. So that's kind of our thinking there.

And actually, just to add, I think from a product perspective, when you saw the AI in those demos earlier, that AI is out there in our sellers' hands today and it's winning new business and it's taking market share. And we're incredibly excited about our product lineup because I think the work that Tony and the team have done has been fantastic in terms of really putting leading-edge AI into our products, and that's resonating with faculty and students. And I think what people care most about is that proximity to the faculty and how we're helping students learn and you saw some beautiful statistics there about increases in active reading, learning. With your faculty, that's kind of what -- that's kind of music to your ears.

I mean the thing I'm just connecting a couple of dots of some of what you're saying is not long ago, people said, "Oh, EdTech is going to kill companies like Pearson." And then -- and also "OER is going to kill companies like Pearson." Those things flatline for reasons that are not always extremely evident. OER is peer-reviewed high-quality content generated by a professor and put out for free. But it needs to be maintained, aligned to the curriculum, aligned to the assessments. It needs to be integrated with all of the LMSs and SISs, all these things. And so that's too much for a typical professor to just do, so it doesn't happen. And so the institutions -- particularly in this world of AI where a lot of nonsense is getting published, they come back to the trusted authorities and the people that they believe in and trust and that's groups like Pearson. So I think we're in good shape.

Anyone else?

We've got one question on the line. If there's no other questions [indiscernible].

Sure.

[Operator Instructions] First question is from Steve Liechti of Deutsche Numis.

I've got a couple. Just on A&Q, can you remind us or scale the size of the big client pause that you had in the first half of last year? And remind us, was that in the first quarter or the second quarter? And is that meaningful to sort of the numbers the way that they sort of flow through in the in the quarters? That's the first question.

Second question is on Enterprise Learning, I know you referred to it as being small within the mix previously. Can you just give us a rough figure or remind us within that ELS overall revenue of EUR 282 million, what that number is that would be Enterprise Learning, just to help us scale that. And you commented about the 20% growth in the fourth quarter of last year. Just how good is your line of sight to that -- to equate to that 20% through to the current year, i.e., have you got the line of sight to say 20% looks realistic for 2026?

Okay. Thank you very much, Steve. I appreciate that. So on A&Q, I think people will remember, we had a bit of a snafu with a Middle Eastern customer around payment terms that ended up causing a pause and then a subsequent reengagement. So do you want to comment on the materiality of that in the quarter?

Yes. So that contract was still running for most of Q1. It was Q2 when it paused and it went back online in Q3.

Okay. So it won't have a relevant flow for Q1, Q2, is what you're?

It won't for Q1. It won't for Q2. [indiscernible] subsequently.

And then on ELS, do we segment out the ES component?

No, we don't, but it's kind of 10%, 20% would be the way to think about it.

There you go, Steve. You've got a clue there. And then in terms of the 20% growth rate, I mean, the -- we've been careful with guiding because what I'm saying -- I think what we're saying to you, Steve, is the future revenues around ES and the other components where the enterprise deals are covering, we see the -- if you like, say, the annual flow of contracts that as previously committed. The exact amount of revenue that you're going to recognize in a given quarter, a little bit depends on the product flow that happens. And so we are not being too direct about that at this point. But -- so I think I'm very proud of what Vishaal and the team have done because they basically built a team that did not exist just over a year ago, engage with these customers and have engaged these deep multiyear, quite profound relationships, which will benefit them and benefit us. But the exact way it flows quarter-to-quarter in terms of revenue growth, we're not probably going to talk about at this point.

We have no further questions on the phone line. So I'd like to hand back to the room.

Yes, we've got one question from Alex at AlphaValue. Can you elaborate on the product impairment? How many platforms did you have before the convergence? And how -- and was it related to past acquisitions?

Okay. Tony, over to you.

Yes. So it's specifically within the Higher Ed segment, and we had 4 courseware platforms, which we're converging down to 1 so that we have better efficiency. And you can see in the video, the AI study tools then work great across the one platform. And then we have a high degree of confidence that we then have the right setup moving forward from a product perspective as well as the way it's played out in the P&L.

Perfect. Thank you, Tony. And Alex, thanks for the question. Mr. Shore, does that cover us?

That covers us.

Okay. Well, ladies and gentlemen, thank you. Thank you for being with us and giving us your time. We appreciate it. We appreciate your interest in Pearson. Do not miss the chance to go across to the innovation studio and see some of these products and play with them and get a sense of what Pearson is building. I mean I love the chart that we showed about the rate of innovation increases we're releasing more and more products each year. You can expect that of this company going forward. Over to you. Thanks. See you soon.

Good morning, everyone, and welcome to Pearson's 2025 9-month Trading Update. [Operator Instructions]. And with that, I'll hand over to Omar.

Good morning, everyone, and thank you for joining us today for our 2025 9-month trading update. I'm here in London with our CFO, Sally Johnson. And as always, I appreciate your time and interest in Pearson's journey as we continue to renew this company by executing against the 3 key priorities that we set out at the start of the year. You'll have seen this morning's announcement already. So I'll just pick out a few points on our progress, and then we'll open it up for Q&A.

Firstly, on our financial performance. Sales growth accelerated to 4% in Q3, and I'm pleased with the broad-based execution across our teams that they're showing and in particular, the way that we're navigating the market headwinds that I outlined at our interim results. When we look at the business units, Virtual Learning delivered a really standout result in the back-to-school period with 17% sales growth, driven by excellent enrollment performance, reflecting improvements in our digital marketing approach, enrollment process and career offering.

Assessment & Qualifications growth accelerated to 4% in Q3, with Pearson VUE returning to growth as expected, driven by new contract launches. These were offset in part by ongoing headwinds in federal hiring and spending that continues to affect PDRI. In Enterprise Learning & Skills, we continue to build our go-to-market for enterprise with growth accelerating in our Enterprise Solutions business and high-quality new customers coming on board. This is good progress, and I'll come back to it in just a minute. Higher Education delivered 2% growth in the 9-month period with a solid performance in core U.S. Higher Ed, which continues to deliver sustained growth.

Q3 saw a decline due to challenging trading conditions in international Higher Ed and the transitioning period in our K-12 channel. And lastly, English Language Learning returned to growth in Q3, driven by the competitiveness and resilience of PTE despite difficult migration conditions in larger markets this year. Our Q3 performance is in line with our expectations, and we're on track for a stronger Q4, given the known business unit dynamics driving Assessments & Qualifications and English Language Learning in particular, alongside the excellent momentum in Virtual Learning.

Naturally, visibility can vary across business units. First, we have a clear line of sight into virtual learning, where Q4 performance is primarily driven by academic year enrollments at the end of September, which are known to us. Second, within Pearson VUE, the customer landscape is certain and contracted, albeit volumes are forecast based on historical trends. So overall, visibility into Q4 is decent. And third, even in the businesses that are more content and software focused, we track detailed sales pipeline data to underpin our forecast. Taken all together, we therefore, have good confidence in a strong end to the year and delivering an annual result in line with market expectations.

Our next priority for 2025 is to lead on the application of innovative technologies across our products and services. Since we last spoke, a lot has been written about the potential negative effects of AI on many sectors, including our own so I wanted to take a moment to address that. We are, of course, alert to the potential for disruptive forces, so I want to share with you how we think about this. We continue to invest to maintain the core strengths that distinguish us, including our brand, our very deep distribution and sales network, our broad and diversified scope and our leading expertise in assessment and verification.

And as you know, we're renewing our products and services at pace with AI at the heart of the significant progress that we're making across the group. On this, I'm excited about the commercial opportunities new innovative technologies like AI bring to Pearson. Let me share 4 examples with you. Firstly, when AI is used effectively, it can personalize learning and deliver enhanced experiences and learning outcomes, in turn, driving demand for our products. We're seeing ever more tangible evidence of the benefits of using AI in our products, including our recent research that shows our AI study tools are meaningfully improving academic outcomes for our Connections Academy students.

Our approach to leveraging innovative technologies is grounded in our data-backed learning science and our proprietary trusted IP, which are then deployed in the flow of study, which we believe is a special competitive advantage. Second, we're using AI to increase our speed to market. I've spoken to you before about the suite of content development tools available for our authoring and editorial teams that are powered by a range of leading LLMs. And these teams are now able to produce high-quality content in a fraction of the time, meaning we're able to shorten the product innovation cycle and expand our market presence faster and at a lower cost than before.

A good example of this being in Brazil, where our team was able to localize 7,700 videos in a little over a month, facilitating a faster international rollout of our study prep tools. Thirdly, we are working with our hyperscaler partners on a set of products that leverage AI agents in combination with skilling and learning data sets to help employees learn in the flow of work, and you will hear more about these developments from us in the coming months.

Finally, you'll recall that about 2/3 of Pearson's business is pure assessments, where we are literally the world leader. And here, we're seeing our customers engage more with our assessment products, as they recognize the growing importance of relevant verified skills in a world of increasing AI usage. Therefore, as you can see, we're evolving and renewing our businesses quickly to take advantage of these new technologies, which we believe will support long-term growth and provide increased resilience to the business.

Before I pause for your questions, let me provide an update on our third priority for the year, growing our business across enterprise customers. Pearson VUE successfully launched a multiyear program with Salesforce, verifying in-demand skills across a diverse set of 80 exams. We were chosen for our global innovative exam delivery options that meet the needs of test takers around the world, and this deal extends our leadership in the technology vertical space. We've also continued to announce new wins delivered by our new enterprise sales teams, including a strategic partnership with Cognizant and a global strategic alliance with Deloitte to help enterprises implement AI-powered learning and build new AI capabilities.

These updates build upon the momentum we've made throughout this year, and I want to take a moment to show examples of the range of services we're providing in this space. Firstly, with HCLTech, we will deploy curated Pearson learning paths in AI, cybersecurity, cloud and career success, both for their internal staff and their enterprise customers globally. Secondly, we're embedding our learning and assessment solutions into Cognizant's client programs across key growth markets, leveraging Cognizant's regional sales and delivery network to accelerate adoption across industries.

And finally, in Saudi Arabia, Pearson has been chosen as a strategic vocational skilling partner for construction, leveraging our expertise in Vocational Training and English Language to support a PIF, the sovereign wealth fund led initiative to build a future-ready workforce in the Kingdom. I'm pleased with the steady progress our teams are making. It reinforces my confidence in our ability to capitalize on the large opportunity in this highly fragmented market, as we support enterprises to address their challenges in talent planning, sourcing and development.

I look forward to updating you on our strategic progress with our full year results next year. And with that, Sally and I are pleased to take your questions.

[Operator Instructions] First question goes to James Tate of Goldman Sachs.

It's James Tate from Goldman. So I've got 2 questions, please, and then a follow-up. I guess, firstly, please, could you just clarify the revenue model for the new contract wins in VUE or perhaps more generally the contracts in the industry for IT certification programs. Do you tend to receive any meaningful upfront implementation fees as part of the contract win? That's my first question.

And then second, just to be clear, does get paid based on a per candidate fee, so revenues are directly correlated to candidate volumes? Or is there something else we should be thinking about here? And then I got a follow-up.

Okay. So the revenue model for VUE, in a lot of our businesses, we have a kind of 2-stage sales process. So the people that we call our customers are the people who we have a partnership with. So think about Microsoft in the technology space or the association of nurses in the nursing space, those sort of people. And they're our customer, and they give us the right to run that certification. And then the people who actually pay are the people who take the test or the people who go into our test center or who are online taking the test.

And so the revenue model is effectively on a per candidate basis because it's the fee that they're paying for that particular test. So you'll know that from a kind of stats point of view, we share test volume. So the way of thinking of the kind of P times Q calculation for VUE is the volume for the candidate times the test charge for that test. And that can range quite a lot because you can have a very quick kind of half an hour certification. So I think, I don't know, U.K. driving theory test or you can have something like a medical exam, which is -- it can be over days, and that's an increased fee.

In terms of the upfront piece, there isn't really an upfront fee at all. Part of the business -- but it's a quite small part of the business is where we actually provide kind of services around actually development of the exam. So I guess that will be slightly different to that volume-based piece. But predominantly, the business is about that volume and the per exam fee.

That's perfect. And I mean, James, I'm going to just add a couple of little points as well about why I like this business. So one is, obviously, we team with these organizations like the one Sally just mentioned, whether it's Microsoft or the Nursing Association to drive volume. So we collaborate with them on how they run promotions in their space. And so we have a lot of insight into those market dynamics, how they work.

And the other thing I really love about what the VUE team are doing is they're making wins right now that we are totally aware of that we know are going to drive incremental revenue growth out into '26 and '27. So I love that forward visibility that, that business gives us as well. So thanks for your question.

And just the follow-up is, as you talked about -- you actually touched upon it there in terms of 2026. Should we expect that improved growth from the new contract wins that are ramping up through Q4, that should benefit the first 9 months or first 3 quarters of 2026 for Pearson VUE specifically. I appreciate you have some headwinds from PDRI, but also have easier comps from the contract pause for most of this year. So is it fair to say that you could grow high single digits for most of next year? Or is there something else I'm missing here?

Are we doing '26 guidance, Sally?

No, we are not, Omar. No, I'm not going to guide you on '26 now, James, that's a conversation for next year. But clearly, a good performance in Q4 is good for the future of this business. What we are guiding to in the medium term is mid-single-digit growth, and that's what we expect in the future.

Next question goes to Adam Berlin of UBS.

Maybe starting on Higher Ed. Can you -- first, I suppose there's a few questions there. So one is why -- what happened in international Higher Ed? It seems it's down like high double digits for the whole segment to be negative in the quarter. Can you just explain what happened there? And is that going to continue? And -- or is it just a difficult comp? Just anything you can explain there would be helpful.

Second thing is your guidance does imply that the Higher Ed segment does improve in Q4 versus Q3. Can you just talk about if that's correct and what the drivers of that improvement in Higher Ed are? And then maybe I'll ask a third one on Higher Ed as well is, can you comment on what you think happened with adoption share into the -- into this selling season? Did you gain share as you were trying to do?

I take this. So in international, our business in the mature markets, so I think Canada, U.K., those sorts of markets, has been particularly challenging. And so you're right in the math that you quoted, Adam. Obviously, for international, that's on relatively small numbers compared to the segment. Strategically, we have shifted our strategy from those mature markets where we saw the fact that this was happening to emerging markets. and shifting the strategy to digital rather than print products using the digital products that we've been developing for the U.S. market, where you know now we're predominantly digital in terms of that business.

And it's taken longer than we had hoped for that digital and emerging market strategy to make the difference in terms of what's been happening in the mature markets. We do see that, that will make a difference, that digital strategy. So next year, those digital products will be out across the important regions that we are looking at. We're not anticipating that the mature markets are going to become any easier, but that investment that we're making from a sales point of view in emerging markets should come through.

In terms of the Higher Ed segment overall in Q4, yes, there will be a slight improvement to what we saw in Q3 in Q4. If I talk through what's happened in the other pieces outside of international, Higher Ed U.S. core has actually grown 2%. So that's another year of growth for Higher Ed U.S., which is great. That is actually 2 things that are happening in there. Good growth in our core business, offset by a decline in our K-12 business, which you'll remember has a transitionary year this year. At this point last year, we told you that we were bringing that sales team in-house. So the sales team that sell our products -- our Higher Ed products into the K-12 segment for things like AP.

The reason for that is it's really strategically important for us, as we think about early careers to have our sales teams talking directly ourselves with those customers because they can also then sell our career and technical product. So that's why we did it. We knew that, that meant that this year would be a transitionary year because we've effectively hired a whole new sales team, who are coming up to speed with our product. And therefore, that's something that will be passed as we go into next year.

From the Q4 point, K-12 is more of a Q3 from a phasing point of view. So K-12 doesn't impact Q4 so much, which is why you see a better performance for Higher Ed overall in Q4. And then adoption share, we don't have the data for yet so we'll talk about that at the full year.

I assume that means you don't have the enrollment data either?

No. And our understanding is these data sets are going to come out later this year than we're used to. So we're going to have to be patient.

The next question goes to Nick Dempsey of Barclays.

So first of all, on Virtual Learning, I mean, really strong growth there. Just the way this works, is there any reason why that strong growth shouldn't be broadly at that level through Q4, Q1 '26 and Q2 '26? Second question, in ELL Institutional, I think you were expecting decent-sized new contracts in LatAm in Q4. Do you now have the visibility on those coming in for sure? Or are you still -- is there any uncertainty on the timing of those?

And the third question, how do you think about AI offerings like Gemini-guided learning and Claude for Education that we saw launched over the summer? Could there be opportunities for partnerships there? Or should we worry that these offerings could make textbooks less central to learning inside university courses?

Those are wonderful questions, Nick. Thank you very much. I'll take the first one. Sally, maybe you can pick up ELL and I'll come back to the AI one. So on Virtual Learning, as you know, Nick, what happened in the back-to-school season and particularly the enrollments that we kind of lock at the end of September, give you very good visibility for the school year. Now there are puts and takes because obviously, parents can choose to unenroll at some point in the year, and there may be some true-ups to do with state-based funding. But overall, we have really quite good visibility going forward. And so I think we feel very strong and good about virtual learning certainly going into Q4. ELL?

Yes, sure. So ELL and Institutional, in particular, will have a great Q4. That is I won't say predominantly, but a large part of that is in Latin America. And the way that we forecast and run this business from a sales point of view is we have a pipeline of things that we've got, of course, good visibility into at this stage of the year, and that's how we forecast for the quarter. So we're expecting a good quarter for Institutional.

Perfect. And then on what some of the AI labs are producing, I mean, I have to say that when we look at things like Gemini's learn mode, I mean, they're doing some great things. And we really like it. Our people are using it and leveraging it as well as part of our own tools. And I think, Nick, you can assume that we are deeply engaged in relevant conversations with the right companies to figure out business models and commercial approaches, but ultimately, solutions that really help learners into the future. So I feel good about the progress that we're seeing with those advances today.

The next question goes to Steve Liechti of Deutsche Numis.

Yes, I've got 3. First one, just in terms of the like-for-like numbers, I know you only go to one significant figure on your like-for-likes. But I'm just trying to sort of bring together your third quarter plus 4% against your 9-month figure of 2%, which is in line with the first half, 2%. It just seems a bit odd to me, given the third quarter is a relatively bigger quarter, but that didn't have an effect on the 9 months. Just any clarification you can give us there or one further decimal place would be helpful.

And then second question, just clarify a bit on PDRI. I know it's a drag in this year, but you're saying it's going to extend into next year as well. Just any kind of quantification you can -- or help you can give there? And then the third question is on PTE, where I kind of had in my head that it was going to be down, and you're saying it's stronger given timings and stuff. Just clarification there and what you expect in the fourth quarter there, please?

Do you want to grab the first 2?

Yes, sure. So I'm not going to do numbers to one decimal place, but -- and don't question my math, the 4%, the 2% [indiscernible] right. But effectively, it is about decimal places. And it's a high 2% is the answer. And I hope when we did the math, it might even be 3%, but sometimes it doesn't work that way for you. And then for PDRI, it's been a really difficult year for PDRI this year with what has happened at a federal level. It's a fantastic business.

And one of the things that we knew was an opportunity when we bought the business was what it could do in the enterprise space as well as in the federal space. So that's part of the things that they're concentrating on now is how that they -- we can use what they do in the recruitment assessment space across the wider Pearson business as well. So for example, they're working very closely with our TalentLens business, which is in ELS at the moment. And we're not anticipating given the kind of contract nature of that business, them having a big -- quick rebound next year. But strategically, we're pivoting to make sure that we're making the very best use of the assets that we've got in a fantastic business. And you wanted to take PTE...

Yes. On PTE, just very simply, Steve. So when we guided at the beginning of the year, obviously, we were alert to some of the migration discussions happening around the world. And so we wanted to be somewhat conservative. And also, we could see like the volumes were down in many of the big markets. Actually, the team have performed really well, including with the change in the nature of the test, for example, for Australia. And they've gone through that period with great results in the 9 months to date.

And given that Sally has got great visibility into registrations for PTE in October and November as well, we felt that it was time to sort of say, okay, like this is going in a decent direction despite the market. And actually, we know that we're taking share. So that's what we're signaling.

We have no further audio questions. So I'll hand back to the team for any written questions.

So one question from Sami Kassab at BNP. Can you comment on the test prep business that you launched in April? Is it performing as expected?

Sami, I think my answer on the test prep business is it's a small thing at the moment. And what we're doing is we're pulling together different threads from across Pearson to say like we've got prep for language, prep for science, prep for workplace skills and pulling it together into a singular package. We launched something called the Pearson Skilling Suite, which is a sort of a software platform to help deliver some of that. And it's going to be an area that we will continue to invest and focus on. But in the scheme of Pearson today, it's a relatively small area. So it's not something that we're making too much of a fuss about.

No further questions.

Okay. Well, Sally, thank you. Team, thank you and for our investors and analysts on the line, thank you so much for your interest in Pearson. We appreciate you. We know you could be doing something else. So thanks for being with us.

Thank you. Have a great day.