Pearson Annual Report and Accounts 2010

Introduction

Financial highlights

In financial terms, Pearson’s goal is to achieve sustainable growth on three key
financial goals – earnings, cash and return on invested capital – and reliable
cash returns to our investors through healthy and growing dividends. Over the
past five years we have produced, on average, 16% growth in earnings and cash
flow. And we have sustained our growth even in the face of very tough
economic and market conditions in recent years.

Business performance and Statutory results

	2010 £m	2009 £m	Headline growth	CER growth	Underlying growth
Business performance
Sales	5,663	5,140	10%	8%	5%
Adjusted operating profit	857	710	21%	15%	14%
Adjusted profit before tax	853	761	12%
Adjusted earnings per share	77.5p	65.4p	19%
Operating cash flow	1,057	913	16%
Total free cash flow	904	723	25%
Total free cash flow per share	112.8p	90.5p	25%
Return on invested capital	10.3%	8.9%	1.4%pts
Net debt	(430)	(1,092)	61%
Statutory results
Operating profit	743	619	20%
Profit before tax	670	523	28%
Basic earnings per share	161.9p	53.2p	204%
Cash generated from operations	1,169	1,012	16%
Dividend per share	38.7p	35.5p	9%

Notes:
Throughout this document:

a) Growth rates are stated on a constant exchange rate (CER) basis unless otherwise stated. Where quoted, underlying growth rates exclude both currency movements and portfolio changes.
b) Interactive Data is treated as a discontinued business and sales and operating profit are stated on a continuing business basis, excluding Interactive Data from both 2009 and 2010. Until its sale on 29 July 2010, Interactive Data contributed revenues of £296m (full year 2009: £484m) and adjusted operating profit of £81m (2009: £148m).
c) The ‘business performance’ measures are non-GAAP measures and reconciliations to the equivalent statutory heading under IFRS are included in notes 2, 8 and 31 to the annual report.