2015 results in line with guidance:
o Sales of £4,468m declined 2% in underlying terms. Good growth in Pearson VUE, Connections Education and Wall Street English in China was more than offset by declines in US Higher Education, UK Qualifications and South Africa.
o Deferred revenues grew 8% in underlying terms.
o Adjusted operating profit of £723m was down 2% in underlying terms due to revenue mix and an operating loss in our Growth segment partly offset by Penguin Random House.
o Adjusted earnings per share grew 5% to 70.3p reflecting lower interest and a lower tax rate of 15.5%, due to the agreement of historical tax positions and the associated release of accrued interest on tax provisions.
o Operating cash flow decreased 33% as a result of challenging trading, disposals and increased US higher education textbook returns partly offset by an increased dividend payment from Penguin Random House.
2015 statutory results: Statutory profit for the year of £823m was affected by two significant items: pre-tax gains on the disposal of the Financial Times, The Economist Group and PowerSchool of £1,214m; and an impairment of goodwill and intangibles of £849m, primarily reflecting challenging market conditions in our Growth and North American businesses.
Simplification and growth: As announced in January, we are taking further action to simplify our business, reduce our costs and position ourselves for growth in our major markets. We will complete the majority of these actions by mid-year and incur implementation costs of approximately £320m in 2016 and expect to generate annualised savings of approximately £350m, with approximately £250m of these savings in 2016 and a further £100m of these savings in 2017. We have already implemented a number of associated actions since the announcement of the programme in January.
2018 goals: With the full benefits of our restructuring programme, the launch of new products, and stability returning to US college enrolments and the UK qualifications market by the end of 2017, we expect adjusted operating profit to be at or above £800m in 2018.
Sustaining the dividend: We are proposing a final dividend of 34p, level with last year, resulting in a 2% increase in the overall 2015 dividend to 52p. Pearson plans to hold its dividend at this 2015 level while it rebuilds cover, reflecting the Board's confidence in the medium term outlook.
2016 outlook: In 2016, we expect to report adjusted operating profit and adjusted earnings per share before the costs of restructuring of between £580m and £620m and between 50p and 55p, respectively, with the in-year benefits from restructuring offset by the loss of operating profit from disposals made in 2015, ongoing challenging conditions in our largest markets, the reinstatement of the employee incentive pool and other operational factors. We are excluding the one-off cost of this major restructuring to better reflect the underlying earnings potential of the business. Operating profit after restructuring charges is expected to be in the £260m to £300m range.
