Citigroup European Media Conference · 9/12/2005  · •Mass market innovation. The FT’s advantage •Global brand •Lower costs •Premium content •Niche audience •Leading

Citigroup European Citigroup European Media ConferenceMedia Conference

12 September 200512 September 2005

Pearson today

2004 revenues: £3.7bn

By region By business

School29%

US 68%

Asia 7%

UK 15%

Europe 8%

Rest of world2%

Higher Education20%

FT Group16%

Professional14%

Penguin21%

Our advantage

• Growth markets

• Leading brands

• Scale and efficiency

• Steady investment in content and services

• New geographic markets; new market segments

Strong start to 2005

• Sales up 10%; good growth in all parts

• Operating profit up strongly

• Balance sheet stronger

• Continuing dividend growth

Our School advantage

Content Assessment Reporting Data/Services Platform

PearsonPearsonPearsonPearson

McGraw-Hill

Harcourt (Reed)

Houghton Mifflin

Significant Some

Healthy adoption opportunities2005-2007

90%+90%+75%90%Pearson participation

160170100100Reading / literature

707038040Other

17017010050Science

620

170

40

2006E

750900500TotalTotalTotalTotal

13021010Social studies

220110300Math

2007E2005E2004$m

Source: Pearson estimates

-12%

-8%

-4%

0%

4%

8%

12%

The funding environmentYear-on-year changes in quarterly state tax revenues

2001 2002 2003 2004 2005

Source: US Census Bureau

The funding environmentAnnual expenditure per child, $000s

Source: US Dept of Education, NCESNote: middle alternative projections as at 2001/02 dollars, not inflation adjusted

8.08.3

8.4 8.5 8.78.8

2005 2006 2007 2008 2009 2010

The policy environment

• Standards movement a priority

• Materials and assessment required for achievement

• Schools looking for operational improvements

• Technology taking hold

Outlook

• Adoption cycle strong

• Funding environment healthy

• Policy supports materials, testing and technology

Our college advantage% change in gross sales vs. prior year

0%

2%

4%

6%

8%

10%

12%

14%

1999 2000 2001 2002 2003 2004

Pearson Education

Rest of industry

Source: Management Practice Data

A growing college populationTotal enrolment in all degree-granting institutions(’000’s)

Source: US Department of Education, NCES

16,67916,887 17,020

17,16817,374

17,541

2005 2006 2007 2008 2009 2010

Growth in workforce education

Our international advantageSales ($bn)

1.2

0.50.4

0.2

PearsonEducation

ThomsonLearning

McGraw-Hill

Harcourt(Reed)

Note: Education revenues from outside the US.

Penguin’s advantage

Penguin’s advantage

Penguin’s advantage

Novel ideas

• Growth in UK commercial fiction

Novel ideas

• Growth in UK commercial fiction

• Successful new imprints

Novel ideas

• Growth in UK commercial fiction

• Successful new imprints

• Mass market innovation

The FT’s advantage

• Global brand

• Lower costs

• Premium content

• Niche audience

• Leading online service

Good news: readershipRegular readers in Europe

Source: Europe 2005Universe: 10.157m Sample: 11,002

1.3%

1.4%

1.7%

5.5%

6.7%

Print Online

Financial Times

IHT

Wall Street JournalEurope

USA Today

The Economist

1.5%

2.1%

1.2%

3.1%

8.2%

Growth in international newsTotal circulation, millions

0

100

200

300

400

500

99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: World Association of Newspapers / ZenithOptimedia

China, India & RoW

EU

Japan

USA

IDC’S advantageRevenues & margins

00 01 02 03 04 H1 05

$375m

$443m$485m

$340m

25.4%

$314m

29.8% 31.2% 30.5% 30.6% 30.0%

$273m

as reported under US GAAP