Okay. Well, good morning, everybody. We already knew that today was going to be a busy day in the media sector, and it's turned out to be an even busier day. So thanks for those of you who have been able to join us. As promised back in February, we've got the full Pearson executive team with us this morning.

We'll leave plenty of time at the end to introduce our colleagues, and to answer all your questions. And there probably will actually be time for most of you to ask quite a few questions as well, so we'll work our way through it. As you know, Pearson's first half usually contributes around 40% of our sales and very significantly less of our profits.

So it's not always a reliable indicator of our full year performance. That's especially true this year, as the U.S. and U.K. school curriculum changes that we talked about back in February and their impact on our qualifications and high stakes assessment operations in particular, have a much greater proportional impact in the first half.

So before Robin talks you through the numbers and the outlook for the rest of the year, let me share with you what I think are the key lessons from our first half performance. The cyclical and policy pressures are entirely consistent with what we told you at the start of the year.

Overall, we are sustaining a pretty good competitive performance through a period of internal change and disruption. A couple of areas where we've underperformed but plenty more areas where we're doing well and gaining share. We're now almost through the big one-off restructuring charges that we started early last year.

We're going to continue to simplify our business to reduce our costs, to scale globally, to improve experiences for our learners. But we can now do that within a normalized level of restructuring from 2015 and beyond.

We are powering ahead in digital, in services and emerging markets, building a bank of deferred revenue, which sets us up very well for future growth. The accelerated restructuring of our mature analog operations is allowing us to invest more behind those faster-growing opportunities. And that investment, as you'll hear, is very much on track.

All that enables us to reiterate our full year guidance and to increase the dividend by 6%. More than any of that, it is also positioning Pearson as a single Global Education services company, increasingly capable of delivering better learning outcomes at real scale.

And it should provide us with a larger market opportunity, a more resilient business and stronger financial returns in 2015 and beyond. So let's have Robin talk you through the numbers, and then I'll be back to elaborate on those themes, and tee us up for the Q&A.

So Robin?.

Thank you very much, John. Good morning, everybody. Given the first half represents just a small proportion, I'm going to start with our guidance. Now this remains unchanged, based upon the assumptions and the exchange rates that we set out on the 28th of February.

We presented our adjusted earnings here, excluding Mergermarket, as it was sold in February, and the only significant acquisition in this half was Multi, which we completed in February and where integration costs will be second half-weighted.

Currency impacts at OI [ph] amounted to GBP 13 million, compared to the first half last year, negative, of course. We are on track to hit our February guidance, as John said, of 62p to 67p, however, if sterling stays at current rates through to the end of the year, it would knock about 1p off this range.

Our net restructuring cost in the first half was GBP 43 million, including our share of Penguin Random House, and this compares to GBP 29 million in the first half of last year.

With incremental second half benefits and some further restructuring activities to come in the second half, we should expect a full year net restructuring charge of around GBP 50 million. That means that restructuring costs and benefits are on track to deliver a net GBP 95 million of increased profit after investment increases in 2015.

And John will talk in more detail about our restructuring and our investment activities in a few moments. Our restructuring activity has been focused in North America during the first half, which tends to deliver a quicker payback, and our investment is being phased evenly across the year. Our organic outlook remains unchanged as well.

As ever, there are some timing issues in the first half which you should be aware of. As we noted in April, our first quarter benefited from the ongoing purchasing shift from December to January in our U.S. Higher Education business. We expect this phasing benefit to unwind again in the fourth quarter of the year.

Our core business was held back by tough U.K. market conditions and phasing in the first half in our qualifications business. Again, we expect the phasing element, which accounts for around half the underlying sales contraction in the first half, to unwind by the end of the year. But we still expect the U.K.

market to remain tough in 2014 due to the ongoing impact of policy changes. Our growth business will experience tough comparables in South Africa from new adoption shipments which were dispatched in quarter 3 in 2013.

This will drag on the organic growth rate of our growth business at the 9-month stage before picking up again as we dispatch books in South Africa in quarter 4 this year.

Penguin Random House had a particularly strong first half, helped by John Green's book, The Fault in Our Stars, which spent 22 weeks at #1 in the New York Times' Children's Bestseller list. Our sales at CER are up 2%, helped by the acquisition of Grupo Multi in February, which contributed GBP 32 million to turnover.

Our underlying sales are flat, with good growth in digital and services businesses in the U.S. and growth markets, offset by tough market conditions in the U.K.

As I've mentioned, FX was negative to the tune of GBP 182 million, or 9%, due to the stronger first half sterling against both the dollar and key emerging market currencies when compared to the first half last year.

Now our deferred revenue represents sales which were invoiced during the period, but which will be recognized in future accounting periods. This, again, drags on our reported first half sales numbers. These revenues grew 18% at CER, compared to the same point last year.

And given Multi is not a deferred revenue business, all of this increase was organic. The main contributors to this increase are from our U.S. virtual and online businesses, workbooks associated with our higher U.S. school adoption opportunity and U.K.

BTEC deferred recognition, which were released during the second half, which I'll come back to in a minute. Year-to-date profits, excluding Mergermarket, are down GBP 51 million to GBP 73 million. Of this, GBP 14 million relates to the year-on-year increase in net restructuring charges.

GBP 11 million, net, came from acquisitions, including a GBP 6 million adverse impact from associated accounting of Penguin Random House; and GBP 13 million relates to negative currency movements. The balance of GBP 35 million is from trading, particularly, the impact of assessment revenue reduction in the U.K.

and the effect of cost inflation running ahead of sales growth, as well as investment in new platform and direct delivery capability to drive future growth. Now let me spend a few minutes talking about what's going on in each of our businesses.

Our sales in North America were up 2%, although around half of that growth is attributable to the timing factor that I mentioned earlier. In U.S. school, our traditional learning services and assessment businesses were down a combined 2%.

However, our Connections Education virtual school business grew 26%, boosted by higher enrollments and new state contracts. In Higher Education, we grew our learning services business 3%, helped by price increases and the continued registration growth of MyLabs, up 4%.

That growth was offset partially by continued enrollment-driven contraction in book volumes, notably, in the career college channel. Our online university services business grew 11%. Now those fast-growing online services and virtual learning businesses for U.S.

schools and colleges comprise Connections, eCollege and Embanet, which, in total, they accounted for 20% of our North American turnover in the first half, and they grew 19% on a combined business basis. The drop-through to profit was helped by a lower book returns provision, mix and reduced U.S. pension costs, despite higher net restructuring charges.

Overall core sales were down 8% at CER. The majority of this reduction was accounted for by the U.K., which still contributed over half of core turnover during the first half, and which was down 15% despite delivering gains in market share. This contraction resulted from 2 factors of equal weighting, which impacted our U.K.

school qualification business, being firstly, low examination volumes caused by fewer resits and lower numbers of students being entered for GCSE exams early, now that only the grade from their first exam sitting counts towards the school league tables, and that won't reverse in the second half.

But secondly, our next-generation BTEC qualifications, where student assessment now occurs at the end of the course rather than throughout the year, meaning revenue is recognized later. This will improve our numbers in the second half of the year.

Outside the U.K., we saw renewed growth in Italy, where we extended our market-leading position; and in Australia, helped by an improved Higher Education performance. Enrollments under our new online services contract with Monash University are also building nicely.

Our sales into partner markets contracted due to the move to a distributor model in the second half of last year. Our CER increase of 18% in growth markets was powered by Multi, which contributed 11%, and strong sales performances from South Africa, China and our Middle East venture markets, primarily, Saudi Arabia.

India reflected planned hardware-related declines in our Digiclass multimedia teaching solutions business. And in Brazil, our underlying sales were lower as a result of changes we made to our private sistemas sales forces.

Investment remains a feature of these markets as we look to build leading positions in markets which clearly have rapid growth potential. In Wall Street, in China, our new English learning technology platforms are rolling out well. And in South Africa, at CTI, MGI, student numbers at our university campuses continue to rise strongly.

In Saudi Arabia, enrollment levels in our 3 brand-new vocational training colleges are building steadily, doubling our Middle East turnover in the first half. For the reasons I've mentioned, we'll see growth in this segment soften in quarter 3 before resuming again in quarter 4, given the shift in the timing of South African orders this year.

As you can see here, on a global line of business basis, it is our school business which has been under pressure during the first half, while Higher Education and Professional have both grown. Within school, it is our U.K. and U.S.

assessment and qualifications revenues which have seen contraction in the face of examination reform, although, in both markets, we now think that we're through the worst of it. In Higher Education, an improved performance in the U.S. and good numbers in growth markets are both helping our performance.

In Professional, Pearson VUE continues to do well, as does English, helped at CER by the Multi franchise, and underlying FT profits are up, benefiting from last year's restructuring. Penguin Random House had a good start to the year, with particular strength in the children's segment, as I mentioned earlier.

Associate accounting knocked GBP 6 million off our reported profits, with a GBP 2 million reduction from currency and net integration charges, which was $7 million higher than last year in the first half. Adjusted EPS is behind last year at 4.7p.

Almost 2p of this decline related to the incremental net restructuring charges in the first half, and about 2p reduction was due to sterling strength against both the dollar and key emerging market currencies. Interest costs were down slightly, mainly due to FX.

We issued a EUR 500 million 7-year eurobond in quarter 2, at a rate of 1.875%, which we swapped into dollars. Our tax rate in the first half was 20%, as expected. On a statutory basis, EPS was significantly bolstered by the sale -- by the profit on the sale of Mergermarket of GBP 245 million, which we completed in the first quarter.

Our traditional free cash outflow was a little lower than last year, reflecting lower pre-pub expenditure, higher deferred revenue, but higher receivables from stronger June shipments. Fixed capital spend was lower than the first half of 2013. You'll recall that last year, it was increased by the buildout of our Manhattan office.

Other movements reflect the dividend stream from Penguin Random House, which is second half-weighted. As expected, tax paid reduced to more normalized levels after high payments in the first half last year.

Our average working capital to sales ratio resumed its downward trend in the first half, as expected, helped by Penguin Random House being deconsolidated and as a result of lower inventory levels and higher deferred revenue.

Stock days for continuing operations improved from 53 days to 45 days, excluding any Penguin deconsolidation impact, reflecting our continued focus on inventory reduction ahead of the Indiana warehouse closure scheduled for quarter 4.

On our balance sheet, our net debt is just over GBP 2 billion, a little higher than the same point last year, reflecting the first half acquisition of Multi, net of Mergermarket proceeds.

We have sustained our BBB+ and Baa1 ratings with our rating agencies but recognize the need to reduce our net debt level, which will constrain acquisition activity in the second half. Now back to John..

Thanks, Robin. I should've said at the outset, for those of you who are joining us virtually by WebEx, if you want to submit your questions online, we'll make sure that we get to them all at the end of the presentation. So thanks, Robin. And let's just remind ourselves of the guidance that we gave back in February.

We said then that 2014 was going to be another difficult year, that we faced tough conditions in our biggest markets, and that, that coincided with continued restructuring and a period of increased organic investment.

We also said that from 2015 onwards, we'd be in good shape to grow again, as all those conditions start to ease and we have the benefit from the big one-off restructuring and reinvestment work that we currently have underway. So let's just take a quick look at how those trends are playing out as we work our way through the year. As we expected, U.S.

college enrollments continued to decline in the spring semester, but as you can see, the rate of decline is easing. Obviously, we all are waiting to see what the more significant autumn figures look like, but the current trend supports our view that college enrollments will stabilize or should start to stabilize in 2015.

And as you can see from this next slide, state budgets across America do continue to improve steadily as the economy recovers. And that is, in turn, boosting potential U.S. school spending.

The California General Fund, which is the primary account from which California funds all of its day-to-day operations, including education, ended the June fiscal year with a positive cash balance for the first time since before the 2008 crash, since 2007.

However, across the country, for us to benefit from that, we need to see the funding and the politics align. And as we've consistently said, the interpretation of major curriculum change in the form of Common Core is slow and uneven, and it is hurting us this year.

We do expect things to start to improve in 2015, even where states distance themselves from Common Core, they remain very much committed to implementing more rigorous college and career readiness standards. And they have to spend money to meet and implement that.

But conditions will improve slowly, messily, uncertainly, and that is requiring us to plan, especially in the high stakes assessment business for a range of contingencies as we see how things unfold through the second half of the year and into 2015. As you know, curriculum changes are also affecting the U.K., our second largest market.

And even though, as you can see here, our market share is strong and growing, the impact of curriculum change, especially, as Robin mentioned, in the first half for the reasons he walked you through, has actually probably been a little greater than what we expected.

However, registrations should start to stabilize in 2015, although it won't be until 2016 that qualification volumes start to grow again in the U.K. We're now almost through our major one-off restructuring program. By the end of this year, we will have altered the cost base of Pearson quite significantly.

We will, for example, have halved our global warehousing capacity, we'll have cut 4,000 jobs, around 10% of our workforce, primarily in print-related activities in mature markets, and always in roles where we have little real impact on learning outcomes.

Over those 2 years, we will have invested GBP 225 million in one-off costs to achieve GBP 145 million of savings every year from 2015, with a significant chunk of that money reinvested each year in our future growth. That intensity of effort means that we can return to taking a more normal level of restructuring charges through the P&L in 2015.

We won't, though, be returning to a normal level of restructuring activity. Because the more we get stuck into the work of making Pearson a simpler, leaner company, the more opportunity we see, actually, to reduce our operating cost and improve the efficiency of the company.

But we can plan and implement now this ongoing rolling program within what you would consider more normalized levels of restructuring, around about the GBP 20 million to GBP 30 million of annual P&L charges that we averaged through the Pearson P&L for much of the last decade, pretty much as a matter of course.

All together, the combined efforts of all this work means less money now spent supporting our flat or analog revenues, and it means we're investing more and more efficiently each year in driving the growth of our digital services and emerging market capabilities, all of which, as you can see, are growing strongly again this year.

And in the Q&A, I hope you'll take the chance to ask my executive colleagues to talk a little more about some of the specific new investments that, that organic spend is going into and which we're making, because we're very excited about them. But for now, let me just explain briefly why I'm so confident about our overall product pipeline.

We're now investing in world-class modular assets and capabilities that are demonstrably able to improve outcomes. We're combining these capabilities to help our customers tackle their biggest challenges, which is often about achieving much more in education with the same or less total resources. Let me just give you a few examples of that.

The work we're doing with the PARCC consortium and on the Pearson system of courses and our own world-class qualifications, on our virtual and blended school learning, all of that work raises the standards of career and college readiness.

And this is really important, when so many young people around the world still leave high school unfit for either.

Our relationships with universities, such as Arizona State and Western Governors, and Indiana Wesleyan and Texas El Paso, and Monash in Australia, and many others around the world, together with our own colleges which we're now operating in Mexico, in South Africa, Saudi Arabia, here in the U.K., all of that work is about making higher education much more accessible, much more affordable and much more relevant.

As part of that, you may have seen last week, we're championing this whole idea of competency-based education, which is really important.

It's going to be very important over the next decade in helping institutions to recruit and retain students and ensure they graduate with a qualification and do so when they are ready to do so and do so as quickly and as efficiently as possible.

This work, solving real problems, becomes increasingly important at a time when, as you all know, college debt is mounting and dropout rates, both in America and around the world, are high.

Our new student experience that Robin mentioned briefly, all about teaching English in a much more engaging, much more globally comparable, much more successful way. And what we mean by modular is we can deploy those assets and capabilities in our own language centers. We can share them with our franchisees.

We can deliver them in partnership with corporates, major businesses, with state schools, with colleges, or we can deliver them direct and virtually to the consumer as an individual.

The point is, whatever way we deliver it, it's a compelling proposition for young professionals all around the world for whom communicative English is absolutely crucial to career progression.

The extended professional certification partnership with Microsoft, which, I think, got announced over the weekend, along with pretty much every similar partnership we have, with pretty much every other major global technology company, just one of many examples of the work we do to ease the path from college to career.

Increasingly important, graduates are now highly, highly motivated by what the career return is they can expect on the investment they've made in college.

And similarly, the Financial Times is working with business schools and on executive education programs to ensure that as professionals, they can go on learning throughout their career, increasingly important, given the disruptive power of technology and how that is changing careers throughout all our working lives.

So we are increasingly confident of the efficacy, of the outcomes of the real needs of our customers for these next generation of products and services because they are, for the first time, built to a shared, proven framework right across the company. For the first time, one global product strategy, agreed, led and implemented by this executive team.

All new products deploy the same new technologies, mobile first, device neutral, connecting content with assessment and feedback, using learner analytics and Big Data to personalize learning, making it far more collaborative and effective experience for students and teachers and allowing them to measure learning outcomes and progress much more effectively, all drawing on world-class research, both, by the way, in which we have expanded our own research capability.

And you can see that in the increasing numbers of thought papers and research documents that we have publish but also by the way we're building out our extensive global network of academic partners, education leaders, all enabling us to draw on the very best new teaching and learning approaches from around the world, all helping to accelerate our own rate of innovation and invention.

All, of course, also designed to scale up, taking account of the fact of just how messy education can be in its implementation and how important it is to be able to deliver large-scale complex projects like PARCC, and to deal with the very significant last mile issues that come with it.

The reason this is so important is all our customers know that the real problem in education around the world is not actually finding a great teacher or a really good school, it's being able to replicate that excellence at scale.

And everything we're doing as a company, all of the investments that we're making, are designed and focused on meeting that need.

That, in turn, is enabling us to start to build Pearson as a much more powerful brand, capitalizing on our status as the world's largest education company and with a global capability that, frankly, in all modesty, is actually now pretty much unmatched.

It also means, for the first time in Pearson, that we are now building on a core technology platform. And this slide just gives you a sense of that. This approach simplifies our products and the platforms that support them. It improves the learner experience, it makes it much more engaging and intuitive.

It makes our products much more easy to use, much more interoperable, both with our products, with each other [ph] and with those of third parties as well.

It improves our efficacy, our ability to improve educational attainment, because it means we can collect the real-time data and insight to be constantly innovating and enhancing our own products and sharing those insights and co-creating with our customers, so they can do what they really want to do, which is achieve much better levels of education with often very scarce resources.

And this simplification of our core technology platform is just one example of the further scope we see to reduce the cost of the company to improve our efficiency.

What do I mean by simplification? Well, it will reduce our technology costs as we slim down, for example, the 20,000 domains, the 3,000 applications, the 700-plus technology vendors, and the 50-plus data centers that we currently operate. That's a good example of the work that we will continue to be doing over the next few years.

And it's also a great example of why we're so confident that this process of simplification is going to enable us to achieve a lot more with the same overall level of technology spending across the company.

So the combination of this restructuring and reinvestment program that we started in January of last year is making Pearson a much more powerful company. We're creating a lower cost, more flexible analog infrastructure.

This is really important because whilst our print products are in decline, they are going to be in demand by our customers for many years to come and they're often going to form a part, a vital part of the blended solution. Simpler, more scalable core technology platform.

It improves the learner experience, makes life easier for our customers, but it also frees up our product teams to focus much more on innovation and disruption of our own. We can build now higher use, higher impact, digital and blended products much more quickly.

You remember the slide that we shared with you in February, that we are now very confident that we can sustain value and price, that we can actually maintain or even increase average revenue per user in the switch from analog to digital. And this is setting us up to do that at scale and across the whole company.

And it also embeds us much deeper into the process or, if you like, the workflow of education.

It means we're not just co-creating but we're often co-delivering teaching and courses with schools, with university and corporates and, of course, it also enables us to deliver education directly to learners as individual consumers, especially in our growth markets.

So to recap, heavy weighting towards the second half means we still have a lot to do to bring home this year. But our performance so far in the first 6 months of the year is consistent with what we set out in February, and it means we are reaffirming the guidance for the full year that we gave you back then.

Looking further ahead, we expect college enrollments to stabilize next year, and the negative impacts of school curriculum change to at least neutralize. Our restructuring costs will return to more normalized levels in 2015, and the benefits of the work we've done over the last 2 years will really start to flow through.

And after increasing infrastructure and product investment in each of the last 2 years, we will sustain that spending at current levels from 2015.

And the combination of all of this work means we are now increasingly well placed to tackle what is, without a doubt, one of the most important global issues of our time, which is how do you make better education more accessible and affordable for more people globally.

To put it another way, how to help all of us to get a far better return on the GBP 5 trillion and more, that we, as taxpayers and individuals, spend each year on education around the world.

Crucially, for shareholders in the process, it sets Pearson up to go after and to address the 50% and more of that GBP 5 trillion pot that gets spent on teaching and learning, rather than be restricted to the 5% or less that goes to textbooks and teaching materials.

That's why we are very confident that all this work provides Pearson with a larger market opportunity, sharper focus on the faster-growing markets, stronger financial returns in 2015, all achieved as a result of us being ever more effective in enabling those better learning outcomes at all ages and stages in education, and in all parts of the world.

So that's all that Robin and I have got to share with you this morning. As we move into the questions, let me introduce the executive team who are going to help Robin and myself to answer them.

You all know John Ridding, who leads our Professional line of business; joined by Tim Bozik and Doug Kubach, who lead Higher Education and School lines of business, respectively; also joined by Rod Bristow, Don Kilburn, Tamara, who lead our Core, North America and Growth geographies.

Then, we have 3 relatively new faces to Pearson with us this morning, our CIO, Albert Hitchcock, who is hiding behind the pillar there; the Head of Corporate Affairs, Kate James; the Head of HR, Melinda Wolfe, is with us as well.

Two of our colleagues, Luke Swanson, who you know very well, and he leads our overall transformation work; and Michael Barber, our Chief Education Advisor, can't be with us this morning.

But the rest of the team are here and we're very keen to answer the questions, both for those of us who are with us in the room and those who have joined us virtually by WebEx..

Sami, you'd like to start? And then we'll come to [indiscernible] next to you. So microphone down here, if we can..

Thank you, John. I'm Sami Kassab at Exane. Three questions to start with, if I may, please.

The first one, on the Higher Education underlying revenue growth rate of 12%, in the context of the North American Higher Ed learning services, up only 3%, can you explain and discuss the sustainability of the drivers that are behind the 12% growth in Higher Ed top line in the first half, please? Secondly, MyLab registration growth was 4%.

It's the weakest number in the decade. How do we have to read that? Do you expect growth to accelerate? Is the product reaching maturity? What is happening there? And lastly, you mentioned the new digital platform, the reduction in the number of data centers, the consolidation in the number of IT vendors and the related cost savings one could expect.

Are these cost savings included in the 2015 numbers? Or are these cost savings to look for in years ahead?.

Okay. So Tim, do you want to give a sense of how the year is shaping up in higher education around the world and perhaps pick up on the MyLab registrations point. I mean, I think, in headline terms, clearly, the relatively lightweighting of the first year -- first half of the year helps the scale of the 12% underlying growth.

I don't think we expect it to be there at the full year. But clearly, it's a good start.

And Tim, do you want to just give a bit of a [indiscernible] of what's going on around the world and then pick up on the MyLab registrations point as well?.

So is the mic on?.

Yes. If you want to stand up and then .....

So Tim Bozik, Head of Higher Education for Pearson.

So your first question about the composition of the growth is -- it's a combination of the learning service growth that you saw in the U.S., so the 3%; two, the growth in direct delivery, that Robin described, coming out of South Africa and Saudi Arabia; and three, the growth in our inside services that was mentioned, that it's up 11% in our inside services.

I'd also like to put those growth numbers, while on the first half and on a smaller part of the year, in the context of what I think is the longer-term growth opportunity in higher education for Pearson, which is fundamentally a function of the number of students, which today are 180 million students in higher education worldwide, projected to go to 300 million by 2030, to 500 million by 2050.

And most of that growth is a result of a demographic dividend in what we would call our growth markets and the aspirations of a growing middle class. And that what -- that's what gives way to the opportunities for Pearson in services and direct delivery for what will largely be employment-led education.

So I think we should connect that first half to, I think, the long-term opportunities for higher education. The second question about the MyLab growth of 4% in the first half of the year, I think, also should be put in context. One of -- the annual base of MyLab usage which is, in round numbers, 10 million.

So at some level, I think, MyLab growth on scale, we would expect to come down; and two, in the context of the enrollment picture. If you recall, the overall enrollments were down 1 point, round numbers, but they were down 3 points in the community college sector and career college, where we have the greatest MyLab usage.

So to some extent, I feel -- in that context, I feel quite good about 4% MyLab product registration growth, which that's a proxy of, in that kind of enrollment environment..

Tim, do you just want to talk about [indiscernible] just to take it on to the next level of growth is really to move the sort of digital experience beyond the sort of quantitative disciplines into the new areas we're tackling with REVEL and the like and just talk a little bit that as a product..

So our MyLab portfolio is mostly concentrated in quantitative areas, so math, science, economics, finance. The opportunity for Pearson is to move a new product model or next-generation product model into the humanities and social sciences.

We are launching a new product model this fall that's branded REVEL that is an example of the kind of next-generation product that John described that's got the characteristics of it's mobile-ready immersive learning. It's also a textbook replacement, meaning it is a digital courseware product. It's instrumented for web services.

It will provide analytics. And we've had very encouraging sort of prelaunch response from the market. And it's a product model we will -- we're both launching this fall and will build and iterate. And that's the avenue to then faster growth in the digital product model registration..

So that's a good example of an investment we're making this year that won't really make a very meaningful impact to revenues this year but helps the analog-to-digital shift and should help growth in future years.

On your technology point, I should probably just repeat what I said in the presentation, which is all the opportunities we see is the reason why we're confident we'll be able to achieve much more with our current level of technology spending. So I think it is already in the guidance that we've given you for 2015.

But I think, Tim, if you just pass on to Albert, Albert, do you want to just talk more generally about the simplification process and the opportunity you see to build around these core technology platforms?.

one is, how do we simplify the processes of how we run systems and processes internally within Pearson? And how do we take cost and efficiency gains through retransforming the company in that respect? Also, how do we focus on improving the customer experience? So simplifying the platforms but also uplifting the customer experience through the deployment of new digital capabilities and then really growing a really high-performing talent pool for technology to enable us, to take us on that journey.

So we're doing a number of things around simplifying the environment. I think you mentioned, data centers. We're creating a private cloud environment. We're rolling that out. So there's a number of significant changes we're going to be making on an ongoing basis as we move forward..

Okay. Sami, pass the microphone around on to the right..

It's Nick Dempsey from Barclays. I've got 3 questions as well, please. Just thinking about the U.S. state testing business, I just want to try and understand in 2015 what we can expect in terms of profits, up or down. So I understand that going in there, we've got California coming back, Florida going away. We've got PARCC starting.

I don't know if there's any startup costs related to that. So just trying to understand the shape of that because that's quite confusing. Question #2, talking about gaining share from competitors in college, I just wondered if you could give us a bit more detail on that in terms of which products it is that you're gaining share in.

Are we just talking about the textbook market, the AAP numbers? Or are we talking more broadly? And then the third question is, just in Brazil, you talked about issues with changing your sales force related to private sistemas. I think last year, we had -- public sistemas was an issue.

I just wonder if you can give us a bit more of an update on how that whole sistema business is unfolding..

Okay. I think we can't give you any more specific financial guidance on U.S. state testing than what we've already given in the guidance that we've released to the market and is encapsulated in our overall approach.

You did hear me say in the presentation that we do have to prepare for a range of different contingencies because the political situation is a little fluid.

Doug, do you just want to talk more generally about PARCC, the field testing we've done this year, where we are in the process and how we think, broadly, things will pan out over the next few years and partly why we're so excited about the contract overall?.

Sure. I'm Doug Kubach. So we're really excited about the launch of PARCC, which is a multistate consortium in the U.S. We've helped them build a new college readiness assessment system. It's based on our market-leading, cloud-based, mobile-ready testing platform called TestNav. And it's a very exciting opportunity for us.

And next year we're currently expecting to test over 5 million students. And as John said, there is a range of uncertainty around exactly what those numbers will be. But we do see a core of the PARCC states that are launching next year, and that will be very, very exciting. We're taking the same approach with many of our other customers as well.

There are some states that, as you know, work on their own to develop their own college readiness standards, states such as Texas and Virginia, where they're also using our TestNav platform, and that's continuing to grow.

And we have partners such as ACT, which is the largest college entrance exam in the U.S., where we're helping them also implement their next-generation products.

We launched with them a new product called ACT Aspire, which is a college readiness assessment system for grades 3 through 10, which then culminates in the ACT assessment, which is the college entrance examination, and that's moving online in 2015. So there are lots of very interesting and exciting opportunities that we're....

Doug, do you want to hand the microphone on to Don? And do you want to talk a little bit, early in the year, still only 6 months through, but why we're feeling good about our competitive performance in college this year after, frankly, a difficult year or 2?.

Sure. Well, we had a difficult year last year, but I think it's safe to say that we've taken away some share. There are a couple of particular areas that we've done very well. One is biology, one is chemistry.

We tend to do very well when we've actually got a compelling content and digital technology offering that lets students interact with us or interact with our content in special ways and has assessment embedded. So those are areas that we've been very good.

I would also have to say we've done much better across the board, even on our soft side disciplines, than we have done before. And the prelaunch of REVEL has also been well received.

The other thing about the first 6 months I would say is that we continue to see the shift from December to January in terms of sales going from analog to digital, and we expect that to continue in the second half of the year.

And frankly, it's -- the first half of the year is on a fairly small sample size, with the bulk of the year coming in, in the next 2 quarters. So I think we've got quite a ways to go.

But the early indications around -- and also, enrollments are forecasted to be down 1 point, but the early indication is that we have taken some share, but there's quite a bit for the year..

Do you want to just give a bit of an update then sort [indiscernible] online services and how that's going?.

Sure. Yes, I mean, one area that we are seeing good growth in is the -- our online services business, where we provide a set of services for emerging online programs, whether that be at Arizona State University or the 200 graduate programs that we support or University of Florida. Those are very exciting programs.

And I give you one example that happened in the first half that's exciting. Our partnership with Arizona State, where we supply a set of resources to recruit students, enroll students and help them with courseware, they've established a partnership with Starbucks.

And the partnership is that Starbucks is going to offer college education for all of their employees, which is fairly revolutionary and new and very exciting. We're behind many of the services on the ASU side that's going to allow ASU to then partner with Starbucks and then actually provide those employees with education.

So that's an example of how we're broadening what we do in a different area to enable a university to both go in online program, but also take that online program and potentially partner with a corporation on a corporate education program..

Okay.

Could you hand the microphone, Don, on to Tamara? Tamara, could you pick up on Brazil part? I mean, just in doing so, I should just say, by way of introduction, you remember every time I've stood up here, I've said that as we go through this process of accelerated restructuring and change, there is a heightened level of operational risk across the company.

I think Brazil is one of those areas, whereas we made a big -- some big changes, as you'll hear from Tamara, some short-term impact but plenty of opportunity. We remain very excited about Brazil. So Tamara, if you could talk about that and also pick up on the Multi acquisition.

And also, while you're at it, a question from Paul -- sorry, Pavel at Natixis, who also wants to know a little more about whether pricing pressure, salary inflation in India and China, how that's impacting on us. And then Rod Bristow, I'll have a question for you in a minute, from David Reynolds, who wants to know about what impact on U.K.

educational policy of the change in secretary of state for education. So I'll be coming to Rod in a minute.

But Tamara, if you could pick up on those?.

Great. Thanks, John. Tamara Minick-Scokalo, and I lead our growth markets. So let's start out with the question on Brazil. We shouldn't forget Brazil has been a great growth market for us for the past several years, both in general and as well as our sistemas business.

And last year, yes, indeed, through the mayor elections, we did lose some of our public sistema business. But I'm happy to say that this year it rebounded strongly. On our private sistema business, where we have 3 different brands, we had 3 sales forces representing each of those brands calling on the same customer.

We made the decision to combine those sales forces but reinvest and add additional investment in upping both the capability of that sales force, as well as its reach into the marketplace. That naturally caused some customer disruption, and we're seeing some softness because of that. We fully expect that to bed down this year.

And in addition, we did an efficacy review earlier this year to ensure our sistemas products are delivering on learner outcomes, and we're significantly increasing our investment in our product offering. And so between that new sales force and a better offering into sistemas, we expect our private sistemas business to rebound strongly next year.

If I move on to Multi, which is another very exciting business for us, that we acquired in February of this year, it was growing earlier this year, but much like the -- much of the retail sector in Brazil, which shut down during the World Cup, everything sort of came to a halt then. So it's broadly flat year-to-date.

But we expect, as it goes into the fall enrollment sector that it will be up strongly based on everything we're seeing to date in the selling season, and we expect it to finish very strongly and much in line with our expectations, both the top and bottom line..

Okay. So if you could just hand on to Rod. Rod, so on any views Michael Gove's departure, regarding impacts on education policy? Maybe just give a little bit more color on why we expect registration volumes to be flat next year but start to grow again in '16 as well would probably be a good -- helpful thing to do..

Thanks, John. Rod Bristow. I think the first thing to say about the policy that's been led by Michael Gove in these last 4 years, that it's been focused on school autonomy, increased autonomy, economization for schools and higher standards. We've heard from his successor, Nicky Morgan, that, that policy won't change under the current government.

And we've heard as well from Tristam Hunt from the opposition that, that policy around higher standards and indeed, the retention of the academies -- the academization of schools in the U.K. is unlikely to change, too. So we don't expect significant changes to policy. On this issue of higher standards, this is not just a political issue.

This actually is a global issue. Schools all around the world, governments around the world are pushing for more quality and better standards in education. As we've seen tests like the PISA, international benchmark tests become more important and more recognized.

And indeed, the changes to the qualification system in the U.K., which have caused some short-term disruption and a slight decline in the size in the market, are all centered around raising standards.

As far as qualifications specifically are concerned, we've seen a small contraction, a slight contraction in the size of the market this year as there's been a focus not on resits, but on first time taking of exams being the only time that they're going to count for school league tables.

We can see that those changes will be neutralizing, and we'll be returning to growth in 2016. But I think the really important point is that every qualification is changing. We've been growing our share in qualifications in the last few years in the U.K., as you've seen from that slide.

And this change in qualifications is our opportunity to really make a far, far bigger difference. We've got a new world-class qualifications program. All of our qualifications are being put through that program. We're very excited about that opportunity. We've, too, been leading the charge on standards.

We have some compelling new qualifications really well supported by all of the resources that we can bring to bear. So we're actually very excited about the future in qualifications and seeing these changes that we've seen as episodic, certainly not structural..

Thanks, Rod. And then I've got -- there's a question here from Andrea Beneventi at Kepler Cheuvreux, a question for Robin, I think.

When do you expect deferred revenue sales to plateau? And at what level, please?.

Thanks, John. I thought I might get away without a single question. So the deferred revenue you saw was up 18% at constant currency. I mean, that is reflective of the fact that it's our faster-growing digital and services businesses, which have deferred revenue, which are becoming a greater proportion of the company.

And of course, our book -- our analog and book revenues don't get deferred. When you sell a book, you recognize the revenues straight away. When you sell a subscription or an access code, then that access code is for a duration and part of that duration is probably outside your accounting period.

So the deferred revenue, I think, will continue to go up whilst we're in this transition away from books and towards more digital and services. So the question is really, how long is this structural change going to last in the company? I think we've got some way to go.

If you think that we are heading towards a target next year of about 70% of the revenues of the company digital and services and 30% books, I'd just say that was before we sold Mergermarket, so we may be a little bit shy on those numbers by the end of next year.

But the transition of the company is 3%, 4%, 5% towards digital and services away from books each year.

While that continues, you're likely to see deferred revenue growing, and you're likely to see our working capital to sales ratios continue to come down because it's the book, analog business which is clearly more cash or capital consumptive, having stock and inventory in warehouses..

Okay.

You want to go, Nick [ph]?.

Firstly, can you give us an -- you gave us an indication at the full year results of where your revenue growth per student was in U.S. higher education.

Could you update us on what that might have been in the first half of this year? And then, similarly, can you give us an update on whether you're seeing any signs in that market of sort of free content or products being equivalent substitutes for your products? And then on the topic of the restructuring, you talked about it being on track, and you've taken out half your warehouses.

What potential risk do you see of identifying other sort of things to do in the second half of the year? Or that -- in 18 months' time, you suddenly need to halve that number of warehouses again..

Okay. So on the -- I think it's because of the relatively lightweighting of the first half against the second half, I think any attempt for us to try and give you a revenue per user number at this point in the year would be somewhat meaningless and potentially quite misleading.

But I think it's an important statistic that we've established in your mind, and it's one that we will continue to report on and think about. This issue of free content is an important one. I think we've picked that up a little bit.

But Tim, do you just want to briefly -- because I think this is an issue that seems to cause the most concern in higher education. So just sort of briefly sort of say how we're thinking about it and perhaps elaborate on what we've talked about before..

improve learner outcomes and raise average revenue per user. And we think by virtue of doing the former, we'll achieve the latter.

We've demonstrated that in the portfolio so far in the sort of first generation of MyLabs, and we're making our investments in the next generation of those, some of which have capabilities we're bringing to market this year.

The MyLabs this year will be released in a new HTML5 player, with a new dashboard that has data visualization and the kind of analytics that impact decision making for faculty.

We were awarded a patent earlier this year for predictive analytics, which we think is an important capability in the future that will, again, have that kind of impact on student learning and the kinds of interventions and actually, student retention type of activities.

So the free issue is one, we think, is best, from our perspective, sort of solved by our ability -- or offset by our ability to deliver those kind of products that do have the ability to impact learner outcomes..

Okay. Just before I answer the operations question, I just realized that in my eagerness to get to the questions, I forgot to introduce either our Chairman, Glen Moreno; or the longest-standing member of our executive team, Phil Hoffman, Head of Corporate Finance and Strategy. So let me just do that there.

They're here with us as well or [ph] my life will not be worth living for the rest of the year, so I have covered that now. On the operations, I mean, clearly, the halving of our physical infrastructure and warehousing in 2 years, we've done more quickly than the corresponding decline in analog sales over that 2-year period.

So we feel the whole point of doing this accelerated restructuring program was to get ahead of it.

Clearly, in that area of our business, as in technology, as in the way we procure a whole load of indirect spending across the company, the whole purpose of moving to one integrated company was that we could act and really get the benefits of our scale and move more quickly and achieve what we think will be some very significant economies over the next few years.

Clearly, we're still working our way through all that. But with everything we know and everything that we've done, we've got a rolling plan, as I mentioned, over the next 3 years, of what we want to get done.

And we've worked it through, and we're very confident that we can do that within a normalized level of restructuring, at the level that I've said. And as importantly, we're obviously planning it in a way that we can sort of manage the operational risk as we work our way through it.

So I think, as I say, we are -- inevitably, as you go through any process of restructuring and change, there's always going to be operational risk as you do it. When we were standing here this time last year, we just appointed the new executive team.

We were just getting started on the major restructuring program, and we were only just about to map [ph] 40,000 people across the company to a completely new way of organizing Pearson. I wouldn't say that every last bit of that is now done, but the majority of it is done. And we're really now bedding down the new organization.

And the fantastic thing, from our point of view, is it means that now we are even more completely and absolutely focused on out there, winning share, meeting our customer's need, growing the business.

And we've got through the pain of all that restructuring and reorganization, and it's actually a pretty good feeling in terms of how we can now run the company and drive it..

It's Ruchi Malaiya from Bank of America Merrill Lynch. On the U.S. school publishing market, is there anything that's structurally changed there that makes you think that it would eventually rebound to sort of historic levels of about GBP 4 billion [ph] of sales? And then sort of within that -- sort of the U.S. school publishing market..

That's your definition of size?.

That's the AAP number from, say, back to 2007 or somewhere about there. So just to understand, if something structurally changed or as pent-up demand works through, we should see that market sort of fully rebound to peak levels.

And then with your outlook on how Common Core should come through, currently, how do you see that sort of pent-up demand working through? Is it a 1 year, 2 year, 2 year plus?.

So the -- yes. So I mean, I think the first point to remember is what we call our learning services business, which is the sort of school publishing, as it moves into a digital world is now less than 10% of Pearson's total sales. The adoption part of that is less than 5%.

So we have all the very big businesses in North America schools in assessment and testing, Connections, our virtual schools business, which is performing very well. So Don, do you just want to pick up more generally on how we see the U.S.

school market and environment sort of shaping up over the next few years in terms of where the growth is likely to be and how we're seeing the structure of sort of standalone textbook resources?.

Sure. So it's partly related to state funding. State funding has gone through quite a trough in the last few years. It seems to be, as John pointed out, picking up somewhat, so that gives us some promise going forward. I think from a -- let me address it from a couple of ways.

One is from, directionally, where we're going in terms of outcomes and efficacy, and then let me maybe direct it towards some of our businesses.

I mean, first, as we mentioned, higher education, the closer we move to actually coming up with measurable outcomes, that puts us in a position to actually do more for schools, to actually engage with schools in deeper ways.

One of the nice things about the reorganization was we went from a situation where we had multiple business units across America to a single entity, both on the product development side and also on the market-facing side.

So now we're able to bring together technology, content and services together, whether it be a large urban school district or whether -- I'll give you an example. L.A. -- Los Angeles Unified, right, second largest district in the United States, they've decided to use Apple devices for all their students.

We were selected to provide the digital curriculum and the professional development for that program. I think, maybe the next day, we've got a call from Microsoft and said, "Can you build on our device as well?" And we have an arrangement with Microsoft to develop a digital learning experience and that same professional development with Microsoft.

So I think that's where we're going in terms of the efficacy agenda and the agenda around the marrying of content, technology and services. We also have some very fast-growing businesses like Connections Academy, where we provide direct education, which is growing very smartly, and where we actually control implementation and outcomes.

And we're particularly exciting about-- excited about that business as well. Can I -- one more story? Another example -- one story. When I was a small boy -- anyway, the other story is, we engage -- I'll give another example.

We engage with Huntsville, Hunstville, Alabama school district, who want to move to an entirely digital environment, which we helped them do. Within a year, they were getting measurable increases in student performance that they could actually track now because they were in a digital environment.

But more importantly, they are getting very interesting results from things like -- they put Wi-Fi on the buses, and our digital environment helped them to actually let students get access to that. Student crime went down on buses by 76%, all right? In general, disciplinary actions went down significant double-digits.

This is the kind of action you get when you begin to enable schools to actually go digital and collect that data and use that for both predictive and for analytical approaches. So we're pretty, pretty excited about that..

Okay. Any other questions? Yes, one more. You only asked 2 before, so you can have the third one..

Just to follow up on that point. If you're starting to sell your content in schools and it's on tablets, Apple, Microsoft or whoever.

If the states only have a certain amount of funding allocated for their content, in a broad sense, are you -- is that introducing a middleman, if they're then buying from Apple or Microsoft, do you then want to take their cut of that funding?.

Do you want to pick it up?.

Sure. So there are various buckets of money in North America for spending. And there's procurement opportunities. Some buckets of money are for devices. Some are for professional development. Some are for content. Sometimes those buckets of money move around depending on what districts would like to accomplish.

I mean, my general take is that, if we are able to demonstrate measurable outcomes, that the -- we will be asked to actually do things for districts that will get them either student achievement or better access and the money will find a way to come to us, so....

But I think the other point there is, if you look at -- take L.A. as an example, providing the digital curriculum is one thing that we're doing, but then we're providing large-scale professional development for teachers, as Don talked about. And we're also doing all the large-scale implementation.

So that's a great example, actually, where we're going from the less than 5% of the pot to competing for a much larger addressable market because it's not just about the content, it's also about the services and the wider implementation and that, that goes with it..

How do we actually move from inputs to outcomes, how do we actually solve a particular pain point with a solution that we can provide. Okay..

Do they pay you? Or do they pay Apple, who then pay it to you?.

In that case, because of the way in which the deal was procured, because it was -- the funding came from a bond, in that particular instance, the primary contractor is Apple. But that is an exception rather than a rule. In a lot of other places, we play that role.

And I think it's part of, actually, a more sort of open and collaborative approach that we need to have. We need to build a much wider network of partners that we work with and engage with. And what's interesting now is, clearly, L.A. are still deploying the iPads, but they've opened it up to a wider range of device makers.

And so we're now working with Microsoft, and we're working with Samsung. And we're working with a wide range of device makers and manufacturers, Lenovo and people like that.

So I think the important thing is that more and more, and if you talk to John Deasy, who's the school superintendent in L.A., he will tell you this himself, the real focus of that project is transforming the way teaching and learning happens across the school district.

And it's the professional development of the teachers and it's been able to implement at scale that is the really valuable part. It just so happened that because of the particularities of that bond and funding, in that case, it went through that route..

John, there was one question [indiscernible] about salaries. The question is....

Oh, sorry, okay.

So Tamara -- yes, so the question around just what's happening with -- is sort of cost of living and inflation increases in China and India causing us a problem in our retail businesses?.

Yes. No, it's not, I'm happy to say. I mean, largely in those emerging markets, John was talking about the escalating demand for both quantity and quality of education. And so in those markets, we often have our direct delivery businesses, full delivery of education. In South Africa, we have the CTI and MGI universities.

In China, we have our Global Education tutoring and test prep and our Wall Street China English language centers. And increasingly, both in delivering a more digital offering, we have 10,000 tablets now deployed in our CTI universities and increasingly digital content in our Wall Street centers.

Our ability to utilize our space more effectively and efficiently, in addition to escalating student enrollments, in combination with some pricing power, allows us to more than mitigate the cost pressures in those markets. And we have tremendously strong growth in all of those markets behind our direct delivery businesses..

Okay. Thanks, Tamara. If there's -- are there any -- sorry, last question or questions..

It's Lisa Hau from Liberum Capital. My question is just on the U.K. I was just wondering if you could, please, expand on the trends that you were expecting for second half and if the 15% decline marks, I guess, the bottom of the transition to the new curriculum.

Or would you expect some further volatility to come?.

I think the point Robin made in the presentation was that a significant proportion of the growth in deferred revenue in the first half of this year relates to a change in revenue recognition at BTEC, so this is vocational qualification.

Previously, it was continuous assessment, so therefore, we were continuously recognizing the revenues on an even line through the year. We've now moved to a combination of continuous assessment and an end-of-year externally assessed exam.

So clearly, that means that we're now -- revenue that, last year, we'd have recognized in the first half is now going to get recognized in the second half. So for that technical reason, clearly, we would expect the performance at the full year to still be down on last year, but not be down as much as it is at the end of June.

And then I think, secondly, Rod, we've seen -- there used to be a January GCSE sitting and March GCSE sitting and a June GCSE sitting. There's now only a March and a June.

And clearly, we won't, by now -- by the end of June, we won't have processed as many exam scripts through the year as we would have done in the first half of last year, so that will help us a bit as well. So those 2 factors will mean it will be -- it will come back somewhat but not the full way, okay.

So I think, on that note, thanks, everybody for joining us, and we look forward to seeing you, all, again soon. Thank you..