John Fallon - CEO Robin Freestone - CFO Donald Kilburn - President, North America Tamara Minick-Scokalo - President, Growth Rod Bristow - President, Core Doug Kubach - President, School Tim Bozik – President, Higher Education Albert Hitchcock - CIO.

Sami Kassab - Exane BNP Paribas Sarah Simon - Berenberg Nick Dempsey - Barclays Giasone Salati - Redburn Mary Pollock - CreditSights Patrick Wellington - Morgan Stanley.

Good morning, everybody. We'll get going. I know this is a busy day, at the end of a very busy week of results, so we very much appreciate you for joining us. I'm John Fallon, here with Robin Freestone, our CFO, and we're joined by the Pearson executive management team.

Just before we get into the results themselves, you'll have seen that we've announced this morning that we've appointed Coram Williams, CFO of Penguin Random House, as Robin's successor. Coram will start with Pearson on July 1, as CFO designate.

And he's going to take over then from Robin on August 1, after we've been through the interim results and the round of shareholder meetings that we do immediately after that. So I can spare Robin's blushes for this morning, because I'll wait until July to take the chance to acknowledge the immense contribution that Robin has made to Pearson.

For today, let me just say that, I think, Coram is going to prove himself a very worthy successor.

He was chosen from a really very strong field of both external and internal candidates, he's proved himself in a wide range of finance roles in Pearson over the last 10 years and he's done a really great job as CFO of Penguin Random House where he has led an integration which I think is both been operationally difficult and culturally challenging and as you can see from the results this morning is one that is going very well and also one where he was very successfully helping the business to be both creatively and commercially successful when Penguin Random House itself is going through period of great internal and external change.

So with that let's move on to the results. Robin and I going to trying to keep this presentation as brief as we can so we got the time to answer your questions.

2014 as you know was a year of significant policy and cyclical pressures and big changes to the fabric of Pearson and in that year we delivered on the earnings guidance we set this time last year and as you can see we're recommending an increase in the full year dividend.

Just before Robin talks you through the details of these numbers and share with you our outlook for 2015, I just want to set out one or two thoughts and what I think with the key headlines from last year and while there is still a lot to do we're increasingly confident both about Pearson's future both this year 2015 and the years ahead.

So this is what I think we'd see is the headlines. First, those cyclical and policy related forces were as bad as we expected they would be last year but they shouldn't get any worst this year and they should then start to improve and you can see updated trends in the appendix to your pack.

Over the past two years, we have made Pearson into a single operating company, we've accelerated the shift from print to digital and services and slower the faster growing markets and to a more focused product strategy based on learning outcomes.

Over that time we have for example more than half of our global warehousing capacity we've got more than 5,000 roles across Pearson mainly relating to print or in mature markets while adding key talent in technology, in efficacy, education research and in our faster growing market.

We're not letting up on the pace of internal change, there is still a lot we can do to simplify the business to reduce cost, to scale globally to improve the learner experience but we think we can now do that as we've said within more normalized levels of restructuring charges.

Another major headline from last year is that whilst, we did underperform in a couple of areas, U.S. K-12 learning services, sistemas in Brazil, and we're working very hard to put that right in 2015 actually in most of our biggest businesses so U.S. higher education, professional certification, U.S.

virtual schools, English in China qualifications in the UK, assessment in the U.S., K-12 learning services in Italy as well as you can see from the results of the Financial Times and Penguin Random House, we actually did very well competitively and gained share.

We achieved good growth again in digital and services, which powered faster organic growth in our deferred revenue bank which Robin will talk more about and that of course goes well for the future growth of the company. Growth markets that we did last year, sets us up for healthy growth in 2015 and future years.

In retrospect of course we could have chosen a better year to rebrand emerging markets of growth because it was the first year in many that they didn't primarily because of that exceptionally strong 2013 performance in textbooks in South Africa coming off but we're very-very confident that they'll live up to that name in 2015 and the years to come.

As we've reduced the cost of running our material analog operations, we're investing more behind this faster growing opportunities and that's driving a very exciting roaster of new products. Both products all about combining new technology with great teaching to expand access to maximize impact and to improve learning outcomes that scale.

So access impact outcomes.

Those are already the hallmarks of our most commercially successful products and as this efficacy agenda making this the whole March of everything that we do that will make us a stronger and more sustainable company with a larger market opportunity and better financial returns, so let’s have Robin talk you through last year’s number and our guidance for this year and then I’ll be back to speak up on the some of the key trends we see that will dive our future growth, so Robin?.

Thank you very much, John.

Good morning all, just a few words to endorse John’s comments about quarter -- what we called about 10 years I am actually delighted that he will take on the CFO role and I can assure you he will be a most brilliant Pearson’s CFO, but just in terms of numbers, so we’re going to look back as before we look forward, and looking at 2014 as a whole sales in North America improves about 2% at CER with growth in higher education in connections in view and in our Clinical Assessment business offsetting declines in K-20 of learning services and state assessments and as you can see in the appendix as John mentioned cyclical and policy related factors were broadly in light with what we’ve through we’re going to be at start of the year.

In higher education, growth was primarily driven by continued strong performance in our online services business where enrollments grew more than 20% as well as share gain and learning services helped by a strong new addition here which provided a modest boost. A 9% growth in test volumes was the key driver of the growth in Pearson view.

Student numbers at connections were more up than 15% and a strong initial demand for Q-Interactive was behind a good performance from our Clinical Assessment business.

As we flagged at the half year, revenue deferral from blended digital programs and market share lost particularly Texas with the main cause of the decline in our case K-12 learning services business.

And in our State Assessment business the impacts of policy change on testing volumes in Texas and California with the primary drivers of lower test volumes and revenues as we expected.

Revenues in core declined 5% with modest growth Australia and Italy more than offset by declines in testing volumes in the UK as we flagged at the start of last year as you can also see in the appendix these volume declines resulted from policy changes effecting our UK school qualification business.

Partner market revenues were impacted by the move to a distributed model which we implemented in 2013 in most markets and some list divestments. FT group revenues were broadly level at CER with growth in subscription offset by declines in advertising.

Our growth business grew by 11% CER but was down 1% in underlying primarily due to a more normal school textbook adoption in South Africa excluding that growth revenue would have about 4 in underlying terms.

Our English language learning enrollments in China and college enrollments in Saudi Arabia and South Africa grew well this was offset by a smaller school textbook market in South Africa down almost 40% on 2013 lower revenues in Brazil from private sistemas, higher education and ELT textbooks.

And how we go modeling we’ve included some more detailed revenues split in the back of you packs. Looking at the bridge overall organic growth in the year was flat held by the factors that are mentioned. Acquisitions contribute to 79 million pounds net after small disposals and FX was a significant negative.

Now at this point I would remind you once again that I do every year that our reported sales numbers don’t tell the full story and we continue to highlight here the value of deferred revenue are 10% excluding currency effects on 2013 and deferred revenues represents the amount built to customer to provide a service in the future which can’t be credited to our P&L account immediately.

It shows the faster growth of digital services and revenues which in 2014 totaled 62% of Pearson’s group revenues. Now although much of this revenue will be credited in 2015, we expect the balance of deferred revenue to be up again at the end of 2015.

This deferral reduced our reported sales growth by about 2% in 2014 and encouragingly all of the growth in deferred revenue in 2014 was organic. Overall profit was up 5% on 2013 after net restructuring charges of £44 million. I am going to come back and talk more about restructuring in a minute.

In North America, we saw 5% profit growth reflecting revenue mix a low return provision which used U.S. pension costs and lower net restructuring charges. Our core business benefited from the restructuring taken in 2013 and lower restructuring charges in 2014.

Growth profits were up 16% at CER with good first year contribution from Grupo Multi offset by drop through on South African revenues, launch cost associated with our new vocational colleges and the contract provision in Saudi Arabia and weaker revenues and restructuring cost in Brazil.

Penguin Random House had a strong publishing performance during 2014 and finished the year very well. Integration process is on track with important milestone of consolidating our warehouses partly without incidence in the last few weeks. The contribution from Penguin Random House was a bit better than we indicated at the beginning of the year.

About half of this was due to better trading and the rest reflects a shift in central cost allocations to other businesses as PRH moved up our systems more quickly. Our exceptional restructuring cost in 2014 were net 44 million comprising gross expenditure of 84 million offset by 40 million of in-year benefits.

During the year, we completed the type of rationalization work started in 2013, rationalize more of our supply chain, started to simplify our technology landscape and exited a number of small non-strategic business lines and lists.

As John said, over the two years this exceptional program has seen about over 5,000 people leave the company with about 1,300 new hires in growth markets. As expected the restructuring will yield nearly £100 million impact in 2015 of the normal restructuring charges of approximately £30 million this year.

Part of the two year restructuring program has been about contraction of our global warehouse capacity from 7.5 million square feet 5 years ago to 2.9 million square feet at the end of 2014 and this number will reduce further in 2015 and thereafter.

In underlying terms, profit improved by £35 million on 2013, this reflects a £91 million gain from lower unmet restructuring charges, 135 million down to 44 million offset by the things we flagged at the beginning of 2014 mainly revenue mix, increased investments, cost inflation and lower revenues and margins primarily in our U.S.

and UK assessment businesses. Portfolio changes include a first year contribution from Grupo Multi, offset by the full year impact of associated accounting for PRH and the disposal of merger market. FX reduced operating profits by £49 million due to sterling strength against the dollar and key emerging market currencies.

Our earnings per share including emerging markets was slightly below 2013 at 66.7p with a lower interest charge more than offset by a higher tax rate.

Within our 2014 statutory earnings, our operating profit primarily reflects the net impact of a gain from the disposal of our stakes in Safari Books Online and CourseSmart, offset by the loss on the disposal of our stake in Nook Media and a write-down of our India based U.S. tutoring business.

Discontinued operations represents the profit on the disposal of merger market in 2014 and the gains on the Penguin disposal in 2013. Our operating cash conversion of 90% was achieved despite ongoing investment in new digital product and enabling technology.

Our traditional working capital excluding pre-pub was down again due to increased deferred revenues. As expected, in 2014 the receipt of the dividend from Penguin Random House was more closely aligned with the profits reported reflecting their 95% dividend policy.

Foreign exchange gains primarily incurred during quarter four on cash receipts amounted to £27 million and other movements represent the cash we're putting into our defined benefit pension schemes partly offset by share-based payment charges without a cash impact.

Our free cash flow grew £144 million helped by our cash tax returning to a more normal level in 2014 often unusually high cash tax charge in 2013. On our balance sheet our net debt increased £1.6 billion mainly due to FX which added around £150 million to 2013 levels.

Our net acquisition cost of £88 million given the multi-acquisition was greater than the merger market disposal as well as cash outflows in 2014 associated with restructuring activity charged to our 2013 accounts.

Despite that net debt increase, our net debt to EBITDA ratio of 1.9 times and our interest coverage ratio at 11.3 times are well within our covenant limits and we remain committed to our current debt ratings over the longer term. Our ROIC percentage, inevitably, continued to suffer in 2014 from lower profitability post restructuring.

We expect this ratio to improve again 2015 and beyond through operating profit which given the high level of good will and intangibles is critical to improving this ratio. Helped by the demerger of Penguin.

Our working capital to sales ratio improved again in 2014 to 12.3% despite high capitalized pre-pub which reflects our increased investment to deliver future growth. Details pre-pub are as usual in the back of your packs.

We expect the downward trend in traditional working capital to continue from by lower inventory levels and higher deferred revenues and our capitalized pre-pub as a percentage of sales to remain around the current level as revenue growth returns.

This chart supports our view for the capital intensity of the business reduces as we gain scale in digital and services. In recognition of our confidence in the future, we proposed to again increase our dividend by 3 pence this represents the 23rd straight year of above inflation dividend growth.

So now let's turn to the outlook and first to the mechanical factors that will influence our profits in 2014.

As I noted earlier good progress was made in 2014 unplugging Penguin from Pearson's infrastructure and integrating it with Random House in effect this leads some of our enabling functions with less volume going through them now that the deconsolidation is largely complete and we reduce fixed cost over time and that will captured through our normal levels of restructuring.

Assuming FX rates stay where they were at the beginning of the year the weakness of Sterling against the U.S dollar will provide a modest boost to profits which will in part be offset by strength of servicing against the basket of emergency currencies the Euro and Australia dollar.

Given the weighting of our debt to dollars the stronger dollar obviously increases our average net debt levels and our interest charge.

We will see a positive swing from our exceptional restructuring program partly offset by normal restructuring charges as I mentioned and our tax rate on profit before tax including Penguin Random House will be approximately 17%. As you know we still expect market conditions to stabilize in our largest markets in 2015.

In North American school although the policy environment remains uncertain in state assessments we expect greater stability in school learning services and growth in connections.

In Higher Ed, we expect growth in online higher education services and with more stable college enrolments and a slower new edition year, learning services to be broadly level. In 2015 our growth business will grow in led by China, Brazil and India. We also expect a steady year in our South African business.

In Core we will see greater stability in our major UK market. And in summary we expect to report adjusted earnings per share of between 75p and 80p. I will now hand back to John. .

Thanks, Robin. So as you heard from Robin this year we expect earnings to grow again and we then expect to be able to sustain that growth in future years.

And we will achieve that growth by meeting what we think is one of the biggest needs in the world today which is all about equipping more people with the education and training that is increasingly essential to prosper in the global economy that really does value knowledge and skills more than it ever did before.

So I am just going to take a few moments really to try to do two things. First to explain how our efficacy strategy helps us to do that by driving access impact and outcomes in education and as a result higher financial returns for Pearson.

And then what our priorities are in implementing our strategy mainly around new digital products and services, a simply more focused company, a higher performing culture and a stronger Pearson brand.

You have seen this image before it's all about the fact that we know and our customers know that technology yes it can be incredibly powerful tool in meeting this need for education but it's only a tool.

And so our strategy is really to try to stand at the intersection of the new technology which gives us the great ability to engage and personalize and to diagnose with all that we and are learning more all the time about the new more effective ways of teaching.

And if we do that we can then develop products and services that means we can share the benefits of richer and deeper learning far more wisely.

And it means that the bigger our impact which we define in terms of improving access to good quality education and translating that into better outcomes for far more people that's the way that we will create a faster growing and more profitable and a more sustainable business.

This is not just theory we know this approach works because it's the Pearson products that most embody this strategy that can best demonstrate those learning outcomes but also our most commercially successful and our fastest growing ones.

These are the products that have proven most successful in making the transition from analog to digital and they are the ones that we are embedding most deeply into the work flow of education which then in turn generates greater customer loyalty and helps to expand our addressable market.

So I know I might sound a little bit theoretical, so let me actually give you some practical examples of what that really means in practice.

So first example students using our elementary school enVisionMATH program as you can see on this chart achieved very dramatic improvements in both their computational ability and their concept and problem solving, so this combination of good technology and the research and application of great teaching practice which is what enVisionMATH embodies and sure that by the end of second year of using the product students math’s capabilities for their great level similar to children between 2 and 4 years older than them that in turn helps us to scale and explain why enVisionMATH is the largest elementary math program in the United States and one of our most commercially successful programs of all time, another example students at College Park Academy which is a blended learning school in Maryland that uses the Pearson’s connection education curriculum and as you can see here it’s got significantly higher than its instate peers in reading in math in the Maryland school assessment for 6 and 7 grades.

Actually they also beat one of the nation’s top performing school districts which in the next door county.

With those sorts of results you can understand why the school in only second year is already 7 times oversubscribed with parents when they get their kids into the school, but they also have to explain why connection education which is Pearson’s virtual school service in which the curriculum is based was actually the faster growing product anywhere in Pearson last year.

Third example Wall Street English in China, this graph demonstrated the way that we’re now improving design and data capture which enables us to predict much earlier and with much greater position those students who are on the path to success and those who are more likely to drop out their course that in turn provide us the opportunity to intervene to personalize the tutoring and to put more those failing students back on tract.

That obviously in term improves our retention rate and it improve our customers completion rates which obviously is going to help us to sustain and enhance our growth in China which is the largest market for learning English as a foreign language in the world and actually builds on a process of continuous improvement over the last three years in which we have raised the average level of completion by our students by over a grade.

That’s obviously helping our learners to progress more quickly and that in terms help us to perform better commercially because it reduces attrition rates and it reduces the cost of requiring new customers.

Another example MyLab you can hear a bigger impact in terms of increasing retention, reducing the cost of remediation and above all improving learning outcomes that what made MyLab probably almost enduring Pearson success story.

This example from California State University of Bakersfield shows how we’re helping to drive achievement and course completion and also reduce the average time that it takes the student to complete and so by improving access because it’s providing support to the students who are most in need of it, it has a real impact because it helps people to match with the skills and the knowledge that they’re going to need to go on and progress in their lives.

As a result of doing that it also helps us to grow and that’s why MyLab registrations have doubled over the last five years because we’re able to deliver results like this and that is why we expect that growth to continue as we develop the next generation versions of these products and further demonstrate their efficacy.

And this also a great example of the point I was making earlier of its by combing new technology with new ways of teaching to achieve better outcome with scale that enables us to navigate this transition from analog to digital far more smoothly. We showed you this chart for the first time last year.

There is now an extra year of data on it which helped to amplify on that point. So on the left you can see that as print volume decline the MyLab digital registration grow and you can see on the right that while the revenue adjusted enrollments were down again the cost was still in point in the cycle when enrollments were declining.

Our revenues through enrollment as you can see actually increased again.

All these tell us I think that where usage is high because efficacy in terms of access impact outcome is high, volumes and price points remain firm, whether the take up is low which is primarily normally because either the efficacy is low or we’re not able to demonstrate it that’s when the volume and price points are in the pressure across the whole of the education section and it was that in sight really that drove the two year program of restructuring and reinvestment that we just been through.

So we can put more of our resources into products that will drive that high usage and drive the high levels of efficacy.

So what it tells is I think is that our customers will pay the greater impact as we can make that shift from analog to digital, if we can demonstrate we extent access and improve outcomes than they will reward us financially and commercially.

So it does that but it does something else because it also helps us to expand the market opportunity for Pearson, so higher education now as we have greater capability to offer student enrollment online services, course design, learning management systems we’ve been able to forge what around 200 partnerships with U.S.

colleges and we’re now expanding those elsewhere into two other markets two most recently, you may have seen that the Financial Times has formed the partnership with IE, one of Europe's leading business schools.

What it means is we shift from supplying products and services to the budget that comprised 5% or less of the total cost of going to college we think on your chart is that the red bar here, the books and supplies and enables us to expand into activities that relate to 60% of the total cost which I think is the blue bar on chart which includes the tuition fees.

Now, as Robin said in his presentation, this strategy doesn't require us to invest more upfront both through the P&L and through the balance sheet and it doesn't mean that we carry more of the risk as we start with more of these new ventures and partnerships but the more deeply engage we are with our partners and with our learners, the more we mitigate that risk in the more sustainable these new business models become and it's the faster way that we grow more quickly and we'll grow by helping our customers and partners to grow because in this model we're very much co-creating and co-developing new products and services with them and we both grow by actually helping more students more learners to be successful in their own studies.

So, the strategy is doing two things for us it's helping us to migrate, make this tricky transition from analog to digital but it is also expanding the addressable market but it is also enabling us to think about another big opportunity in education as well because you'd be familiar with this data so make you very quickly in the U.S.

biggest market, college degree as you can see has always been a good investment but it now brings a bigger return than ever before why because more middle class jobs now require a degree as an entry level requirement.

But we also know for too many people in United States the pathway to that better job is blocked by low completion rates and the lack of affordability as you can see on this chart and these issues I think we would argue are a symptom of an education system unfortunately in some ways, some important ways is actually barely changed from the days of the industrial revolution it's still from an era when manual labor was key and intellectual capital was only valued for an elite.

Obviously we now live in this era what's often described as the second machine age when the public and private imperative is to equip every young person with this idea of the 21st century skills that they need to be successful.

And what that means is, that the education industry like pretty much every other industry in the world is going through its own revolution and in our case that revolution must be about what our strategy is which is about combining the technology, good teaching and to scale in a way that those access, those achievement and improves the affordability of higher education.

And so the services that we are co-developing with our customers and our customers in this world are very much the college who are the pioneers the people who are at the moment are at the forefront of reimagining higher education this way is all about making it more accessible, more adaptable, more relevant and more productive and providing a better return on investment for more people and this is where that you must note that we're not now just doing in the U.S.

within Australia and the UK as well. There is another leg to it though as well because I'd argue as you can see from this chart that in emerging markets the challenge is actually even more from fundamentally is actually about the chronic lack of capacity relative to this rapidly growing demand.

Just to take one example, in South Africa, the largest five public universities in South Africa can offer about 45,000 places a year, they each receive more than 200,000 applications and other emerging economies face very similar challenges.

We're over the last few years starting to nibble away at this demand with encouraging results, successes in UTEL in Mexico, CTI in South Africa both growing strongly but it now needs to be a bigger area of focus for us as we organizes one company that you can better apply to products and services, the capabilities, the expertise, the lessons that we've learned in America to help to meet this demand around the world but there is two other elements to which is where I think it worth whelming on just briefly first, this trend also drives of the value of good school because parents want to be confident that their 18 year old is going to leave school career and college ready.

And so schools like universities are going to their own revolution, they also need to reimaging the way that they operate which is why we think the blended learning model which college Park Academy is very much at the forefront of is going to have a very big future over the next decade and the other operating part of it is, this new middle class in these emerging markets face with these trends, value more than anything else and English speaking university degree and make some of you may have seen the story in the economist last week that the number of Chinese students enrolling American universities has grown 11 fold in just seven years.

And that’s one of the big factors that's driving the growth to learn English in countries like China and they need not just the grammar and the vocabulary if you talked to vice-chancellors around the world that talk about the speaking and listening skills that they need to be successful.

So the point of that is this that the, world spends today round about $5 trillion each year on education of which about $700 billion to $800 billion is potentially addressable by the for profit sector. We're the largest education company in the world.

We account for about 1% of those addressable dollars, so the opportunity as we work away at least over the next decade I think is pretty clear. So hope that explains how our efficacy strategy creates a much bigger opportunity for Pearson. Let's just talk briefly about the priorities for this year in implementing it.

First, as you can see in this chart, we're investing in a smaller number of priority products and services that can address those global opportunities. They each combine new technology, great teaching to expand access to maximize impact and to improve outcomes at scale. Those three things access impact outcomes.

They are the hallmarks of the most commercially successful products we have in Pearson today and the efficacy agenda is about making those the hallmarks of everything that we do as a company, so we can capitalize on that bigger opportunity and deliver better financial returns for shareholders.

Just quickly to give two examples of the sorts of products we're talking about.

We've taken all that we've learned over the last decade from our MyLabs and how adaptive learning and data analytics are transforming the teaching of quantitative subjects such as math’s and science and combining that with wider research findings and applying those insights to more qualitative arts based subject.

REVEL, our new emissive learning experience for the humanities and social sciences is the result of that work, it's adaptable, engaging, it's easy to use, it's designed for mobile multi-platform world, it's replicable, it's scalable and the initial response from the customers suggests it's going to be very successful commercially.

Another example briefly would just be TestNav. That's the latest version of our onscreen assessment platform. It assesses those 21st century skills far more effectively. It's provides immediate feedback to student and teacher, which in turn makes the whole process of learning far more flexible and relevant and productive.

And it also scales across what I think everybody now understands a notoriously complex school hardware and software environments with all the very specific challenges that bring, so for example, it enabled us to administer 11 million secure High Stakes tests last year from 8 million the year before.

The second part of that is we've got to be able to deploy those products in a global and scalable manner and that's why this simplification agenda is so important.

You may remember back in July that we saw really great scope to reduce our technology cost by slimming down the 3,000 applications, the 700 plus technology vendors, the 50 data centers that we currently operate. We made good progress on that last year.

We've reduced the number of applications by 10% and we reduced the number of vendors by 20% and we expect to make similar progress again this year. But over the next three years, there's an even more significant opportunity to standardize and streamline our core technology platform.

For example as you can see here, we're currently spread across 94 hosting locations and across Pearson we use 63 different finance ERP instances from the likes of SAP and Oracle. Within three years, we expect to be running Pearson on one global platform supporting all our operations.

So that's why we say that we're not letting up on the pace of change internally even though we can now sustain that pace with more normal levels of restructuring, because in IT and in our product technology, we've a lot of scope to improve the customer experience to reduce our operating cost.

All with the aim, we've also been able to scale more of those products and services globally and we obviously will work hard to make the most of it.

Third priority for the year is ensuring that this ongoing program of change operates right, applies right across the company, so the efficacy program to focus on access impact and outcomes is something that we are embedding into everything we do.

It shapes the way that we think about our company portfolio as you can see from today's announcement regarding PowerSchool and it also drives the way we now recruit, promote and reward our employees. And fourth and this is very important it also drives how we project ourselves externally through our market presence and brand.

Public awareness for Pearson is the world's leading learning company is still relatively limited as you all know education is quite rightly an issue to attract much public debate and comment.

So as we grow, we need to ensure that Pearson is both widely known and widely trusted, so that means the major priority for this management team is more public engagement. It means that we need to organize our product marketing to position Pearson in a much more coherent way.

And most of all, it's about demonstrating the Pearson's biggest branded products really do help our customers to do more and better with less. So, just very briefly to recap.

2014 was a challenging year for Pearson, but we delivered in the phase of some pretty tough market conditions and we do enter 2015 with those cyclical and policy related headwinds easing.

We completed a large restructuring, reducing our analog infrastructure, increasing our ability to combine new technology with great teaching to improve learning outcomes of scale and we're just now just starting to see the benefits of that work in the form of a faster growing, a leaner, a more cash generating business.

We're driving more cost out of our infrastructure by making our systems and our platforms more efficient and more scalable. This improves the customer experience, it frees up more resources to invest in better digital products and services all designed to expand access and improve outcomes.

This will overtime drive a relentlessly high performance company, it forges a stronger brand for Pearson and it actually also attracts more partners and customers to share that mission and that purpose around empowering people through learning.

And that all will make Pearson a higher returning company both to which shareholders and to the communities we serve. And that should enable us to sustain the high return for many years to come.

So that's where we're at and with that Robin and myself helped by the Pearson Executive Team who I will introduce as we go along are now very happy to take your questions, so who wants to go first, Sami. We got a microphone down here and then if you could bring more along here as well and then we'll go here next..

Sami Kassab, Exane BNP Paribas. Three small questions to start with, please.

The first one, market share in K-12, can you help us understand why you think you lost them, and how you think you will regain them? And what outcome would you expect in market share for 2015, please? Secondly, can you please come back on Brazil; help us understand the drivers of the poor performance there, and how you see 2015 developing for Brazil, and, in particular, Brazilian sistemas? And lastly, perhaps, could you quantify the impact that moving to a distributor model had on your organic revenue growth?.

So Don, do you want to pick up on the K-12 learning services point? Then Tamara will talk about Brazil and then I think the move to the distribution model had the biggest impact in core markets so Rod perhaps you could pick up on that..

Well clearly that we lost some share in the competitive wars in 2014. I think in particular we lost some share middle school in Texas around our math products and our science product. We lost a little bit of share in Florida.

I think the underlying reasons was we were coming out of a substantial reorganization in 2013 and the sales force where we went from I think eight or nine the sales force is down to one. There was some disruption there.

I think also we identified in '14 that we had some product gaps that we are about addressing, so the good news is the reorganization has bedded down after '14 moving into '15 and on the product side again we are addressing the issues there and again we won share I think in '13 we lost some share in '14 and we're anticipating that we will be back to being very competitive in '15..

Tamara if you want to pick up on Brazil..

What does the breakeven mean, is it 30% like your 10 year average?.

I'm sorry, what was your question?.

What does breakeven mean, is it 30% like your 10 year average?.

So I think what we're saying that we expect to start to regain our performance and I think overall you can assume that in our U.S.

K-12 business benefit all the deferred revenues coming through that Robin talked about an improved competitive performance offsets the fact that it's a smaller adoption year this year which should enable us to sort of sustain a similar level of revenues to last year. I think probably the summary of it.

Tamara, can you talk about Brazil?.

In Brazil, Sistema as we flagged at the half year that business had stalled out because we are combining with three private Sistema brand and we were combining three sales forces that largely called on similar customers together integrating those.

In addition, we made the decision to accelerate the integration of Multi and our Pearson Brazil business into last year full integration and those two disruptive forces caused that business to stall out, but we took the opportunity both to invest in that sales force both the capabilities as well as increased reach into the marketplace, we reinvested from that restructure into a further reach into the marketplace the capabilities as well as invested in new product refresh and digital blended products for our Sistema.

So we fully expect that to come to into growth in '15 and return to growth..

And then Rod, do you want to pick up on the question that was around impact of distributor of moving to distributor model?.

Yes there was some impact as Robin said is moving to a distributor model, but I wouldn’t want that to be overstated in the context of other changes we were also making, we exited some lists, some businesses as well.

And if that moved to a distributor model whilst there is a degree of impact partly through a disruption partly through timing, it also means that as we develop those relations with those distributors it gives us a sharper focus and an ability to grow going forward..

Yes, Sarah Simon from Berenberg. Three questions also.

First one is can you – you talked about sort of great stability in terms of policy, can you comment on what the impact would be if there's a major rewrite to the No Child Left Behind which is kind of going through at the moment? Second one in terms of the net restructuring benefit you showed us the same numbers obviously currency has moved a lot so presumably the savings that are going to come from that being dollar based is going to be even bigger than they were guided to before? And then the third one was just about the user or registration numbers for global English and Wall Street English were sort of flat to down, just a comment on that would be helpful.

Thanks..

So Doug, do you want to pick up on the sort of political and reauthorization changes to No Child Left Behind and perhaps talk a little bit more about where you think we are on common core as well..

Sure. So as you know the No Child Left Behind or Elementary Secondary Education Act is the U.S. federal initiative to provide funding primarily for disadvantaged students across the country.

It also is the act that specifies that states need to implement standards and have annual assessments for many of the grades in reading math and in science as well.

So we are following the reauthorization quite closely, because that does drive a lot of aspects of our business around assessments and professional development and new curriculum materials.

It's likely that if it is reauthorized that the major focus will be on the accountability provisions and moving more of the control around accountability back to states, but as far as we can tell right now there really won't be any major impact on the implementation of standards or on the annual assessments provision..

Thanks Doug. And then John, do you want to pick up and so I think we're looking at the slide in the appendix is looking at the sort of global English registrations and the Wall Street English registrations pretty much flat year-on-year talk a little about that.

And perhaps also and talk a little bit about some of the new products we've got coming out that gives us good confidence we're going to see some momentum in those registrations this year..

Yes sure so on Wall Street English, which is our sort of direct delivery English language business, we saw a slight slip from the 1% down to about 190,000, but we did see good growth, we saw growth in China.

We saw a bit of slippage in Europe, but really one of the really interesting thing going on there is we are sort of completely overhauling and redesigning the Wall Street experience one of our key projects is the new student experience which is a fundamental overhaul of really everything from the syllabus to the center of design of the centers to the digital community around there and sort of digital marketing effort.

And it's all embedded and connected to our global scale of English which is a proprietary learning scale. So it is very much in progress and we start rolling this out in Q4 this year in China which is obviously our biggest market.

And on global English as to what we're seeing in global English is quite good activity in new sales and new contracts and because of the sort of subscription nature of that that needs to flow through and we'll see the impact of that this year and ongoing years.

And again we're in the process of refreshing and upgrading the product including embedding content from the FT and video from the FT into the course of that..

And Robin, do you want to pick up on Sarah's question that sort of impacts of exchange rates on the net restructuring benefit?.

Yes so you recalled in 2013 we had restructuring cost a little bit higher than we indicated at the start of the year.

In 2014 they've been little bit lower actually so we thought we'd be having that restructuring cost of about 50 million pounds that come in at 44 million and I think on Slide 10 we shown you what we expect to happen in 2015 which is the growth restructuring charges we took in '14 of 84 million pound fall away, we get the second half of the benefits from the 2014 restructuring and then we've got normalized restructuring of about 30 million pounds and I think that is the corollary of all the activity we've undertaken in '14 coming through.

There may be a little bit strange movement, but frankly the numbers are they were our best estimate what's going to happen in '15 now from what we done in '14..

If we sort of move onto our next question for those listening on the webcast I think I was supposed to say at beginning that if you have a question if you wanted to e-mail it and then I will pick it up and make sure it gets answered and I'm still trying to do that if you want to respond even though I've done it about 40 minutes later than I was supposed to have done, but anyway we go ahead to next.

Thank you..

It's Nick Dempsey from Barclays. Three questions please. First of all on Texas and California testing we have those contracts coming up for renewal I think in the second quarter.

I wonder if you could give us a sense of the scale of impacts, I know you won't give us the numbers but a sense of the scale of impact if you were to lose those? And I'm thinking in terms of restructuring charges as well as just losing the profits. Second question, Houghton Mifflin talked about the K-12 text and market down 9% in 2015.

That doesn’t seems tally very well with the sort of directional comments that you guys have made. So I want a few comments on that. And lastly, the stranded cost related to Penguin I guess I'd originally thought that those were included in your restructuring program.

So is that a change or did I just misunderstand that in the first place?.

On Texas and California, you'll understand that we're in a quiet period in terms of bidding for both of those contracts, so obviously we're not in the position to talk about them.

In terms of the guidance for '15, you can assume there is minimal impact from any change in contracts there in the sense that we already have contracts in Texas and California that will last for most of this year whatever happens to those processes that are currently in place.

So that’s on the guidance, on the K12 mark I think the -- I mean I can ask Don to expand on the answer he gave before, but I think the answer is the same what I said which is, yes, the available market will be smaller this year with a combination of deferred revenues releasing from last year and what we expect to be an improve competitive performance explains the guidance that were given for the years.

I don’t this Don there is much more we can have -- just when it take the market….

The only other thing is reduction in some of the market is on a cash basis not on a P&L basis that it becomes deferred revenue next year..

So there is what the AAP numbers and Houghton Mifflin are quoting this cash bands not recognize revenue spend this year because it defers over a number of years.

And then on the sort of Penguin’s around the cost, I think you said back in this room two years ago when we announced that we will be doing this major restructuring program one of the major drivers of it was the demerger of Penguin from patient.

We always knew that that would be a stranded cost related to it and actually fact the scale of the funded cost is somewhat lower than we modeled when is it board we were weighing up the option or merging Penguin with Random House and I think what’s happened is although there is whole, they have materialize more quickly because Penguin has got off to Pearson systems more quickly than we expected.

We still expect to whittle away at that 30 million over next couple of years and that will be one of the factors of the further restructuring word that’s gone, but that a whole answers that question. Was there another one, did somebody answer the question. Tom? And then I’ll move over to this side of the room..

I have two questions on two different subjects.

The first one on K12 curriculum, I think there had been some hope that period of sort of sub trend level of spend relating to sort of steady state levels on sub text, but there might be a period of about trend spend is that -- should we discount that as very low likelihood? That’s first question and then the second one is on Penguin Random House, I recognize there is potentially a lot more good stuff to happen there in terms of restructuring and maybe a good economic reason for holding on to that stake, but can you just talk about the strategic value of it, is there a reason why you need to hold it from a strategic perspective now that the warehouses all separate?.

Sure, I mean on Penguin Random House I think the cleared decision that we made was there enough time of grade change in the trade publishing industry the best way to secure the courageous and commercial future of Penguin with the merger with Random House, I think so far that proving to be the right call.

Clearly there is a lot of value that being created this further significant program of integration going on this year. So at this point we are very comfortable with our shareholding in the company and the terms in which anything different might happen, we clearly set out in the shareholding agreement.

On the K12, again I am not sure we can and I think the first point I remember is that the K12 learning services business is just one pile of a not bigger U.S.

K12 business and we saw strong growth in connections last year and we expect to see good growth in connections this year and I mean we’ve included in the appendix to the fact what happen to our cashing volumes which is obviously the single biggest part of our K12 business last year were down.

So, I think in broad terms you're right to say that the funding environment because state tax receipts are now in surplus is more favorable and as the policy environment becomes bit clearer, you would expect some positive momentum, but we’ll see that as not in our virtual schools and testing businesses we will in learning services.

I think that’s probably the way to think about lot and….

Two questions if I may, the first is on Wall Street English, you mentioned growth in China, so you're talking about double-digit growth or single-digit growth? And secondly, South Africa was quite weak in 2014, so do you expect now adoptions to stabilize with the level of 2014 or rather to revert back to 2013 please?.

So two question for that for tomorrow there, we got microphone so, outlook for textbook publishing in South Africa and Wall Street English growth in China, you might brought that out to talk about the textbook business we’ve got there in English more generally..

We have two very strong English businesses in China, one is our Wall Street business which had very strong growth last year and our business of English test prep for aspiring young student who want that certification in order as a gateway to study abroad, both of them had robust growth the exact growth I don’t think is appropriate to give out exact numbers on that, but looks to stay very strong growth and we expect that to continue in the future especially as we layer in new products more digital blended engaging et cetera.

And the second question was South Africa, this was a market correction and we had anticipated some drop in the market. There were three tranches of curriculum reform in K-12 in the public school system the last of which took that market in 2013 to an unprecedented high.

We had forecasted a drop, a drop of 40% was not forecasted in that market for it to drop-off in those top ups quite as much given there's still probably only seven textbooks for every 10 children, we expected those top ups to remain stronger than they did.

We expect that market to stabilize in '15 and so and we've taken share over the last few years, we expect to continue to take modest share for that market to really stabilize and not go back to those high levels that we've previously seen through curriculum reform..

Thanks John. I've got three questions. The first one is really on U.S.

assessment I wonder if you can elaborate I mean there's been a lot of negative report in the trade press backlash against testing sharing of tests what's really happening there? How much of it is political posturing and what does it mean for revenues and profits for you in '15 and '16? That's the first question.

Second one is change in its business model in the college market is that a positive for the market? And the third one is really about the board composition you're looking for a new chairman, do you need to shift it a bit more to having someone with sort of U.S.

political experience someone to navigate that or do you think the board composition is right as it is?.

Well let me take the third one first because Glen is still very much the chairman of Pearson and very active so the question is somewhat hypothetical but I think it's fair to say that myself, Kate, Don, Doug, Tim, the wider Pearson team all invest very significant amounts of time into engaging with policy makers in the states as the whole of the team does around the world.

I think we have good relations across the political spectrum and I think we are widely respected for our ability to take on large complex projects and do so in the full glare of publicity and where the lot of political sensitivities around it and do it effectively.

Clearly if you're in the business of education is one of the most important issues in the world, it's something on which everybody has an opinion and rightly so.

So you've got to be willing to be open transparent engaged and you've got to hold yourself accountable and that's why another reason why I think this whole move to us being focused much more on the impact of what we have and measuring our success by access and outcomes is the best way for us to sustain and grow the business and navigate our way through those issues.

And on that then Tim, do you want to talk about the changes in the business model and what that means for us in higher education and why we're excited about that both in the U.S. and around the world and then John if you want to pick up then on bring a bit of sort of context in perspective to the whole debate over assessment.

Is that okay, so Tim first..

So, Paddy to respond to your question about Chegg. Chegg's recent I think decisions and announcement were really about focusing on digital and services by outsourcing the rental business or partnering a rental business to Ingram.

So I think that that actually that squares pretty well with our product portfolio strategy that John described has applied to higher education which is we're participating in digital courseware and services and then Chegg plays a role in the distribution channel and insofar as we work with multiple partners we think that actually supports the movements that are healthy for the business.

And from a portfolio standpoint, we're investing in new digital products and courseware models that John described if I could give you a sliver of color on the REVEL model that he described so I can give you some context around that.

It is a couple of think really interesting things for learners and for Pearson so first to describe the user experience it combines a reading text experience with a suite of learning application or applets.

In the UX that is super simple and modern and it's based on principles of learning design and cognitive research so that's where John's point about applying what we know about teaching and technology.

It is a fully mobile user experience, it's based on our increasingly modern cloud-based stacks that will bring the efficiencies that he described about and it provides a kind of dashboard and analytics for faculty that really give them a predictive and leading indicator of student performance.

From a business respect it was launched with some less than 20 products and it's already used it over 100 colleges and universities in the U.S.

The platform is globally deployable, our product release cycle is tripling in 2015 and from a portfolio standpoint John characterized that is getting us into the qualitative areas, it extends the reach of our digital courseware portfolio in some pretty interesting ways.

So that gives you maybe little more color on business models, product models and sort of tech piece..

So John can you just give a bit more perspective on assessment and while you're there can you also deal with the question from Tim Nolan a query that's come on my e-mail which is PowerSchool I thought this was an important part of your digital services is it because you have overlaps with other offerings? Any color so just deal with the assessment then explain the rationale behind the PowerSchool decision..

Sure well the first thing to note about our assessment business in the U.S. is how diversified we've become while the state assessments that are driven by the Federal No Child Left Behind Act are an important part of our business there.

Just one part of our business, we have a really strong clinic assessment business, diagnostic testing, future certification, language testing and so on. So we are not really that exposed if there are dramatic changes in terms of the federal legislation.

Now as I mentioned earlier, we are watching the reauthorization of the No Child Left Behind Act very closely, because that does affect that part of the business if there is a move which we are anticipating of more control back to states that’s really the environment that we’ve been operating in under No Child Left Behind from the beginning.

So, we don’t think that that is a raw material. Moving on to PowerSchool, so PowerSchool is an administrative software system, it's a great business, it's a really good brand performing quite well, it's a market leader.

But it is an administrative system and it's about managing customers data, it's not information or data that we can use and really in anyway.

And we also have to work with the whole market with all of our learning systems and assessment programs we have to integrate with every schools student information system product and while PowerSchool is the leader with about quarter in the market.

There are three quarters of the market using other systems and this will actually help us work with that part of the market because will no longer be a competitor.

And given that we cannot directly measure an impact on student outcomes relative to providing and administrative software system it's just not a priority for investment and we think that it will be a better served in under another order..

I will ask you to step back and think about two broader issues please. One is the fact that you’ve been describing now, but you and your predecessor have been describing the efficacy of digital education tools for long time but is skeptics abound and don’t seem to be any less vocal.

Can you get investors a sense of whether you are making tangible progress or not in a length concerns or if not is there a strategy, a different strategy that you can deploy going forward? Second question, can you please draw distinction between your strategy on data protection and data usage compared to some of the other competitors and do you see there is a competitive advantage and why?.

Two good questions, I think on the first question, I mean clearly I think we are making significant progress, I think that progress has been clouded by the very significant cyclical and policy related issues we have to deal with over the last couple of years, if you just look -- just take one example, we just look at the appendix of the back and what happened to BTEC qualifications holding over the last couple of years and you compound that was happening with college enrollments at this point in the cycle that something is clouding the very significant progress we are making the growth in digital and services as a percentage of revenues, the growth in deferred revenue which is the equivalent of two points of organic revenue growth.

So, I think those help to provide some evidence of it. And I think the --well efficacy is something that we’ve been talking about for some years it really does take a while for this to really deeper than get traction across the company.

So I think is really now over the next three to five years that you will really see very significant benefits of that coming through.

I think the other data point I could provide is when we were having this conversation two years ago when I was new to the job to hold that all of your questions were about analog to digital and how we were going to see significant secret of value in that transition.

Well, I think we can now say clearly that, we are sustaining the value in that transition. So, I think there is quite a lot of points there if you look that should already give shareholders confidence, but there is a lot more still to do.

On the data analytics point, Tim do you want to pick his up, you wanted to say something -- is something that was across the whole of the lines of business something that Tim and John are all working on collectively across the company, but we do think this is a significant course of competitive advantage and actually the very reason for us to get out of a business like PowerSchool is because we free up resources and time and focus to really focus on the front end where we think we really can bring value and expertise.

So Tim you want to summarize some of the word that we’re doing in that area?.

Sure, so I think that the -- that Pearson has very strong opportunities for competitive advantage as it pertains to applying data and data analytics and predicted fashions that can have the kind of learner impact and by doing so provide the kind of business growth for us.

The moves that we’re making to a simplified technology platform which perhaps Albert collaborate on that will allows to get the benefits of that skill from the kind of consistency of the architectural and the application that are customers, so I think at in principal level there is I think a fair agreement about at least the directional potential of the application of data on impact of learning and therefore the connection of what that could do from a business standpoint for us and perhaps I could ask Albert to talk about how we’re approaching that from a technology architectural standpoint to elaborate on that?.

And so I think it’d be helpful just to talk a bit more Jim, this is really fundamental drive of opportunity for us over the next three years the really opportunity to really simplify our technology platforms..

Good morning everyone, so there is a huge opportunity and I mean largely I think driven through some of Pearson’s history and that we have acquired over the Company over the long time we had very fragmented structure and to some extent that technology architecture reflects that fragmentation over the many years.

So the strategy really is to dramatically simplify the technology environment and create what we’re calling a set of call platforms for the Company effectively core assets that underpinned both the customers and their experience, but also enables us to run an effective business and John mentioned about going from 63 ERP systems down to one and we’ve got a program for that we’re doing the same thing CRM we have many CRM systems across the country.

We want to get one of the next few years and really create what I call a 360 degree view of customers so all that customer data sits in one place, so we can see every customer interaction the Company has and create a very personalized way of dealing with customer and of course that then cascades up to the product layer and how we actually touch product and customer experience.

And so when we think about big data and customer learn our analytics the intention is to have again one platform that does that, so today we have many fragmented views of customer data by getting to one platform than we can really start to look at customer lifecycle across the whole learning continuum wherever a learner sits in the world and then start to get to as Tim says a very predicted view of customers behavior, so we can understand customer trends.

We both have a historical view of what the customer has done with us but increasingly like a number of other industries get to this predicative view and ultimately then the nirvana of that is can we actually change the learning process and the content in real-time to suite an individual’s personality and behaviors and so that sort of where we increasingly want to spend their R&D dollar is who we’re getting that really adaptive learning cycle that continuously learns and continuous improves around a personalized learning experience..

I am just linking that back to your first question then of course the reason we know that this efficacy strategy is a commercially successful strategy is what driven our most successful commercial products over the last five years.

The issue is, is not every product in Pearson yet, so we need to make all Pearson like the best of Pearson already is and that’s what’s going to drive grow of the Company. So Patrick and then also [indiscernible] and then it’s Patrick and then I’ll come to the back..

Hi Giasone Salati, Redburn.

I have three questions please can you give us the split of for-profit college and K-12 testing as a percentage of profit now? Second how is the Pearson College going in London, I think it’s been running for two years a bit, is that model that you’re ready to roll out as well? And picking up on the last answer, I am looking at Slide 38 with all of those datacenters, it is reminiscent of Reuters coming out of the 90s after a long period of acquisitions never integrated and unfortunately they fail consistently year after year to integrate those datacenters, is technology much easier now? Or is Pearson a totally different beast from Reuters clearly there was live only where is live testing maybe live at this point which makes you more confident that you can actually combine these different datacenters in one and what time arise?.

Thank you for that question. Robin, do you want -- I suspect the answer is we can’t provide a lot more guidance, but do you want to try and answer the first one..

Little bit I think, if we look on 44 we put in the appendix I mean which helps you split out within our North American business how much of it is in various parts and clearly the for-profit colleges you reference is part of the higher education blue bar in that business and we’ve always said remember for for-profit colleges are only about 7% of the U.S.

higher education market but we’re somewhat more highly weighted into the for-profit colleges because MyLab tend to have greater penetration in that space so that give you some degree of clue to how much of that blue area is the profit colleges certainly isn’t a majority of it but isn’t an important of it.

The testing business that you referenced and I think John covered this earlier is part of the green bar in school, but remembering the state testing is only part of our testing business because we’ve got natural testing and clinical which is one of our highest margin businesses in there as well.

So it’s important but it’s again not like changing in itself..

Okay, Rod, do you want to pick up on Pearson college, which honestly still very much in private phase isn’t it..

Yes, it’s still very much of in early days but we’re pleased with the progress that we’re making with Pearson college and the proposition the reason why students that comes to Pearson college, chose Pearson college is because if you want to a get job working for a FTSE 100 company then you come to get your degree from FTSE 100 company, you may get some direct firsthand experience this is going to be valuable to even if what the Steven is telling us to come through Pearson College.

The reason we decided to make the commitment to fill Pearson College is a couple of reasons; first of all, it gives us much more firsthand direct experience to prove out some of the things we are working with other higher education plan is on.

So that we can better develop partnerships with other higher education institutions and develop the kind of partnerships outside of North America that we’ve been very successful at in North America for example Arizona State University.

So to build out our expertise environment also to be able to acquire degree-awarding powers, so that ultimately we are degree-awarding powers we will be able to take our degree programs to other institutions and particular outside of the UK. So it's a very good future growth opportunity early days, but so far on track..

Albert I don’t think either of us can help very much with the writers historical analogy, but I know the company that grew very rapidly through acquisition was Vodafone and that’s one way you bring direct experience, so I think you can apply that to this question..

Yes, I mean a good question, I would say the data center landscape directly reflects the complexity in the application environment. So, as we reduced the number of applications and the number of digital products in so much more standardize set that enable us to collapse the data center, so there is a direct linkage there.

But I think there are many example companies have failed on this and also many examples of companies of being successful out there and I did the same thing at Vodafone and did a lot of technology consolidation and I did also the same job at Nortel Networks when I was the CIO there as well.

So it's a leadership challenge, it's not a technology challenge per say and we’re assembling a very high caliber professional technology organizations that are worth the journey here both in terms of the process rationalization simplification because clearly applications so that is support business process, so we’ve got to do two things, we got to simplify the business model, simplify the processes of the company, moved to standardize platforms and as we do that journey the consolidation of the underlying infrastructure data centers and network follows that continue.

So, it's a multi age journey, but we very made some good start on the journey and we got a lot to do, but we’re making good progress..

I think that’s a really important point because I think it's the organizational changes that we made over the last two years to start from one person as a single operating company three job for three lines of business that actually enables this program to have much greater success rather integrate what are hundreds of still vertically integrated P&Ls.

So I think this is as much a leadership and culture issue as it is a technology challenge and that’s really important and I think we’ve made huge progress on that there the back and then I think we got time for one more question probably..

Thanks. Mary Pollock, CreditSights.

My question is on your uses of discretionary free cash flow your dividend increasing, your free cash flow is better but you don’t have a huge amount of headroom so if you could that’s employ there particularly regarding M&A? And secondly on your credit ratings last year you said you were comfortable being which will be this year your high BBB and the long-term.

How you are thinking about your ratings and is there a leverage level where Pearson has being more proactive showing up their balance sheet?.

Robin do you want to take both of those?.

I mean two related fairly, I mean I think that we’ve always been clear that the uses of cash the first one is organic investment and you’ve seen us actually to reprioritize even higher up this trade organic investment over the last couple of years and that’s where that great pipeline is exceeding new products so wherever it is on John’s chart putting all the ’16 is actually going to come from this from that organic investment.

We then said dividends, we then said M&A and you’ve seen us coming back a little bit on the M&A activity in the recent times, although Grupo Multi last year was one of the largest acquisitions we’ve done and I think at the moment you won’t see us do that many very significant acquisitions because the prioritization has gone into organic.

Just on the debt rating we’ve always been very clear that we’re committed to BBB+ BAA1 and that is what is in some ways constraining our acquisition activity.

We are still committed to those ratings I have thought there might be a chance a year ago that we might get downgraded we also gone negative what if Moody’s that weren’t I think the ratios are very similar now as they were a year ago.

So in the extensive discussions we’ll have with the rating agencies in March, I am kind of hopeful that we get through those again with the ratings intact. But we’ve always committed to BBB+ BAA1 as our ratings..

Patrick Wellington, Morgan Stanley.

Very quick one, the UK where are we in terms of BTEC qualifications and when can we expect the UK business to start peaking up again? Second one Robin if you go to some of the other education companies so it would stick to further income and as sort of revenue, so should I cross out your zero organic group revenue growth and put plus 3% in why don’t you put next column in or encourage success to do so? And then thirdly going, I think Paddy touch on this, does everybody hate Pearson, does that really matter in U.S.

because you do get a lot of very negative publicity and lot that it relates to the fact the system is changing more than Pearson that you are [indiscernible] for that, that you're British company.

Are you losing business because everybody hates Pearson?.

So Rod, do you want to take up on BTECs first?.

Yes, so we did see a contraction in the market last year the size of the market for qualifications as a result of the changes that were made to school accountability measures in other words the kind of lead table points if you like that get applied to different qualifications and also the degree to which schools are incentivized now to ensure that there is much fewer re-sits of qualifications.

So we saw a decline last year. We will see some follow through of that in 2015 but much-much less than what we saw last year and we will see stabilization in '16.

And we have a record of growing our market share in qualifications in the UK, we expect we also continue to do that and so to be able to grow beyond that we've been investing in the last couple of years in a new suite of qualifications including BTEC but also including our GCSE and A level qualifications our world class qualifications program.

We're very proud of the work that we've done there and we expect to be very successful when those new qualifications get launched into the market in the next couple of years..

Robin, do you want to pick up on the deferred revenue and billings point?.

I'd love to.

So Patrick, I like to think of myself as a traditionalist you may think I'm a dinosaur and I do quite like our sales number which reflects the sort of statutory sales number that we have in the accounts and I think what you're going to see on the new accounting standards is quite a lot of companies moving to billings or some other word billings is not a great word I think but the concept that what we are actually invoiced to customers and you are absolutely right were we to do it that way you would be looking at higher levels if declared billings than we currently show in our sales line because that deferred revenue increase would come back into this year's revenues.

Being a traditionalist we've not chosen for the last few years to show you the sales which are aligned with the statutory number and then the deferred revenue and if you wish to make that adjustment I'd allow you to do that with the data we provide.

And my successor may very well choose differently and where billings may appear in the future presentation but that will be for others..

A very diplomatic and thoughtful answer for your successor. So, on your third point I mean I think Pearson is a global company with a long and proud American history and tradition over half of people who work for Pearson work in America. It generates 60% of our revenues over a quarter of our shareholders are registered in the U.S.

So I think we are every bit as an American company as we are a British company or anything else.

I don’t think that we are losing business as a result of some of the headlines that you talk about and some of those headlines as you implied are a direct result of our willingness and ability to take on difficult politically controversial issues and not get distracted by the headlines and the noise but do what needs to be done and it's the really professional way and always with great concern for the people that we work with and I think the other point I would make is not just that we are a global company but we're also a company that is very significantly made up of former educators and all of us who work for Pearson are here because we care deeply about the power of education to transform people lives and the importance that has and the opportunities that it opens up for people.

I think that there are times when currently we need to do a better job of telling that story and some of the appointments for example with Kate, James joining us is doing that and it's the number of people who number of customers partners parents at a recent event who say actually the Pearson we know is the company that only works for Pearson recognizes as a company really committed to doing the best let it come.

And so transparency accountability absolute focus on outcomes and improving access that's the way that we will work our way through these, but we're never not going to be in a position you can't be the world's largest education company and not find yourselves at the heart sometimes of a lot of political controversy and hate so it's not for the faint hearted but nor is it for people who aren’t always try to act in the best interests of learners and that's what I think every single person in Pearson tries to do every day.

So okay, I think we're done. Thanks everybody for coming and I'm sure Simon will be around to help and Tom will be around to help with follow up..