Pearson PLC (PSO) 2019 Q4 法說會逐字稿

Well, good morning, everybody, and thank you for joining us. For those of you joining us online, John Fallon here, CEO of Pearson. And just to flag that at the end of the presentation, there will obviously be chance for Q&A. So if you're joining us online, you do have the facility to ask questions, and we will -- we'll take them at the appropriate point.

So this is the plan for this morning. Coram Williams, our outgoing CFO, is going to take us through the 2019 preliminary results, and then his successor, Sally Johnson, currently our Deputy CFO, will then take us through the guidance for 2020, which is based on the new financial reporting structure that we've previewed in January and which we are outlining in more detail today. And then I'm going to ask our Chief Technology Officer, Albert Hitchcock, and our Chief Product Officer, Ishantha Lokuge, to share with you something that we're very excited about, which is the accelerated digital road map, which is enabled by the launch of the new Pearson Learning Platform. And building on that, we'll then hear from the leaders of our 4 business divisions: Tim Bozik, Bob Whelan, Gio Giovannelli and Rod Bristow, who are going to talk briefly about the longer-term outlook for each part of the company. And then with a very brief wrap up from myself and our Chairman, Sidney Taurel, we'll be very happy to take your questions.

Just before we get going, this is the slide that we show you each year, which charts the progress in our digital transition. As you can see, 68% -- 66%, sorry, of Pearson's total revenues are now digital or digital-enable. That's up from 59% 2 years ago, and 34% of our revenues are now non-digital, down from 41%,2 years ago. The 6% growth in digital and digital-enabled was broadly spread across the whole company. The 11% decline in non-digital was highly concentrated in one part of Pearson.

Textbook sales to U.S. college students were down 30% on prior year and now stand at a little shy of GBP 200 million. And this tells us 3 things. One, we are now in the final throes of the death of the U.S. college textbook. Sales have declined by 80% from their GBP 1 billion peak a decade ago. We've gone from selling 21 million textbooks a year back in 2010 to somewhere in the region of 2 million or so this year. As Sally will explain in our guidance, we are expecting this to inflict further pain this year. But then its ability to damage Pearson financially is now diminishing, and we should see that over the next couple of years. Two, we are still in the very early stages of the growth in digital learning where Pearson has established clear global leadership. 66% of group sales is GBP 2.5 billion, which makes Pearson the world's leading digital learning company by revenue by some distance. And third, we now have a great platform from which to build on that leadership with a really, a tough difficult foundational work done, we will now lead the next generation of digital learning built around the 3 things that learners care most about: that's the experience, the outcome and affordability. And as you'll hear later, we will win in digital learning because we built a company that is better placed than anyone else to deliver on all 3.

But before we get on to that, let me hand over to Coram to take you through last year's results. Coram?

Thank you, John. Good morning, everybody. Let's start with the summary of our financial performance. As we shared with you in January, group revenues were flat. Operating profit was in line with guidance at GBP 581 million after adjusting for currency movements. Our cash conversion, 72%, was impacted by the timing of disposals and incentive payments, but our underlying conversion rate was healthy. On a post-IFRS 16 basis, net debt increased modestly from GBP 809 million to GBP 1.016 billion, primarily reflecting acquisitions and outflows from disposals.

I'll now walk you through the detail in each area. Let's start with sales. We saw a strong performance across the majority of businesses in Pearson, up 4%, excluding U.S. Higher Education Courseware. This was offset at a group level by performance in our U.S. Higher Education Courseware business, which meant underlying group revenue was flat for the year. We saw continued momentum in our strategic growth opportunities with Online Program Management, up 10%; Virtual Schools, up 6%; Professional Certification, up 10%; and Pearson Test of English, up 17%.

Looking at each geographic segment in turn. In North America, underlying sales declined 3% primarily due to U.S. Higher Education Courseware declining by 12%. As we outlined in January, this was driven by a much quicker decline than we expected in print textbooks of around 30% partially offset by modest growth in digital. In Core, revenues grew 5%. We saw strong growth in Student Assessment and Qualifications, Pearson Test of English, OPM, Professional Certification and the delivery of a new digital assessment contract in Egypt. This was partly offset by declines in courseware. And in Growth, revenue was up 4% with strong performances in China, Brazil and smaller markets, partially offset by declines in South Africa in both Higher Education Courseware and Higher Education Services.

Let's now look at profits. Our adjusted operating profit is GBP 581 million at 2019 exchange rates or equivalent to GBP 592 million at original guidance rates. Underlying profit declined in North America due to the impact of U.S. Higher Education Courseware partially offset by the benefits of our restructuring program. Underlying profit grew across both Core and Growth due to a good sales performance combined with the benefits of restructuring.

This slide shows the operating profit bridge from 2018 to 2019. The main items of the bridge are as we described at our January trading update. Firstly, a negative GBP 67 million impact from trading driven by U.S. Higher Education Courseware partially offset by growth in the rest of the business. Secondly, we saw a GBP 19 million benefit from other operating factors as additional investment in our strategic growth priorities was more than offset by one-off cost savings announced in our 9-month trading update and a partial release of the accrual for the annual incentive plan. Third, we saw inflation of around GBP 50 million in 2019 more than offset by restructuring savings of GBP 130 million, which was in line with our plan for 2019. Finally, and as expected, we saw a modest GBP 25 million benefit from the adoption of IFRS 16.

I turn now to the income statement. Our tax rate of 16.5% was slightly better than the revised guidance that we provided in July and benefits from the favorable settlement of historic tax positions. Our interest charge was also slightly better than our guidance at GBP 41 million primarily due to favorable interest outcomes on those historical settlements. As expected, interest was up on last year due to the adoption of IFRS 16. EPS was 57.8p, at the upper end of the guidance range that we gave you in January. It was down on 2018, which, you will remember, benefited from a substantial one-off tax credit. Excluding those one-offs, EPS was up on 2018. On a statutory basis, operating profit for the year was GBP 275 million, representing a decrease on 2018. However, 2018 was helped considerably by gains on the disposal of Wall Street English. The absence of this one-off benefit, together with increased intangible and restructuring charges, more than offset the year-on-year increase in adjusted operating profit. Statutory EPS at 34p, was down on last year for the same reason as well as due to the absence of the one-off tax credit in 2018 that I just mentioned.

Let's turn now to cash flow and the balance sheet. Our operating cash conversion was 72%. This was impacted by 3 factors. Firstly, the timing of the disposal of our U.S. K12 courseware business. K-12 Courseware's cash flows are heavily seasonal, and we sold the business at a point in the year which coincided with our maximum cash outflow. Secondly, we have a mismatch in the timing of incentive payments and accruals. In 2019, our P&L benefited from the partial release of the staff incentive accrual, in line with performance. However, in cash terms, we paid incentives relating to 2018 performance in the first half of 2019. This led to a mismatch between cash and P&L, which hurt cash conversion in 2019, but should help cash conversion in 2020. Thirdly, we saw challenging trading in our U.S. Higher Education Courseware business, which impacted working capital. On an underlying basis, and excluding these 3 factors, cash conversion was above 90%.

Our balance sheet remains very strong. You can see from this chart that we have completely transformed the financial health of the company, reducing net debt on a pre-IFRS 16 basis from over GBP 1.6 billion in 2014 to GBP 374 million in 2019. We've been doing this at the same time as increasing organic investment in the business, ensuring that we are well positioned to grow in the future. On a post-IFRS 16 basis, net debt rose from GBP 809 million in 2018 to 1.016 billion in 2019 or 1.3x net debt to EBITDA. This increase was driven by 3 factors: firstly, cash outflows from the disposal of K12 courseware; secondly, modest additional capital invested in PRH; and third, the acquisitions of Smart Sparrow and Lumerit.

This ongoing strength of the balance sheet has been helped by our disciplined approach to capital allocation. To remind you, our priorities are: one, to maintain a strong balance sheet with a solid investment-grade credit rating; two, to continue to invest in the business; three, to maintain a sustainable and progressive dividend; and four, to return surplus cash to shareholders where appropriate. With this in mind, the Board has decided to increase the final dividend by 0.5p to 13.5p, resulting in a full year dividend of 19.5p. This is a 5% increase on 2018, and is consistent with the underlying profit growth that we've delivered this year. Remember, this is on top of the GBP 350 million share buyback program that we commenced in January. It's also worth highlighting that with the simplification of our back office largely complete, the strength of our balance sheet means we're now in a position to selectively look at acquisitions, which can be integrated quickly, can bolster our capabilities in key areas and generate synergies rapidly.

And with that, I'll hand over to Sally to go through the new reporting structure and 2020 guidance with you.

Good morning. I'm going to take you through 2020 guidance. But before that, I'm going to walk through our new reporting structure from 2020. This reporting reflects the management structure in place from the start of this year as well as showing divisional contribution and global support costs separately, which is the way we model the business. Revenues and contribution will be split into our 4 operating divisions: Global Online Learning, Global Assessment, North American Courseware and International.

This table shows our 2019 and 2018 revenues on this basis with 8% growth in Global Online Learning, 4% growth in Global Assessment and 3% growth in International offset by the decline in North American Courseware driven by our print decline in U.S. Higher Education Courseware.

This next slide shows the 2019 and 2018 profit breakdown into divisional contributions and global support costs, which we term enabling functions and which include enterprise technology and functions, such as finance and HR. Enabling functions support the whole business, and this structure enables us to manage those costs effectively. This analysis provides clarity on the profitability of each part of the business and also demonstrates that there is no overdependence on one particular division in terms of profitability. You can also clearly see the contribution margins for each business. Global Online Learning currently has a lower margin than the other divisions, and we -- as we invest in the growth in these businesses. We have talked previously about the different P&L profile of the OPM business, where upfront program costs are not capitalizable. You would expect margins for these businesses to reach average Pearson margins as they mature. Global Assessment is our highest contribution margin business. We expect those margins to be relatively stable over time. International margins are in line with the average across our divisions, which we expect to continue. Within North America Courseware, U.S. Higher Education Courseware is an ever increasingly digital business with 63% of 2019 revenues from digital products.

We have previously indicated that profitability of the digital business is similar to that of the legacy print business. This slide demonstrates that and, for the first time, shows the breakdown of the cost structure for each. As you can see, the digital business requires lower operations costs, such as supply chain and property, than the physical business, but attracts higher digital costs, such as hosting and technology. As we saw last year, as revenue declines, contribution margins are impacted due to the high operational leverage of this business.

I'll now walk through guidance using the new reporting structure. As we said in January, 2020 guidance on a comparable basis to 2019 guidance, is GBP 500 million to GBP 580 million. Taking into account the disposal of our remaining stake in PRH and FX, which now uses 31st of December 2019 rates with GBP 1 to $1 of $1.32, guidance is GBP 410 million to GBP 490 million. We expect a normalized tax rate of 21%, and interest levels of GBP 50 million. As an associate, PRH tax is netted directly against its profit contribution. Thus, its disposal increases the tax rate by 2%. This, combined with a lower number of shares in issue following our GBP 350 million share buyback, generates EPS of between 38p and 47p. Cash conversion will be at or above 90%, the normalized level you'd expect from this business.

Looking at 2020 revenue guidance. We expect the business to grow low single digits in aggregate with the exception of U.S. Higher Education Courseware. Global Online Learning will see mid-single digit growth driven by both OPM and Virtual Schools. In OPM, we are deliberately slightly slowing the rate of growth as we transition to a new operating model, which will drive future growth and synergies, which Rod will talk more about later. Growth in Virtual Schools is driven by enrollment growth in existing and new schools primarily offset by the loss of some schools -- partially, sorry, offset by the loss of schools. Global Assessment will see low to mid-single-digit growth driven by Professional Certification and stabilization in U.S. Student Assessment. In International, we expect to see low to mid-single-digit growth with growth in the Pearson Test of English, English Courseware and Qualifications. Growth in the U.K. business is offset by the loss of the NCT contract, which comes into effect this year. In U.S. Higher Education Courseware, we expect the trends we saw last year to continue with significant declines in print partially offset by modest growth in digital as we add more products to the PLP. We plan to accelerate our product release schedule from the end of 2020 onwards, and digital growth will also accelerate.

Adjusting 2019 profit of GBP 581 million for portfolio impacts and FX reduces profit by GBP 76 million, giving a comparable 2019 profit of GBP 505 million. The increased benefits of our restructuring program adds an incremental GBP 60 million. This means we will be delivering increased annualized cost savings of GBP 335 million from the end of 2019 as a result of this efficiency program. The specific actions that we have taken to drive these cost savings are now complete. But now that we have streamlined our back-office systems and processes, we expect to realize further efficiency savings, and this is something we are actively working on. Inflationary headwinds of GBP 30 million are now representative of our lower cost base. Other operating factors of GBP 45 million are predominantly reinstatement of bonus, but also include investment in our Growth businesses. Trading is expected to impact profit between flat and negative GBP 80 million. This decline, and the largest element of the volatility, relates to North American Higher Ed Courseware, which has high operating leverage offset by continued growth in the rest of our business.

Finally, I want to end on the opportunities we have as a platform-based learner-centric company with a purpose. As U.S. Higher Education Courseware print revenues become increasingly immaterial, the vast majority of our business, which is growing, will provide a foundation for medium-term sustainable revenue growth. Revenue growth and cost opportunities will ensure that profits grow while the strength of our balance sheet ensures we will continue to invest for the future. I'm excited about these opportunities and about Pearson's future and to be taking over as CFO from Coram at our AGM.

Now the executives will take you through our strategy and our longer-term growth assumptions, starting with Albert.

Thank you, Sally, and good morning, everyone. So back in 2014, our vision was to replace Pearson's highly complex and outdated technology estate with a future-proof platform model. This would equip Pearson with similar capabilities to digital native organizations, such as Netflix, Spotify or Amazon. Over the last 5 years, starting with our enterprise systems, we've implemented 16 brand-new state-of-the-art platforms in the cloud. As a result of this, we've fully decommissioned over 2,500 legacy applications. We've shut down 81 data centers and delivered significant cost savings to Pearson. In addition to this, we brought in new talent, reskilled the existing workforce and move to an agile-based approach for development. Our Pearson Learning Platform, as an example, is built using microservices in the cloud. This is comparable to the leading Silicon Valley platform companies. This platform will allow us to transform the way educational content is delivered with highly engaging and personalized experiences delivered at scale on a global basis.

The 16 new platforms, including the Pearson Learning Platform, have moved our business from being highly reactive with little insight into either our operations or our customer experience to one leveraging a common operating model, shared scale -- scaled shared services that are able to proactively engage customers based upon real time data insights, utilizing integrated customer journeys. This year, we will have over 30 million learner identities in our single identity platform, and we will be able to link these identities through all stages of a learner's journey, gaining valuable insights into their experiences and increasingly being able to personalize their interactions. This is a fundamental underlying component to moving Pearson to a platform, which Ishantha and Tim will talk about further. The successful transition to a modern platform is rare in traditional businesses and positions Pearson exceptionally well to compete and win in the future education market.

And with that, thank you. I'll now hand over to Ishantha to take you through a little bit more detail.

Thank you, Albert, and good morning, everyone. So what Albert talked about is the progress we made on building out the core foundational technology. What I'm going to share is how we build upon that foundation to accelerate our vision for the Pearson Learning Platform, which is core to our digital transformation and growth. Just by way of background, my name is Ishantha Lokuge. I came to Pearson with about 20 years of experience working for Silicon Valley companies, such as eBay and Shutterfly. I am truly excited to be here. I am excited by the mission of transforming how millions of people learn, and I'm excited to do that at such a massive scale by helping building out the Pearson Learning Platform, which I believe has a compelling vision. The vision for the platform is driven by a mindset that is relentlessly focused on the learner. This is really important. It's important because as we embrace the consumerization of learning, it's really essential to build experiences that are going to engage learners in very critical ways. I've seen this other -- in other industries as well.

The vision for the platform is grounded on 3 strategic pillars, and they are: create, connect and sell. And now what I'm going to do, I'm going to walk you through these 3 pillars and how they operate in concert to help us grow. So the first pillar is the create pillar. This enables the creation of highly engaging experiences that'll engage and delight learners. This'll be game-changing from a business and learner outcome perspective. The recent acquisition we did of Smart Sparrow is going to be the underpinning technology that's going to enable us to do that. The next pillar is connect. Connect is critical as we lean in to understanding the needs of our learners and building a lifelong relationship through in-depth insights and data. Just imagine as learners move from higher education to lifelong learning, our ability to build a meaningful relationship with the learner will be a catalyst for growth. The final pillar is create. You're fairly familiar with this. So these are the applications, portals and, eventually, marketplaces that'll connect the learning content that we leverage from the first pillar through multiple applications. Today, we have applications like Revel, Mastering, MyLabs and a host of other applications in the sell pillar. These 3 pillars are going to be the guiding force towards our digital road map plan. That's the vision. That's why we are so excited.

So now what I'm going to do is I'm going to take that vision down into specific missions through road map. In order to execute on this strategy, we have created a road map of missions with very dedicated teams. This has enabled us -- this notion of missions and dedicated teams has enabled us to have concurrent development, which is the thing that's enabling us to accelerate our road map plans. The first set of missions I'm going to talk about are missions that are aimed at High Education Courseware products. Second, I will discuss our direct-to-learner eText portal and why that's so exciting. And then I'm going to wrap up with how the Pearson Learning Platform is going to extend beyond North American Courseware.

But before I get into the details of this, I want to give you a glimpse of what the future of learning looks like.

(presentation)

So I hope you got a sense. This is exciting because this is real. This is happening right now as we speak.

So now I'm going to talk about some specific missions that are underway. The first mission is Revel. Revel is so important because this was the first application, it's really important to educators and learners. It broke new ground as a mobile textbook -- sort of a mobile-first textbook replacement. And now the next big step is moving Revel to the Pearson Learning Platform. The result is going to be an application that learners can use any time across multiple devices. We have an ambitious schedule to move subscriptions to the new platform this year. You can see how the new Revel experience will help educators organize their classes, grading and understand their students in real time. For learners, Revel creates a much better learning experience through UX improvements, search improvements and audio playback. Audio is starting to become a real interesting trend with the air pods and so on, where we are starting a trend from reading to listening, and that's really critical as we speak to our students and instructors.

The next thing that I want to talk about is eText. The Pearson Learning Platform will help our eText application stand out in the marketplace, both from a content distribution standpoint as well as from an experience standpoint. The technology that you saw previously, the Smart Sparrow technology, is going to be the one that's going to invent eText so that it's no longer text on the glass. With the great -- sort of with the growth of the eText offering, I'm really excited by our ability to also offer a direct-to-learner e-commerce portal. And again, this goes back to the broader strategy I talked about. The connect layer is going to be the layer that's going to connect the learner directly to Pearson through this eText experience that we are going to launch. That's also in the plans for 2020 as well.

So I talked about eText. I talked about Revel. I'm even more excited about what's to come with Mastering and MyLabs, which I'm sure most of you are familiar with. So this is a STEM offering. MyLab and Mastering are leading high education applications today, and the future that we are envisioning will be a step change and a breakthrough learning experience that's going to embed content and assessment, all in a seamless experience. This is what students want. This is what our educators want.

When I started out, I talked about the learner being at the core of everything we do. This is a paradigm shift from where we are today. And we are going to lean into the customer and the learner in ways that we have not seen before. And towards that end, we created a specific mission towards the end-to-end customer experience. This mindset will come in every single thing we do, and you will see a lot of different applications of this. But one of the most exciting applications is going to be the direct-to-learner eText portal that we spoke about earlier. So just imagine if a user could come to the website and they could search on Google for any particular eText title, just with a single click, they can buy and then they're on to learning. And this is really critical because once we build this e-commerce portal, now we have the ability to build a relationship with our learners. Once they are done with the course, we can now upsell so that the learner is building a digital repository, which becomes the foundation for how we are going to move into lifelong learning. So that's sort of the gamut of initiatives that are on the docket right now for 2020.

But as I said earlier, this platform is just not for U.S. Higher Education. The PLP, the Pearson Learning Platform, is going to extend way beyond the sort of North America high education. In a sense, it will power digital learning wherever it happens in the world. So let me share 2 examples that we are working on this year. First, Pearson has entered into a visionary pilot partnership with Northeastern to launch an employability program through online learning. This partnership will help Pearson take a leading role in the growing market of lifelong learning. Pearson will also use its platform to develop an employability short courses program in the U.K. In addition, the platform will support the rapid growth of Pearson Test of English around the world. As the test continues to grow, we will create an unparalleled prep experience to drive engagement and growth.

Look, I'm really excited and confident on the path we are on, truly believe we have the right strategy and the talent to bring this vision to life.

So with that, I'm going to hand it over to Tim.

Thank you, Ishantha. Good morning. I'm Tim Bozik, and I lead our North America Courseware business and our global product teams.

The Pearson Learning Platform that Ishantha just described will have a significant business impact anywhere the digital learning happens. That'll start in U.S. Higher Education Courseware, a sector that has seen one of the most challenging disruptions of any industry. Ten years ago, Pearson was overweight in a business with high print textbook prices in a largely analog business model. In 2010, Pearson had a $2 billion U.S. Higher Education business, selling 21 million print textbooks a year. As you can see from the chart, the revenue split was roughly 75%-25% print to digital. 10 years later, Pearson expects to sell roughly 2.5 million print textbooks in this business with the ratio of print to digital roughly reversed. By 2022, we expect the number of print texts we sell to be around 1 million on the way to a small long tail. And yet we still expect to generate 1 billion revenue from our U.S. Higher Education Coursework business and the then almost completely digital business, increasingly based on the Pearson Learning Platform. That will enable us to grow. The disruptions come from the analog past of the U.S. Higher Education business. The digital future can grow. The digital future can grow because the future of learning in the U.S. Higher Education business will be digitally and consumer-defined and platform-led.

You heard from John that experience, outcomes and affordability all matter to our customers. I hear that directly from our customers. We'll meet the demand for all 3, but we'll win on experience and outcomes as the platform leader. The Pearson Learning Platform will drive digital growth in 4 ways: first, through share gains with differentiated experiences that impact outcomes that provide customer and competitive advantages; second, by expanding the platform's segment with innovative new products like the kind that Ishantha just depicted; third, by recapturing sales from the secondary market amid rising digital consumer preferences; and fourth, by establishing direct relationships with an evergreen pipeline of learners that can -- that we can engage over a lifetime of learning. That's the connect pillar that Ishantha described. The Pearson Learning Platform will drive digital growth first in U.S. Higher Education Courseware, but it's a platform for Pearson's growth anywhere the digital learning happens at any moment that matters to learners.

With that, I'll turn it over to my colleague, Bob Whelan.

Good morning, everyone. I'm Bob Whelan. I lead the Pearson Global Assessment business, and it's the strong part of the Pearson's portfolio as you can see some of the financial outcomes of the capability of this business. There are 3 businesses in the Global Assessment business: there's the Student Assessment. That measures what you have learned, what a student might have learned; a Clinical Assessment that measure why students might be struggling to learn as well as a talent assessment business for employer selection and retention purposes; and Pearson VUE allows a student to prove what you've learned so you can move on with the next phase of your career or your academic endeavors. We coined a phrase about this a few years back and it stuck around, call it, "Turning learners to earners." We coined it about 3 or 4 years ago, and they -- and it sort of become a little motto of the VUE business. And we -- it stuck around, although it was not intended to stick around, but it has.

But today, I'm going to highlight the 2 largest businesses. Student Assessment is in the midst of a dramatic shift from analog to digital. It reduces our cost, but more importantly, it allows us to give results back to students and teachers so they can take appropriate action much faster. But we meet the customers where they are. If they're not ready for digital, don't have the infrastructure, don't have iPads or computers in the classrooms, we will continue to do what they want to do and move them to digital at their pace. We also have AI scoring of essays and math items. There's a number of different domains, which, again, reduces our cost, but even more importantly, helps get results to the students faster.

This market has thrived under a number of legislative actions. You all -- you know them all: No Child Left Behind, Race to the Top, Common Core, Every Student Succeeds Act. Seems like every couple of years, we have a new and then we have to manage through. And as part of the -- this PARCC consortium, which is associated with Common Core, as that's winding down, we rewon most of those states. And there was one major opportunity in 2019 for those states, and that was the State of Tennessee. And hopefully, you know that we proudly won that one opportunity in 2019. The revenue is stabilizing. And as contracts come up for bid, we have a strong track record of winning our share, we expect that to continue.

I'm going to shift over now to the Pearson VUE business. It's a rapidly growing business. Revenue has grown from GBP 56 million in 2003 to over GBP 700 million last year. I'll pause to give you time to write that down. GBP 56 million in 2003 to GBP 700 million last year. Now the growth was driven by a couple of factors, share gains and market expansion. Not only is the pie bigger, but our piece of the pie is bigger. So that's a -- outstanding characteristic of a market, if the market is getting bigger and you're getting bigger as well. The business is highly scalable, and we only add testing centers to increase capacity after a contract is won. Most contracts fit into our network of 20,000 testing centers worldwide. But major contracts in 2019, launch of Medical College Admissions Test and Project Management Institute, require us to use the CapEx to build additional network of testing centers. We are also seeing a trend in work-based assessments that not only measure what you know, but what you can do. This is a strong trend in the employability space. This trend will expand our markets and our capability of performance-based testing and, combined with our talent assessment, puts us in a strong position in this emerging space.

Now this slide shows the diversity of our customers. This portfolio approach in this business provides a natural hedge for economic shifts, enabling consistent and steady growth.

I'm proud to lead this business, and I look forward to having a continuing market leadership in all 3 businesses. I'm happy to answer any questions later on this morning.

So I'll now turn it over to Gio.

Thanks, Bob. Good morning, everyone. I'm Gio, I look after the International business. We have 6 hubs: the U.K., Continental Europe, Latin America, China and India, Middle East and Africa and Australia and Pacific. In these markets, we have decades of presence with a well-known brand. We have a local -- great local team and valuable relationships with governments and institutions. These are markets where billions of people live and where there's a strong demand for quality, affordable education.

In the last few years, we have simplified the business and increased its profitability. In 2019, we started to grow it low to mid-single digit, and we believe we can continue to do so in 2020. The reason is simple, International is a large marketplace where we can leverage Pearson's global assets, such as our content, our assessment and our services, and deliver them locally using our local sales team and our local marketing network. Let us think for a minute at our company's strategic priority, employability. It really starts in schools. And we have, in International, a significant footprint in schools that allow us to leverage our global brands and our capabilities, such as the BTEC, the iGCSEs and others so that we can benefit students and employers.

Turning to the next slide. In the English language space, we have great opportunities. Our biggest one is PTE, the Pearson Test of English. This is a fully digital test, which we developed internally. It's more convenient, more reliable and faster scoring, because it's powered by AI, than our competition. It gained official approval in Australia. And as a result of that, we were able to grow our market share from virtually 0 to 60% in just a few years. We had test volume growth, not only in Australia, but also in countries such as China and India where foreign students and immigrants to Australia come from. We have recently won the U.K. Home Office approval for PTE. We believe the U.K. is a comparable market to Australia. And over time, we can -- we believe we can grow revenue there and also in other markets where foreign students to the U.K. come from. As Bob mentioned, we own a unique asset, our network of VUE test centers where the PTE test is administered. We see further opportunity of growing demand in PTE as we seek recognition in other countries, such as Canada and China.

Still in the English space, we have a significant opportunity in Courseware. In every international market, if you're fluent in English, your chances of getting a job and of improving your career are dramatically different. And from an employer perspective, improving English of existing staff is often the first step to upskilling and reskilling employees.

So once again, in Pearson, we start with great assets. We have a world-class content, global content and pedagogy, and we're well-known and respected in all these markets. We keep adding new products, primarily digital and e-commerce channels, and we're blending them with local expertise in delivering and adding services. This is why our English business grew in 2019. In particular, we had good growth in China, in the Middle East and in Brazil, where, by the way, we own the largest English franchising network in the world. We expect to grow and to continue to grow during 2020.

Moving to assessment space, we had good performance in 2019. This was driven by the Student Assessment and Quals in the U.K., but also by a new contract in Egypt schools. It is our largest-ever fully digital assessment contract. We support the development, delivery and marking of 125 million online assessments over a 4-year period. The online marking system that we developed can open up an opportunity elsewhere in the world to deliver digitally national high-stakes assessments.

And with that, I'll turn it over to my colleague, Rod.

Thank you, Gio. Morning, everybody. I'm Rod Bristow. I lead the Global Online Learning business. And over the last 3 decades, I've worked in or led every business in education, content, assessment and services. But I've never been more optimistic about the future than now.

Online learning is perhaps education's biggest growth opportunity. We operate 2 businesses in Virtual Schools and in Online Program Management in higher education, and this year, we're entering the market for online corporate learning. So we work across education in 3 segments: schools, higher education and corporate learning. And our role is to provide teaching, marketing, enrollment and retention services supported by our content, assessment and technology, and this is a market that's growing strongly across all 3 of those segments.

In schools, we operate more than 40 virtual schools in the United States, where 400,000 students are in virtual schooling and 20% of them study with Pearson. Our strategy is to deliver these learners excellent academic outcomes and the digital skills that they need throughout their lives. Demand for virtual schooling is also growing outside of the United States. So we're launching Harrow School Online in a number of international markets, a partnership with Harrow School using our platform, delivering Pearson content and Pearson A-level qualifications.

And then in higher education, the overall market for online programs is also growing strongly. Most of our revenues are in the United States, but we've built strong businesses in Australia and the U.K. with potential to expand into Europe, Middle East and Asia. The strategy is to offer more student choice through short courses, certifications and a better learning experience, which we are in a unique position to provide through Pearson content and assessment. And we're also starting to combine them with our partner programs to offer a more affordable learner choice in a Pearson-facilitated marketplace.

And then in Corporate Learning, the recent acquisition of Lumerit is a strong foothold in the fast-growing corporate segment for online learning. We've had experience of employers' needs through talent assessment, Pearson certifications, BTEC and apprenticeships and English language learning internationally. And employers face greater workforce challenges than ever before, the growing gap between the knowledge the education system delivers and what matters in the workplace, the increasing specialization in job roles. Employers want to offer talent development as an employee benefit, high-quality learning pathways that offer progression for their employees. We connect them to these pathways through online learning.

And then the final slide, this shows that Pearson will provide the connective tissue in the ecosystem between employers, learners and educators. We help teachers provide a better online learning experience through the courseware and learning platform described earlier by Tim and Ishantha. We enable learners to prove what they have learned through certified short courses described by Bob, and we see the international opportunity for growth described by Gio. Virtual Schools, Pearson English, BTEC, Pearson VUE, Professional Certification, short courses, courseware, the Pearson Learning Platform and our employees' deep knowledge of education, each will enable Pearson to build its position at the heart of one of education's biggest growth opportunities as the world's online learning company.

And online learning has the power to enable a teacher to know what their student has learned and to personalize their learning. Online learning is inclusive. It gives learners more control. And online learning is a natural vehicle for delivering the digital technical skills that an increasingly specialized job market demands. Online learning is just entering the foothills of a very significant growth opportunity, and it's one for which Pearson is very well positioned.

John, back to you.

Thanks, Rod. So as you've just heard, global demand for digital learning is still in its infancy, but we'll grow strongly over the next decade. As you've also heard, we're very well placed to help meet this demand. It's the very reason we exist. Our purpose is to empower people to progress in their lives through learning. We believe that the future of learning will be increasingly digital. So we have built by revenue what is, by some distance, the world's leading digital learning company. And as you've heard, we've also now built the learning platform by which we can build on that digital leadership. We believe that the 3 things that matter most to learners are experience, outcomes and affordability. So you've also heard, we've created, right across this business, the capabilities and the competitive advantage by which we can deliver on all 3.

But we also believe that learning is now increasingly lifelong. The school students of today could be the first generation of 100-year-old workers with multiple careers across this lifetime, and this will mean we all have to go on learning throughout life. And so as you heard, we're also building a platform by which learners will come to us at a specific moment of learning. But then through the experience they have, the help, the support, the engagement and the outcome, we help them to achieve the progression in their career, they then come back to us. They want to come back to us at key moments of learning throughout their lives. Now obviously, we can't do this in isolation. And so we're going to have to be at the heart of a wider ecosystem, which matches needs of learners to providers, such as universities or employers or communities, as you've heard from my colleagues throughout the presentation. But we do aspire to be the platform that helps learners with every moment that matters in their journey of lifelong learning and employability. And over time, that's the really big growth opportunity for Pearson, to achieve this vision of scale.

But first, of course, as finally, finally, we bury the old college publishing model and ushering a new more attractive and scalable access-based model as Tim described, we have to make sure that all the constituent parts of Pearson are profitable and sustainable. And as you've heard, this team and all the great talent we have right across this company is very focused on doing just that and, in doing so, providing the bedrock for an exciting and sustainable long-term future.

And on that note and just before we move to questions, I'd like to ask our Chairman, Sidney Taurel -- so I know he's keen to share some thoughts of his own. So Sidney, over to you.

Thank you, John. I'd like to make 3 comments to put these presentations in context. First, Pearson's transformation from a conglomerate to a digital learning company is in its later stages. We still have a bit of business in print in the U.S. college business, but this is decreasing rapidly. And the shape of the new company, with a Pearson Learning Platform at its heart, is clear.

Second, this transformation means that we are able to run the business differently. And today, you've heard from several heads of those divisions and other leaders of the reshaped business. They have described the attractive markets in which they operate, their competitive advantages, their interdependencies and their prospects for growth. And the demos will give you a better feel for all of this, and I hope you'll spend some time on them. Our new segmental analysis also will help you to better understand and model the Pearson that we have created.

The third point I want to make is that the Board and I believe that Pearson is well placed to face what lies ahead, and we look forward with confidence. We appreciate the huge amount of work that John, ably assisted by Coram, and the rest of the management team have been doing. And while the benefits will not be reflected in the short term in the financial results, the platform for growth has been firmly established. The Board has been intimately engaged in the development of the strategy and fully support the strategic direction of the company to become a leading learning company in this new world of lifelong learning.

So let me finish with a brief update on succession planning, I'm sure you are curious. The search for John's successor is in full swing. We have a clear sense of the attributes we are looking for. Not surprisingly, we are looking for someone who has demonstrable experience in corporate transformation, digital experience, a global view and an ability to nurture a strong and healthy organization culture, together with a commitment and a passion for our strategic direction. We know it may not be easy to secure all of these attributes, but we are making very good progress, and we will make an announcement as and when the time comes. And meanwhile, I appreciate, as always, John's full dedication and passion.

And as we talk about transition, as you all know, Coram is stepping down as CFO with Sally Johnson, current Deputy CFO, succeeding him. We will miss Coram's steady hand and balanced and independent views, great communication skills and his sense of humor. We are very fortunate to have an outstanding successor in Sally, who is equally an independent thinker and knows every nook and cranny of this company and has great followership within the company. So today, we confirm that Coram will be stepping down at our Annual General Meeting in April and with Sally taking over at that point.

And with that, let me turn it over to John, who will direct the Q&A.

Thank you, Sidney. A quick reminder for those of you joining us online, that you can submit questions online and we'll be very happy to take them. Sally and Coram here, for those of you who are online, are joining me up on the podium, but we've got the whole of the team here ready and willing to answer all your questions.

Let's start here.

Adam Berlin here from UBS. You know me, 2 questions on HE Courseware and one on online. So the first question on Courseware is given all these great products...

Sorry, can you just take the microphone? Sorry. I should have said that initially.

Given the -- the first question is, given the product sets you've talked about, is there an opportunity to increase the size of the U.S. sales force in order to drive penetration of these new products over next few years and accelerate growth? Or do you think you've got the right size team to do that?

The second question, if you'll allow me a hypothetical. Your strategy on Courseware seems to be to let the revenues fall to around $1 billion and then grow from there. Let's say, growth doesn't take off. What would be the costs if you decided to shut the Courseware business in the U.S.? And how much of the enabling costs that you talked about today could you take out of the business if you did that -- made that decision? So we kind of know the maximum downside case if your strategy doesn't work.

And then the third question on Global Online is, will we see an improvement in profitability in 2020, given that the investments you're making seem to be a little bit smaller this year than they were last year?

Okay. I'll ask Tim to pick up on the first question, and I'll ask Sally to pick up the question around the sort of enabling functions costs. But I think, first of all, let's just -- to sort of clarify the strategy. I mean what we are is we are in the latter stages of an analog-to-digital transition. And there's some analogies, I would say, with the music publishing industry. It's not that people have stopped using our content and assessment, it's just that they are accessing it in different ways. So we already have 8 million annual subscribers and another 5 million digital downloads. I think we're pretty sure that we have a pretty solid digital platform on which to build. And the plan then, obviously, is to complete that analog to digital transition as quickly as we can, which is a way of saying I don't think it's a hypothetical question with a hypothesis that's very likely to happen because of that solid platform we've already built.

But given the confidence, Tim, I'm -- perhaps you could pick up and expand on that and also talk a little bit about the sales opportunity we see. And then Sally will pick on the enabling function costs, and maybe Rod can pick up on the Global Online Learning question. Thank you.

So I think the size and the shape of our sales force is a good current fit right now. Of course, we could evolve that over time, as needed. The reason I think we can be effective with a smaller general sales force amid future growth is because they'll be drawing on, one, a much more efficient back-end system, the new enterprise systems you put in, single source of truth. Their one CRM application allows for greater productivity in the sales force. And on the front end, as we move our applications to a single application on the Pearson Learning Platform, that brings a ton of productivity for them and are factual interactions. So we think our assumptions about the size of the sales force are broadly in line to not only support the business now, but to drive future growth.

And then the great thing, of course is, we've made all those changes, all that disruption is behind us, painful last year. But it now completely and absolutely customer-centric focus, very, very sales-centric. That's a great position to be in to have all that disruption behind us.

Sally, do you want to pick up on the enabling function?

So I think you know that the operating leverage for Higher Education Courseware is about 70% to 75%. The difference between that and contribution are the costs for that business, so such as the sales team. So whilst those don't go away straight away, over time, you'd manage the business to make sure that you were cost competitive, part of the business.

In terms of the enabling function costs, we now have an enabling function base that is benchmarks well. But we are very focused on being cost competitive and making sure that, that cost base is suitable. There are some elements of that cost base that move with sales. So for example, where we've outsourced invoicing, for example, if invoicing levels fall, then that goes in line. If invoicing levels rise and with our growth themselves, that goes in the same direction. So over time, we will manage those costs in the way that's appropriate.

Okay. Sorry. Perhaps while we're on that because there's a couple of questions coming online, which build on the same theme. So to get adjusted operating profit margins for each of the new divisions, should we just allocate the enabling function cost based on revenue share? And will you report it like Slide 16 going forward?

So yes, we will report it like Slide 16 going forward.

In terms of the enabling function costs, the reason that we have those as central costs is because that's the way we manage the business. That's what means that we can keep cost effectiveness in those areas. We want to keep cost competitiveness going forward. I don't think it's right to allocate those sales -- those costs. We look at them centrally, and that's the way that I'd model them as well.

Okay. Thanks, Sally. And Rod, do you want to pick up on the Global Online Learning questions?

I think your question was about profitability. I mean we're continuing to invest, but we're putting our investment into the things that are going to make our programs and our proposition much more distinctive in the market. And that is into things like improving the learning experience, investing -- which improves retention, investing into more short courses, which will improve learner choice. These things will -- and also we're investing into sort of back-office enterprise that improves the -- digitizes the enrollment experience, removes friction in the enrollment experience. All of those things actually will, over time, improve profitability because they will improve our conversion rates. But this is -- these are investments that will pay back over time.

Okay. Thank you. We'll go next. Go ahead, Katherine. Wait for the microphone. Thank you.

It's Katherine Tait from Goldman. Three questions from me, please. The first one on Higher Ed Courseware on the sort of digital side. You're talking about modest growth going forward. Can you sort of break that down a little bit more for us in terms of what the key drivers of that are? Obviously, we've seen registrations kind of ticking down a little bit over the last couple of years. Does that come back? What are we -- what about pricing? Some of your peers have talked about further accelerated share gains. So how should we sort of -- what are the key drivers of that modest growth in digital part of Higher Ed?

Secondly, on OPM. Could you perhaps just talk a little bit about how that market is developing for you? Clearly, a number of new universities, partnership signed but also some political pressure on the sort of business model. So keen to understand sort of any perspective you can give on that and also I think continuing question marks around the sort of student acquisition cost that's being associated with that business model. I think some of your competitors are talking about CACs of well over $10,000 per student. So if you can give any sort of clarity on what that sort of looks like for you, that'd be very helpful.

And then finally, your commentary around scaling up in lifelong learning and, obviously, your acquisition of Lumerit. My understanding is that Lumerit doesn't actually have any corporate clients on the acquisition of it. So if you could just give us a bit of color on how you're thinking about recruiting those corporate clients.

Okay. Tim, do you want to pick up on the first point? I mean I think the headline message is, obviously, modest growth in digital short term, but picking up longer term as we launch all the new products and services. But Tim, do you want to pick up on that and give a bit more of a view of the sort of competitive landscape? How pricing is playing out? And also, another question that came through online is, how you see -- how the sort of analog revenue to digital revenue is playing out.

Sure. So I heard maybe 3 sets of interrelated questions about digital price and competitiveness, I think, were the themes of those. I might ask Ishantha to come in on the tail end to talk about some differentiation of products and why we think that will drive growth.

So the -- while digital revenue has grown modestly, we've been under volume pressure. And those volume pressures are really due to a handful of reasons. One is we've been over-indexed to developmental education. And so that's a -- developmental math specifically. So it's been a structural pressure. We've done some strategic retirement of some products. And last year, that was a reflection also of some of the share pressure that we felt. The share pressure that we felt was largely due to some of the disruption from implementing the ERP system and some supply chain, from changing our sales force, both of those were actually downpayments on future readiness, were the biggest impact on our share. We think those are now stabilized, and we expect to be more competitive and to regain that share steadily and increasingly over time. We'll do that by virtue of what we believe will be those platform-enabled products that will drive -- or the new applications that drive customer benefit and, therefore, competitive advantage. And so growth through share gain, the extension of the digital market and recapture from secondary, so those are the issues, which I'll ask -- and I'll ask Ishantha to talk a little bit about differentiation.

On pricing, since that was sort of one of the pieces as well as I'm sure it's a question that's coming in otherwise, the pricing -- first of all, the pricing issue of affordability is one of several that customers care about: affordability, experience and outcomes. Students might talk about that as pricing utility, but they're articulating the same issues or drivers around that. So bear in mind, it's multiple factors that drive the market, not just price alone. The prices that we communicated last year with our digital-first announcement -- as a reminder, roughly our average price for eText at $40, print rental at $60 and our platform-based products at $80. Those are average prices. Those platform prices are for products that combine content and assessment, we think, fit what the faculty and students need and a go-to-market model that we think also fits the way they consume them. So we think we're positioned properly from a pricing standpoint, and we think we're positioned in a leadership position from a platform standpoint with applications that will drive volume, which in turn will drive then to digital growth over time.

So you want to talk a bit more about how those experiences will be differentiated?

Yes, happy to. So on the product side, we are doing 3 distinct things that I believe are going to be really important to our growth. So the first is really think about what we have today, right? So these are platforms that have been around for 10-plus years, so products that are out to market right now. So one thing that we are doing that's really significant is changing the object. We are changing the artifact, right? So we had a -- we had a physical textbook. We moved to digital. That was eText. And now with the Smart Sparrow technology, we are completely reconceiving what that experience looks like. But we are not doing this in isolation. We are doing this, talking to others. We are talking to professors to understand what that new modality of learning looks like. And the professors we are talking to -- for example, we talk to one particular author who's completely reimagining what the textbook starts to look like when you have a technology such as Smart Sparrow. So that's one big thing, and there's no one out there that has that kind of technology. So I'm personally very appreciative of the support that we've got in the acquisition of Smart Sparrow, because that's going to be the thing that's going to enable that. So that's number one. That's sort of what we sell.

The second is how we sell is also important, because today, we sell through different channels, we sell through a sales force, et cetera. But as we look at that connect layer and building a direct relationship and building a next generation e-commerce website, where students can come and transact directly on that, that starts to build sort of a direct relationship where we are able to do interesting things there as well. So that's the second. That's the distribution channel.

And then the third is now that the sale has happened, the product has been sort of consummated by the student, we have the ability now to upsell. So imagine you're done with the course, now we have additional channel where students can start to build a digital library of their sort of material that they had as -- so those are the 3 different methods in which we plan to expand the market.

Thanks, Ishantha. And Katherine, so to transition to Rod, just to reinforce the point that Rod made, $40 for an eText, $80 for a digital platform product, we are achieving those prices in the market. Where the pricing pressure was coming last year was in the unbundling of the digital platform with the print product, and that's a transitional issue as you go from analog to digital. But as those bundle products decline very sharply, that obviously doesn't exist in the $80 platform, which gives them all the benefit of the former package particularly because how much we're improving the experience of the eText. Because actually, for the first time that eText, rather than being a flat PDF version of the physical textbook, has so much more utility and value in it. We think that's a very, very compelling price proposition.

So Rod, do you want to pick up on the -- both on the OPM issue and the opportunity in lifelong learning?

Yes. So I think you -- the question was about growing sort of -- growing activity, more programs coming into the market, and also you asked a question about public concern -- or regulatory concern over what's happening in the market. I think, actually, there's a connection because -- yes, of course, because this is -- the demand for online learning continues to grow. Of course, there's more provision in the market. You could even say there's a proliferation of new programs from a number of different providers coming into the market. That makes it all the more important that we are clear on our competitive advantage and what we can bring to our partners, which essentially is the power of Pearson through all of the power of the learning platform, the courseware, the resources, the learning experience that we can provide means that we provide better outcomes. And by providing better outcomes, we're also ensuring that we continue to protect the reputation of what we do, not just through recruiting with integrity but the reputation of what we do, that it actually does serve the interest of learners and lifelong as well and which is why we're also investing into short courses focused on the digital technical skills that young people need if they're going to progress into meaningful employment. By doing those things, we don't just sort of make sure we're competitive, we also protect the reputation of what we're doing. And I think we're feeling pretty confident about our ability to do that.

And then just to pick up on your Lumerit point, I must introduce, you're right to say that Lumerit has really been up to now a direct-to-individual learner business. We got to know each other because as we acquired a new corporate client, Verizon, we realized that by working together, we could better deliver the needs of Verizon's employees. And so it's a great example of whereby a combination of Pearson and Lumerit, we're able to do something together, enter the corporate learning market that neither of us could've done as easily on our own. So I think that explains what's happened there. Okay.

A question there. Matthew?

This is Matthew Walker from Crédit Suisse. A few questions, please. The first is for you and Coram. You've outlined a sort of rather rosy future, digital future. Why not stick around and do the victory lap in a couple of years' time?

Second question is McGraw-Hill, Cengage. Sounds like they're having more difficulties than expected. Is a merger -- if it is allowed, is that good for you long term? Because having 2 players basically allows pricing to rise. Or is it negative because they'll be more competitive? And are you contemplating buying some of their courses, which they might have to dispose?

And then final question is for Sally on the enabling functions, the GBP 449 million. Can you just give us some concrete guidance on what that GBP 449 million is going to look like for -- well, certainly for '20, if possible for '21? Because that's quite a difficult number to forecast.

Okay. Sally, do you want to pick up on the third one first? And then I'll come back and do the 2?

Yes. So the GBP 449 million includes enterprise technology, other enabling function costs like finance and HR. I think the 2 things to take into account are the transformation program we've got -- been going on, that GBP 60 million worth of incremental savings that we've got in this year. That's not all in enabling functions, but a large part of it is and then a small level of inflation. So you should see savings in that line in 2020. And then as I said, it's going to be key for us to remain cost competitive. We've built a really good foundation now in terms of systems and processes to make sure that, that is the case. And therefore, we'll be focusing on those costs going into the future to make sure that that's the case.

And then on your -- I mean on the -- you'll forgive me for not wanting to comment. We're going to completely focus on what we're doing and not sort of worry about other people are up to. Actually, it's the one thing I would say I'm thrilled that all the hard stuff that we had to do, all the restructuring, all the consolidation to get ourselves to a generalist sales force, to get to this point where we're completely focused on product development, how we can serve the learner better, we've got all that disruption behind us, that's a great position to be in.

And on your first question, I mean, I've been with this company for 22 years. It's my eighth year as CEO. Albert made it sound simple, all that hard graph that's been done, but I think Sidney signaled it as well. We've been through a very, very significant period of really hard, difficult consolidation and change. And as I think you've heard from this team, it's now a very, very different phase of development. And in my view, I think, a sort of new leader with a fresh perspective to take that on over the next 5 years or so is the right thing for the company. And I'm more confident than ever that it will be obvious in 2 or 3 years just how important that work was and how much growth there is to come, but obviously, still a lot to do. Okay?

Next question? Question from Tom Singlehurst.

It's Tom here from Citi. I had a handful of questions. Adam started with a hypothetical. I've got another hypothetical, which is given the volatility we've seen, what happens if print doesn't decline as much as you think? I mean obviously, there'd be an upgrade for consensus. But at the same time, you'd have still this potentially legacy revenue that's going to 0. That would still be there. So can you just talk sort of conceptually about how linear we expect that decline to be? Why it continues at the rate it does? And how -- whether it'd be better just to start withdrawing products just to take it out so you avoid that chance of also providing full storms, which has caught us out in the past? That was the first question.

The second question was maybe for Sidney on a new CEO. And just -- I mean you mentioned that a new CEO would have to have some compassion for the existing strategy. I was just trying to get a sense of how much scope there would be for someone coming in to think the unthinkable. And specifically on that point, with PRH, you did a really good job of merging it with a third-party, to get synergies with no incremental invested capital and just diminished your exposure via that route. Why don't you do that with Courseware? Or why is that not on the table at all?

And then final question, cost saves or the -- so the cost savings that are reversing. Are they coming back into the North American Courseware line? So is the -- on a like-for-like basis, should that sort of gross contribution from North America Courseware be lower because it's benefiting from temporary cost savings?

Sally, do you want to pick up on that last question first? And then I'll perhaps answer the second -- the other 2 and then maybe ask Sidney to join in.

Sure. So the savings that we've got from our transformation program don't reverse. They're very much part of our business going forward, and as I said, we will build from that. Now we have the systems and processes in place to make sure that we're cost competitive. We had a very small amount of kind of variable cost that we looked at, at the end of last year, but it's a relatively immaterial amount for this year.

And the only thing I would add to that is, as Sally mentioned, there is an item on the '19 to '20 bridge, other operating factors, that is the incentive going back in, plus those modest cost saves.

(inaudible) enabling line or is it going...

So we pay bonuses across the business. So there's an element in both the businesses that are shown as contribution. So for example, the bonuses across the sales teams in those businesses, but also there's bonuses that go into the enabling functions.

So then just before Sidney comes on, just on your first point around the -- what's the risk that print doesn't decline. Perhaps that's the first time I've been asked that question. But I think the point -- I mean I think the sort of the direction of travel is clear. We've gone from 21 million units to 7 million in '16, and then we went 6.5 million, 6 million and then we saw a sudden drop. So I think the one thing we could say is where this is ending up. What has, frankly, made this difficult from quarter-to-quarter and year for year is it -- to your point, it doesn't go in a straight line. And to the point that Bob made earlier, we have to meet our customers where they are on the analog to digital transition. So for as long as people still want printed textbooks, whether to own or to rent, we will provide them. But the overall direction of travel is clear, and I'll let the Chairman answer the question about the future because he will be here beyond me. The only point I would make was I don't think we've been through so much hard work and so much pain not to now want to capture 100% of the opportunity that we see as we finally reach the bottom of the valley in analog and see the growth in digital, that as, you can see, isn't just going to help us in Higher Ed Courseware, but brings great opportunities to other parts of the company as well.

But I should let Sidney answer that.

This is a very purpose and mission-driven company. So it's very important as we look for a new leader to ensure that this person adheres to the strategic direction and the vision of becoming the leading digital learning company in a world of lifelong learning. Now how you get to that vision, there are many ways, and so clearly, the tactics will vary. The new leader will bring his or her own personality and so forth, and strategies are also meant to evolve as the environment changes. So nothing is stuck, but the strategic direction is clear.

Thank you. Other -- are there any other questions? No? I -- sorry, there's a question right at the very back there. And I think -- I'll say this is our final question. Sorry, I didn't see you there.

No worries. So 2 questions on my side. Just firstly, much of the investment at Pearson has been in North America Higher Education Courseware and Online Program Management. Are there areas where you could accelerate investment at the rest of the group and where you think you have a good chance of driving accelerated revenue growth?

And secondly, in North America Higher Education Services. Organic growth of 4% looks a little low. Can you give us a sense of the drag from Learning Studio within this number? And are there any other one-off effects that have impacted growth here? And is the underlying market still growing 8% to 10%?

Okay. Sally, do you want to pick up -- or Coram, pick up on the specific of what happened to the -- that services line?

And then I think we are actually investing not just in higher -- in the Courseware business, but in Global Online Learning, but also in Assessment and International. So I think I'll ask Bob and Gio to share a couple of the things that they're most excited about in a minute as well. But just -- somebody, first of all, want to pick up on the...

Yes. I'll pick that one up. I think I mentioned in my script, we saw Online Program Management, which was up 10%. The drag between the 10% and the 4% that you see in the back of the book is all about learning studio, and the most important aspect of this is that this is the last year where Learning Studio will be a drag. So that's quantified it, and it's given you a sense that it's come to an end.

Okay. And then, Bob, do you want to share? I mean because we have been -- obviously, been investing in Global Assessment as well as in International. So do you just want to share some of the things that you're excited about? And then Gio, do the same.

Sure. As I mentioned in my few minutes talk a few minutes ago, the move toward a number of type of different assessments for employability, where your market is all of a sudden becomes thousands of companies instead of 50 states. And the other thing is around the ability to look at different technologies that we've invested in to reduce our costs at which we can pass on some of that savings to our customers. So John and Coram and Sally have been giving me my very fair share of the investment dollars, and I'll continue to ask some more every year.

Thank you, Bob.

Yes. So the picture in International markets is actually pretty exciting. When you look at the sum of everything, there's obviously a mix -- mixed bag of things. But there is certain parts of the world, like China, that have been growing double digits for us for the past few years; India as well, high single digits; Australia. And there is particular products. Look at the PTE, Test of English, as you've heard, they grew 17% this year. And we're just at the beginning of what we can do. We can replicate what we did in Australia, again, going from 0% to 60% market share in a few years as we gain recognition. We just want it in the U.K. We're getting it -- we're hoping to getting it soon in Canada and China, the potential can be enormous.

So the -- what I think we really have built is a very powerful machine, where we have local knowledge, we have local sales network and we understand these markets. We have local people in each of them. But we have global products. We have global capability like BTECs. We're not going to replicate everything. We have this very nice sales channels operated by people who really understand these markets. I think we can go very, very far now, powered now obviously, as Ishantha said, by the Pearson Learning Platform. Thank you.

Thanks, Gio. That's a great (inaudible) to end. So thank you for that question. I hope you'll stay with us to have a look and then play around with some of the exciting new digital products that we've got. Jo and Anjali are obviously here with us and happy to field and take questions through the course of the rest of the day.

And thank you for your ongoing interest in the company, and we look forward to seeing you all again soon. Thank you.