Pearson PLC (PSO) 2021 Q4 法說會逐字稿

And with that, we'll be very happy to take any of your questions, both in the room, and for those of you who are watching us online, please post your questions in the chat function, and Jo will act as the moderator and translate those to us. If you do have a question in the room, please raise your hand and wait for a microphone so that the people online can hear your question. Okay. So if we may, yes, I have to pull this back a bit, hold on 1 second, sorry. Here we go. I hope that's good. Thank you, though, excellent.

Okay. If we -- these people probably have the microphones. That's what I'm guessing. I'd also like to say that our Chairman, Sidney Taurel, is here with us as well.

We'll take the first question from Nick Dempsey.

I've got 3 questions, please. So first one, I'm assuming that your forecast of more than doubling Workforce Skills revenues by '25 is all organic. And if so, I'm kind of backing out 20% to 25% organic growth for the 3 years beyond '22. So inside that, are you assuming any reduction in the BTEC business in the U.K. as T levels come on stream? Or do you have a more optimistic assumption for that slice of the revenues?

Second question, can you give us a sense of the scale of the stranded costs that you mentioned will be left behind once you've sold the businesses under strategic review?

And the third question, in Higher Ed, Cengage sticks their version of MyLabs and Mastering into Cengage Unlimited. Do you think that you'll have to do that eventually to kind of match the product? And will that represent another leg of revenue reduction per student as you get a kind of bundling effect there?

If you want, I can -- I'll start with the last question and then hand over to Sally for the first 2 questions. I think the way that certainly we look at our Higher Education business and why we started in the Higher Education business with Pearson+ is we have a defined cohort of users of Pearson product today, about 10 million students. And they are a very low-cost and efficient consumer acquisition tool. So if you think of the cost of acquisition for that 2.75 million students, the majority of whom actually came through Mastering and MyLabs, into the Pearson+ ecosystem, that is a very, very cost-effective way of generating scale within that community. Now as we add channels and other functionality to Pearson+ this year and in the coming years, we create -- this is always what I said at the end of last year, why that registered user number is very, very important. I hope now you get -- you kind of get a sense that there are really 3 phases in the evolution of Pearson+ growth. Today, for those students who are using a Pearson textbook or MLM, later this year -- actually starting now, any student in the U.S. and then any student globally, and with the increased functionality that I hinted at and the opportunity I hinted at, at the end of my presentation, we can expand that to anyone who kind of wants to learn anything and really utilize the leverage, the assets that we have. So we will build a seamless and have -- are building a seamless integration between Mastering and MyLabs into Pearson+. The cost of that to a student and to your -- the financial aspect of your question, we do not see a need for us to reduce that. We see you enter through the Mastering and MyLabs funnel. And now rather than go get an eText or get a physical book, you got sent into the world of Pearson+. And when you're there in the future, you're able to discover a whole host of other features within higher education and beyond as we expand the product. Sally, would you like to pick up?

I'd love to. So on stranded costs, I'll update guidance at the point that we've got anything to say around those businesses at whatever point in the year it is. And I'm sure you understand that presuming it's a normal disposal, there'll be TSAs in place for a while because the other side will need those services. And that will give us some time to work through how we eliminate any duplicated costs. We're talking about a cost of sort of GBP 10 million to GBP 15 million. And then on Workforce, I'll give you the sort of short financial answer and then I'll pass over to Mike to give you a little bit more flavor. The 2022, I've tried to break it down for you so that you can see the kind of underlying organic growth of the existing business. And then I've given you growth rates for the 2 acquisitions we've made. Then from '22 to '25, of course, they will be in the base of organic going forward. Mike, do you want to add some flavor?

I would just say on the effect of the L3 policy review on BTEC revenue, of course, that's a factor. But we have a wide portfolio of services. We're also a T-level provider. So we've got enough optionality in the portfolio to cover changes in consumer preference. So as we've guided you, we expect to see that part of the business continue to grow in the U.K. and internationally.

Where next, Jo?

Omar?

It's Omar Sheikh from Morgan Stanley. I've got, I suppose, 3 questions. First one for Andy, it's a bit of 2-parter. Sticking with Workforce, if you look at your target of '25, you're talking about doubling the size of the business with double-digit margins. But really, you're talking about increasing operating profit by about GBP 30 million to GBP 40 million. So is that really ambitious enough in the context of the opportunity that you talked about in the $100 billion market, for example? So that's the first question. And related to that, if you just take a step back and look at the strategy over the last year, you're 1 year into your transformation plan. Do you think you're going fast enough? And how do you sort of weigh the organic versus inorganic opportunities, particularly in the context of the very strong balance sheet that you still have?

And then finally, maybe for Sally on Higher Ed, I'm going to maybe try and pin you down on the revenue decline this year. I mean, it is quite a wide range. I mean, you're saying decline better than last year. Let's say, we're talking about somewhere between minus 1 and minus 4. Can you give us a sense of where you think it might land, bottom end or top end of that range?

Great. Thanks, Omar. So for your first part of your question on the opportunity for Workforce Skills, I think there's a phrase about underpromising and overdeliver comes to mind. So we have spent a lot of time in all seriousness and Mike and the team. And actually, it's a cross-company effort. The Workforce Skills part of the business, the division we set up is part of a longer -- and I think you've got a sense of that across the company. We've been doing business with enterprise for a long, long time, whether it's in PTE or Pearson VUE in terms of the credentialing. So we have a lot of experience in this area and a lot of contacts, as Mike was referring to, over 2,000 corporate clients today. We have worked very deliberately on the strategy that Mike outlined for you. I fully expect that we may be coming back to you in due course as we come to market and maybe realizing some potential upside because it is such a large market, and we believe that we have a unique proposition. We didn't want to follow, we wanted to innovate. And I believe we've really truly created something that is uniquely Pearson, that really plays to our strengths. And we have seen really, really is being welcomed by corporates around the world at scale. So as we get more information, as we get more data that comes in, as we further integrate the Faethm and the Credly acquisitions into the Workforce Skills division and more broadly actually into the company, then we're going to get a better sense of what we really truly believe that opportunity is. But as mentioned, it is a huge market. As we're doing all of this and whether -- how we use our balance sheet and as it results, I guess, 2 parts in terms of innovation within the company and our need to acquire new skills through acquisition. I think when I started -- and actually when I first joined the Board, thanks to Sidney, what really struck me was the power of the assets that this company has today. And really, what we've been trying to do over the last 12 months is paint a new picture and understand which pieces of the jigsaw go into this new picture, and frankly, which pieces are missing. And we are very targeted about bringing in the right talent and the right skills into the company. The human capital aspect of our acquisitions is very, very important to me and to us as a company, in addition to the technology that we bring in. So we're being very deliberate around how we use our balance sheet and how we look at acquisition targets and then how we can integrate them into the company.

And more broadly, one of the things that maybe I hope you get a sense of today is the innovation culture that we are creating within the whole organization. I came back from the holidays, Christmas, and we meet as a group, by the way, and my other colleagues of the executive team are here in the front row, every Monday for 2 hours. Because I think it's really important that we all share what we're doing and we're all aligned around what needs to be done today and also in the future. And I came back from the first meeting, I said, "Right. We're going to put a woman on the moon." That was -- yes. And I said that because I was really always been struck by, when President Kennedy said that in the '60s, how it galvanized an entire nation and really was typified, I guess, with the example of when President Kennedy was visiting NASA in Houston and he's talking to a janitor who's sweeping the floor who turns around to the President, who asked, what are you doing? He says "Mr. President, I'm helping put a man on the moon." And we're really getting a sense within the company of wherever you are, whatever you do, over 20,000 employees of this company are all contributing to the success, not just of their own business but to other businesses. And that, I think, is very, very powerful in creating an innovative and accepting culture to do that. I bought all of us Oculus headsets. And I do these monthly Ask Andy videos where I communicate out to all of the employees. And one of the employees saw that I had an Oculus headset on my desk behind me. They formed a tiger team. They weren't asked to do this, and send me an e-mail 2 days ago they've created an Internet. And it's members of -- these guys and others, employees from around the world who just went, "I wonder what it would look like if we went into the Metaverse. And then they send me an e-mail. And when -- so Jody, if you're watching this and the team, because I haven't had time to reply to them, thank you. I wrote it. But there is -- that's the type of innovative culture that we are trying to engender within the company. Sorry, that was a very, very long answer. I didn't mean to go off. Can't remember what the other question was. I know, I know, yes. Anywhere between 1 and 4.

Yes, you're right. I'm not going to be specific about Higher Ed on a 1-year basis. But what I am going to emphasize is there's going to be growth out to 2025. I think we've given you the moving parts around enrollments, market share, secondary recapture, that course enrollment piece. And if you want to be specific, I'll let you draw your own judgment anyway. Anything you want to add?

No, I think you've got it.

We're going to -- can go to Katherine.

It's Katherine Tait from Goldman Sachs. A couple of questions from me. Firstly, you laid out, as you did with Workforce, the great opportunity there is in Assessment & Qualifications and also in Virtual Learning. So a similar question, really, why is your sort of growth outlook as sort of conservative or maybe you wouldn't describe it as conservative as it is? Why can't Assessment grow faster than that sort of low single digit, particularly VUE and Clinical? I understand the other stuff perhaps being slightly lower growth. But why can't we see faster growth there? And similar for OPM, I think you talked about a 14% growth -- market growth levels. So again, why are we talking about only mid-single digit in that market?

Second question, on Workforce Skills. Curious, the contracts that you have won recently with corporates. I'd like to understand like how are you winning those. Like what is it? Are you displacing other competitors? Is it a completely new product that these corporates are bringing in, in addition to other services they have? Are they displacing in-house solutions? Just keen to understand that a little bit better.

And then finally, on the buyback. If you -- or as and when you are successful in selling the sort of businesses up for sale, could we anticipate further cash returns? Or is that already baked into the GBP 350 million?

Thank you very much. Have you met Bob and Art, to your first question, and that earlier response about underpromise and overdeliver? No. In all seriousness, I don't know. Art?

Yes. Yes. Not a bad move to plagiarize the boss in the first session like this, so underpromise and overdeliver is absolutely a good mantra for all of us. We feel great about the Assessment & Qualification business. We're very proud of the track record that we've shown in delivering that steady growth. And we're planning on continuing the formula that has delivered that, the breadth of the portfolio, the coverage of the broad range of professions, things like IT have certainly pulled things upward. Other areas like traditional students admissions maybe reacted specific things like the COVID disruption to traditional admission testing. So that whole portfolio effect is what contributes to that low to mid-single-digit growth. We feel quite good about it when we add in the investments that we'll be making in geographic expansion and continuing to broaden the solution set. We're quite happy with being able to stand up here and say that. And if we do, in fact, overdeliver, we'll be happier still.

Perfect. Mike, do you want to touch on the...

I'm going to follow Art's example standing actually. I could talk to you about this for hours and I'm not going to because we have other things we need to talk about. But just a couple of points about this market that I think are really important to keep in mind. The first one is it is highly fragmented at the moment, and it's changing very, very rapidly. That's creating a lot of friction and churn for companies. It also means that no company yet has really, in this new space, achieving single-digit market share. So there's a lot of demand and expectation from customers, employers for better services and a lot of opportunity for us. So to your specific question, the services that we are winning these contracts for are new in the market. So the new services, for example, that Faethm provide, the new services that Credly provide, these are innovations in the market today, and they take us into a much more effective high-value future state in terms of outcomes for customers and returns for Pearson. What the opportunity for us now, having landed so many of these contracts, is to expand the revenue opportunity that we have there by integrating our products and services together and filling out some of the gaps that I mentioned when I spoke. Thanks.

Sally?

I'm not going to stand up because I've got a suspicion I'm going to lose my mic, if I do. So in terms of the application of our capital allocation policy, I've looked out and I have incorporated an assumption around what happens around the international courseware local publishing businesses. The Board will always apply our capital allocation policy. Our priority is in investing in the business and driving future growth. But at any point in time, if we see the opportunity to return -- make returns to shareholders, we absolutely will. And we've demonstrated that we have now.

Can I take the OPM, please?

Yes. Sorry, Tom.

Yes. So I mean, I think, look, the simple answer is Rome wasn't built in a day. So we started off with a major reset of that business. We're bringing in a new leadership team. We're putting the foundations in place from a marketing enrollment perspective in terms of getting the funnel right. And then we need to get one with the new business development pipeline. But as you appreciate, when you're ramping up these new courses, they take time to ramp up as an investment cost required. We're doing that. And we want to be really clear. We've got the right partners where we can scale with. So that doesn't mean you're going to take 1 university online with 3 programs. We're talking about taking university online with the right number of programs, so you can grow scale behind the brand, leverage the brand, the university's brand to grow in that space. Because we recognize it's a competitive market. So we're being very choiceful about where and how we grow. And so we're not starting off by saying, well, on day 1, 14%, there we go. So gradual thoughtful step-up approach to growth.

The next question from Citi from Tom just in the back.

It's Tom here from Citi. So yes, 3 questions. Let's go for it. The first one, on the guidance, it's GBP 417 million, which I think you've taken from consensus. But looking at consensus, it also includes just shy of GBP 30 million for Workforce Skills. So I mean, by definition, there's an extra sort of GBP 30 million of investment. I'm just coming in somewhere. I'm interested whether that's fresh money being spent on developing Workforce Skills or whether that's a sort of run rate of losses for Faethm and Credly that will just be absorbed by the Workforce Skills division. That's I suppose the first question and maybe the small addendum there is if -- where is conservative -- where is consensus too low for 2022 as well?

And then the second question was on Assessment & Qualification, just around account wins and losses. Obviously, the DVSA contract is coming out. I was just wondering whether you have line of sight on any big contracts that are coming this year just so we can just keep an eye on them.

And then a final one for Tom on OPM. Do you feel like you're missing out not having any big destination consumer site like Edex or Coursera? Or is that something that Pearson+ is going to build -- sort of fill in over time?

The GBP 30 million for Workforce Skills increased investment, which we've -- which I indicated, that's a kind of mixture of both, Tom. So there are losses in Faethm and Credly, and we're also putting further, I guess, organic investment into Workforce as well. And that broadly comes from capital reallocation across the other divisions, as you know, I'm very cost conscious. So there's some places where we're making savings that enable us to invest in that future growth. So I think that probably answers the question. Anything you want to add?

Art, do you want to talk -- or Bob, do you want to talk about...

The DVSA contract was disaggregated. We didn't lose it all. In fact, we maintained about 1/3 of what it was. But 2/3 was a hit. And when you're going to grow in mid-single digits and you lost a big contract like that, that means there are obviously some new contracts in the works. And one of them has already been signed, but they've chosen not to go public with it yet because they don't want to stir up their -- make sure they have a nice exit from the current vendor. They think announcing that will create havoc. So that will be announced soon. And we expect several new fairly significant contracts to be signed in '22, which I really can't talk about because they're in the stages of finalization. But the pipeline for the VUE business is as strong as it's been in many years.

And also, as you recall, have that stability of the number of contracts, so a win and a loss anywhere over the overall breadth of scale of those contracts, it mitigates some of that. And Tom?

Yes. Look, I think from an OPM perspective, when we speak to university partners, they care about one thing: having high-quality pipeline of students that we can bring in for them. Obviously, to you and others can get access to that from their large base of [moot-based] clients. We feel good about what we're doing in terms of our marketing and enrollment funnel. We said there's a lot of opportunity there to optimize that to drive efficiency through it to get better conversion, to get the media mix right, to improve the work we're doing with our enrollment teams. So frankly, we're happy with what we've got, and we're going to make sure we deliver with that for our partners. And if we do that, we'll continue to build a reputation for consistent delivery for those partners, and we'll continue to grow relationships and build an excellent reputation in the marketplace. So that's the plan and we're sticking to it.

Susie, can you get to Adam?

It's Adam Berlin from UBS. I've also got 3 questions, 2 on the Higher Ed and 1 on Workforce Skills, if we can. So on Higher Ed, does it make sense to target a stable margin this year? You said you're going to have declining revenue. There's obviously salary inflation in the U.S.. And Andy has talked about this huge opportunity in Pearson+ and to invest in that platform. So how are you going to do it? This is kind of the question.

The second thing, following up on that, is you talked about the importance of MyLabs and Mastering, which is actually where most of the revenue in U.S. Higher Ed is today and how important that is as an acquisition funnel for Pearson+ in your strategy. How are you going to stop the decline in Mastering and MyLabs units? What's the plan? You don't talk about it. You always talk about inclusive access in Pearson+, which will focus on textbooks. But what are you doing to turn around that big problem that you have in that business?

And then the question I wanted to ask on Workforce Skills is, could you just explain how large the enterprise sales team is today? How big does it need to get? How hard is that going to be to recruit those people in the current labor market? And what's that like? Because that's the real challenge for lots of tech start-ups. And that would be really helpful.

Thank you. Do you want to start with the Higher Ed margins and then move on to...

Yes. And then I'll hand over to Tim to fill in as well. Yes, it does make sense to target those margins. We've got 2 things happening. We've got the revenue, please, but we've also got ongoing cost savings within the business, which we've seen in 2021. So it's a continuation of the things that we're doing there. As you move from print to digital, there's costs that you can naturally take out of the business. And Tim and his team are very expert at doing that. So I'm really confident about Higher Ed margin this year.

And I've just said, before Tim leads up, is about -- we take a holistic view about how we spend and how we allocate our expenses across the company and how we utilize any cost savings that we're bringing in so that we're prioritizing and triaging. It's really important that we put our money to work so that we are going to be driving growth. We are focused relentlessly on growth and delivering that. So we don't -- no longer look at just a segment by segment by segment. We are really thinking around, okay, this is in totality how much we spend on these different aspects on a day-to-day basis, and these are the areas. You've heard some areas in terms of Pearson+, Workforce, [Jio's] world. The real answer, all of these businesses are constantly innovating, constantly investing. But what we do, where we have opportunities to optimize our operations is then how -- where is the best way to allocate our funds. I think it's just very important you understand that's how we see that. But Tim, do you want...

I forgot to pick up on the Pearson+ funds. I'm sorry, Adam. I really will let you have a go, Tim. So we've got investment in Pearson+ in 2021. We've got it in 2022. It's just kind of not an incremental piece because we already had it.

We built that in. That was kind of more eloquently said. That's what I was trying to say. Go ahead, Tim.

Yes. I appreciate the question. So I mentioned 3 key drivers for the Higher Education business, the headline level, which is enhancing those core products, which I'll come back to, accelerating secondary recapture and scaling Pearson+ in a way that can expand our addressable market. All 3 of those are not aspirational, they're operational and they're well underway. So now double-clicking on the enhancement of the core products, MyLab and Mastering, to put a finer point on what we've done and what we're doing. The migration to cloud, as I mentioned, will essentially be complete this year. That's a very significant undertaking that will support reliability and stability. You can call those table stakes, but it's a heavy lift from an execution standpoint. So almost done this year.

Point two, about convergence. Again, that is bringing the MyLab and Mastering platforms to a single application, right, so common UX framework, common services that will, in turn, bring a consistent user experience and a much faster innovation cycle. So our ability to respond and remain or be -- gain competitive advantage is supported by that. That convergence will be completed over this period. It is underway. You have to step by step through one application at a time, you deconstruct the services. So it's been underway and it will be complete within this period.

And point three is we have a road map of features that are aimed at improving the learner experience. So improved adaptivity, improved interactivity, more integrated learning experience. All these things, we're very close contact with both faculty instructors and on the student side of things that will, again, both maintain our competitive position or improve it. So those are the reasons we believe that, that core product suite will remain competitive.

The other issue we've seen in the last couple of years is they were designed -- they're very anchored on lower-level undergraduate courses. When we introduced them 20 years ago, their faculty productivity tools for one, which means people use them in large-scale courses because they bring faculty productivity. Those have been under significant pressure over the last 2 years, where undergraduate moments are down 6%, right, in the U.S. So I think a lot of the volume pressure we're seeing is a reflection of the enrollment environment, which we don't control for but we don't expect to be as severe on the outlook. And while we can't predict it, we might see some improvements in there. So that's the reason why we believe that, that set of core franchises will remain an essential part and a reliable part of the portfolio and the revenues and profits.

And to be clear, we see no erosion in our share, to just your earlier points. Mike?

Great question. So 3 parts of the answer to this. So I mentioned we've integrated our smaller, faster-growing assets into the Workforce solutions business, so that's 3 of the existing Pearson business units plus the 2 acquisitions. So that's a new single integrated go-to-market structure that we're creating out of that. So today, less than 100 in terms of people working in the sales and marketing function. But we're structuring that and executing that in a different way than Pearson has in the past.

The second thing I would say just is partly it's about the acquisitions. So obviously, with Faethm and Credly, we've brought in some very talented people on the go-to-market side as well as on product development and data, particularly in the B2B SaaS business model space, which is going to be a key driver of revenue for us. Great unit economics, highly scalable, big part of what we're going to do.

But then the third part, and this is really interesting, is really the appeal and the offer and the story that Pearson has. So I think a lot -- I am recruiting at the moment. If any of you are interested, see me afterwards. But there's a lot of people from that B2B SaaS world very attracted to the purpose that Andy's bringing and that we've talked about today, but also the opportunity they see as sales professionals in our growth story. So it's a hugely competitive labor market out there for sure, but we've got a great offer that we're finding is very appealing to people.

(inaudible)

It's (inaudible) from Berenberg. Maybe just 2 questions on Pearson+. So in terms of the 2.75 million users, that's a December figure, if I'm not mistaken. So now that we're halfway through a new colored semester, how has it trended since? And any indication on the number of paid users within there? And maybe one on Credly as well. Could you just maybe talk about maybe compared to LinkedIn, you can sort of qualifications on LinkedIn-credited and everything. So just the difference in use cases between Credly and LinkedIn.

I'll take your -- the first question on Pearson+. As I mentioned in my remarks, we're going to focus on releasing both registered user numbers and subscriber numbers twice a year. We're going to do it at the end of the calendar year, i.e., we report at year-end and at interims. So the next update you should expect is at our interim presentation. I will say that there has been healthy growth, shall we say, since that number at the end of last year. But we will be getting into more details around both of those numbers and get into that regular cadence so that we're mirroring both the calendar and fiscal year, but also then the academic year, so that we're giving you accurate numbers at the end of each of those periods.

Mike, do you want to talk Credly?

Sure. I mean there are great synergies actually between Credly and LinkedIn. And many people will communicate their Credly credentials on LinkedIn. So that's one of the application areas. I think the difference to think about here is 2: LinkedIn, obviously is fundamentally a social platform for professional work. Think of Credly as the data layer for skills. That's the first difference. And the really key thing is around verified skills. So LinkedIn has got some great technology, working very hard to bring an element of verification to what we in the room say about ourselves on LinkedIn. You can query how accurate some of that data is. I'm sure we're all completely honest about what we've said, we've done in the past on LinkedIn. Credly is a verified skills deck space. So if you have a Credly badge, you can take that to the bank. It tells you as an individual that helps you also communicate what you can do. But as a consumer of those skills, as an employer, for your employees within your enterprise and you're thinking about how to make use of them or if you're seeking to recruit new employees, Credly gives you an accurate verified picture on skills. That's the big differentiator.

I'd like to add one quick statement to that. I was on the Credly Board. As you know, Pearson owned 20% of that. And one key differentiator is that Credly badge tells you what you can do, not just what you know. There's a lot of difference between what you know and what you can do, and the Credly badge verifies that you can actually do something, not just know about it.

Good point. Jo?

We have a couple from online. Sally, for you. Matt from Credit Suisse. How much M&A revenue is in the 2025 guidance? And are you looking for stable margins in '23 as well as '22?

So we've got both -- I think it's probably the answer to the question I had earlier. So in 2022, I've given you the breakdown both for the organic or the existing business in 2021. Then I've given you the growth rate for both Faethm and Credly. And then for '22 to '25 onwards, that's included -- it will be within the base. And then for 2023 margins, so the margin for 2021, 11.3%. Could that mean that the margin for 2022 rounds up to 12% rather than 11%? Absolutely, but broadly stable.

And another one from Sami from Exane. Mike, I think it's for you for the first one. What is the annual revenue base of Faethm and Credly from which you are guiding for 4% revenue growth in 2022?

Today, about GBP 25 million.

Perfect. And Tom, one for you. How much of the COVID cohort are you planning on retaining in full '22? I think that virtual schools.

It is indeed. So I mean, I think the first thing to say is we have grown 33,000 students over the last couple of years as a result of the COVID cohort and interest in virtual schools increasing. Two things are different this year. One is that in the '21, '22 school year, we had a lower proportion of new students. So we have a lower retention rate for new students versus returning students. So that mix has changed positively. And then secondly, in our new students in 2021, about 1/3 of them said their principal reason for coming was COVID. And in 2020, that was around 50%. So you've got a proportionately better mix in terms of new vessels returning, and you've got a proportionately fewer number of students in terms of COVID being the principal reason they were coming in terms of new students in the first place. So you put all of that together and then you can back out the difference between our guidance for 2022 and then '23 to '25 in terms of the difference that that's having on our year-over-year growth rates.

A question from Nick.

This is Nick from Artemis. Thanks very much for really interesting presentation, helping us build out an understanding of where you're taking this business. When we look at it, we can see the opportunity to go from being, let's say, a higher education publisher to a global learning media company. And you talked about the jigsaw pieces and then the picture that you're creating. To get there it's going to take an ability to create compelling content that people really want and value. And that's an element of magic, which is -- we've seen in businesses like Disney that is a bit harder for investors to imagine. So can you give us some explanation of where your confidence comes from, that you have that content heritage and culture and capability within Pearson that you believe you can execute and create that compelling product and service for your users around the world?

Great question, Nick, and thank you for raising it. I think one of my first presentations, I said intellectual property, IP, is really at the heart of this company. And as you would imagine, given where I've been in the past, I'm a strong believer in the power both of intellectual property and of brand. And whether that's in the past, our 3,500 authors in the Higher Education business who created intellectual property in the form of a textbook through to what we're doing in English Language Learning, the intellectual property that we create across all of our businesses, the 5,500 teachers that we have in our virtual schools business and the bespoke curriculum that is our intellectual property that we create in Connections Academy, across this entire range of businesses, intellectual property and the people who create it and the people who go search for that talent to create the next generation or next iteration of intellectual property is fundamental to our success across the business, whether that is through an acquisition such as Clutch Prep that Tim mentioned today, all the way through to, constantly, we have teams in each of the divisions whose sole job is essentially talent spotting, finding talent, attracting talent, nurturing talent and then delivering and creating compelling quality trusted product that learners want. That's how we have won in the past, and that's how we will win in the future. It's that marrying of intellectual property with the technology and the developments in technology that are enabling us to create direct relationships with consumers. I hope that helps.

Yes. It's about the magic of the content, as you say, and as Andy has explained. It's also about the magic of the algorithm in these global media companies. And we are connecting Pearson through the services that we are developing the acquisitions that we are making. So Faethm and Credly, as Andy mentioned, the capability they have as diagnoses, as recommenders of pathways of content has applicability across the whole of the portfolio. And what that will allow us to do as well as bringing compelling new content to market to meet the specific needs of our learners in a Pearson+ environment, for example, wherever they are in life, it also allows us to gain much greater value and scale for our existing content because we have got great content -- locked up is maybe too strong a word. But in use cases, which we can dramatically expand through that connectivity as well.

And just to build on Mike's point, we've got a new curriculum that we're building the Virtual Schools space that is aligned to the world economic framework, skills ontology. Guess what, Faethm is very closely aligned to that in terms of its own understanding of Workforce Skills. So that can all be aligned. We're building that content in a different way. So it's modular. It does not -- you don't think about it as a textbook, think about it as a database of content, which gives you a very clear learner feedback so you can understand performance from students in terms of how they're doing. You can then take (inaudible), which is an assessment qualification. You can then start thinking about how you provide a broader service to virtual school students because of the range of the things we can offer. And then you can think about the relationship with virtual schools and workforce, for example, as we're thinking about making those linkages up and down in terms of the lifelong learning value. So I think there's a great content. There's cross synergies. And then there's the aging stages of the organization and how we bring that together.

The amount of data that we are receiving, and we've referenced a bit around the importance we see and the opportunity we see with data across the company, how we manage, how we utilize and how we use data not only to inform us on how to improve our products and our content and our IP, but also to help the learners. One of the things that struck me recently was the use of -- our data is a predictive tool. If someone comes in to the beginning of their high school or their college life or university life, and we are able to follow their -- what they are studying over a 3- or 4-year period, we can help students answer that main question they have. So what the hell can I do with this degree? What jobs are available? And if we know and through Credly, we can also then say, "By the way, if you took this credential or this badging, that's going to help differentiate you in the market." And we can -- if, for example, we thought you were good for a marketing role, and there are enterprises who are looking for 100 marketing graduates, we have data on tens of thousands of potential recruits into that marketing world. So this is another way to think about Pearson VUE. I went into a High Holborn Pearson VUE Test Center a few weeks ago and there was a bunch of candidates taking a nursing exam. Now if you think about it, we know there's a bunch of individuals who want to become nurses before anyone else. So how we leverage those insights across the company and across a consistent data layer and a common identity, I think, is something that's very, very interesting.

Question from Simon from BNP. Andy, for you. Does the business have an indication of what good best case scenario looks like for growth and margins?

Does the...

Business have an indication of what good best scenario case would look like for revenue and margins?

Well, aside from the financial metrics that we have in place and the nonfinancial KPIs, we have a relentless focus and rigor and transparency around how we're operating. And we share when things are going well. We understand what are the levers that are generating that success. And if there were any challenges, we know then how to address them and become -- move with agility. And then you layer that into it. So it's almost like an intuitive management. That's why we meet together for 2 hours every Monday morning because you can get a certain amount of information from the numbers and a lot of those numbers are generated. We have the forecasting of -- accurate forecasting that feeds into various -- the models within Sally's team. Very, very important. But there is something about understanding at an early stage what's working or what not is working or what we need to change and what we need to improve. I'm not sure whether I'm getting at the essence of the question, per se, or if anyone wants to add. But that's how I interpret how we are managing the company as a whole above and beyond the pure numbers.

I'll just add to that maybe a bit more directly. We've laid out what we feel is a base case of what we expect from ourselves here. We would hope to improve on that. And Pearson+ should give us the vehicle to do so.

Yes

And I'll hand back to Andy, I think.

Okay. Well, thank you very much. If you're watching online. I appreciate the -- taking the time out of your day. And particularly for those of you who've made it into 80 Strand this morning, I greatly appreciate your interest in our company. We are all here. There will be product demonstrations for both Faethm. There are some folks here from Credly as well as the Pearson+ team. So you can -- I don't -- we're doing it in groups and in individuals. So for those of you who are interested in any of those elements, any other questions that you have that you haven't had the opportunity to raise now, we are all here and at your service.

So thank you very, very much. And I believe there may be refreshments for those of you here outside. Thank you.

Thank you.