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Financial Highlights

  2006   2005  
  £m $m £m $m Headline
growth %		 Underlying
growth %
Business performance            
Sales 4,423 8,669 4,096 8,028 8 4
Adjusted operating profit 592 1,160 506 992 17 15
Adjusted profit before tax 502 984 422 827 19 –
Adjusted earnings per share 40.2p 78.8¢ 34.1p 66.8¢ 18 –
Operating cash flow 575 1,127 570 1,117 1 –
Free cash flow 433 849 431 845 – –
Return on invested capital 8.0% – 6.7% – 1.3% pts 0.6% pts
Net debt 1,059 2,076 996 1,952 (6) –
 
Statutory results            
Sales 4,137 8,109 3,808 7,464 9 –
Operating profit 540 1,058 516 1,011 5 –
Profit before tax 466 913 446 874 4 –
Basic earnings per share 55.9p 109.6¢ 78.2p 153.3¢ (29) –
Basic earnings per share – continuing 54.1p 106.0¢ 38.9p 76.2¢ 39 –
Cash generated from operations 621 1,217 653 1,280 (5) –
Dividend per share 29.3p 57.4¢ 27.0p 52.9¢ 9 –
Throughout this review we refer to business performance measures for total operations (including Pearson Government Solutions) and growth rates on an underlying basis (i.e. excluding currency movements and portfolio changes) unless otherwise stated. The business performance measures are non-GAAP measures and reconciliations to the equivalent statutory heading under IFRS are included in notes to the accounts 2, 7, 9 and 31 of the Governance and Financial Statements 2006. The sales and profit measures within business performance include the results of Pearson Government Solutions for both years. Pearson Government Solutions is treated as a discontinued operation within statutory results. Additionally, profit measures within business performance are presented on an adjusted basis to exclude: i) other gains and losses arising in connection with the sale of subsidiaries, associates and other financial assets; ii) amortisation of acquired intangible assets; iii) short-term fluctuations in the market value of financial instruments (under IAS 39) and other currency movements (under IAS 21); iv) tax benefits on the recognition of tax losses.

Sales: Total £4,423m $8,669m


North America: 65%/£2,899m/$5,682m; RoW: 3%/£120m/$235m; Europe: 25%/£1,106m/$2,168m; Asia: 7%/£298m/$584m


Adjusted operating profit: Total £592m $1,160m


School: 31%/£184m/$361m; Higher Education: 27%/£161m/$315m; Penguin: 11%/£66m/$129m; Professional: 10%/£60m/$118m; FT Group: 21%/£121m/$237m North America: 82%/£482m/$945m; RoW: 3%/£20m/$39m; Europe: 10%/£59m/$115m; Asia: 5%/£31m/$61m

Throughout this report (unless otherwise stated):

  • 1. Growth rates are on an underlying basis, excluding the impact of currency movements and portfolio changes. In 2006, currency movements reduced sales on a total business basis (including Government Solutions) by £48m and profits by £7m, while portfolio changes increased sales by £197m and profits by £17m.
  • 2. The business performance measures, which Pearson uses alongside other measures to track performance, are non-GAAP measures for both US and UK reporting. Reconciliations of operating profit, adjusted earnings per share and operating free cash flow to the equivalent statutory heading under IFRS are included in notes 2, 7, 9 and 31 of the Governance and Financial Statements 2006.
  • 3. Dollar comparative figures have been translated at the year end rate of $1.96: £1 sterling for illustrative purposes only.

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