Financial Highlights

	2005			2004		Headline Growth %	Underlying Growth %
	£M	$M		£M	$M
Business performance
Sales - continuing	4,096	7,045		3,696	6,357	11	9
Adjusted operating profit - continuing	509	875		400	688	27	22
Adjusted profit before tax	422	726		350	602	21	23
Adjusted earnings per share	34.1p	58.7¢		27.5p	47.3¢	24	24
Operating cash flow	570	980		418	719	36	-
Free cash flow	431	741		284	488	52	-
Return on invested capital	6.7%			6.2%		-	1.0% pts
Net Debt	996	1,713		1,221	2,100	18	-
Statutory results
Operating profit	536	922		404	695	33	-
Profit before tax	466	802		325	559	43	-
Basic earnings per share	78.2p	134.5¢		32.9p	56.6¢	138	-
Basic earnings per share - continuing	40.4p	69.5¢		30.8p	53.0¢	31	-
Cash flow from operations	875	1,505		705	1,213	24	-
Dividend per share	27.0p	46.4¢		25.4p	43.7¢	6	-

The profit measures within business performance above are presented on an adjusted basis to exclude: i) other net gains and losses arising in connection with the sale of subsidiaries, investments and associates; ii) amortisation of acquired intangible assets; and iii) short-term fluctuations in the market value of financial instruments (under IAS 39) and other currency movements (under IAS 21). Growth rates are on an underlying basis, excluding the impact of currency movements and portfolio changes. The underlying growth in the return on invested capital represents the constant currency growth.

^*Includes IDC.

Throughout this review (unless otherwise stated):

1. Growth rates are on an underlying basis, excluding the impact of currency movements and portfolio changes. In 2005, currency movements increased sales on a continuing business basis by £46m and profits by £12m, while portfolio changes increased sales by £29m and profits by £9m.

2. Profit measures are presented on an adjusted basis to exclude: i) other net gains and losses arising in connection with the sale of subsidiaries, investments and associates; ii) amortisation of acquired intangible assets; and iii) short-term fluctuations in the market value of financial instruments (under IAS 39) and other currency movements (under IAS 21).

3. The 'business performance' measures, which Pearson uses alongside other measures to track performance are non-GAAP measures for both US and UK reporting. Pearson uses these measures because we consider them to be most useful for tracking underlying business performance. 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, 9 and 29 of the governance and financial statements.

4. Dollar comparative figures have been translated at the year end rate of $1.72: £1 sterling for illustrative purposes only.

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