Trading Statement

Pearson PLC
16 December 2003



16 December 2003
For Immediate Release

Trading update

Pearson remains on track to make earnings progress again this year. We expect
our reported adjusted earnings per share to be within the range of current
market expectations, as the effect of the weaker dollar and lower profits in our
Professional division are partially offset by a lower tax rate. Though market
conditions remain tough for corporate advertising and technology-related
businesses, we continue to perform strongly in our markets and are benefiting
from further efficiency gains.

With two important weeks of trading still to go - especially for Higher
Education and Penguin - our expectations for 2003 are as follows:

Pearson Education Our School and Higher Education businesses will report good
underlying progress on revenues and profits, but our Professional division will
be significantly lower than last year and below current expectations due to the
TSA contract.

School We continue to expect underlying revenues in our School division to be a
little ahead of last year. Our basal publishing business has taken the leading
share of new US state adoptions and is growing ahead of the industry. This
strong competitive performance has offset weak trading conditions as state
budget pressures continue to affect school funding, especially for discretionary
purchases such as supplementary materials and curriculum software.

Higher Education Our Higher Education business is growing faster than the
industry for the fifth consecutive year, helped once again by strong publishing,
the integration of textbooks and technology, and custom publishing. We expect it
to increase underlying revenues in the 5-7% range.

Professional Results from our Professional division will reflect the absence of
the TSA contract and close-out costs associated with it. Excluding the TSA
contract, revenues in our Government Solutions business will show good growth as
we benefit from the major contracts with the US Departments of Health and of
Justice which began this year.

New contract wins We are announcing today a series of long-term contract wins
across our education businesses:

   • Our school testing business has won several multi-year state testing
    contracts in the second half worth more than $160 million. These contracts,
    which will be effective from 2005, take our total contract wins in
    educational testing this year to more than $300 million.


   • In Government Solutions, the US Department of Education has renewed and
    expanded our work on the Federal Student Aid programme, in a $160 million
    ten-year contract beginning in 2004.


   • In Professional Testing, we have won a nine-year contract to provide
    testing services to the US National Association of Securities Dealers. This
    follows our recent contract wins from the Graduate Management Admissions
    Council for its GMAT examination and the UK's Driving Standards Agency.


Financial Times Group We expect the FT Group to report profits slightly ahead of
last year, benefiting from another strong year at IDC. Advertising revenues
across our business newspapers continue to be erratic. At the Financial Times,
advertising has continued to decline year-on-year, despite modest growth in
September and good growth in the US. Certain advertising categories, including
recruitment, corporate results and transactions, and online are showing signs of
stabilisation. We expect the FT's total advertising revenues to be some 12%
lower in the second half and approximately 15% lower for the full year (after an
18% decline in the first half). We have reduced the FT's cost base by
approximately £15 million this year, around half of which has been reinvested in
the newspaper. Since 2000, the FT has reduced costs by approximately £100
million.

Penguin We expect Penguin to increase underlying revenues by 1-2%. A strong
frontlist performance, particularly in the US and Australia, has been partially
offset by tough conditions for backlist sales. Penguin's cash performance will
be affected by the concentration of its publishing schedule in the fourth
quarter, pushing collections into next year, and by investment in new authors
for 2004 and future years.

Cash The TSA continues to owe Pearson approximately $150 million relating to the
contract we successfully completed last year. If we receive payment before the
year end, we will deliver total free cash flow ahead of last year. We also
expect the average working capital / sales ratio to be slightly lower than last
year, excluding the TSA receivable.

Interest, exchange and tax rates Our interest charge for the second half of the
year will be similar to the first half. As Pearson generates approximately 70%
of revenues in the US, the weakening of the US dollar will affect our reported
results. Our full-year exchange rate will be approximately £1: $1.63 (compared
to £1:$1.51 in 2002), which reduces our reported adjusted earnings per share by
approximately two pence. We expect our effective tax rate to be at the low end
of our 33 - 35% guidance.

Outlook We are confident that we will make progress on earnings, cash and
returns next year, even at current exchange rates. At this early stage, the
outlook for our major businesses in 2004 is:

Pearson Education As a particularly slow adoption cycle combines with state
budget pressures, we expect the US School publishing industry to decline in the
mid-single digits ahead of a significant rebound from 2005 onwards. In 2004, as
in 2003, we expect the US Higher Education industry to fall below its average
growth rate of 5-7%, but we expect our Higher Education business to grow ahead
of the market, somewhere in the 4-6% range. We expect sales and profits in
Professional to be ahead of 2003, despite continued weakness in technology
publishing and approximately £10 million of start-up costs relating to our new
professional testing contracts.

FT Group Although the outlook for advertising remains uncertain, we expect a
significant profit improvement as our business newspapers benefit from
continuing cost reductions. We also expect further growth at IDC.

Penguin We expect Penguin to grow faster than the consumer publishing market,
with another strong publishing schedule and the launch of several new imprints
in the US.

Pearson will announce its preliminary results for the 12 months ending 31
December 2003 on 1 March 2004.

Ends

Note: All growth rates in this statement are stated on an underlying basis.
Underlying growth excludes the impact of acquisitions, disposals and currency
movements.

Further information:

Luke Swanson / Charlotte Elston + 44 (0) 20 7010 2310

Conference call details

Pearson will be holding two conference calls today with Marjorie Scardino, Chief
Executive, and Rona Fairhead, Chief Financial Officer, for analysts and
investors.


Europe

This call will take place at 09.30 GMT. To dial in from the UK, the telephone
number is 0800 626 606, passcode C490191. Participants from outside the UK
should call [phone], passcode C490191. To register, please dial in five
minutes before conference call starts.

US

This call will take place at 09.30 EST (14.30 GMT). To participate from the US,
please call toll free [phone], passcode 21255680. Participants from
outside the US should call [phone], passcode 21255680. To register,
please dial in five minutes before conference call starts.

Both calls will be audiocast live on www.pearson.com. They will also be
available on demand at www.pearson.com afterwards.


Forward-looking statements

Except for the historical information contained herein, the matters discussed in
this press release include forward-looking statements that involve risk and
uncertainties that could cause actual results to differ materially from those
predicted by such forward-looking statements. These risks and uncertainties
include international, national and local conditions, as well as competition.
They also include other risks detailed from time to time in the company's
publicly-filed documents, including the company's Annual Report on form 20-F for
the period ended December 31, 2002. The company undertakes no obligation to
publicly update any forward looking statement, whether as a result of new
information, future events or otherwise.



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