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UBS Media Conference 6 December 2001. Global. No. 1 in Science No. 1 in Medical. No 1 or 2 in all markets. US, UK, Europe Asia Pacific Latin America. US UK Commonwealth. No. 3 No. 1 No. 1. No. 1 No. 1. Magazines US, UK, Netherlands Exhibitions Global. Four Businesses.
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UBS Media Conference 6 December 2001
Global No. 1 in Science No. 1 in Medical No 1 or 2 in all markets US, UK, Europe Asia Pacific Latin America US UK Commonwealth No. 3 No. 1 No. 1 No. 1 No. 1 Magazines US, UK, Netherlands Exhibitions Global Four Businesses Scientific & Medical c$2.0bn Legal c$2.0bn Education c$1.5bn Business c$2.0bn Note: Proforma Revenues post Harcourt
Positive Fundamentals • Sustained long-term market demand & growth • Strong number 1 or 2 position globallyin each sector • Prestigious, leadership brands andpremium content • Targeted single-mindedly at professional users • Strong bias to stable, non-cyclicalrevenue streams • Strong cashflow underpinned bysubscription model
Reed Elsevier Vision • Indispensable partner of professional customers • Demonstrably superior information driven services • Global presence and leadership in four target sectors • High quality management and organisational effectiveness 2002: Above market revenue growth Double digit earnings growth
Upgrade management effectiveness Demonstrably superior products Upgrade sales & marketing Focus on four corebusinesses Build global capability Add acquisitions/ alliances Major cost savings Substantially increased investment Key Foundations of Growth Strategy
1999 revenues Pro forma revenues post Harcourt Science 20% Science 26% Business 28% Business 43% Legal 32% Education 20% Legal 26% Education 5% Reshaping Reed ElsevierMore Balanced Portfolio
1999 operating profit Pro forma operating profit post Harcourt Business 19% Business 31% Science 29% Science 38% Education 18% Education 5% Legal 35% Legal 25% Reshaping Reed ElsevierMore Balanced Portfolio
Reshaping Reed ElsevierAdvertising Revenues % Total RE Revenues 1999 Post Harcourt Business to Business 21% 13%(including recruitment) Legal 2% 2%(Martindale-Hubbell) Science 1% 1%(Healthcare) 24% 16%
Elsevier Science:Key Strategic Milestones • Successful introduction of leading online information service, ScienceDirect • Rationalisation of pricing policies • Significant expansion of sales force and upgrade in marketing • Continual development of functionality, customisation, ease of use • Acquisition of leading global medical publisher
Authorship and pre-publication tools ACADEMIC WORK BENCH Web search engine SCIRUS 55m science related pages ScienceDirect 1.4m articles Fully searchable database Library Management Tools:ENDEAVOR ScienceDirect:Superior Global Product Navigation 30m abstracts & indices Subject Portals Physics Econ. Chem. Bio Med Etc Archive 4m backfiles
Marketplace Impact:Positive Key Performance Indicators • Dramatic increase in usage • Increasing penetration of ScienceDirect • Subscriber attrition reduced • Major new contracts agreed
ScienceDirect:Increase in Usage Number of page views (millions) 25 20 15 10 5 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 99 99 99 99 99 99 00 00 00 00 00 00 01 01 01 01 01
ScienceDirect:Increasing Penetration % 80 70 60 50 40 30 20 10 0 Mar Aug Feb Aug Dec Aug Dec (target) 99 99 00 00 00 01 01
8.5 6.0 5.2 4.1 4.0 Elsevier Science:Reversal in Attrition % 10 8 6 4 2 0 1997 1998 1999 2000 2001 (target)
Marketplace Impact:Major New Contracts Canada Dutch Consortium China Bavaria Taiwan Nord Rhein Westphalia Vale (USA) Korea Brazil Australia
Health Sciences: Key Strategic Milestones • Global leading position with Harcourt acquisition • New management team and organisational structure • Major upgrade of publishing, sales and marketing • Refocus of publishing portfolio • Development of superior online capabilities
Science & Medical • Continued strong growth momentum • Driven by ScienceDirect electronic platform • All executional elements successfullyon track • Harcourt will further strengthen position
Legal:Key Strategic Milestones • Major investment to turn around historic underperformance • Dramatic upgrade in LexisNexis online service • Acquisitions and alliances to secure key content • Expansion of sales force and upgrade of marketing programme • Launch of online service in Europe and Asia • Acquisitions in Europe, Latin America andAsia Pacific
LexisNexis: Product Upgrade Programme TAX CCH/Tax Analysts LEGAL Expanded E-treatises Improved Linkages CITATOR Functionality Upgrade CASE SUMMARIES 300 700 Editors PUBLIC RECORDS Riskwise/Corp America Acquisitions WEB RELIABILITY Private Nodes EASE OF USE New lexis.com New WebSphere Platform NEWS & BUSINESS FT Profile/ Company Dossier
LexisNexis:Marketing & Sales Upgrade Programme CUSTOMER RESEARCH lexisnexis.com SALES FORCE EXPANSION 450-700 sales representatives LAW SCHOOL PREFERENCE Dedicated sales effort LEGAL PORTAL lexisone.com CUSTOMISATION eSolutions Plumtree ALLIANCES Siebel LawCommerce.com BRANDING Global LexisNexis Brand MONETISE INCREASED USAGE over 20% usage increase
Marketplace Impact:Positive Key Performance Indicators • Turnaround in revenue growth • Competitive product performance • Competitive preference in law schools • Powerful growth in % online usage • Major new contracts won
+5% +3% +2% +1% Marketplace Impact: Turnaround in LexisNexis Revenue Growth % 6 5 4 3 2 1 0 1998 1999 2000 2001 * first half
54 50 32 19 15 Marketplace Impact:Online Product Preference Confirmed LexisNexis Preference Overall in Law Schools (%) 60 50 40 30 20 10 0 Fall Fall Fall Fall Fall 1997 1998 1999 2000 2001
Marketplace Impact:Increase in Usage Number of Searches (millions) 10 9 8 7 6 5 4 3 Jan May Sep Jan May Sep Jan May Sep 99 99 99 00 00 00 01 01 01
Marketplace Impact:Major New Contracts • Preferred provider agreements closed with five of top US law firms • New contracts increased more than 25% in Small Law Firm market • Department wide contract signed with Immigration and Naturalisation service • Major new Nexis contracts with US government (US Navy, Internal Revenue Service), Sprint, Proctor & Gamble etc
Legal • Real evidence of turnaround for US LexisNexis • Fundamentals on product, sales and marketing positive • Confidence that growth momentum can be maintained • International business and global development on track
Business: Leadership Portfolio inPrint Magazines and Exhibitions
Business: Key Strategic Milestones • Refocus and rationalise portfolio • Focus on building share: product quality, sales and marketing • Aggressive cost savings programme • Coherent internet strategy to deliver profitable growth • Strengthen leadership position in global exhibitions
US • Decline in revenues in second half; costs cut aggressively UK • Revenue decline in second half; weakness in IT spread to other sectors Continental Europe • Slow down in second half; subscription and circulation holding up Global Exhibitions • Weakness in US autumn shows; Europe & Rest of World robust Conclusions • 2001: small overall decline in revenues and profit versus prior year Progressive Downturn in B2B
Business: Outperformance of Market • Portfolio quality and sector spread • Good geographic balance • Leadership positions in nearly all sectors • Investment led momentum in product development sales and marketing • Effective management of costs • Continued strong online growth
Cahners Variety +6% Interior Design +4% Broadcasting & Cable +10% Computer Weekly +16% Electronics Weekly +10% New Scientist + 7% RBI EBI Fem/De Week +15% Boerderij +2% Bouwwereld +25% Business:Market Share Gains Based on ad pages January - September 2001
90 55 20 Business:Total Online Revenue Growth $m 120 Including Acquisitions 100 Organic 80 60 40 20 0 1999 2000 2001 target
Business • Executing successfully remedial plan to meet economic downturn • Market share momentum through improved product/sales/marketing • Cost savings successfully delivered • Balancing online investment with size of opportunity • Impact of economic downturn manageable
Education: Key Strategic Milestones • Acquired most consistently successful US schools education publisher • Again, # 1 overall market share in 2001 adoptions • Strong management team in place • Focus on school classroom • Maintain momentum in K-12 basal and supplemental markets • Exploit leadership position in growing testing market • Build capacity in online teacher training and e-learning
Education: Outperformance of Market 1997 1998 1999 2000 2001 US Education Market* Growth % 13 12 2 13 7-8 Harcourt Education** Growth % 21 9 outperform 33 4 x Outperform Note: * US Education Market represent total K-12 textbook sales as reported by Association of American Publishers (AAP) for years 1997-2000/ ** Harcourt Education sales include elementary, secondary, and supplemental (Steck-Vaughn)
Education: Performance in 2001 Adoptions Elementary Secondary Reading/Literature # 3 #1 Language Arts # 1 # 1 Mathematics # 1 # 3 Social Studies # 1 # 3 Science # 1 # 1 Overall # 1 Overall # 1
Education:E-learning Programme • E-strategy:Major research programme to determine customer needs and future strategy • E-content:Technology programme accelerated by Riverdeep alliance • E-professional development:Acquisition of leading online provider: Classroom Connect • E-testing:Increased investment in classroom testing
2001 Trading Update • Good momentum on Science, Legal and Education maintained • Business to Business challenging 2nd Half Year, particularly US • outperformance vs. market; effective cost management • Harcourt slightly ahead of expectation, driven by Education • On track to deliver double digit earnings growth this year* * Earnings: Adjusted earnings per share excluding exceptional items and amortisation of goodwill and intangible assets
Conclusions • Strong business fundamentals and financial position • Reed Elsevier strategy proving effective • All four businesses showing strong organic growth versus market • Harcourt acquisition will accelerate progress further • On track to deliver 2002 goals of above-market revenue and double-digit profit growth