S&p Global Inc. · NYSE:SPGI
S&p Global — The McGraw-Hill Companies — Goldman Sachs Communacopia XVII Conference 2008
23 slides from S&p Global's conference presentation, Sep 18, 2008
Slide 1: Goldman Sachs Communacopia XVII Conference
Goldman Sachs Communacopia XVII Conference September 18, 2008 1 Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies Presented at the Goldman Sachs Communacopia XVII Conference September 18, 2008 2
Slide 2: Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995
“Safe Harbor” Statement Under The Private Securities Litigation Reform Act of 1995 This presentation includes certain forward-looking statements about the Company’s businesses, new products, sales, expenses, tax rates, cash flows, prepublication investments and operating and capital requirements. Su
Slide 3: Outlook for broader U.S. economy doesn't improve until 2Q 2009
Outlook for broader U.S. economy doesn’t improve until 2Q 2009 • Wyss’ current forecast: – Modest gross domestic product growth of 1.3% in 3Q 2008 followed by two quarters of decline – Economy will start to recover by 2Q 2009 and will be growing 3% in 4Q 2009 • State and local governments face more
Slide 4: Financial Services
Financial Services 7 Four key questions about prospects for Financial Services 1. How severe will the downturn be in the bond market? 2. How long will the downturn last? 3. What are our legal risks? 4. What are the regulatory risks? 8
Slide 5: Turbulence in credit markets has carried into third quarter of 2008
Turbulence in credit markets has carried into third quarter of 2008 120 U.S. RMBS 100 96.3 97.8 (in billions of US$) 80 86.3 86.1 75.3 70.9 60 47.5 40 34.5 20 5.1 5.1 2.2 2.6 2.7 2.6 1.1 1.4 0 Jan Feb Mar Apr May June July Aug 9 Source: Thomson Financial, Harrison Scott Publications, Standard & Poor
Slide 6: Turbulence in credit markets has carried into third quarter of 2008
Turbulence in credit markets has carried into third quarter of 2008 80 U.S. CDOs 69.0 60 (in billions of US$) 47.5 40 38.1 38.0 30.2 27.7 20 20.6 18.9 6.2 4.9 5.6 2.4 1.1 2.8 6.1 3.2 0 Jan Feb Mar Apr May June July Aug 11 Source: Thomson Financial, Harrison Scott Publications, Standard & Poor’s 2007
Slide 7: Turbulence in credit markets has carried into third quarter of 2008
Turbulence in credit markets has carried into third quarter of 2008 75 U.S. Public Finance 60.2 55.6 50 (in billions of US$) 52.8 44.1 44.7 44.6 43.6 41.7 36.4 38.3 34.0 33.5 33.7 33.8 25 22.2 22.3 0 Jan Feb Mar Apr May June July Aug 13 Source: Thomson Financial, Harrison Scott Publications, Standar
Slide 8: Enhancing capacity at Standard & Poor's
Enhancing capacity at Standard & Poor’s • S&P will emerge from current turmoil stronger and with enhanced capacity to serve its customers – Plays important part in improving relevant information in capital markets – Taking a series of actions to increase transparency of ratings analytics and the way
Slide 9: Measuring regulatory risk at Financial Services
Measuring regulatory risk at Financial Services • S&P committed to: – Transparency – Strengthening of the governance process – Helping to restore confidence in capital markets • Working with regulators and policymakers here and abroad – Recent S&P correspondence available at www.standardandpoors.com
Slide 10: Measuring regulatory risk at Financial Services
Measuring regulatory risk at Financial Services • S&P’s sent letter on Sept. 5 to SEC commenting on proposed rules to remove NRSRO reference from a series of rules and forms – S&P operates successfully outside U.S. without these rules – We believe S&P can continue to operate successfully in U.S. if
Slide 11: Measuring legal risk at Financial Services
Measuring legal risk at Financial Services • July: Won our first court decision related to subprime litigation when Court dismissed the Blomquist action – Judgment dismissing the action is now on appeal • State of Connecticut’s lawsuit alleges that artificially low municipal credit ratings by S&P an
Slide 12: Diversification: A key strategic initiative for S&P
Diversification: A key strategic initiative for S&P • Non-transaction revenue buffers S&P against decline in new issue volume – 53.8% of 2007 ratings revenue – Grew by 12.5% in 1H 2008 – Will continue to grow in 2H 2008 – Comes from annual fees for frequent issuer programs, surveillance, subscriptio
Slide 13: More growth from S&P index services
More growth from S&P index services • Creating alpha generating strategy indices across the globe for a growing number of sophisticated investors • 31 new exchange-traded funds based on S&P indices launched in first half – S&P/CITIC is leader in creating benchmarks for both equity and fixed income m
Slide 14: Guidance for Financial Services segment
Guidance for Financial Services segment • Cost containment a priority in areas of weakness • Continue to invest in promising areas that will drive growth • Eliminated 418 positions since end of last year; continue to look for opportunities to streamline organization • Legal, regulatory risk remain l
Slide 15: McGraw-Hill Education
Elementary-high school market performed as expected in July • Industry sales of K-12 basals – July: Up 5.8% from 2007 – After 7 months: Up 6.6% • Supplemental market soft, but total basal and supplemental is up – July: Up 5.0% from 2007 – After 7 months: Up 3.9% 29 State new adoption market still in
Slide 16: Emerging signs of softness in el-hi market
Emerging signs of softness in el-hi market • 1Q: Florida’s two largest district’s decided to implement K-5 reading over two years instead of buying in 2008 • 2Q: California’s largest district announced it would delay math until 2009 due to funding concerns • 3Q: Some adoptions are being postponed in
Slide 17: Emerging signs of softness in el-hi market
Emerging signs of softness in el-hi market • Cutbacks in residual orders may reflect funding problems that schools are experiencing – Sharp reduction in Reading First from $1 billion last year to less than $400 million this year – Lower tax revenues have forced states to budget tightly – Our analysi
Slide 18: Mixed outlook for testing
Mixed outlook for testing • 3Q is typically slow for testing, but there is some evidence of state budget problems – Custom contract revenue will be impacted by several major customers who are reducing scope of their contracts to reduce costs • Good news with Acuity, new formative assessment system –
Slide 19: Prospects for professional and international markets
Prospects for professional and international markets • Growth in digital products will be a key to outlook in professional markets – Revenue from digital subscription and digital licensing rights have increased significantly year-to-date • International markets: Still anticipating a good third quart
Slide 20: Information & Media: Outlook for Business-to-Business Group
Information & Media 39 Outlook for Business-to-Business Group • Group will show improvement this year despite weakness in print advertising • Revenue was up 5.7% for first half even though BusinessWeek’s advertising pages were off 15% – Platts: Global growth to meet demand for information in volatil
Slide 21: BusinessExchange launched as part of BusinessWeek's digital expansion
BusinessExchange launched as part of BusinessWeek’s digital expansion • Driven by user- generated content and embraces links to outside content • Users create topics around business issues that matter to them and connect with BusinessWeek’s community • Partnerships: – LinkedIn to http://bx.businessw
Slide 22: MHP faces challenging conditions in second half
MHP faces challenging conditions in second half • Slow down in GDP growth in U.S., Europe and Japan • Slow pace of recovery in housing market • Continued softness in structured finance market • Possible effect of state and local budget concerns on spending in education, particularly el-hi school mar
Slide 23: Goldman Sachs Communacopia XVII Conference
Goldman Sachs Communacopia XVII Conference September 18, 2008 45
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