S&p Global Inc. · NYSE:SPGI
S&p Global — The McGraw-Hill Companies — Deutsche Bank Media & Telecommunications Conference 2008
26 slides from S&p Global's conference presentation, Jun 9, 2008
Slide 1: Deutsche Bank Media & Telecommunications Conference
Deutsche Bank Media & Telecommunications Conference June 9, 2008 1 Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies Presented at the Deutsche Bank Media & Telecommunications Conference June 9, 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: Committed to advancing total shareholder value
Committed to advancing total shareholder value • Share buyback program – Bought back 3.4 million shares in 1Q 2008 – Target for 2008: 15.0 million shares • Dividend has increased for 35 consecutive years – Cash returned to shareholders through dividends and share repurchases has grown at compound an
Slide 4: McGraw-Hill Education
McGraw-Hill Education 7 Most important part of the year is just ahead of us • 3Q: Produces more than 40% of segment’s annual revenue and most of operating profit – July-August period is the “60-day month” • 2Q: June is key month – Order flow in last few days of June is very difficult to predict; can
Slide 5: Operating margin decline masks improvements in MHE's performance
Operating margin decline masks improvements in MHE’s performance • We still expect 50 to 100 basis point decline this year in operating margin – Stepped-up investments in technology to accelerate digital transformation of MHE – $18 million in costs for transition to new data center and an increase o
Slide 6: State new adoption market expected to grow 10% to 15% in 2008
State new adoption market expected to grow 10% to 15% in 2008 • Key markets in 2008: Florida, Texas and California – Florida: Good year taking shape for K–5 reading adoption – Texas: We’re competing well in K–5 math adoption – California: Goods signs for first-year math and second-year adoptions 11
Slide 7: State education budgets
State education budgets • In tracking 2009 fiscal History of Elementary and Secondary Education Funding year budgets, we’ve for U.S. States: Fiscal 2001-2007 Elementary and seen bigger increases Year Secondary Education Funding (% increase) in education budget 2001 7.90% than overall state 2002 3.10
Slide 8: Testing: A growing lineup of products to serve needs of all learners
Testing: A growing lineup of products to serve needs of all learners • Grow Network continues leadership with parent engagement – Parent Network provides parents with online access to their children’s assessment results – Provides personal • Adopted statewide by action plans, Florida, Nevada and Ind
Slide 9: Outlook for higher education market
Outlook for higher education market • Wrapping up spring selling season on positive note; too early to make prediction on summer’s activity • 2008 U.S. college and university market expected to grow 3% to 4% – We hope to at least match those expectations 17 Growth accelerating in digital and custom
Slide 10: Summing up for McGraw-Hill Education
Summing up for McGraw-Hill Education • Revenue projected to grow 6% to 8% in 2008 • Operating margin will probably decline 50 to 100 basis points due to stepped up investments in technology • Growing confidence in our forecast for the year based on sales results to date 19 Financial Services 20
Slide 11: Four key questions about prospects for Financial Services
Four key questions about prospects for Financial Services 1. What is the severity of the downturn in the market? 2. What is the duration of the downturn? 3. What are the regulatory risks? 4. What are the legal risks? 21 Measuring new issue volume in U.S. credit markets in 2008 U.S. RMBS U.S. CMBS 60
Slide 12: Measuring new issue volume in U.S. credit markets in 2008
Measuring new issue volume in U.S. credit markets in 2008 U.S. Corporates U.S. Public Finance 210 60 (in billions of US$) 180 (in billions of US$) 184.8 53.6 150 145.3 135.1 40 44.1 44.9 43.6 40.9 120 126.4 119.7 129.5 34.0 33.5 33.7 90 97.8 83.4 20 60 60.6 68.8 22.2 21.9 30 0 0 Jan Feb Mar Apr May
Slide 13: Financial Services faces challenging comparisons with 2007
Financial Services faces challenging comparisons with 2007 • 2Q ‘07 set high water mark last year for revenue and operating profits at Financial Services • Segment operating profits grew by 27.9% in 2Q ‘07 • Revenue for Credit Market Services grew by nearly 24% in 2Q ‘07 25 Cost containment a priori
Slide 14: Efforts to diversify are paying off
Efforts to diversify are paying off • Expanding ratings information services – Investing in ratings models and tools for surveillance for sale to the financial community – Adding new data and functionality to products such as Capital IQ and RatingsDirect • Growth in surveillance fees, annual contrac
Slide 15: S&P index services continue to grow
S&P index services continue to grow • Assets under management in exchange- traded funds based on S&P indices increased 19.2% to $214.9 billion as of May 31, 2008 • S&P signed agreement with the Korean Exchange to develop new tradeable indices – Adds to lineup of partnerships S&P has with other excha
Slide 16: How S&P is expanding Index Services
How S&P is expanding Index Services • S&P earns revenue from exchange-traded derivatives, such as S&P 500 futures and options • S&P had 71% share of Chicago Mercantile Exchange’s equity and index futures, and options on futures in 2007 • S&P had 45% share of Chicago Board Options Exchange Index and
Slide 17: Current outlook for legal risk at Financial Services
Current outlook for legal risk at Financial Services • Still believe legal risk is modest • Total of five lawsuits, including three recently against several defendants including banks and some ratings agencies – Allegations concern RMBS securities purchased by plaintiffs which have lost value and ha
Slide 18: Current outlook for regulatory risk at Financial Services
Current outlook for regulatory risk at Financial Services • S&P has been in discussions with both CESR and IOSCO and is reviewing recommendations – Many of IOSCO’s recommendations are already reflected in 27 initiatives S&P is taking to strengthen and enhance our governance, quality of analytics and
Slide 19: Current outlook for regulatory risk at Financial Services
Current outlook for regulatory risk at Financial Services • Upcoming actions from SEC: – June 11: SEC holding a public meeting to discuss proposed new rules for NRSROs • Once rules are issued, we expect industry participants will have an opportunity to comment on them – Later in June: Expect report
Slide 20: Six keys to settlement with NY State Attorney General
Six keys to settlement with NY State Attorney General 2. Quarterly disclosure of collateral pools S&P is asked to rate – Designed to discourage shopping for ratings 39 Six keys to settlement with NY State Attorney General Next three parts call for improvement in the quality of data submitted for rat
Slide 21: Six keys to settlement with NY State Attorney General
Six keys to settlement with NY State Attorney General 6. S&P will be required to review annually its RMBS rating processes to assess for and remediate any practices that could compromise its independence 41 Assessing the agreement: A strong message to the market • Attorney General Cuomo’s assessment
Slide 22: Guidance for Financial Services segment
Guidance for Financial Services segment • We expect double-digit growth for S&P Investment Services • First half remains challenging for Credit Market Services • If little or no improvement in financial markets this year, particularly in structured finance, we would expect the Financial Services seg
Slide 23: Guidance for Information & Media unchanged
Guidance for Information & Media unchanged • We expect a 6% to 8% increase in revenue and improvement in the operating margin 45 Building on a rich legacy at Information & Media • Framework for growth: Integrate our products with our customers’ workflow and infrastructure From To Transactional, one-
Slide 24: Expect another year of progress at Information & Media
Expect another year of progress at Information & Media • J.D. Power and Associates: Turning industry performance benchmarks into actionable information is key to expansion • Platts’ information is increasingly the benchmark for global energy markets • McGraw-Hill Construction Network: Improving valu
Slide 25: Summing up for Information & Media
Summing up for Information & Media • A segment in transition • Growth in benchmarks, analytics and solutions • Solid year shaping up for political advertising • On track to produce a 6% to 8% increase in revenue • Improved operating margin 49 For MHP: 2008 guidance unchanged • With the seasonality o
Slide 26: Deutsche Bank Media & Telecommunications Conference
Deutsche Bank Media & Telecommunications Conference June 9, 2008 51
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