S&p Global Inc. · NYSE:SPGI
S&p Global — The McGraw-Hill Companies — 2009 Jefferies 5th Annual Internet & Media Conference
30 slides from S&p Global's conference presentation, Feb 26, 2009
Slide 1: 2009 Jefferies 5th Annual Internet & Media Conference
2009 Jefferies 5th Annual Internet & Media Conference 1 February 26, 2009 Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies Presented at the 2009 Jefferies 5th Annual Internet & Media Conference February 26, 2009 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 and our prospects, new products, sales, expenses, tax rates, cash flows, prepublication investments and operating and capita
Slide 3: Will economy bottom out in next six months?
Will economy bottom out in next six months? • Economists expect economy to find bottom in next six months with help of stimulus package, The American Recovery and Reinvestment Act • Existing and prospective programs designed to: – Stimulate spending – Revive credit and housing markets – Provide reli
Slide 4: Growing global support for credit markets
Growing global support for credit markets • Bank of England and European Central Bank also have important initiatives • All this activity may underpin Federal Reserve’s forecasts for economic growth in 2010 – Fed currently projecting a rise in real GDP of 2.5% to 3.3% over 4Q 2009, which is forecast
Slide 5: Maintaining a strong financial position
Maintaining a strong financial position • MHP’s free cash flow includes payment of dividends • To calculate free cash flow, MHP starts with Cash Provided by Operations and subtracts: – Prepublication investments – Purchase of property and equipment – Additions to technology projects – Dividends • MH
Slide 6: McGraw-Hill Education
McGraw-Hill Education 11 Improved outlook for education funding • Strong political and public support for improvement in el-hi education • $106 billion for education in new federal stimulus package • McGraw-Hill Education’s analysis: – Both direct and indirect benefits 12
Slide 7: How the $106 billion will be distributed
How the $106 billion will be distributed State Fiscal Stabilization: $53.6B Title I and IDEA: $25.2B Funds may be used to Distribution becomes restore K-12 and higher available in 2009 for education budget cuts, Title I obligation until school modernization and $13B Sept 30, 2011 any activity author
Slide 8: Potential benefits for McGraw-Hill Education
Potential benefits for McGraw-Hill Education Likely Funding Outcomes MHE Advantages/Benefits COLLEGE & UNIVERSITY State Fiscal Stabilization Help offset state education budget cuts Pell Grant increases Leading publisher of higher $2,500 tuition tax credit education materials (includes course materia
Slide 9: Potential impact of new funding on the elementary-high school market
Potential impact of new funding on the elementary-high school market • Protect the 2010 and 2011 state adoption schedule • Restore funds to first-year purchases in adoption states • Fund vocational and technical career programs • Mitigate funding pressures in the open territory market 17 Outlook for
Slide 10: Outlook for 2009 state new adoption market
Outlook for 2009 state new adoption market • California and Florida remain key adoption states – Florida: New adoption opportunity is in 6-12 literature – California: Buying K-5 reading and second year of math adoption • California’s new budget includes $355 million for instructional materials in fi
Slide 11: Need more clarity on impact of stimulus before changing 2009 forecasts
Need more clarity on impact of stimulus before changing 2009 forecasts • Still early days in 2009 el-hi school market • Education markets will benefit from stimulus but we will stay with original forecasts in 2009 for now – Elementary-secondary: 10% to 15% decline – U.S. college and university marke
Slide 12: New ways to connect college students and instructors
New ways to “connect" college students and instructors • New platform bridges printed page with online interactive environment • Integrates an Accounting Psychology Economics Chemistry eBook, study Finance Mechanical Engineering tools and Management Physics assessments all Marketing Non Majors Biolo
Slide 13: Current material integrated into print and online
Current material integrated into print and online • Print and online materials are updated frequently to incorporate current speeches to better engage students – Chapter 5, “Analyzing the Audience” is correlated to a speech by Barack Obama 25 Current material integrated into print and online • Stude
Slide 14: Speech Capture benefits students and instructors
Current material integrated into print and online • Connect Lucas is updated to include latest speeches • Adds timeliness to class discussion 27 Speech Capture benefits students and instructors • Students upload video recordings of their speeches Be careful • Instructors watch with your online and i
Slide 15: Summing up for McGraw-Hill Education
The power of convergence • Leveraging content and distribution – Enriches the learning experience – Enables instructors to create, administer and grade assignments completely online 29 Summing up for McGraw-Hill Education • Federal funds may alleviate pressure on state and local education funding •
Slide 16: Maintaining guidance for Financial Services
Financial Services 31 Maintaining guidance for Financial Services • Segment: Expect revenue to grow 1.5% to 2% in 2009 – High single-digit growth at S&P Investment Services – Slight decline in revenue at S&P Credit Market Services 32
Slide 17: 2009 outlook for S&P Credit Market Services
2009 outlook for S&P Credit Market Services • Non-transaction revenue: Expect to grow 1% to 2% – Resilient revenue stream; accounted for 73% of ratings’ total 2008 revenue – Nearly 90% is recurring revenue (surveillance fees, annual contracts and subscriptions) • Grew in 2008 • 2009: Growth will be
Slide 18: 2009 outlook for Financial Services
2009 outlook for Financial Services • Segment operating margin expected to decline 250 to 300 basis points, excluding impact of 2008 restructuring charges – Implies expense increase of approximately 6%, resulting in operating margin between 37.7% and 38.2% • Strengthening dollar will negatively impa
Slide 19: Turbulence in credit markets carried into 1Q 2009
Turbulence in credit markets carried into 1Q 2009 U.S. Corporates U.S. Public Finance 160 Sequential Sequential 60 120 112.8 101.6 45 80 30 23.7 24.2 (in billions of US$) (in billions of US$) 40 15 0 0 Dec-08 Jan-09 Dec-08 Jan-09 160 Year over Year Year over Year 60 126.8 120 101.6 45 80 30 22.2 24.
Slide 20: Turbulence in credit markets; strategic goal: an S&P index for all investments
Turbulence in credit markets carried into 1Q 2009 U.S. RMBS U.S. CMBS 6.0 Sequential 2.0 Sequential 4.5 1.5 3.9 3.0 1.0 (in billions of US$) (in billions of US$) 1.5 0.5 0.0 0.0 0.0 0.0 0.0 Dec-08 Jan-09 Dec-08 Jan-09 6.0 Year over Year 2.0 Year over Year 5.1 4.5 1.5 3.0 1.0 0.7 1.5 0.5 0.0 0.0 0.0
Slide 21: More new indices, ETFs launched in January
More new indices, ETFs launched in January • Introduced four new non-correlated indices in January: – S&P Risk Control Indices/Euro – S&P 500 VIX Futures Index – S&P Financial Trends Indicator – S&P CDS index series • Three new exchanged-traded funds based on S&P indices listed in January: – iShares
Slide 22: A dialogue with regulators, policymakers, market participants
A dialogue with regulators, policymakers, market participants • S&P’s president Deven Sharma outlined 10 goals at CESR (Committee of European Regulators) conference on February 23 1. Ratings should be independently derived, credible and unbiased 2. Regulators should conduct robust periodic inspectio
Slide 23: Sound, internationally consistent regulation
A dialogue with regulators, policymakers, market participants 9. Ratings performance statistics should be publicly disclosed, including comparability of ratings across asset classes and geographies 10. There should be competitive market for ratings with more varying views on credit quality from qual
Slide 24: Assessing legal risk at Financial Services
Assessing legal risk at Financial Services Three broad categories of law suits 1. Underwriter claims based on Securities Act of 1933 • Purchasers of subprime RMBS assert S&P is liable as an “underwriter” or “seller” • S&P is not an underwriter or seller of securities 47 Assessing legal risk at Finan
Slide 25: Summing up for Financial Services
Summing up for Financial Services • Growth in non-transaction revenue at S&P Credit Market Services • Growth in S&P Investment Services • Slow start to 2009 • Low single-digit revenue growth, probably 1.5% to 2% • Margin decline of 250 to 300 basis points, excluding 2008 restructuring charges 49 Inf
Slide 26: Information & Media: Benefits from new federal stimulus package
Information & Media: Benefits from new federal stimulus package • Worth $130 billion to McGraw-Hill Construction’s customers • Will stimulate more construction activity for the next three years – 2009: Adds 7.6% to market, bringing total construction to $494 billion – 2010: Adds 10.6% to market, bri
Slide 27: 2010 construction activity helped by stimulus effect
2010 construction activity helped by stimulus effect 70 60 (in billions of US$) 27% % Share from Stimulus 50 Stimulus 40 27% 6% 2010 30 38% 7% 20 35% 15% 10 54% 0 ily e er s re gs ks n f ic ge io ow ca am or in Of at id lth ild W cP ltif or Br Bu a lic sp Mu tri He s& ub an ec ic et bl lP El /Tr re
Slide 28: Outlook for Information & Media segment
McGraw-Hill Construction will capitalize on stimulus package • McGraw-Hill Construction has been pioneering “green” – MHC tracks green projects and green market opportunities – Award winning editorial content of green project and product information (e.g., GreenSource) • Stimulus green drivers: – Re
Slide 29: Summing up for Information & Media
Summing up for Information & Media • Low single-digit decline in revenue • 200 to 300 basis point decline in operating margin, excluding restructuring charges in 2008 • Growth in information products will be offset by declines in advertising • Need to see when stimulus package will benefit McGraw-Hi
Slide 30: 2009 Jefferies 5th Annual Internet & Media Conference
2009 Jefferies 5th Annual Internet & Media Conference February 26, 2009 59
The McGraw-Hill Companies — 2009 Jefferies 5th Annual Internet & Media Conference on 6ix