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S&p Global — The McGraw-Hill Companies — UBS 37th Annual Global Media and Communications Conference 2009
28 slides from S&p Global's conference presentation, Dec 7, 2009
Slide 1: UBS 37th Annual Global Media and Communications Conference
UBS 37th Annual Global Media and Communications Conference December 7, 2009 1 Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies Presented at the UBS 37th Annual Global Media and Communications Conference December 7, 2009 2
Slide 2: Safe Harbor Statement Under The Private Securities Litigation Reform Act
“Safe Harbor” Statement Under The Private Securities Litigation Reform Act of 1995 This presentation includes certain forward-looking statements about our businesses and our prospects, new products, sales, expenses, tax rates, cash flows, prepublication investments and operating and capital requirem
Slide 3: 2009 outlook for MHP
2009 outlook for MHP • Controlling costs – Through 3Q ’09: Down 6.5%, or 6.1% excluding impact of restructurings in 2008 and 2009 and loss on divestiture of Vista Research in 2009 • Free cash flow after dividends – Now expected to exceed $500 million despite lower operating results 5 2009 outlook fo
Slide 4: 2010 outlook for McGraw-Hill Education and Financial Services
2010 outlook for McGraw-Hill Education • Many reasons to expect a better year in 2010 – Key markets are improving – Substantial increase in state new adoption calendar – Federal stimulus funding – Elementary-high school market should improve after decline of about 20% this year – U.S. college and un
Slide 5: 2010 outlook for Information & Media; benefits of 2009 restructuring
2010 outlook for Information & Media • Platts continues to be a stand out performer – Volatile energy market should help produce another solid year • TV: Political advertising should rebound with election year in 2010 • Sale of BusinessWeek will trim revenue by about $100 million – Should produce sa
Slide 6: Continued expansion in international markets in 2010
Continued expansion in international markets in 2010 • Revenue from foreign sources has outpaced domestic performance for the last seven years – Accounted for about 30% of our total revenue in 2008 • Measured in constant dollars, revenue from foreign sources is showing modest growth this year even a
Slide 7: McGraw-Hill Education
Employing technology throughout our segments • Technology enables us to: – Innovate – Create new revenue streams and distribution channels – Lower operating costs • Connecting content and managing digital assets globally is key – Building size and scale globally by expanding digital capabilities – A
Slide 8: 2010 outlook for McGraw-Hill Education
2010 outlook for McGraw-Hill Education • Expect improvement in 2010 education market despite state budget issues - Improved 2010 el-hi state new adoption outlook – Estimated $925 million to $975 million in 2010, up from $500 million to $510 million in 2009 – Texas is back on the adoption calendar in
Slide 9: Growing elementary-high school enrollment
Growing elementary-high school enrollment • About 55.9 million students will be enrolled in 2010 60 Projected 45 (in millions) 30 15 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 PK-8 38.9 38.9 38.9 39.2 39.5 39.8 40.2 40.6 41.0 41.4 41.7 42.1 42.5 42.8 9-12 16.3 16.4 16.5
Slide 10: $100 billion for education from federal stimulus an important factor in 2010
$100 billion for education from federal stimulus an important factor in 2010 • Instructional materials market will benefit from incremental Title I funds for schools serving disadvantaged students and IDEA funds for special education programs Education Funds Obligated and Disbursed, by Program Progr
Slide 11: College and university market benefiting from federal stimulus funding
College and university market is benefiting from federal stimulus funding • Increased support for Pell Grants and other financial aid has helped boost enrollments in 2009 • Will continue to have positive effect in 2010 21 Making the digital connection • Integration of content, technology and distrib
Slide 12: Investing in digital content and data management for growth
Investing in digital content and data management for growth • For the college market: – Digital revenue growing at a double-digit rate as technology expands the addressable market – Approximately 95% of MHP textbooks are available as e-books – Penetrating a new market with assessment tools and servi
Slide 13: An all-digital learning platform for higher education
An all-digital learning platform for the higher education market • An all-digital learning platform for the higher education market 25 McGraw-Hill Create takes custom publishing to a new level • McGraw-Hill Create enables instructors to customize their own course materials – Choose from nearly 4,000
Slide 14: The digital connection in the K–12 classroom: ConnectEd
Investing in digital content and data management for growth • Our el-hi products and services are meeting growing demand for digital solutions – Using social media products like Cinch, which operates in a Web 2.0 environment – Our products enable teachers to individualize lesson plans for early inte
Slide 15: 2010 prospects for the education market
2010 prospects for the education market • Benefits of 2009 restructuring will be realized in 2010 – We combined our basal and supplemental school operations in a new streamlined organization to improve operating efficiencies • Elementary-high school market: Expected to grow 8% to 10% in 2010 – We be
Slide 16: Positive signs for S&P Credit Market Services
Positive signs for S&P Credit Market Services • Signs of a thaw in the credit markets – Tighter spreads – Low interest rates – Federal stimulus funding • 3Q 2009: Significant growth in investment- grade and high-yield issuance – Helped produce first quarterly increase in revenue at S&P Credit Market
Slide 17: U.S. corporates: 4Q 2009 vs. 2008 and interest rate spreads
U.S. corporates: 4Q 2009 vs. 2008—A pickup in October U.S. Corporate U.S. Public Finance 150 60 $49.9 $110.4 (in billions of US$) (in billions of US$) 100 40 $30.6 $29.4 $23.7 $48.4 50 $40.8 20 $23.3 N/A N/A N/A N/A 0 0 Oct Nov Dec Oct Nov Dec 2008 2009 Source: Thomson Financial, Harrison Scott Publ
Slide 18: 2010 outlook for Financial Services
2010 outlook for Financial Services • Corporates: Positive signs ahead for global issuance – Interest rates remain low – Spreads continue to tighten • Public finance: – The Build American Bonds program has unlocked new channels of financing for municipalities – Slow recovery and higher borrowing cos
Slide 19: How S&P is adding value to ratings
How S&P is adding value to ratings • S&P is applying the lessons of the past to improve ratings for the future – Criteria is the framework S&P uses to rate debt • Transparency has been improved – Providing additional detail about rating definitions – Reassessed the criteria in structured finance • S
Slide 20: How S&P is adding value to ratings
How S&P is adding value to ratings • S&P is going beyond default risk to introduce explicit stability measures in its ratings criteria – Recognition that some issuers are prone to gradual decay while others are more vulnerable to sudden deteriorating – S&P will provide a lower rating if it believes
Slide 21: Meeting the need for market-based valuations
Meeting the need for market-based valuations • Recovery analytics from S&P Credit Market Services – Uses current criteria and performance assumptions on underlying collateral to assess a security’s recovery prospects in the event of default under various stress scenarios – Helps users differentiate
Slide 22: Finding new ways to grow index business
Finding new ways to grow index business • For S&P indices: – Growing diversification – More international expansion • Continued expansion into commodities, fixed income, real estate, custom and thematic indices • Forging relationships with stock exchanges around the world – Australia, Japan, India,
Slide 23: How S&P indices have diversified and expanded
How S&P indices have diversified and expanded • Growth in asset classes in exchange-traded funds based on S&P indices $300 $250 $200 (in billions) $150 $100 $50 $0 4Q08 1Q09 2Q09 3Q09 AUM $203.60 $158.60 $189.80 $220.80 45 Source: Standard & Poor’s and Bloomberg How S&P indices have diversified and
Slide 24: Data and information benefiting S&P Investment Services
Data and information benefiting S&P Investment • Bringing financial data Services and analytics to the off- trading floor market • An array of applications for the desktop: – Research – Screening – Backtesting – Portfolio management – Financial modeling Capital IQ now provides proprietary equity own
Slide 25: The legal scene: Encouraged by recent Federal District Court decision
The legal scene: Encouraged by recent Federal District Court decision • Nomura Asset Acceptance Corporation case – Noteworthy decision in case not involving ratings agencies • Judge gave clear and unambiguous response to similar claims to those which have been made against the ratings agencies based
Slide 26: The regulatory scene
The regulatory scene • S&P Credit Market Services is subject to heavy global regulation – Expecting new legislation from the U.S. Congress in late 2009 or early 2010 • We continue to review our concerns with decision makers in Washington and abroad to: – Develop end-to-end solutions that ensure effe
Slide 27: 2010 outlook for Information & Media and The McGraw-Hill Companies
2010 outlook for Information & Media • Three important developments: – Platts’ continued growth in volatile energy markets – A rebound in TV political advertising – A pre-tax savings of $20 million to $25 million from sale of BusinessWeek 53 2010 outlook for The McGraw-Hill Companies • Improvement i
Slide 28: UBS 37th Annual Global Media and Communications Conference
UBS 37th Annual Global Media and Communications Conference December 7, 2009 55
The McGraw-Hill Companies — UBS 37th Annual Global Media and Communications Conference 2009 on 6ix