S&p Global Inc. · NYSE:SPGI
S&p Global — The McGraw-Hill Companies — Bank of America Merrill Lynch Investment Conference 2010
27 slides from S&p Global's conference presentation, Sep 13, 2010
Slide 1: Bank of America Merrill Lynch Investment Conference
Bank of America Merrill Lynch Investment Conference September 13, 2010 1 Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies Presented at the Bank of America Merrill Lynch Investment Conference September 13, 2010 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 our businesses and our prospects, new products, sales, expenses, tax rates, cash flows, prepublication investments and operating and capital requirem
Slide 3: Why we like MHP's prospects
Why we like MHP’s prospects • Growing digitally in all our segments – Those who define us as “a textbook publisher” or think we are wedded to legacy print model are working with dated notions 5 Why we like MHP’s prospects • Seeing improvement in two of our most profitable markets – S&P is benefiting
Slide 4: Why we like MHP's prospects: balance sheet and liquidity
Why we like MHP’s prospects • Balance sheet remains strong – Net debt at end of first half of 2010 was $53 million 7 Why we like MHP’s prospects • Liquidity is not an issue – Debt is almost entirely long-term – No major debt repayment due until 2012 • Majority not due until 2017 – Recently renewed a
Slide 5: Why we like MHP's prospects: free cash flow and regulation
Why we like MHP’s prospects • Free cash flow after dividends is improving – Expect free cash flow after dividends in range of $600 million to $650 million 9 Why we like MHP’s prospects • S&P Credit Market Services has been preparing to operate in the regulatory environment for credit ratings – In Ju
Slide 6: Why we like MHP's prospects: legal risk and buybacks
Why we like MHP’s prospects • We still believe our legal risk remains low – 14 motions to dismiss complaints have been granted – 5 more cases have been withdrawn 11 Why we like MHP’s prospects • We are buying back shares in the third quarter – In 2Q 2010, repurchased 6.5 million shares repurchased a
Slide 7: Financial Services
Why we like MHP’s prospects • We are reaffirming 2010 EPS guidance – Expect to finish at the low end of $2.55 to $2.65 range 13 Financial Services 14
Slide 8: Next several years in global financial markets look very promising
Next several years in global financial markets look very promising • Banks’ capacity is limited in some of the high-growth markets • Banks are deleveraging • Some nations are encouraging development of local bond markets – Shift in financing will make accessing the public debt markets more important
Slide 9: Next several years in global financial markets look very promising
Next several years in global financial markets look very promising • India will continue to be a key driver for S&P • CRISIL revenue has more than quadrupled since we gained majority control in 2005 • We expect Europe to grow • Continue to search for right position in the still nascent Chinese marke
Slide 10: S&P Indices is increasing its global focus
S&P indices is increasing its global focus • Through August, S&P has introduced 57 new exchange-traded funds based on S&P indices – 37 ETFs are outside the U.S. – Currently 261 ETFs based on S&P indices 19 S&P indices is increasing its global focus • S&P licensed the National Stock Exchange of India
Slide 11: S&P Indices strengthened position in U.S. market
S&P indices strengthened position in U.S. market • S&P now has agreements for multiple products with all three major U.S. index providers: – Vanguard – Black Rock – State Street 21 3Q issuance: 2010 vs. 2009 U.S. Corporates Investment Grade & High Yield 100 (in billions of US$) 80 15.9 60 22.2 14.2
Slide 12: 3Q issuance: 2010 vs. 2009
3Q issuance: 2010 vs. 2009 U.S. RMBS U.S. CMBS 25 5 (in billions of US$) (in billions of US$) 20 4 15 3 9.1 10 2 1.4 1.4 1.4 4.3 0.9 5 2.5 1 2.1 1.0 0.2 0 0 July Aug Sept July Aug Sept U.S. CDOs U.S. ABS 6 60 50 (in billions of US$) (in billions of US$) 4 40 30 21.3 2 20 17.8 1.1 12.3 9.0 9.8 0.4 10
Slide 13: The regulatory timeline for credit ratings agencies
The regulatory timeline for credit ratings agencies 2011+ July ‘10: US Financial Canada Reform Law passed Hong Kong Summer ‘07: Summer ‘08: CRARA Regs Apr ‘10: Sep ‘10: 2011+: SEC SF Exam become Japan Regs EU Reg Future SEC report Issued Effective Effective Implementation Exams 2007 2008 2009 2010 2
Slide 14: Investing in the QCCR framework
Investing in the QCCR framework • 2009: Spent $63 million for QCCR-related items • 2010: Spending will increase by about $15 million • 2011: We expect some incremental costs which will put some pressure on margins • New financial regulations will require many adjustments 27 How S&P is responding to
Slide 15: How S&P is responding to repeal of 436(g)
How S&P is responding to repeal of 436(g) – Under 436(g), issuers of U.S. public offerings could include the rating of a security in registration statements without obtaining consent of the credit rating agencies – Consent could trigger potential expert liability exposure for credit rating agencies
Slide 16: McGraw-Hill Education
Financial Services • Global growth opportunities • New clarity on the regulatory front • New requirements are manageable • Legal risk remains low • Signs of improved new issuance 31 McGraw-Hill Education 32
Slide 17: Our vision of the digital transformation in education
Our vision of the digital transformation in education • The digital transformation of education is not about textbooks or e-books • What is transforming: – Creating more effective solutions – Linking technology, content and distribution to transform quality and utility of content – Moving educationa
Slide 18: Technology: An opportunity, not a threat
Technology: An opportunity, not a threat • Expanding the addressable market by offering self-assessment tools that help students master their coursework • Now more than 1.8 million registered users of McGraw-Hill Connect™ and other homework management products 35 Growing digital opportunities in hig
Slide 19: Our growing digital initiatives
Our growing digital initiatives • Digital business is increasing at a double- digit rate in higher education • Accounts for 15% of our revenue in our higher education and professional markets 37 Partnering to link technology, content and distribution to expand our reach • In July, became the first m
Slide 20: Partnering to link technology, content and distribution
Partnering to link technology, content and distribution to expand our reach • We will be among the first publishers to offer interactive e-textbooks on the iPad – Students will have the choice of buying the full text or individual chapters – Titles take advantage of iPad’s color, video, and touch sc
Slide 21: More digital content for the el-hi market
More digital content for the el-hi market • As bandwidth increases in K–12 market, we will have more opportunities to provide real-time assessment and individualized instruction • Digital components are integrated into virtually every program we produce – We offer multimedia packages – Mix of compon
Slide 22: Continued growth in higher education market
Continued growth in higher education market • U.S. college market could grow faster in 2010 than original projection – Now forecasting market growth of 8% to 10% – Originally projected growth of 5% to 7% • Growth in enrollments is key to the new forecast 43 Outlook for elementary-high school market
Slide 23: Outlook for McGraw-Hill Education
Outlook for McGraw-Hill Education • U.S. higher education market now expected to grow 8% to 10% – Up from earlier forecast of 5% to 7% • Elementary-high school market is still expected to grow 4% to 6% • In both markets, we expect solid growth in digital products and services • Key to our digital op
Slide 24: Framework for growth at Information & Media
Framework for growth at Information & Media • Strengthening segment’s technology infrastructure with common capabilities to reshape its business • Delivering premium services that transform data into valuable insights • Digital products and services account for more than 60% of the Business-to-Busin
Slide 25: Creating valuable industry benchmarks
Creating valuable industry benchmarks • Platts continue to build on its deep knowledge of the global energy and metal markets by adding new price assessment services – In August, Platts started publishing the world’s first daily spot price assessment for alumina, a mineral used to make aluminum • Re
Slide 26: Outlook for Information & Media
Outlook for Information & Media • Segment’s progress has been masked by deterioration in the advertising market experienced by BusinessWeek in 2009 • 2010 operating margin: We expect to rebound to the mid teens or possibly higher based on: – Growth in digital products – Divestiture of BusinessWeek i
Slide 27: The McGraw-Hill Companies
The McGraw-Hill Companies • Growing globally • Growing digitally in all our markets • Strong financially • Seeing improvement in some key markets 53 Bank of America Merrill Lynch Investment Conference September 13, 2010 54
The McGraw-Hill Companies — Bank of America Merrill Lynch Investment Conference 2010 on 6ix