october 2009 sami kassab andrea beneventi adrien de saint hilaire direct tel.: +44 (0) 20 7039 9448...

EquitiesEquities

October 2009

Sami Kassab

Andrea Beneventi

Adrien de Saint Hilaire

Direct Tel.: +44 (0) 20 7039 9448Mobile Tel + 44 779 55 28 [email protected]

Professional publishers

A selective approach

Equities2

Media team

Sami Kassab Charles BedouelleTeam Head Ad agencies, conglomerates, broadcasting+44 207 039 9448 +33 207 039 [email protected] [email protected]

Andrea Beneventi Adrien de Saint HilairePublishing Publishing+44 207 039 9509 +44 207 039 [email protected] [email protected]

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What has changed in our sub-sector view following H109 results?

Change in segment outlook post H109 results

Percentage of revenue exposureIndustry segment Pearson Reed Elsevier Wolters Kluwer Thomson Reuters Informa UBM FY09e trends FY10e trends Chg. to our forecasts post H109 results

University textbooks 27% 2% 9% 2% 7% 0% +6% to +10% +4% to +6% Revised up

Science, Technical & Medical 0% 29% 13% 8% 23% 25% +2% to +3% 0% to -2% Unchanged

Legal 0% 24% 32% 26% 13% 0% 0% to 2% 1% to 3% Revised downof which Subscriptions 0% 17% 29% 23% 13%

of which Transactions (incl. copy sales, advertising) 0% 7% 3% 3% 0%

Tax, Accounting & Regulatory 0% 18% 37% 7% 1% 0% +4% to 6% +4% to 6% Unchangedof which Tax & Accounting 0% 2% 23% 7% 1%

Financial Information 10% 0% 5% 57% 9% 0% -2% to +3% 0% to +3% Revised up

Trade Book 21% 0% 0% 0% 0% 0% -5% to -2% -2% to +1% Unchanged

School textbooks & services 36% 0% 0% 0% 0% 0% -10% to -15% +3% to +5% Revised down for FY09 and up for FY10

Events and Exhibitions 0% 11% 0% 0% 45% 39% -10% to -15% 0% to +3% Revised down

B2B Information 6% 16% 4% 0% 2% 36% -10% to -15% 0% to -5% Revised downof which print magazines 6% 12% 4% 0% 2% 18% -20% to -30% -2% to -5% UnchangedTOTAL 100% 100% 100% 100% 100% 100%

EquitiesEquities

Late cyclical pressure on scientific information

Go long Tax, short US Legal

Cost efficiency programs to accelerate

Industry analysis

Equities5

Late-cyclical pressure on scientific, technical and medical (STM)

Consensus expects ongoing growth in US research libraries materials budgets We disagree

Library content spending has declined in the past -10% in the Great Depression and WWII Consensus expects growth in 2009 and 2010 Large universities have seen several years of

decline in recent past

Library budgets under strong pressure due to: decline in state budgets and universities endowments Total endowments to US universities down 25-

30% in FY2009

Source: nabuco.org, Exane BNP Paribas estimates

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

Average journal expenditure change

Period of recession

Source: Gerould, ARL, Exane BNP Paribas estimates

Years with decline in library materials budgets

Chg. in US research libraries materials spending

University Years where library materials spending declined

California, Berkeley 1965,1969, 1972,1995,1996,2003,2004,2005

UCLA 1965, 1967, 1971,1972, 1988, 1991,1997, 2003, 2005

Columbia University 1966,1967,1971,1972, 1977

Duke University 1968,1969,1974,1976,1985,1991, 2004

Georgetown 1967, 1970, 1976,1998,2002

Harvard 1985, 2005

Illinois,Urbana 1968,1969,1972, 1976,1978,1983, 1987

John Hopkins 1969

Princeton 1969,1972,1977, 1989,1997,2000

Toronto 1970,1971, 1974, 1975, 1977,1985

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Books & Monographs34%

Others10%

Bibliographic databases

22%

Journal collections34%

Worse than -10%

Between -5% and -10%Between -5% and 0%

Between 0% and 5%

More than 5%

More negative view on academic library market in 2010

We have conducted a proprietary survey with the support of Yale University to find that Over 80% of academic libraries expect decline in content

spending in next 18 months Yale and Harvard at -10% and -15% in FY10 Books and databases appear more at risk compared to

journals

Our contacts with ARL and ICOLC (library associations) show academic library budgets under unprecedented pressure ‘it may not be uncommon for consortia budgets to decline by

double digits year over year’ ‘cuts will be prolonged’ ‘Most member libraries are preparing cancellations of

ongoing commitments for 2010’

We exepect US library materials spending to fall by 4% in the US and 2% globally. Consensus expectations of 3% revenue growth for Elsevier,

Wiley, Informa is too high, in our view

Expected decline in library materials budget for FY10 among 50 US libraries

Source: Exane BNP Paribas estimates

Main area of expected cuts

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Cutting our forecasts for STM information publishers for 2010

Reed & Informa are most exposed to libraries

Reed Elsevier’s STM revenues are likely to decline in FY10. Consensus expects growth

Informa has been less agressive on pushing for multi-year contracts and is more expensive

Exane is below consenus expectations for 2010 underlying revenue growth

Short term catalysts: bad news from renewal cycle from August to October 2009

Long term: growth of Open Access is still an issue


0%

10%

20%

30%

40%

50%

60%

Wiley Reed Elsevier Informa WoltersKluwer

ThomsonReuters

Pearson

% of group revenue exposure % of group Adj. EBIT

Publisher’s exposure to STM, 2009e

3% 3%2% 2%

-1%

-3%-2%

0%

(4%)(3%)(2%)(1%)

0%1%2%3%4%5%

Reed Elsevier Informa Thomson ReutersScience

Wolters KluwerHealth

Consensus Exane

STM revenue growth forecasts for FY2010

0

10

20

30

40

50

60

70

80

90

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Funder mandates Institutional and departmental mandates


Number of Open Access Mandates worldwide

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What publisher is most at risk?

Average of contract length varies across publishers Informa’s average subscription length of less than 2 years Reed Elsevier above 3 years with less renewals in 2010

than in 2009 than in 2008

Size of product portfolio as a driver of market shares We expect publishers with large product mix to take market

shares away from smaller publishers Increased bundling Elsevier aggressively bundling primary and

secondary content?

Price per citation and price per article analysis shows wide discrepancy between publishers Within commercial publishers, Elsevier offers an attractive

price per citation mix Informa’s mix is least attractive

STM journal prices per citation and article (USD)

Average STM subscription length

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Reed Elsevier Springer Wiley Wolters KluwerHealth

ThomsonReuters Science

Informa

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

10.0 15.0 20.0 25.0 30.0 35.0 40.0

MIT PressWolters Kluwer

OUP

CUP Reed Elsevier

Springer

John Wiley

Informa

Price per article

Pric

e pe

r ci

tatio

n

Indsutry Average

Source: journalprices.com, Exane estimates

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Deteriorating revenue trends in exhibitions and B2B magazines

Exhibitions are sensitive to economic conditions

Deteriorating trends since beginning of the year 2009

Our tracking of 60 exhibitions shows general decline in exhibitors, visitors and net square space

Recent survey of 180 trade show organisers suggest over 50% expect industry recovery by 2010 Tentative signs of improvement in H209

Deteriorating trends in B2B Magazines in the US, UK and Continental Europe

Revenue growth unlikely to return in 2010

Source: UFI, Exane BNP Paribas estimates

Exhibitor’s percentage change at Reed Exhibitions in 2009 vs. 2008

When do you believe that the global exhibition industry’s economic recovery will begin?

3 10

55 63

4340 51

41 35

56 50 47

2120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Americas Asia & Pacific Europe Middle Eastand Africa

World

In 2009 In 2010 After 2010

Nb. of shows tracked

Total number of exhibitors 2008


Growth

January 13 8,338 8,097 -3%February 18 6,376 6,263 -2%

March 17 5,145 4,553 -12%

April 14 8,064 7,793 -3%

May 11 9,677 6,792 -30%

June 10 8,747 7,848 -10%July 7 2,781 2,799 1%August 1 164 167 2%YTD 91 49,292 44,312 -10%

Equities10

Growing pressure in US legal information market

US Law firms KPI kept deteriorating in Q209 Hildebrandt PMI score at 44 Legal jobs in the US down 2.5% in July, -2% ytd

US legal information budget under pressure

70% of law librarians have experienced budget cuts

Cuts in duplicated materials likely

Overhead expenses (incl. Legal information budgets) down 5% in Q209

Traditional marketing expenditures under pressure

Reed Elsevier’s Martindale Hubbell revenues down 29% but Thomson Reuters Findlaw.com revenues are up

LexisNexis suffers from business news segment. Thomson Reuters exited the segment last year

Source: Hildebrandt, LLB, Exane

Cuts in US Corporate and Academic law library budgets

Between 0% and -3%

Between -3% and -6%

Between -7% and -10%

Worse than -10%don't know

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

Q2 08 Q2 09

Demand for legal services Overhead expenses

Change in US law firms KPI

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Westlaw vs. LexisNexis

Westlaw vs. LexisNexis

Stanford Law School survey suggests preference for Westlaw

West is more exposed than LexisNexis to counter-cyclical trends in law schools

Intention to cancel duplicate subscriptions has increased

American Lawyer survey of September 2009 suggests 31% (vs. 15% in 2008) intended to cancel duplicate subscriptions

Increasing investments to compress margins at LexisNexis and Westlaw

Westlaw to roll out a new front-end interface

Forces LexisNexis to increase investments as well (dedicated sales force at MH, front interface)

Source: LLB April 2009, American Lawyer Sepy. 09, Exane estimates

Nb of law firm responses to ‘if you had to choose one legal research platform…’

Are cancellations of duplicate subscriptions likely?

Source: Stanford Law School 2008, Exane BNP Paribas estimates

0

50

100

150

200

250

300

Westlaw LexisNexis

0%

5%

10%

15%

20%

25%

30%

35%

2008 2009

Do you intend to cancel duplicate subscriptions to Westlaw and LexisNexis (N=86)

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Wolters Kluwer to strike back on US tax & accounting

Wolters Kluwer is the most exposed player on the regulatory information

Tax, accounting, compliance activity is likely to increase in the US and Europe

Thomson Reuters has outpaced Wolters Kluwer over the past years but...

Due to higher investments in a better online product

...Wolters Kluwer has launched a new tax research platform, Intelliconnect

Potential market shares gains not factored in


Tax & accounting contributions to group revenues, 2009e

Tax & accounting underlying revenue growth

0%

5%

10%

15%

20%

25%

Wolters Kluw er Thomson Reuters Reed Elsevier

0%

2%

4%

6%

8%

10%

12%

2004 2005 2006 2007 2008 2009 2010 2011

Thomson Reuters Tax & Accounting Wolters Kluwer Tax, Accounting, Legal

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Education: solid fundamentals in Higher Ed. – strong pressure in US School

University textbooks: one of the best media segments

Enrolment growth sustained by rise in applications to universities and to the GMAT

Price increase in college textbooks still ongoing

School textbooks: state budgets under pressure

Brighter picture for 2010

Rebound in new textbook adoptions

Texas rather than California is the key state in 2009

ARRA funds available

Pent-up demand from postponements

Source: Universities, Exane BNP Paribas estimates

Applications growth in sample of US universities to 2009-10 academic year

5%6%

9%

12%

14% 14%

7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Cornell Harvard Princeton Columbia Dartmouth Yale AverageSample

States textbook budgets are under pressure

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Financial Information: speck of gold amid the ashes

Market data terminals under pressure

IDC affected by acceleration of decline in hedge fund creations

Resilience of terminal business (Reuters 3000 Xtra at Thomson Reuters in Q4 08)

We expect through of the cancellation cycle to be reached in H1 09

Potential for growth in 2009

Regulatory and technological changes

Acceleration of buy vs. build for banking IT systems in large financial firms

Picking up of the mortgage activity

Roll out of a new Thomson Reuters terminal in H2 09

Source: Mortgage bankers association, Bloomberg, Exane BNP Paribas estimates

Yoy variation of mortgage applications in the US

Number of layoffs in banking and broking

0

20,000

40,000

60,000

80,000

100,000

120,000

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09

Americas Europe Asia

(50%)(30%)(10%)

10%30%50%70%90%

110%130%150%

Jan

08

Feb 0

8

Mar

08

Apr 0

8

May

08

Jun

08

Jul 0

8

Aug 0

8

Sep 0

8

Oct 08

Nov 0

8

Dec 0

8

Jan

09

Feb 0

9

Mar

09

Apr 0

9

May

09

Jun

09

Jul 0

9

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Major cost savings opportunities ahead for the industry

Off-shoring: a major trend for professional publishers

50% of the editorial work of professional publishers offers potential for offshoring

Indexing, typesetting, abstracting, hyper text linking, file conversions are « offshorable » process

Related on-shored costs accounts for c. 5% of professional publishers’ divisional revenues

Cost savings of 50 to 70% on onshore costs


Number of employees offshore

Breakdown of offshorable editorial costs

Core Editorial (non

offshorable)48%

Technical Editorial

20%

Conversion6%

DB Structuring7%

Supply Chain Management

2%

Other17%

0%

5%

10%

15%

20%

Reed Elsevier Thomson Reuters Woltres Kluwer

2007 2010e

Equities16

Major cost savings opportunities ahead for the industry

We expect further IT rationalisation as back office integration of IT and publishing

systems has often been poor LexisNexis could save up to GBP15m (40bps)

of adjusted operating margins if it were to move storage to a cloud architecture

Benefits from the consolidation of dispersed data centres

Limited execution risk current management have been able to over-

deliver on prior cost-savings plan

Source: UC Berkeley, Exane BNP Paribas estimates

Number of current data centres and consolidation plans

Monthly storage cost of one gigabyte

0

20

40

60

80

100

120

140

160

Thomson Reutres Wolters Kluwer Reed Elsevier

2007 2008-2009

0.0

0.5

1.0

1.5

2.0

2.5

In a data centre of 1,000 servers In a cloud data centre of 50,000 servers

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Who will benefit more from cost saving?

Wolters Kluwer and Thomson Reuters are to post the strongest operating margin improvements over 2009-11 Benefits from cost efficiency

programmes with control on top-line pressure

Informa to suffer the most among peer group Lack of a wide-reaching cost

efficiency plan

Top-line pressure on its cyclical PI and Events business with slowdown on Academic and Scientific revenue growth


Change in group operating margins 2008-2011e (bps)

Cumulative cost efficiency benefits

(400)

(300)

(200)

(100)

0

100

200

300

Informa Group Pearson Group Reed ElsevierGroup

ThomsonReuters Group

Wolters KluwerGroup

0%

2%

4%

6%

8%

10%

12%

14%

16%

Thomson Reuters Reed Elsevier Wolters Kluwer

% of opex 2008 % of revenues

EquitiesEquities

Investment cases

EquitiesEquities

Outperform, TP GBp650

United Business Media

Hidden Jewels

Sami Kassab Andrea BeneventiDirect Tel.: +44 (0) 20 7039 9448 Direct Tel: +44 (0) 20 7039 9509Mobile Tel + 44 779 55 28 365 [email protected]@exanebnpparibas.com

Equities20

UBM’s change of status is overlooked: asset mix shifting from structurally declining media into structurally strong events, press releases and databases (80% of total revenues)

Cyclical exposure (80% of the mix) is not fully priced in as consensus seem to overestimate the late cyclicality of the business

UBM is now trading on historic and relative lows on 8.3x EBITA09e, 14% below professional publishers despite a 12% FCF yield, 8% EPS CAGR between 2009e and 2012e and 6% dividend yield

Investment case: Hidden JewelsOutperform

1

2

3

UBM’s cyclical upside and improved asset mix still forgotten by the market

Equities21

United Kingdom

19%

Americas48%

Europe and Middle East

17%

Asia/P acific16%

Asset mix has improved into growing events, press releases and databases

In the last few years, UBM has aggressively sold out from structurally weak areas of:

Newspapers (The Express, sold in 2000) Free-to-air TV (Channel Five, sold in 2005) B2B magazines (from 46% of total revenues in 2005

to 20% in 2009)

… and reallocated capital into the structurally growing businesses of:

Events c. 35% of group revenues, 50% of EBIT Professional databases (medical, trade, semicon) Online verticals

With only 1.2x net debt/EBITDA, UBM should be able to capitalise on a revival of M&A activity

China Optoelectronic Expo (Aug-09) Iasist clinical monitoring, Spain, EUR6m (Jul-09)

Management has a good track record on acquisitions and is incentivised on relative share price performance

UBM revenue mix over time (% of total)

Revenues by region, 2009e

24 29 30 33 35 37 37

1518

2525

27 26 26

4636

28 24 20 18 17

15 17 18 17 18 19 19

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009e 2010e 2011e

Events Data, Services and Online Print B2B Distribution, Monitoring and Targeting

Sources: UBM, Exane BNP Paribas estimates

Equities22

Asia/Pacific34%

Americas24%

UK15%

EMEA27%

Cyclical improvement in Events and Databases not yet priced in

We believe consensus overestimates the late cyclicality of several key revenue streams

Consensus expects flat to declining Events revenues in FY10. We disagree due to:

Geographic mix of Events revenues Tracking of Asian events show strong

performance in H209 Recently published survey by trade body

suggests industry participants expect recovery in 2010

Stronger exposure to cyclical improvement in Data & Services business in FY10 (online advertising, customised research work)

When do you believe that the global exhibition industry’s economic recovery will begin?

Geographical split of UBM Events’ revenues ’09e

Sources: UFI, Exane BNP Paribas estimates

3 10

55 63

4340 51

41 35

56 50 47

2120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Americas Asia & Pacific Europe Middle Eastand Africa

World

In 2009 In 2010 After 2010

Equities23

8.8%6.8% 6.9%

2.0%

(2.6%)

1.1% 1.8% 2.5% 3.6% 3.1% 2.7% 2.1%0.4%

2.0%

(9.5%)

(3.4%)

(13.8%)

(1.0%)(2.3%)

10.6%

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

USA GDP growth PR Newswire organic revenue growth

Press releases: gaining market share, better product mix, geared to the US recovery

UBM’s is regaining market share UBM volumes trends suggest PR Newswire is

gaining market share on BusinessWire Exit of smaller players with poorer competitive

positioning (M2 Presswire) likely to benefit UBM

Improving the revenue mix Proprietary tracking shows multimedia releases

volumes (video, photo) doubled vs.2008

Cyclical upside: historically high correlation with US GDP. We forecast a return to 2% growth in 2010 versus -10% in 2009

Thomson Reuters buys Hugin on a 45% premium on our PR Newswire valuation, underlying the attractiveness of the news wiring business

Est. chg. in press releases volumes 2009

US GDP vs. PR Newswire growth

Sources: UBM, Factiva, IMF,Exane BNP Paribas estimates

(20%)

(18%)

(16%)

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0%

J anuary February March April May J une J uly August

P R Newswire BusinessWire Total market

Equities24

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09

(100%)

(80%)

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

100%

UBM 12m fw d P/E (LHS) UBM vs. FTSE250 GBP (RHS)

Late '90s : a TV, magazines company diversifying into digital properties, press releases…

..lif ted by the .com expectations…

…w hich benefited earlier than the index from the recovery…

…then converged due to w eakness in B2B magazines.

Today: late-cyclical fears are overdone given the strong asset

mix. 25% discount to index is unjustif ied

Valuation versus history: 25% below the index despite structural improvement, cyclical exposure

The stock trades at a discount to the market in terms of Forward PE despite the improvement in the asset mix…

Which suggests an improved growth profile from an average 1% organic revenue growth over last 10 years to a 2-3% expected for 2010-11

…and despite the cyclical upside.

Our valuation implies a P/E 2011 of 10.5x at target.

UBM 12m forward consensus P/E relative to FTSE 250

FactSet, Exane BNP Paribas estimates

Equities25

Key catalysts ahead

Short term

Long term

Positive catalystsNegative catalysts

Swine flu outbreak (our bear case implies 10% of events cancelled and -3.5% group revenue, vs.-1.3% in 2003 due to SARS)

Weaker than expected advertising trends

Strong growth in exhibitors/visitors from September tradeshows

Up tick in monthly press release volumes

Delivery on “mid teens” magazine margin

Further volume decline in the press releases market

Higher investment requirements

Emerging market sustaining growth in Events

Attractively valued acquisitions or share buybacks

Bull-bear case analysis, fair value per share and upside

+5% Events revenues in

2010

Base case

650p

40% Upside

759p

64% upside

15% op. margins on

magazines by 2011

Swine flu pandemic (10%of

tradeshows cancelled in 2010)

+5% press release

volumes in 2010

693p

50% upside

723p

56% upside

-5% press release

volumes in 2010

636p

39% Upside

590p

29% Upside

474p

3% Upside

Further -5% decline in

advertising

Equities26

UNITED BUSINESS MEDIA (Outperform)Publishing | Media (Neutral) - United Kingdom

Stockmarket ratios Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e Enterprise value (GBPm) Dec. 09e %EV Historical price

P / E 9.5x 8.7x 8.4x 7.5x 6.9x Market cap (*) 1,135 76%

P / CF 7.3x 8.3x 7.2x 6.4x 6.0x + Adjusted net debt 216 14%

FCF yield 12.2% 10.4% 12.2% 13.9% 14.9% + Other liab. and comm. 96 6%

P / BVPS 2.78x 2.27x 2.04x 1.81x 1.60x + Revalued minority interests 56 4%

Net yield 4.5% 5.3% 5.6% 6.0% 6.4% - Revalued investments 0 0%

EV / Sales 1.71x 1.68x 1.60x 1.45x 1.31x = Enterprise value 1,502

EV / Restated EBITDA 8.1x 8.3x 7.6x 6.4x 5.6x

EV / Restated EBIT 8.7x 9.1x 8.4x 7.1x 6.2x

EV / OpFCF 8.5x 10.7x 8.6x 7.1x 6.3x

Per share data (p) Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e Financial structure* Risk

EPS restated 55.79 53.85 55.37 62.46 67.81 Gearing 09 42% Risk rating 1.41

EPS (IBES) 56.97 50.17 47.75 51.73 50.10 Debt/Mkt cap 09 19% Beta * 0.83

CFPS 72.52 56.18 65.22 72.57 78.05 Debt/EBITDA 09 1.2x 1y HV 45.6

BVPS 190.10 205.67 228.89 258.35 291.43 * for FY ending Dec. 09e

Net dividend 23.80 24.70 26.24 28.08 30.04

Accounts (GBPm) Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e CAGR 2005/2009 2009/2012 Performance 1w 1m 3m 6m 12m YTD

Sales 887 896 885 913 927 Sales 0.0% 1.2% Absolute (4%) 2% 17% 7% (11%) (4%)

EBITDA 186 182 188 205 215 EBITDA (0.6%) 5.8% Rel. sector (5%) (4%) (1%) (12%) (3%) (14%)

EBIT 174 166 169 186 196 EBIT 1.3% 5.8% Rel. DJ STOXX50 (5%) (1%) 1% (23%) 2% (19%)

Net attributable profit restated 137 132 136 154 167 Net att. profit restated (5.2%) 8.0%

Operating free cash flow 177 140 165 185 193 Operating free cash flow (21.7%) 11.4% 12m range Price %ch. Tickers

Cash flow, group share 179 138 160 178 192 Cash flow, group share (21.0%) 11.6% High 549 (15%) Reuters UBM.L

Adjusted net debt 261 216 134 33 (74) EPS restated 10.8% 8.0% Low 369 26% Bloomberg UBM LN

Shareholders' funds, group share 464 500 557 629 709 CFPS (7.7%) 11.6%

Ratios Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e

Restated EBITDA margin 21.0% 20.3% 21.2% 22.4% 23.2%

Restated EBIT margin 19.6% 18.5% 19.1% 20.4% 21.2%

Net margin 14.6% 13.3% 13.5% 15.0% 16.2%

ROCE incl gross goodwill 18.6% 17.5% 17.1% 18.8% 19.7%

ROE 29.6% 26.5% 24.4% 24.4% 23.5%

Analyst: Andrea Beneventi (+44) 207 039 9509 - [email protected]

Free float (GBPm): 1,135 (100%)TP: 650p Upside: +39.4% EV (GBPm): 1,502Price at 22 Sep. 09: 466p

* vs DJ STOXX50

Market cap (GBPm): 1,135

304

380

456

532

608

09/08 12/08 03/09 06/09

(28%)

(14%)

0%

14%

28%

42%

Price (lhs) Price rel DJ STOXX50 (rhs)

Equities27

Academic and Scientif ic Division

38%

Professional Division

29%

Commercial Division

33%

UK15%

North America37%

Continental Europe29%

RoW19%

Academic and Scientif ic Division

31%

Professional Division

32%

Commercial Division

37%

Source: Company, Exane BNP Paribas

Breakdown of turnover by revenue stream Geographic Revenue Breakdown in 2008

Pro Forma Adj. profit per division 2009ePro Forma revenue breakdown per division 2009e

Publishing47%

Events35%

Performance Improvement

18%

INFORMA AT A GLANCE16 April – Now: Underperform11 September 2008 – 16 April 2009: NeutralJune 2007 – September 2008: Outperform

Equities28

Informa: Late cyclical pressure in STM

Recent share price rallye driven by relief on balance sheet pressure

But we now have a more cautious view on Scientific information Library budgets pressure to put pressure on subscription

renewals and one-off purchases from August 2009 Informa less aggressive than peers in pushing multi-year

contracts Informa’s STM articles are more expensive than peers

Late-cyclicality of Events not fully priced in Exhibitors’ space for H109 has been booked before the

worsening of the downturn Proprietary tracking suggests worsening trends in the Events

business

Balance sheet shows dividend pressure We are now assuming no final dividend for FY09 in order to avoid

a covenant breach in FY10 vs. consensus of around 10-12p per share

Catalysts and risks Informa currently trades on EV/EBIT09 of 8x, in line with peers

despite higher cyclicality and balance sheet risk Key negative catalysts: earnings downgrades on FY10 forecasts Key risk: higher-than-expected cost savings to protect balance

sheet

STM journal prices per citation and article (USD)

Average STM subscription length

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Reed Elsevier Springer Wiley Wolters KluwerHealth

ThomsonReuters Science

Informa

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

10.0 15.0 20.0 25.0 30.0 35.0 40.0

MIT PressWolters Kluwer

OUP

CUP Reed Elsevier

Springer

John Wiley

Informa

Price per article

Pric

e pe

r ci

tatio

n

Indsutry Average

Source: journalprices.com, Exane estimates

Equities29

Delegate Fees61%

Sponsorship15%

Exhibitors19%

Other5%

Most cyclical exposure within peers


Events business likely to suffer in 2009 45% of group revenues are late cyclical Small conferences at risk Growth in Dubai only likely to mitigate decline

in European and financial events Sponsorship revenues to large events under

growing pressure

PI organic revenue decline likely to accelerate in FY09

Management taking aggressive cost control measures Capex cut by 50% Reduction in variable costs GBP35m cost savings plan (c.2.6% of revs.)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Pearson WoltersKluw er

ReedElsevier

ThomsonReuters

Informa

Percentage of cyclically exposed revenues

Events revenue breakdown

Equities30

INFORMA (Underperform)Publishing | Media (Neutral) - United Kingdom

Stockmarket ratios Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e Enterprise value (GBPm) Dec. 09e %EV Historical price


P / CF 7.3x 9.6x 10.7x 10.5x 9.9x + Adjusted net debt 972 34%







EV / OpFCF 8.7x 10.6x 11.7x 11.7x 11.0x

Per share data (p) Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e Financial structure* Risk


EPS (IBES) 33.94 32.24 30.34 33.38 34.72 Debt/Mkt cap 09 51% Beta * 0.95



Net dividend 10.00 10.60 10.00 10.40 11.04

Accounts (GBPm) Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e CAGR 2004/2009 2009/2013 Performance 1w 1m 3m 6m 12m YTD

Sales 1,278 1,278 1,221 1,251 1,292 Sales 16.3% 1.1% Absolute 1% 16% 54% 51% 13% 58%

EBITDA 317 311 274 276 286 EBITDA 17.8% (1.2%) Rel. sector (0%) 9% 31% 25% 24% 41%

EBIT 306 299 261 263 273 EBIT 18.6% (1.4%) Rel. DJ STOXX50 (0%) 12% 34% 8% 29% 33%

Net attributable profit restated 171 168 161 166 176 Net att. profit restated 16.8% 1.5%

Operating free cash flow 319 273 239 232 239 Operating free cash flow 19.6% (2.4%) 12m range Price %ch. Tickers

Cash flow, group share 197 187 177 182 193 Cash flow, group share 14.3% 1.3% High 335 (5%) Reuters INF.L

Adjusted net debt 1,342 972 887 808 724 EPS restated 12.5% (0.1%) Low 121 164% Bloomberg INF LN

Shareholders' funds, group share 1,072 1,296 1,274 1,255 1,244 CFPS 10.1% (0.3%)

Ratios Dec. 08 Dec. 09e Dec. 10e Dec. 11e Dec. 12e



Net margin 3.8% 2.0% 3.1% 3.5% 4.2%


ROE 16.0% 13.0% 12.6% 13.2% 14.1%

Analyst: Sami Kassab (+44) 207 039 9448 - [email protected]

Free float (GBPm): 1,901 (100%)TP: 240p Upside: (24.8%) EV (GBPm): 2,885Price at 21 Sep. 09: 319p

* vs DJ STOXX50


0

107

214

321

428

09/08 12/08 03/09 06/09

(63%)

(42%)

(21%)

0%

21%

42%


Equities31

Staff cost37%

Paper, printing, binding,

production20%

Royalties expensed

10%

Amortisation of Prepublication

expenses7%

Distribution costs7%

Property costs7%

A&P and marketing

5%

IT costs2%

Depreciation of property, plant and equipment

2% Other costs3%


Operating cost breakdown (as % of revs.)Geographic breakdown of revenues

PEARSON AT A GLANCE28 July 2009 – Present: Outperform16 April 2009 – 27 July 2009: Neutral11 March 2008 – 16 April 2009: OutperformFeb. 2005 – 11 March 2008: Neutral

Equities32

14

31

7 10 11

34

35

7

18

33

21

58

91

72

56

0

10

20

30

40

50

60

70

80

90

100

Pearson Reed Elsevier ThomsonReuters

Wolters Kluw er Informa

Consumer markets Students Institutional markets Corporate markets

FT Publishing8%

IDC16%

Penguin13%

US Higher Education

20%

US School14%

International Testing

2%

International School and

ELT7%

US Assessment

and other10%

International Higher Ed.

6%

Professional4%

A solid asset mix within Media companies

A solid asset mix No major structural challenges

Little exposure to advertising revenues

Good pricing power

A solid balance sheet

With a favourable exposure to defensive client types Strongest exposure to student market

through textbooks Non-discretionary spending

Little exposure to corporate budgets

Exposure to politically sensitive school funding segment

Publishers’s exposure by client type, 2008


Divisional breakdown of adj. op. profit 2008e

Equities33

Further consensus upgrades likely

54.0

55.0

56.0

57.0

58.0

59.0

60.0

61.0

62.0

63.0

Exane Consensus

Exane vs. consensus EPS10e

Source: FactSet, Exane BNP Paribas estimates

28%

29%

30%

31%

32%

33%

34%

35%

36%

37%

38%

FY08 H109

Market share gains in US School


Despite strong share price reaction on Q209 results, we see further 25% upside

We are 9% ahead of consensus We see improving operating trends in areas of

weaknesses Rebound in new US school textbook adoption

market in 2010 confirmed by contact with Texas Education Agency

Impact of Obama stimulus plan revised upwards for 2010

Penguin to benefit from restocking activity in H209-2010

While areas of strength are powering ahead of expectations Market share gains greater than anticipated Higher Education too remain very strong in H209-

2010 International Education to remain strong as

underpinned by discussion with privately-held competitors of Pearson

Equities34

Economic recovery not yet priced in

Unlike other media stocks, Pearson share price is not pricing in any economic recovery

Blue sky scenario suggests 13% upside to DCF with a recovery in FT advertising revenues and

book retail sales in 2010 and improvement in state budgets in 2011

Stock continues to trade on historic lows in terms of forward PE despite:

Evidence of lower cyclicality than in 2000 Evidence of innovation and competition

leadership Likely improvement in growth fundamentals

0%

2%

4%

6%

8%

10%

12%

14%

DCF value EP S10e

Blue sky scenario vs. base case


0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Nov

94

No

v 9

5

No

v 96

Nov

97

No

v 9

8

No

v 99

Nov

00

No

v 0

1

Nov

02

Nov

03

No

v 04

Nov

05

No

v 0

6

No

v 07

Nov

08

Pearson one-year forward PE


Equities35

Sustainable competitive advantage drives market share gains

Market share gains in Education Pearson has been consistently gaining

market shares in: US higher education, UK school and higher ed, US testing Global professional certification

And at the FT group and Penguin FT and The Economist show growth in

print circulation in 2008 Increase in number of Penguin

bestsellers Three drivers of sustainable competitive

advantage Technology lead in Education Strong balance sheet vs. over-leveraged

competitors Access to quality content

PSON market share in US Higher Ed.

Source: Exane BNP Paribas estimates * Number digital textbooks published divided by total number of textbooks on US Higher Ed. Market

Penetration rate of digital textbooks among publishers

30.8%

31.0%

31.2%

31.4%

31.6%

31.8%

32.0%

32.2%

2005 2006 2007 2008e

54%

30% 32%

44%

17%

10%

0%

10%

20%

30%

40%

50%

60%

Pearson CengageLearning

McGraw -Hill John Wiley &Sons

Georg vonHoltzbrinck

Jones &Bartlett

Equities36

Attractive exposure to counter cyclical trends in Higher Education

Higher Education shows historical counter-cyclical trends c30% of group operating profit University enrolment increase when the job

market tightens

Growth in the number of applicants for freshman year Own analysis of applications to 2009/10

academic year show strong growth Applications for academic year starting

September 2009 is up 8% in the UK, the biggest rise in 8 years

Pricing power remains US PPI shows college textbook prices up

9% yoy in March. Stable trends

Expect consensus of +3% to revise up to our +5% in FY09

US real GDP vs. University enrolment growth

Source: NCES, Exane BNP Paribas estimates

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

19

48

19

51

19

54

19

57

19

60

19

63

19

66

19

69

19

72

19

75

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

Enrollment in degree granting institutions growth rate USGDP Real Growth Rate

University Growth in applications 2009 vs. 2008Brown 21.3%Stanford 20.0%Duke 17.0%M.I.T 17.0%Tulane 16.5%U. of Virginia 16.0%Yale 14.0%Dartmouth College 13.9%Rice 13.0%Columbia 12.0%Carnegie Mellon 12.0%Princeton 8.7%U. of Chicago 7.0%Harvard 6.3%Cornell 4.7%Northwestern 1.5%UCLA 1.0%NYU 0.5%UC Berkeley 0.4%U. of Pennsylvania 0.1%TOTAL 8.5%

Equities37

Good exposure to International Education assets

Secular growth of emerging markets (12% of revs.)

Rise in secondary and university education enrolment rates

Rise in English language learning due to globalisation

By 2018, there will be more English speakers in China than anywhere else in the world

Pearson tapping into USD1.9bn Chinese market for English language service. Now #2.

Move into the global English language certification (TOEFL) market

Successful bid for UK SAT contract (c. GBP28m annual revenues)

2009 underlying revenue growth raised from 6% to 7%

University education enrolment rates 1991-Now

Source: OECD, company, Exane BNP Paribas estimates

0

10

20

30

40

50

60

70

80

90

Turkey USA Poland Egypt South Africa India

Now

1991

UK 37%

Europe19%

Asia 15%

Africa10%

LatAm9%

EMEA6%

Other4%

Pearson International Education revenues

Equities38

US School to improve in 2010

US School textbook account for an est. 14% of group EBIT (vs. 20% in 2002) Most states show major budget gaps for FY09/10

But Pearson is gaining market share in US school A more positive view of 2010 driven by:

Rebound in new textbook adoptions from USD500 to USD900m

c.+13% impact offset by assumptions of 10% decline in open territories

Texas rather than California is the key adoption state in 2010

ARRA funds available (positive impact on Pearson School software unit)

Pent-up demand from 2008-2009 postponements

Pearson New adoption participation rate to increase from 89% to 94%

We forecast Pearson North American School to grow 6% (vs. -4% in 2009e)

Change in state textbook budgets

0

100

200

300

400

500

600

700

800

900

Sep 2008 to Aug 2009 Sep 2009 to Aug 2010 Sep 2010 to Aug 2011

Educator Quality, Information Systems and Certifications Technology/Instructional Materials

Texas instructional materials & IS budget

Equities39

New adoption calendar 2009-2011e

Discipline (Core subjects only) 2009 Est. Enrollment 2010 Est. Enrollment 2011 Est. EnrollmentMathematics Idaho (K-5) 119,397 Florida K-5 1,214,020 Tennessee (K-5) 434,933

Kentucky (K-5) 295,874 Indiana 1-8 638,447 Virginia (K-5) 537,322North Carolina K-5 661,028 Oklahoma (K-5) 281,005 Alabama (K-5) 345,645South Carolina (K-5) 311,724 West Virginia (K-5) 122,960 South Carolina (9-12) 203,514Oregon (K-5) 249,118 Florida (6-12) 1,413,764 Tennessee (6-12) 494,448South Carolina (6-8) 164,702 North Carolina (6-12) 745,561 Virginia (6-12) 657,272Idaho (6-12) 139,801 South Carolina (9-12) 203,514 Alabama (6-12) 391,625Kentucky (6-12) 340,773 Indiana (9-12) 554,471Oregon (6-8) 128,725 Oklahoma (6-12) 316,514

Oregon (9-12) 172,185West Virginia (6-12) 148,763

TOTAL Mathematics 2,411,142 5,811,204 3,064,759

Reading Oklahoma (K-5) 281,005California (K-5) 2,836,163 Texas (1-5) 1,711,551 South Carolina (K-5) 426,948Georgia (K-5) 736,294 New mexico (K-5) 147,431 Arkansas (k-5) 216,193California (6-8) 1,470,732 New Mexico (6-8) 76,051 Mississippi (K-5) 229,976Georgia (6-8) 370,519 Texas (Elective 6-8) 998,697 Arkansas (6-8) 108,658New Mexico (9-12) 97,206 Mississippi (6-8) 118,519

TOTAL Reading 5,510,914 2,933,730 1,381,299

Literature (6-12)Florida 1,413,764 Georgia (9-12) 453,015 Mississippi 250,711New Mexico (9-12) 97,206 New Mexico (6-8) 76,051 Arkansas 246,895Georgia (6-8) 370,519 Texas 2,255,752South Carolina (9-12) 203,514

TOTAL Literature 2,085,003 2,784,818 497,606

Science Mississippi 229,976 Florida (9-12) 1,413,764South Carolina (9-12) 203,514 Oregon 249,118 Indiana (9-12) 554,471Tennessee (K-5) 494,448 Mississippi 250,711 Louisiana (9-12) 326,355Tennessee (6-12) 434,933 Oregon 300,910 South Carolina (9-12) 203,514

North Carolina (9-12) 745,561Arkansas (K-5) 216,193Oklahoma (K-5) 281,005Texas (Eng/Span 2-6) 1,676,327South Carolina (K-5) 54,307South Carolina (K-5) 54,307

TOTAL Science 1,132,895 1,030,715 5,525,804

Social Studies Indiana (1-6) 474,185 West Virginia (6-12) 148,763 Alabama (K-5) 345,645Indiana (6-12) 554,471 Virginia (K-5) 537,322 Georgia (K-5) 736,294

New Mexico (K-5) 147,431Idaho (K-5) 119,397Mississippi (K-5) 229,976West Virginia (K-5) 122,960Alabama (6-12) 391,625Georgia (6-12) 823,534New Mexico (6-12) 173,257South Carolina (9-12) 203,514Mississippi (6-12) 250,711Idaho (6-12) 139,801West Virginia (6-12) 148,763

TOTAL Social Studies 1,028,656 686,085 3,832,908

Foreign Languages (6-12 only)Arkansas 246,895 Georgia 823,534 Kentucky 340,773New Mexico (9-12) 97,206 North carolina 745,561 Oregon 300,910Oklahoma 316,514 Tennessee 494,448West Virginia (7-12) 127,580 New Mexico (6-8) 76,051Mississippi 250,711 Idaho 139,801

TOTAL Foreign Languages 1,038,906 2,279,395 641,683

* we estimate that core subjects cover over 85% of total industry revenues

Total number of pupils in Core subjects 13,207,516 15,525,947 14,944,059pct change 18% -4%

Equities40

Impact from the new US administration: more in 2010 than in 2009

Source: www.nacsl.org, www.ed.gov, Exane BNP Paribas estimates

c.$98 billion Obama Stimulus Plan for US Education

Direct exposure for Pearson

$650 million to modernize classrooms, including computer, science labs and teacher

technology training.

$15.6 bn to increase grant threshold from by $500 from $4,850 to $5,350, sustaining

enrollment growth

$250 million to design and develop data systems to analyze individual student data

and to provide teachers effective tools.

Indirect exposure for Pearson

$100 million to improve instruction in science, math and engineering. Pearson Exposure: Professional development

$10 bn in Title I Fund, that can be partly used to purchase of textbooks

$65bn stabilization fund to reduce local school districts spending cuts (incl. IDEA)

Equities41

Trade book publishing to benefit from restocking

Penguin accounts for 13% of group EBIT

Destocking activity has hurt the US market in H1 but Borders mentions restocking Penguin CEO talks about restocking Destocking started in Q408

US book retail market likely to be down 2-4% Structural decline of trade reference

publishing (dictionnaries, travel guides) We estimate it accounts between 10 and 15%

of Penguin revenues

Long term favourable margin impact from the migration to ebooks

US Household spending on books 1930-2005

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007


Units Print Book Kindle Book

Basic assumption for print run 500,000 500,000 Free copies 5,000 5,000 Gross sales 495,000 495,000 Return rate (%) 35 0 Returns 173,250 0 Never Shipped (inventory obsolescence) 7,425 0 Sell through 314,325 495,000 Print, Paper, Distribution cost per copy (USD) 2 0 Royalty rate (in pct of retail price) (%) 10.0 12.5 USD Suggested Retail Price (USD) 20 10 Retail bookstore revenues (USD) per book 9,900,000 4,950,000 Retail bookstore discount (%) 45 57 Publishers revenues 3,284,696 2,022,075 Cost breakdown: Paper, Printing, Distribution 1,000,000 0 Editorial costs (art, design, editorial) 10,000 50,000 Marketing costs 400,000 600,000 Author royalties 628,650 618,750 Inventory write off 361,350 0 G&A 492,704 303,311.25 EBIT 391,992 450,013.75 EBIT margin (%) 12 22 Kindle Book EBIT vs. Print Book EBIT (%) 15

Kindle vs. print book publishing profitability

Equities42

FT Group improving the mix

FT publishing is diversifying away pressure points Disposals of non global brands Investment in ft.com drives a trebling of

visitors while print circulation declined 10% Exploiting pricing power and geographic

opportunities to offset an expected 25% decline in FT advertising revenues in FY09

IDC: cutting top line guidance Independent asset valuation services have

seen surge in demand But pression on renewals and new sales

activity led management to cut underlying revenue growth guidance for FY09 (profit guidance unchanged)

Trends in the number of UMV at ft.com

Change in global FT print circulation

Source: ABC, Exane BNP Paribas estimates

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

Jan 08 Mar 08 May 08 Jul 08 Sep 08 Nov 08 Jan 09 Mar 09 May 09

0

2

4

6

8

10

12

Jan 05 Sep 05 Jan 06 Mar 06 Mar 07 Sep 07 Mar 08 Mar 09

Mil

lio

ns

Equities43

PEARSON (Outperform)Publishing | Media (Neutral) - United Kingdom

Stockmarket ratios Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Enterprise value (GBPm) Dec. 09e %EV Historical price


P / CF 11.6x 5.0x 7.1x 6.8x 6.7x + Adjusted net debt 1,327 17%







EV / OpFCF 15.4x 9.5x 11.5x 11.1x 10.5x

Per share data (p) Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Financial structure* Risk


EPS (IBES) 57.70 57.23 57.80 61.88 Debt/Mkt cap 09 22% Beta * 0.70



Net dividend 31.60 33.80 36.50 39.42 42.58

Accounts (GBPm) Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e CAGR 1996/2009 2009/2011 Performance 1w 1m 3m 6m 12m YTD

Sales 4,218 4,811 5,444 5,546 5,766 Sales 6.3% 2.9% Absolute 2% 4% 26% 14% 25% 24%

EBITDA 652 817 881 901 951 EBITDA 7.2% 3.9% Rel. sector 1% (2%) 7% (6%) 37% 11%

EBIT 584 737 768 808 854 EBIT 7.8% 5.5% Rel. DJ STOXX50 1% 1% 10% (18%) 43% 4%


Operating free cash flow 473 752 696 700 724 Operating free cash flow 5.3% 2.0% 12m range Price %ch. Tickers

Cash flow, group share 551 1,020 850 885 906 Cash flow, group share 8.3% 3.2% High 764 (1%) Reuters PSON.L

Adjusted net debt 1,024 1,460 1,327 1,141 979 EPS restated 2.6% 7.1% Low 520 46% Bloomberg PSON LN

Shareholders' funds, group share 3,695 4,603 4,753 4,878 5,050 CFPS 6.6% 3.2%

Ratios Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e



Net margin 7.7% 8.6% 7.8% 8.1% 8.5%


ROE 10.1% 10.0% 9.8% 10.2% 10.6%


Free float (GBPm): 6,125 (100%)TP: 850p Upside: +11.9% EV (GBPm): 7,977Price at 21 Sep. 09: 760p

* vs DJ STOXX50


366

488

610

732

854

09/08 12/08 03/09 06/09

(25%)

0%

25%

50%

75%

100%


Equities44

Prepub costs and other cost

of sales50%Staff cost

43%

Operating lease rentals

3%

Amor.of capitalised IT

spending2%

Depreciation2%

REED ELSEVIER AT A GLANCE11 September 2008 – Now: Underperform11 March 2008 –September 2008: NeutralOct. 2004 – March 2008 : Underperform

Pro Forma revenue breakdown per division 2009e

Geographic revenue breakdown 2008

Pro Forma Adj. profit per division 2008e


North America56%

UK14%

The Netherlands10%

Rest of Europe12%

Rest of World8%

Operating cost as % of revs.

Science, Technology &

Medical 30%

Legal & Regulatory

27%

Risk solutions17%

Exhibitions10%

B2B magazines16%

Science, Technology &

Medical 40%

Legal & Regulatory

25%

Risk solutions18%

Exhibitions11%

B2B magazines

6%

Equities45

Dead money for a while

Bearish outlook from new CEO leads to capital increase Surprise move given CDS of 35bps, but removes refinancing risks

LexisNexis top line and margin guidance has been revised down

Exhibition and RBI below expectations

Stock likely to remain dead money until Communication of new investment budget (Autumn 2009)

Clarification of 2010 trends (subscription renewals trends in Q3 and Q409)

Positive catalyst from disposal of RBI US titles

We close shorts but prefer Pearson or Wolters Kluwer Pearson is gaining market shares while LexisNexis is under pressure

Wolters Kluwer also benefits from cost efficiency gains, reaffirmed outlook and is less expensive

Equities46

LexisNexis: into a new investment phase?

A difficult market environment Westlaw, reported below-expectation Q1 09 organic

revenue growth (+2%), guided on further slowdown

Further deterioration of law firms environment in Q109

LexisNexis faces increased competitive pressure Thomson Reuters is gaining share on Lexis Nexis

Librarian preferences for Thomson West are at a record high

Structural pressure in directories and news aggregation business

Cost saving opportunities to be largely reinvested We believe cost effeciency programme likely to be

reinvested in the product mix

We have cut our op. margins by 70bps and stand below consensus

Peer Monitor Index vs. legal information organic revenue growth

24%

25%

26%

27%

28%

29%

30%

31%

2009E 2010E 2011E

Exane BNP Paribas Consensus

Exane BNP Paribas vs. consensus legal margins expectations


1%2%3%4%5%6%7%8%9%

H1 06 H2 06 H1 07 H2 07 H1 08 H2 08 Q1

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

LexisNexis USA org. rev. growth TRIL Legal org. rev. growth PMI (rhs)

Source: Hildebrandt, Exane BNP Paribas estimates

Equities47

Scientific publishing likely to decline due to late cyclical pressure

2010 top line at risk 2009 to benefit from late cyclicality but 2010

revenues likely to decline due to library budget pressure

Small competitors have announced flat to declining prices for 2010

Springer has announced 5% price increases for 2010

Consensus still likely to come down (+3% vs. -1%)

Past 2010 pricing power unlikely to return Price increases have driven 80% + of historic top

line growth of STM publishing revenues 2010 pricing pressure likely to persist due to long

term nature of scientific journal subscriptions Growth in open access mandates adds to long

term pricing pressure. New bill introduced to US congress could accelerate the shift

Proprietary contacts with managers of scientific publishers suggests lower price increases than before.

2010 price increases to journal subscriptions

0

10

20

30

40

50

60

70

80

90

Q1 02

Q3 02

Q1 03

Q3 03

Q1 04

Q3 04

Q1 05

Q3 05

Q1 06

Q3 06

Q1 07

Q3 07

Q1 08

Q3 08

Q1 09

Nb. Of open access mandates

Source: Roarmap, Exane BNP Paribas estimates

Publisher Journal price increase Springer 5%Taylor and Francis (1-2-3 offer) 1%AMA (including JAMA) 0%American Mathematical Society 0%American Physiologial Society 0%American Society of Microbiology 0%Annals of Internal Medecine 0%ASM Journals 0%Brill 0%Duke University Press 0%IOP 0%National Academy of Sciences - PNAS 0%OECD Publishing 0%Oxford University Press 0%Rockfeller U. Press 0%SPIE -10%

Equities48

RBI and Reed Exhibitions under cyclical pressure

Deterioration in Reed Exhibitions went through difficult months of May and June Only broker on the street to have a monthly tracking

of exhibitor and visitor numbers to Reed Exhibitions

Trends have deteriorated with a double digit decline in exhibitors in May & June

Consensus is too optimistic (-16% vs. -10% for FY09)

Ongoing weakness to persist at RBI More negative view of RBI online (job classified

advertising)

Cautious view from CEO

Additional disposal and closure of print titles likely

High operating leverage likely to put pressure on margins

Y-o-y decline in nb. of exhibitors at Reed Exhibitions

0

20

40

60

80

100

120

140

160

180

February 2008 June 2009

Number of classified ads on totaljobs.com


Nb. of shows tracked



Growth

January 13 8,338 8,097 -3%February 18 6,376 6,263 -2%

March 17 5,145 4,553 -12%

April 14 8,064 7,793 -3%

May 11 9,677 6,792 -30%

June 10 8,747 7,848 -10%July 7 2,781 2,799 1%August 1 164 167 2%YTD 91 49,292 44,312 -10%

Equities49

REED ELSEVIER PLC (Underperform)Publishing | Media (Neutral) - United Kingdom

Stockmarket ratios Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Enterprise value (GBPm) Dec. 09e %EV Historical price




P / BVPS 5.14x 12.57x 5.18x 4.78x 4.32x + Revalued minority interests 4,201 29%





EV / OpFCF 7.8x 14.4x 10.9x 9.1x 8.3x

Per share data (p) Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Financial structure* Risk





Net dividend 18.17 18.90 19.29 19.47 20.45

Accounts (GBPm) Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e CAGR 1999/2009 2009/2011 Performance 1w 1m 3m 6m 12m YTD

Sales 5,331 5,334 6,045 6,040 6,134 Sales 2.6% 0.7% Absolute 1% 11% 5% (0%) (17%) (1%)

EBITDA 1,287 1,507 1,712 1,719 1,769 EBITDA (0.1%) 1.7% Rel. sector (1%) 5% (11%) (18%) (9%) (11%)

EBIT 1,100 1,340 1,519 1,499 1,552 EBIT 3.4% 1.1% Rel. DJ STOXX50 (0%) 8% (9%) (28%) (5%) (17%)

Net attributable profit restated 452 486 485 513 545 Net att. profit restated (11.2%) 6.0%

Operating free cash flow 1,893 1,234 1,315 1,525 1,585 Operating free cash flow 4.4% 9.8% 12m range Price %ch. Tickers

Cash flow, group share 735 697 636 727 758 Cash flow, group share 4.1% 9.2% High 603 (20%) Reuters REL.L

Adjusted net debt 662 5,767 4,308 3,779 3,189 EPS restated (9.7%) 2.8% Low 420 15% Bloomberg REL LN

Shareholders' funds, group share 1,568 504 1,111 1,209 1,342 CFPS 7.5% 5.9%

Ratios Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Calendar

Restated EBITDA margin 24.2% 28.3% 28.3% 28.5% 28.8% Q3 2009 Results


Net margin 16.8% 8.7% 6.9% 11.1% 12.1%


ROE 28.8% 96.4% 43.7% 42.4% 40.6%


Free float (GBPm): 5,496 (100%)TP: 440p Upside: (8.5%) EV (GBPm): 14,332Price at 21 Sep. 09: 481p

* vs DJ STOXX50

12 Nov. 09


332

415

498

581

664

09/08 12/08 03/09 06/09

(32%)

(16%)

0%

16%

32%

48%


Equities50

legal27%

Financial59%

Scientific5%

Healthcare4%

Tax & Acct.5% legal

40%

Financial43%

Tax & Acct.7%

Healthcare4%

Scientific6%


Thomson-Reuters pro forma adj. EBIT breakdown 2009e

Thomson-Reuters pro forma revenue breakdown 2009e

THOMSON REUTERS AT A GLANCE24 October 2008 – Now: Neutral11 September 2008 – 24 October 2008: Outperform11 March 2008 – September 2008: Underperform June 2007 – March 2008: Outperform

USD62%GBP

10%

EUR15%

Other13%

Breakdown of 2008 revenues by currency

Equities51

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

YoY change 12 month rolling

Markets division: Past the worst?

Headcount-related revenues are driven by number of terminals

Q209 organic revenue growth in TR Markets Past the peak in banking layoffs and hedge fund

destruction? 2010 to benefit from rollout of new products

Pockets of growth remain Regulatory and technological changes drive revenue

growth in Enterprise division (c. 20% of TRM) IDC guides for +5% organic revenue growth in 2009 2% price increases for FY09 Acceleration of buy vs. build within large financial firms (risk

solutions, client reporting, process automation)

Areas of risks as well 10% of TRM revs are volume-based (mostly in FX trading) ICAP reports declining trading volumes in Q109

A more positive view of TRM with forecasts revised up and ahead of consensus

Resilience of flagship market data terminals

Source: ICAP, HFR, Bloomberg, Exane BNP Paribas

Number of layoffs in banking

Dec-04 Dec-05 Dec-06 Dec-07 Dec-08

Number of Reuters 3000 Xtra accesses 88 100 112 124 125

Number or Reuters Dealing accesses 18 18 18 18 18

Yoy change in FX trading volumes

0

20,000

40,000

60,000

80,000

100,000

120,000

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09

Americas Europe Asia

Equities52

TR Professional deserves a valuation premium to Reed Elsevier and Wolters Kluwer

TRIL better positioned than REL in Legal Less than transactional revenues Less exposure to small law firms and

directories Exposure to counter-cyclical law textbooks

But likely to suffer strong pricing pressure from large law firms

TRIL better positioned than WKL in Tax Due to better online platform and strong

investments But WKL launches new platform in March 09

TRIL better than REL in Scientific and Healthcare as not exposed to open access risk

TR Professional deserves 1-pt higher EV/EBIT multiple than REL or WKL

TRIL vs. WKL tax organic revenue growth

Percentage of revenue from small law firms

Source: Company data, Exane BNP Paribas estimates

15%

30%

0%

5%

10%

15%

20%

25%

30%

35%

Thomson Reuters Reed Elsevier

0%

2%

4%

6%

8%

10%

12%

2004 2005 2006 2007 2008 2009 2010 2011

Thomson Reuters Tax & Accounting Wolters Kluwer Tax, Accounting, Legal

Equities53

Best cost savings play within European Media

TRIL offers the largest scope for cost savings within publishers and European Media at 10% of revenues

Integration of Reuters Efficiency gains in offshoring and IT

Rationalizing overlapping corporate functions is the main driver of integration cost savings

Several projects not included in raised USD1.4bn cost savings

Migration from two platform to one common platform post 2011e

Further reduction in the number of datacentres

But valuation is now full. Remain Neutral. Support from Woodbridge buyback (now owns 20% of TRIL PLC)

PLC to be delisted by end of Q3

Sources of integration cost savings

Cost savings opportunities amongst publishers

Source: Company data, Exane BNP Paribas estimates

Consolidate overlapping sales

and support20%

Eliminate duplicative technology

15%

Harmonize and simplify product

development20%

Rationalize overlapping

corporate functions30%

Eliminate redundant content sets

15%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Thomson Reuters Reed Elsevier Wolters Kluwer

% of opex 2008 % of revenues

Equities54

Corporate & Financial Services

19%

Legal, Tax & Regulatory

Europe38%

Health15%

Tax, Accounting & Legal

28%

Corporate & Financial Services

14%

Legal, Tax & Regulatory

Europe40%

Health21%

Tax, Accounting & Legal

25%


Geographic Revenue Breakdown Revenue breakdown by formats 2008

Pro Forma Adj. profit per division 2008Pro Forma revenue breakdown per division 2008

North America52%

Europe45%

Asie Pacific3%

WOLTERS KLUWER AT A GLANCE

16-April 2009- Now: Outperform17 June 2008 – 16 April 2009: NeutralOct. 2003 – June 2008: Outperform

Print36%

Online29%

Services15%

Softw are20%

Equities55

Bad news in CFS seems priced in

Valuation now factors in pressure on the top line Current share price reflects group’s wearker

revenues in 2008 Tentative signs of improvement in early

2009 will impact price

CFS: past the trough Plummetting lending activity in the US in

2008 stalled top-line growth 3% revenue decline expected in 2009 on

the back of US Federal Reserve actions Pick up of mortgage applications since

January Positive outlook for refinancing Risk: acceleration of community banks

consolidation

Mortgage origination forecasts for 2009-11e

Yoy changes in US mortgage applications

Source: Mortgage Bankers Association, Exane BNP Paribas estimates

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Q1

05

Q2

05

Q3

05

Q4

05

Q1

06

Q2

06

Q3

06

Q4

06

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

e

Q2

09

e

Q3

09

e

Q4

09

e

Q1

10

e

Q2

10

e

Q3

10

e

Q4

10

e

Q1

11

e

Q2

11

e

Q3

11

e

Q4

11

e

(50%)(30%)(10%)

10%30%50%70%90%

110%130%150%

Jan

08

Feb 0

8

Mar

08

Apr 0

8

May

08

Jun

08

Jul 0

8

Aug 0

8

Sep 0

8

Oct 08

Nov 0

8

Dec 0

8

Jan

09

Feb 0

9

Mar

09

Apr 0

9

May

09

Jun

09

Jul 0

9

Equities56

And Health issues appear under control

Issue 1: book destocking under control

Increase in sales to inventory ratio (from 1 to 3x)

Growth in revenues of professional publishing books in the US in January 2009

Growth in enrolment to US medical colleges and in recruitment of nurses in Feb. 09.

Issue 2: Positive impact of contract gains (BMS, FDA) vs. losses (Pfizer)

Issue 3: consolidation of client base and rise of generics remain an issue

But also impacts Elsevier, UBM, Publicis

Lack of international network an issue vs. IMS

Enrolment growth into US medical colleges

Source: AAMC, Exane BNP Paribas estimates

Inventory to sale ratio of Health book wholesellers

Source: Wolters Kluwer

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2000 2001 2002 2003 2004 2005 2006 2007 2008

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2007 2009

Equities57

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Tax & Accounting Legal

0%

5%

10%

15%

20%

25%

Wolters Kluwer Thomson Reuters Reed Elsevier

Best exposure to Tax & Regulation information

Expect increase in tax, accounting and regulatory activity in 2009-2011 Obama pledge to reform US tax code

Move from US GAAP to IFRS

More stringent banking compliance rule

US tax a better place to be than US legal Tax & Accounting client base is already

consolidated (vs. acceleration in consolidation of US law firm market)

Tax & Accounting firms see revenue growth in H208 vs. 6% fall in demand for legal services in Q4

Q1 growth in US tax information market likely, vs. decline in US legal according to CEO of BNA.

Potential to improve market shares with launch of new platform (Intelliconnect)

We expect underlying revenue growth in FY09-11e

Source: AAMC, WebCPA, Exane BNP Paribas estimates

Exposure to Tax & Accounting information (pct of group revs. 2009e)

Weight of top 6 firms in US accounting and legal services market

Equities58

Cost efficiency plan not priced in

Market seems not to have priced in Springboard cost savings plan

Springboard is to deliver EUR120m of run-rate cost savings by 2011: Offshoring of an additional 1000 FTE Reducing IT costs by 8–12% Increasing the sourcing programme from

40% of group spending with suppliers to 75% Re-engineering content manufacturing

processes

Management has a track record of exceeding cost savings guidance Raised guidance twice in 2004 and 2005 Already raised Springboard cost savings

guidance in Q308 Execution risk appears low

Guidance vs. Actual cost savings achievement

0

20

40

60

80

100

120

140

2008 2009 2010 2011

Est. Springboard cost savings (EURm)


0

20

40

60

80

100

120

140

160

180

Wolters Kluwer 2004-2007cost savings (EURm)

Thomson Plus (USDm) Reuters Core Plus2006-2007(GBPm)

Guidance

Actual

Equities59

Acquisition track record: several successes one marked failure

Questionable acquisition track record

Average 2008 acquisitions on 11x EV/EBITA

UpToDate considered expensive

Our view: many good acquisitions and one marked failure

Provation, DeAgostini, ATX, Kleinrock have proven good deals

NDC has proven a bad deal

Reported ROIC on an improving trend

Acquisition risk should not be an issue in 2009 as management has given priority on deleveraging the balance sheet

Source: Company, Exane BNP Paribas estimates

Acquisition track record

Acquisitions including Revenue CAGR (%)

EPS accretive in Year 1

Year ROIC exceeds WACC

2005 DeAgostini, Nolis, Osra, Eon, Best Case, Tripoint, Entyre, Amerisearch, Boucher

6 Yes 2

2006 NDC, Heymanns, ProVation, Sage, ATX, Kleinrock, UTS Taxwise

3 Yes 5

2007 MCFR, TeamMate, GEE, AppOne, Europea del Derecho

6 Yes 2

2008 MYOB, Addison, UpToDate, IntelliTax 10 Yes 2

WKL’s reported ROIC

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2003 2004 2005 2006 2007 2008

Equities60

WOLTERS KLUWER (Outperform)Publishing | Media (Neutral) - Netherlands

Stockmarket ratios Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Enterprise value (EURm) Dec. 09e %EV Historical price









EV / OpFCF 13.9x 12.3x 11.9x 9.4x 7.9x

Per share data (EUR) Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Financial structure* Risk





Net dividend 0.64 0.65 0.68 0.69 0.75

Accounts (EURm) Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e CAGR 1996/2009 2009/2011 Performance 1w 1m 3m 6m 12m YTD

Sales 3,413 3,374 3,491 3,439 3,542 Sales 4.5% 0.7% Absolute 4% 5% 19% 33% (6%) 13%

EBITDA 747 756 812 827 903 EBITDA 3.6% 5.5% Rel. sector 3% (1%) 1% 10% 3% 1%

EBIT 667 678 722 723 763 EBIT 4.0% 2.8% Rel. DJ STOXX50 3% 2% 4% (5%) 7% (5%)


Operating free cash flow 601 566 530 639 725 Operating free cash flow (1.1%) 16.9% 12m range Price %ch. Tickers

Cash flow, group share 547 544 508 576 658 Cash flow, group share (0.0%) 13.8% High 16.3 (10%) Reuters WLSNc.AS

Adjusted net debt 1,689 2,252 2,056 1,757 1,380 EPS restated 4.1% 2.0% Low 11.5 28% Bloomberg WKL NA

Shareholders' funds, group share 1,291 1,414 1,529 1,684 1,881 CFPS (0.6%) 11.4%

Ratios Dec. 07 Dec. 08 Dec. 09e Dec. 10e Dec. 11e Calendar

Restated EBITDA margin 21.9% 22.4% 23.3% 24.1% 25.5% FY 2009 Sales and Results


Net margin 9.7% 9.3% 7.8% 8.5% 9.5%


ROE 32.6% 29.9% 29.3% 26.6% 25.9%


Free float (EURm): 4,246 (100%)TP: EUR18 Upside: +22.8% EV (EURm): 6,299Price at 21 Sep. 09: EUR14.7

* vs DJ STOXX50

24 Feb. 10

Market cap (EURm): 4,246

10

12

14

16

09/08 12/08 03/09 06/09

(24%)

(12%)

0%

12%

24%

36%


Equities

Disclaimer

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october 2009 sami kassab andrea beneventi adrien de saint hilaire direct tel.: +44 (0) 20 7039 9448...

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