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UBS Warburg Conference New York City December 10, 2002.

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Presentation on theme: "UBS Warburg Conference New York City December 10, 2002."— Presentation transcript:

1 UBS Warburg Conference New York City December 10, 2002

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3 December 1998:$4.2 bn Simon & Schuster acquisition September 2000:$2.5 bn NCS acquisition

4 December 1998:$4.2 bn Simon & Schuster acquisition  #1 in educational publishing (school & college) –Sustained market leadership  Benefits of scale –Integrated benefits delivered; now working across book publishing  Cash generative –Consistent cash conversion; scope on working capital  Value creation –Earning our cost of capital

5  #1 in Assessment & Training –All major contracts renewed; new business won  #1 in Enterprise & Curriculum software –Strong competitive position; new products launched  Benefits of scale –In products and markets  Good cash profile –Lite working capital  Value creation –15% CAGR in Revenues; 20%+ CAGR in operating income September 2000:$2.5 bn NCS acquisition

6 2002: breadth & depth of products and customers School & ELT 42% Federal 18% College 29% Professional 11% ProductsCustomers Shaded Areas Indicate Domestic Note: Estimate of ’02 revenue breakdown

7 What is Government solutions? How fast can educational publishing grow? Does “Integrated Learning” still apply?

8 What is Government Solutions?  What do we do?  Is it a good business to be in?  How does it change the revenue/margin/cash mix?

9 We do for federal agencies what we do for state education boards and local school districts  Manage data  Score applications/tests  Enable them to share information  Support education and training and …  Deal with public inquiries Government Solutions: What do we do?

10 “[President Bush] has laid out a plan to transfer as many as 850,000 government jobs – nearly half the federal civilian workforce – to private companies as a way to save money and improve performance.” Government may make private nearly half of its civilian jobs The New York Times, November 15, 2002 Government Solutions: Is it a good business to be in?

11  Strong revenue growth –Can come in spurts –Broader contract portfolio being built  12%+ margins –Scope for improvement  Cash –Modest capital investment –A good customer Government Solutions: the revenue/margin/cash mix?

12 What is Government solutions? How fast can educational publishing grow? Does “Integrated Learning” still apply?

13 How fast can educational publishing grow? School:Increased federal funding or lower state and local tax revenues? College:Market-wide growth or Pearson- specific? School & College:1990s’ growth levels sustainable in the 2000s?

14 School: Increased federal funding or lower state & local tax revenues?  No benefit from new federal funding  A quieter adoption year  Open territory spending down on ‘01 2002

15 School: Increased federal funding or lower state & local tax revenues?  Pearson competing for more adoption dollars –65% in ’02; 85% in ’03-’04  School spending lags recession  Reading First  What gets tested, gets taught, gets bought 2003 - 2004

16 College: market-wide or Pearson-specific?  Strong market-wide growth –Demographics –Jobs market  And Pearson out-performance –Full benefits of integration –Addison Wesley matching Prentice Hall performance –Technology and Custom Publishing leadership

17 School & College: 1990s’ growth levels sustainable in 2000s? Some cyclicality in K-12 markets –Adoptions schedules –State and local budgets For 20 years, K-16 markets have grown faster than: –Enrollments –GDP –Overall education spending This trend should continue: –Standards-based learning –No Child Left Behind –Economic value of a degree

18 What is Government solutions? How fast can educational publishing grow? Does “Integrated Learning” still apply?

19 –Will schools pay for online content & services? –Is there demand for “integrated learning”

20 Will customers pay for online content and services?  $140m in curriculum software sales  $100m in enterprise software sales

21 Is there a demand for “integrated learning”?  No Child Left Behind creates the demand –Test –Report –Remediate  E-rate funding has created the platform

22 Where students, parents, teachers, and administrators harmonize their efforts for maximum student achievement. A comprehensive, integrated family of Web-based applications that: –Revolutionizes K-12 education with a new category of technology: the online education community –Meets NCLB requirements with integrated standards-aligned content, assessment, student performance management, and parent communication –Helps all members of the education communitystudents, parents, teachers, and administratorsachieve success

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24 What is Government solutions? How fast can educational publishing grow? Does “Integrated Learning” still apply?

25  We like working for the federal government  The future of educational publishing still looks pretty bright  Integrated Learning is coming fairly soon to a school near you


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