ARCOURT: FINANCING ACCELERATED REVENUE AND PROFIT GROWTH Preliminary Results 2000 Execution and Delivery on Strategy.

ARCOURT: FINANCING

ACCELERATED REVENUE AND PROFIT GROWTHPreliminary Results 2000Execution and Delivery on Strategy

HIGHLIGHTS

• Results ahead of target

• Execution and delivery of strategy on track across all businesses

• Acquisition of Harcourt is major opportunity

• Confidence in future growth targets

Financial Results 2000

Mark ArmourChief Financial Officer

ADJUSTED PROFIT AND LOSS

Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items

Turnover

Adjusted operating profit

Operating margin

Net interest expense

Adjusted profit before tax

%

%

%

% changeconstant

1999€m

2000€m

1999£m

2000£m

3390

1204792

23.4%23.4%

(125)(82)

1079710

12 months to 31 December

51533768

793

21.0%

(103)

690

6180

1301

21.0%

(169)

1132

+9

-1

-3

SCIENCE & MEDICAL

• Underlying revenues up 8%; operating profit up 12%

• Strong take up of ScienceDirect and lower attrition

• ScienceDirect adds 2% pts to revenue growth

• Additional investment funded by cost savings

REVENUES UP 7% - OPERATING PROFIT UP 12% - MARGIN 36.4%

Revenues €m£m Operating profit

€m£m

652

991

1137

693

0

200

400

600

800

1000

1200

1999 20001999 2000

231

351

413

252

0

100

200

300

400

1999 20001999 2000

LEGAL

• Underlying revenues up 3%; operating profit down 19%

• Substantial investment programme; major cost savings

• LEXIS online up 5%; NEXIS online up 4%

• LEXIS-NEXIS International solid performance

REVENUES UP 5% - OPERATING PROFIT DOWN 19% - MARGIN 19.7%

€m£m €m£m

1087

1652

1970

1201

0

400

800

1200

1600

2000

1999 20001999 2000

282

428389

237

0

100

200

300

400

500

1999 20001999 2000

Revenues Operating profit

EDUCATION

• Rigby US supplementary revenues up 37%

• UK secondary revenues up 23%

• Reduced funding for UK elementary literacy

REVENUES UP 9% - OPERATING PROFIT UP 15% - MARGIN 19.8%

€m£m €m£m

181

275

331

202

0

100

200

300

400

1999 20001999 2000

34

52

66

40

0

20

40

60

80

100

1999 20001999 2000

Revenues Operating profit

BUSINESS

• Underlying revenues up 4%; operating profit up 3%

• Revenue recovery at Cahners and restructuring benefits

• Good growth in other markets; exhibitions adverse show cycling

• Significant increase in investment; cost savings delivered

REVENUES UP 12% - OPERATING PROFIT UP 7% - MARGIN 15.8%

€m£m €m£m

1470

2235

2742

1672

0

800

1600

2400

3200

1999 20001999 2000

245

373

433

264

0

100

200

300

400

500

1999 20001999 2000

Revenues Operating profit

ADJUSTED PROFIT BEFORE TAX : RECONCILIATION

Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items

1999 Adjusted profit before tax

Acquisitions

Currency translation effect

%change€m

%change

710

12 months to 31 December 2000 £m

2000 adjusted profit before tax

Base business

(8)

(1)

-1%

0%

1079

(12)

Disposals

Equity issue

(8) -1% (12)

5 +1% 8

82

(8) -1% (13) -1%

-1%

-1%

+1%

+8%

690 -3% 1132 +5%

CASH FLOW

Adjusted operating cash flow

% conversion

Free cash flow

Acquisition spend

1999 €m

2000€m

1999£m

12 months to 31 December 2000

£m

Total cash outflow

Other exceptional items

780 1186

98% 98%

775

98%

(167) (1499)

1271

98%

(914) (254)

(41) (803)(490) (61)

334 187 548 286

Disposals 153 3 251 5

(63) (64) (103) (98)

EARNINGS AND DIVIDENDS

• Adjusted EPS

• Equalised dividends

+4%

+4%

ElsevierReed International

€0.59

€0.28

-5%

0%

23.3p

10.0p

-5%

0%

changeconstant

HARCOURT REPORTED 2000 RESULTS

Notes: Segment analysis adjusted from reported figures to reallocate revenues to respective businessesAdjusted operating profit is stated before amortisation of goodwill/intangible assetsBusinesses to be on-sold excluded; also corporate expenses of $26 million (1999 $21 million)

RevenueYear to 31 October

STM

Education and Testing

Adjusted Operating Profit

2000 1999 Growth 2000 1999 Growth $m $m % $m $m %

688 633 +9% 161 138 +17%

990 787 +26% 210 159 +32%

1678 1420 +18% 371 297 +25%

Strategy and Execution

Crispin DavisChief Executive Officer

KEY STRATEGIC FOUNDATIONS

• Focus on core businesses

• Upgrade management effectiveness

• Deliver demonstrably superior Internet products

• Substantial upgrade of marketing and sales

• Significant increase in investment spend

• Aggressive cost savings programme

• Build global capability and leadership

• Target infill acquisitions/alliances

CLEAR STRUCTURE AND MANAGEMENT

Group CEO

Crispin Davis

CEO

Andrew Prozes

CFOMark Armour

CTOKeith McGarr

EDUCATION

HR DirectorJean Luc Augustin

LEGALCEO

Andrew Prozes

BUSINESSCEO

Gerard van de Aast

SCIENCECEO

Derk Haank

EDUCATION

SCIENCE & MEDICAL: DELIVERY OF STRATEGIC MILESTONES

• ScienceDirect successful rollout

• Customised products launched and well received

• Sales force expanded

• New pricing policy affirmed

• Investment programme executed as planned

• Targeted cost savings exceeded

• Acquisition of Harcourt STM announced

+

SCIENCE & MEDICAL: PROVEN BUSINESS MODEL

UPGRADEDSCIENCEDIRECT

PRODUCT

HIGHERPENETRATION

HIGHER USAGE

INTERNET MIGRATIONCUSTOMER PREFERENCE

MODERATEPRICINGPOLICY

AGGRESSIVESALES ANDMARKETING

LOWERATTRITION

ACCELERATED REVENUE GROWTH

4.1

6.0

8.5

5.2

0

2

4

6

8

10

1997 1998 1999 2000

%

SCIENCE & MEDICAL: REVERSAL IN ATTRITION

1015

25

35

45

65

0

10

20

30

40

50

60

70

Mar 99 Aug 99 Feb 00 Aug 00 Dec 00 Dec 01

%

SCIENCEDIRECT: INCREASE IN PENETRATION

SCIENCEDIRECT: INCREASE IN USAGE

0

2

4

6

8

10

12

14

16

Jan99

Feb99

Mar99

Apr99

May99

Jun99

Jul99

Aug99

Sep99

Oct99

Nov99

Dec99

Jan00

Feb00

Mar00

Apr00

May00

Jun00

Jul00

Aug00

Sep00

Oct00

Nov00

No of Page Views

m

HARCOURT: STM

• Excellent fit with Elsevier Science

• Outstanding portfolio in Science and Medical

• Strong platform for faster internet growth

• Well positioned to take on integration and expansion

ACCELERATE REVENUE AND PROFIT GROWTH

SCIENCE & MEDICAL: 2001 PRIORITIES

• Further upgrade of ScienceDirect

- new customised products

- enrich content, including backfiles

- add navigation tools

• Broaden user base

- upsell existing users

- expand to new users

- increase overall usage

• Successfully integrate Harcourt STM

- reorganise medical operations on key clinical disciplines

- realise $40 million of synergies

- accelerate online solutions

LEGAL: DELIVERY OF STRATEGIC MILESTONES

• Deliver competitive online product v West

• Achieve parity preference in US Law Schools

• Introduce US small law turnaround programme

• Launch of legal portal

• Launch of significantly improved nexis.com product

• Investment in upgraded products, sales, marketing

• Targeted cost savings delivered

• Acquisitions to expand global capability and reach

LEGAL: SOUND BUSINESS MODEL

ACCELERATED MIGRATIONACCELERATED IGRATION

ACCELERATED REVENUE GROWTH

CUSTOMER PREFERENCEINTERNET MIGRATION

US LAW SCHOOL PREFERENCE

SMALL LAWPROGRAMME

UPGRADEDSALES AND MARKETING

COMPETITIVEPRODUCTlexis.comnexis.com

HIGHER USAGE

NEWSALES

STRONGERRENEWALS

LEGAL : PRODUCT UPGRADE PROGRAMME

TAXCCH/Tax Analysts

LEGALExpanded E-treatises

Improved Linkages

CITATORFunctionality

Upgrade

CASE SUMMARIES300 700 Editors

$19m Investment in 2001

WEB RELIABILITYPrivate Nodes

EASE OF USENew lexis.com

New WebSphere Platform

NEWS & BUSINESSFT Profile/

Company Dossier

PUBLIC RECORDSRiskwise/Corp America

Acquisitions

LEGAL: US LAW SCHOOL PROGRAMME

0

10

20

30

40

50

60

Fall 1997 Fall 1998 Spring1999

Fall 1999 Spring2000

Fall 2000

%

LEXIS Preference Overall

1519

22

3235

54

LAUNCH OF LEGAL PORTAL FOR US SMALL LAW

+13% REVENUE; STRONG SHARE GROWTHOUTSTANDING REVERSAL: REVENUE GROWTH: 2000: +4%; 1999: -5%JANUARY 2001: 43,500 REGISTERED USERS, 8.2M PAGE VIEWS, AVERAGE TIME 18 MINUTES

LexisONE.com

Paid LegalResearch

Legal and Business News

ClientDevelopment

Community

Legal FirmSuppliesPractice

Management

ProfessionalDevelopment

Travel, SportsEntertainment etc

Legal InternetGuide

Free CaseLaw, Forms etc

LEGAL: NEXIS.COM RELAUNCH

SUBSTANTIAL REVENUE PROGRESS: +18%

SUBSTANTIAL REVENUE PROGRESS: +18%

+13% REVENUE; STRONG SHARE GROWTHOUTSTANDING REVERSAL: REVENUE GROWTH: 2000: +4%; 1999: -5%REVENUE GROWTH TURNAROUND: 2000: +4%; 1999: -4%

Plain EnglishSearch

Simple SearchResults Reports

Point and Click Access to News, Company, Legislative Sources

Tailored Results

LEGAL: ACQUISITIONS AND ALLIANCES

+13% REVENUE; STRONG SHARE GROWTHOUTSTANDING REVERSAL: REVENUE GROWTH: 2000: +4%; 1999: -5%

US Legal MealeysCCH allianceTax Analysts alliance

State code publishingLong term licenseLong term license

US Corporate/Federal FT ProfileRiskwisePress Access

FT archive and licenseOnline validationMedia database and planningsoftware

International PublitecsaEclipseConosurTHC Press

ChileUKChileHong Kong

BUILDING GLOBAL CAPABILITY

LEGAL: 2001 PRIORITIES

• Continued product upgrade: content, customisation, functionality

• Build targeted marketing/sales efforts behind upgraded products

• Monetise increased usage

• Improve print performances within on-line migration strategy

• Adopt Lexis Nexis as global brand and product platform

• Expand geographical presence in key markets

EDUCATION: 2001 PRIORITIES

• Maintain momentum in existing business

- continued share progress in UK

- capitalise on new Rigby supplemental programmes

• Integrate Harcourt Education and Testing businesses

- maintain momentum in US state adoptions

- combine Steck-Vaughn and Rigby

- step up investment in US secondary

- accelerate Testing through Internet delivery and services

- expand e-learning programme: +18%

• Investment programme driving print growth

• Successful launch of Internet portals

• Expansion of portfolio through acquisitions and launches

• Major cost savings delivered

• Global division established

• Focus on fewer, faster growing sectors

BUSINESS: DELIVERY ON STRATEGIC MILESTONES

BUSINESS: NEW AND UPGRADED PORTALS LAUNCHED

INTERNET B2B REVENUE GROWTH

SUBSTANTIAL REVENUE PROGRESS: +18%

SUBSTANTIAL REVENUE PROGRESS: +18%

+13% REVENUE; STRONG SHARE GROWTH

• Traffic and revenues building

• Size of market opportunity smaller

• Investment slightly reduced and reprioritised

0

20

40

60

80

1999 2000 2001

Organic Including Acquisitions

15

39

70

£m

BUSINESS: PORTFOLIO REFOCUS AND EXPANSION

+13% REVENUE; STRONG SHARE GROWTHOUTSTANDING REVERSAL: REVENUE GROWTH: 2000: +4%; 1999: -5%FEWER, FASTER GROWING, HIGHER QUALITY SECTORS

Construction

Entertainment

Global Chemicals

European Exhibitions

Travel

US Auto, Metals, Food Processing

Tuition Businesses

Bowker Directories

Non Core Titles, Exhibitions, Reference

+ -

Electronics

• Maintain print momentum through upgraded product/sales programmes

• Maximise revenues and returns from internet programme

• Drive global strategy: organisation, portfolio, platforms, acquisitions/disposals

• Complete integration of CMD Group and Miller Freeman Europe

• Respond quickly to changing economic environment

BUSINESS: 2001 PRIORITIES

INTERNET REVENUES

+13% REVENUE; STRONG SHARE GROWTHOUTSTANDING REVERSAL: REVENUE GROWTH: 2000: +4%; 1999: -5%2000 TARGET EXCEEDED

0

200

400

600

800

1000

1999 2000 2001 2002

Target

436

120

Actual

700

1000£m

PROGRESS ON HARCOURT ACQUISITION

• Results (year to October 2000) reaffirmed very positive momentum

• Meetings with management encouraging and confirmed opportunity

• Integration plans well advanced

• Strategies and programmes for growth developing well

CONCLUSIONS: 2000

• Organisational issues addressed

• Clear, customer led growth strategies and targets

• Investment programme showing real benefits

• Increasing evidence of business turnaround

• Harcourt acquisition is substantial opportunity

KEY OBJECTIVES FOR 2001

• Drive benefits from strengthened management structure

• Continue to execute effectively against strategic milestones

• Accelerate revenue growth, exceeding market growth in 75% of businesses

• Grow operating margin through increased efficiency

• Accelerate profit growth strongly towards double digit

• Integrate Harcourt successfully

ARCOURT: FINANCING

ACCELERATED REVENUE AND PROFIT GROWTHPreliminary Results 2000Execution and Delivery on Strategy

Appendices

% % £m change €m change

1999 Turnover 3390 5153

Base businesses 146 +5% 237 +5%

1999 & 2000 acquisitions 205 +6% 336 +6%

Disposals (59) -2% (97) -2%

Currency translation effect 86 +2% 551 +11%

2000 Turnover 3,768 +11% 6180 +20%

TURNOVER: RECONCILIATION

INVESTMENT SPEND

Science Legal Business Education

£35m/€57m

£126m/€205m

£105m/€171m

2000 TOTAL: £270m/€440m

• Applied to product upgrade, sales and marketing• £10m/€16m higher than budgeted• Additional £20m/€32m budgeted in 2001

£4m/€7m

COST SAVINGS

Science Legal Education Business Centre

2000 TOTAL: £143m/€235m

£19m/€31m

£53m/€87m£61m/€100m

£8m/€13m

£2m/€3m

• Principally production, infrastructure and support staff• £13m/€21m ahead of plan• On track to deliver targeted £170m/€278m savings in 2001

Interim Final

2000 1999 % change 2000 1999 % change

Reed Int (p) 3.10 4.60 -33% 6.90 5.40 +28%

UK tax credit rate 10% 10% 10% 10%

Reed Int (gross) (p) 3.44 5.11 7.67 6.00 +28%

Equalisation ratio 1.538 1.538 1.538 1.538

Exchange rate (€:£) 1.62 1.50 1.57 1.62

Elsevier (€) 0.09 0.12 -25% 0.19 0.15 +27%

DIVIDEND EQUALISATION

2000 1999

£m £m

Adjusted profit attributable 511 527 838 801

Amortisation of goodwill and

intangible assets (468) (373) (768) (567)

Exceptional items (10) (217) (16) (329)

Reported profit attributable 33 (63) 54 (95)

Reed International EPS 1.0p (3.4)p

Elsevier EPS €0.04 €(0.07)

2000 1999

€m €m

REPORTED PROFIT ATTRIBUTABLE

ACQUISITIONS

Science EndeavorAfferent

Legal Conosur and PublitecsaEclipseRiskwiseFT ProfileMealeyPress AccessCorpAmerica

Business CMDe:LogicMarket Cast/LA411SchnellInstitut VerlagMiller Freeman Europe

TOTAL ACQUISITION SPEND £952M/€1562m; CONTRIBUTION AHEAD OF PLAN

DISPOSAL PROGRAMME

Science Springhouse

Legal RTIS

Business Tuition businessesREZsolutionsKG SaurUS Exhibitions

TOTAL 2000 DISPOSAL PROCEEDS: £153M/€251M

In Progress OAG WorldwideCahners Travel Group Bowker

EXCEPTIONAL ITEMS

2000 1999 2000 1999 12 months to 31 December £m £m €m €m

Reorganisation costs (77) (161) (126) (244)

Acquisition related costs (38) (28) (63) (43)

Year 2000 compliance costs - (50) - (76)

Charged to operating profit (115) (239) (189) (363)

Net profit on sale of businesses 85 7 140 11 and fixed asset investments

Total exceptional charge (30) (232) (49) (352)

Net tax credit 20 15 33 23

Sales by Market Sales by Source

57%

14%

6%

13%

10%

North America UK

The Netherlands Rest of Europe

Rest of World

17%

24%

10%10%

39%

Circulation Advertising

Exhibitions Other

Subscriptions

SALES BY MARKET AND SOURCE

Exchange rate to £1:

2000 1999

US Dollar 1.51 1.62

Euro 1.64 1.5233%

29%

31%

7%

US Dollar UK Sterling

Euro Other

CURRENCY PROFILE: ADJUSTED PROFIT BEFORE TAX

Exchange rate to €1:

2000 1999

US Dollar 0.92 1.06

Sterling 0.61 0.66

BALANCE SHEET

Goodwill/intangible assets

Tangible fixed assets

Working capital/othernet liabilities

2000

£m £m €m €m

4127 3400

Shareholders’ funds

Provisions and minorities

Net debt

416 386

(934)

3609

3041

135

433

Capital Employed 3609 3042

(744)

3042

1855

121

1066

1999 19992000

6644 5474

670 622

(1504) (1196)

5810 4900

4896

217

697

2987

196

1717

5810 4900

2000 1999 2000 1999

£m £m €m €m

Adjusted operating cash flow 775 780 1271 1186

Interest (104) (81) (171) (123)

Tax (141) (173) (231) (262)

Dividends (196) (339) (321) (515)

Free cash inflow 334 187 548 286

FREE CASH FLOW

12 months to 31 December