Preliminary Results 2001

Preliminary Results 2001

HighlightsHighlights

Strong financial result despite economic Strong financial result despite economic slowdownslowdown

Above market revenue growth and double digit Above market revenue growth and double digit earnings growth achieved one year early earnings growth achieved one year early

Harcourt makes strong contribution, ahead of Harcourt makes strong contribution, ahead of expectationsexpectations

On track to meet strategic and financial targets On track to meet strategic and financial targets for 2002 and beyondfor 2002 and beyond

Financial UpdateFinancial Update

Mark Armour Mark Armour

Chief Financial OfficerChief Financial Officer

Adjusted figures exclude amortisation of goodwill and intangible assets and exceptional items Adjusted figures exclude amortisation of goodwill and intangible assets and exceptional items

TurnoverTurnover

Adjusted operating profitAdjusted operating profit

Operating marginOperating margin

Net interest expenseNet interest expense

Adjusted profit before taxAdjusted profit before tax

%%

%%

%%

% change% changeconstantconstant

20002000 €m €m

20012001€m€m

20002000£m£m

20012001£m£m

3,7683,768

1,3011,301793793

21%21%21%21%

(169)(169)(103)(103)

1,1321,132690690

12 months to 31 December12 months to 31 December

6,1806,1804,5604,560

990990

22%22%

(142)(142)

848848

7,3427,342

1,5941,594

22%22%

(229)(229)

1,3651,365

+18+18

+22+22

+20+20

Adjusted Profit And LossAdjusted Profit And Loss

RevenuesRevenues Operating Operating profitprofit

693

1,137

1,649

1,024

0

400

800

1200

1600

2000

20002000 2001200120002000 20012001

252

413

554

344

0

100

200

300

400

500

600

20002000 2001200120002000 20012001

Science & MedicalScience & MedicalRevenues up 44% - operating profit up 34% - margin 33.6%Revenues up 44% - operating profit up 34% - margin 33.6%

Elsevier Science: underlying revenues up 8%; operating profit up 13%Elsevier Science: underlying revenues up 8%; operating profit up 13% Strong subscription renewals and growing online salesStrong subscription renewals and growing online sales Harcourt STM: proforma revenues up 3%; proforma operating profit up 5%Harcourt STM: proforma revenues up 3%; proforma operating profit up 5% Integration progressing well Integration progressing well

£m£m €€mm £m£m €€mm

LegalLegalRevenues up 7% - operating profit up 9% - margin 20.1%Revenues up 7% - operating profit up 9% - margin 20.1%

Underlying revenues up 5%; operating profit up 9%Underlying revenues up 5%; operating profit up 9% Operating margins improved to 20.1%Operating margins improved to 20.1% North American Legal Markets online up 10%North American Legal Markets online up 10% LexisNexis International solid performanceLexisNexis International solid performance

RevenuesRevenues Operating Operating profitprofit

1,201

1,9702,141

1,330

0

500

1000

1500

2000

2500

237

389

267

430

0

100

200

300

400

500

20002000 2001200120002000 20012001 20002000 2001200120002000 20012001

£m£m £m£m€€€€ €€mm€€mm

EducationEducationRevenues up 177% - operating profit up 218% - margin 22.8%Revenues up 177% - operating profit up 218% - margin 22.8%

Harcourt Education and Testing: proforma revenues up 12%Harcourt Education and Testing: proforma revenues up 12%and operating profits up 10%and operating profits up 10%

Harcourt K-12 revenues up 11%; Harcourt Testing revenues up 22%Harcourt K-12 revenues up 11%; Harcourt Testing revenues up 22% Harcourt overall leader in winning new state adoption revenuesHarcourt overall leader in winning new state adoption revenues REPP: underlying revenues up 8%; operating profit up 10%REPP: underlying revenues up 8%; operating profit up 10%

RevenuesRevenues Operating Operating profitprofit

202

331

932

579

0

200

400

600

800

1000

4066

212

132

0

50

100

150

200

250

20002000 2001200120002000 20012001 20002000 2001200120002000 20012001

£m£m £m£m€€mm €€mm

BusinessBusinessRevenues down 5% - operating profit down 8% - margin 15.2%Revenues down 5% - operating profit down 8% - margin 15.2%

Underlying revenues down 3%; operating profit down 8%Underlying revenues down 3%; operating profit down 8% Significant downturn in advertising markets, particularly USSignificant downturn in advertising markets, particularly US Strong outperformance of marketStrong outperformance of market Good performance by Exhibitions; revenues up 9%; operating profit up 6%Good performance by Exhibitions; revenues up 9%; operating profit up 6% Aggressive cost cutting programme; $90m annual savingsAggressive cost cutting programme; $90m annual savings

RevenuesRevenues Operating Operating profitprofit

1,672

2,742 2,620

1,627

0

1000

2000

3000

264

433398

247

0

100

200

300

400

500

20002000 2001200120002000 20012001 20002000 2001200120002000 20012001

£m£m £m£m€€mm €€mm

Adjusted Profit Before Tax: Adjusted Profit Before Tax: ReconciliationReconciliation

+21%+21%1,3651,365+23%+23%8488482001 Adjusted profit before tax2001 Adjusted profit before tax

+1%+1%11+3%+3%1717Currency translation effectCurrency translation effect

-1%-1%(13)(13)-1%-1%(8)(8)Acquisitions/DisposalsAcquisitions/Disposals

+9%+9%9797+9%+9%5959Equity issueEquity issue

+5%+5%5656+5%+5%3434Base businessBase business

1,1321,1326906902000 Adjusted profit before tax2000 Adjusted profit before tax

% % changechange€€mm

% % changechange£m£m12 months to 31 December12 months to 31 December

Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items

+8%+8%9292+8%+8%5656HarcourtHarcourt

Cash FlowCash Flow

(803)(803)(2,731)(2,731)(490)(490)(1,696)(1,696)Total cash outflow before financingTotal cash outflow before financing

(103)(103)(71)(71)(63)(63)4444Other exceptional itemsOther exceptional items

2512511541541531539696DisposalsDisposals

(1,499)(1,499)(3,694)(3,694)(914)(914)(2,295)(2,295)Acquisition spendAcquisition spend

548548738738334334459459Free cash flowFree cash flow

98%98%102%102%98%98%102%102%% conversion% conversion

1,2711,2711,6201,6207757751,0061,006Adjusted operating cash flowAdjusted operating cash flow

2000 2000 €€mm

2001 2001 €€mm

20002000£m£m

20012001£m£m

12 months to 31 December12 months to 31 December

Earnings and DividendsEarnings and Dividends

+5%+5%+7%+7%€€0.300.30+5%+5%10.5p10.5pEqualised dividendsEqualised dividends

+10%+10%+8%+8%€€0.640.64+12%+12%26.1p26.1pAdjusted EPSAdjusted EPS

% change % change constantconstantElsevierElsevier

Reed Reed InternationalInternational

€€0.040.04€€0.130.13Elsevier EPSElsevier EPS

1.0p1.0p4.8p4.8pReed International EPSReed International EPS

54542022023333126126Reported profit attributableReported profit attributable

(16)(16)1313(10)(10)99Exceptional itemsExceptional items

(768)(768)(816)(816)(468)(468)(507)(507)Amortisation of goodwill and Amortisation of goodwill and intangible assetsintangible assets

8388381,0051,005511511624624Adjusted profit attributableAdjusted profit attributable

20002000€€mm

20012001€€mm

20002000£m£m

20012001£m£m12 months to 31 December12 months to 31 December

Reported Profit AttributableReported Profit Attributable

Strong Financial PositionStrong Financial Position

Efficient and robust capital structure following Efficient and robust capital structure following Harcourt financingHarcourt financing

Credit rating of A3/A-Credit rating of A3/A- EBITDA/net interest cover target: 5 times+ EBITDA/net interest cover target: 5 times+

over longer termover longer term Strong cashflow and negative working capitalStrong cashflow and negative working capital

Strategy & ExecutionStrategy & Execution

Crispin Davis Crispin Davis

Chief Executive OfficerChief Executive Officer

Upgrade Upgrade sales & sales &

marketingmarketing

Upgrade Upgrade sales & sales &

marketingmarketing

Build Build global global

capabilitycapability

Build Build global global

capabilitycapability

Major cost Major cost savingssavings

Major cost Major cost savingssavings

SubstantiallSubstantially increased y increased investmentinvestment

SubstantiallSubstantially increased y increased investmentinvestment

Add Add acquisitionsacquisitions/ alliances/ alliances

Add Add acquisitionsacquisitions/ alliances/ alliances

Demonstrably Demonstrably superior superior productsproducts

Demonstrably Demonstrably superior superior productsproducts

Upgrade Upgrade managementmanagementeffectivenesseffectiveness

Upgrade Upgrade managementmanagementeffectivenesseffectiveness

Focus onFocus onfour corefour core

businessesbusinesses

Key Foundations of Growth StrategyKey Foundations of Growth Strategy

Pro forma revenues Pro forma revenues post Harcourtpost Harcourt

Pro forma revenues Pro forma revenues post Harcourtpost Harcourt1999 revenues1999 revenues1999 revenues1999 revenues

EducationEducation20%20%

ScienceScience26%26%

LegalLegal26%26%

BusinessBusiness28%28%BusinessBusiness

43%43%

ScienceScience20%20%

LegalLegal32%32%

EducationEducation5%5%

Reshaping Reed ElsevierReshaping Reed ElsevierMore Balanced PortfolioMore Balanced Portfolio

1999 1999 operating profitoperating profit1999 1999 operating profitoperating profit Pro forma operating Pro forma operating profit post Harcourtprofit post Harcourt

Pro forma operating Pro forma operating profit post Harcourtprofit post Harcourt

EducationEducation18%18%

ScienceScience38%38%

LegalLegal25%25%

BusinessBusiness19%19%ScienceScience

29%29%

LegalLegal35%35%

BusinessBusiness31%31%

EducationEducation5%5%

Reshaping Reed ElsevierReshaping Reed ElsevierMore Balanced PortfolioMore Balanced Portfolio

Business to BusinessBusiness to Business 21%21% 1122%%(including recruitment)(including recruitment)

LegalLegal 2%2% 2% 2%(Martindale-Hubbell)(Martindale-Hubbell)

ScienceScience 1%1% 1% 1%(Healthcare)(Healthcare)

24%24% 1 155%%

% Total RE Revenues% Total RE Revenues

19991999 Post HarcourtPost Harcourt

Reshaping Reed ElsevierReshaping Reed ElsevierAdvertising Revenues Advertising Revenues

Science & Medical:Science & Medical:2001 Strategic Milestones2001 Strategic Milestones

Further upgrade of ScienceDirectFurther upgrade of ScienceDirect– new customised productsnew customised products – enrich content, including backfilesenrich content, including backfiles – add navigation toolsadd navigation tools

Broaden user baseBroaden user base– upsell existing users upsell existing users – expand to new usersexpand to new users – increase overall usage increase overall usage

Successfully integrate Harcourt STM Successfully integrate Harcourt STM – reorganise medical operations reorganise medical operations – realise $40 million of synergiesrealise $40 million of synergies ON TRACK ON TRACK – accelerate online solutionsaccelerate online solutions ON TRACK ON TRACK

ScienceDirect:ScienceDirect:Extending Product SuperiorityExtending Product Superiority

Core Article ContentCore Article ContentCore Article ContentCore Article Content210,000 articles added1.8m articles in total

IDEAL content to be included

210,000 articles added1.8m articles in total

IDEAL content to be included

Customised Subject CollectionsCustomised Subject CollectionsCustomised Subject CollectionsCustomised Subject Collections 23 collections launchedSubject specific navigation tools

23 collections launchedSubject specific navigation tools

Archive BackfilesArchive BackfilesArchive BackfilesArchive Backfiles 5 modules launched5 modules launched

Access to over 70m web pages1m page requests per month

Access to over 70m web pages1m page requests per monthScirusScirusScirusScirus

Author GatewayAuthor GatewayAuthor GatewayAuthor GatewayElectronic submission

Article trackingE-mail alert

Electronic submissionArticle tracking

E-mail alert

Immediate online publication 800 journals covered

Immediate online publication 800 journals coveredArticles in PressArticles in PressArticles in PressArticles in Press

Marketplace Impact:Marketplace Impact:Positive Key Performance IndicatorsPositive Key Performance Indicators

Increasing penetration of ScienceDirectIncreasing penetration of ScienceDirect Continued increase in usageContinued increase in usage Subscriber attrition reducedSubscriber attrition reduced Major new contracts signedMajor new contracts signed Market acceptance of ScienceDirectMarket acceptance of ScienceDirect

ScienceDirect:ScienceDirect:Increasing PenetrationIncreasing Penetration

%%

00

1010

2020

3030

4040

5050

6060

7070

8080

MarMar9999

AugAug9999

FebFeb0000

AugAug0000

DecDec0000

AugAug0101

DecDec0011

ScienceDirect:ScienceDirect:Increase in UsageIncrease in Usage

Number of page views (millions)Number of page views (millions)

00

55

1010

1515

2020

2525

JanJan

0000MarMar

0000MayMay

0000JulJul

0000SepSep

0000NovNov

0000JanJan

0101MarMar

0101MayMay

0101JulJul

0101SepSep

0101NovNov

0101JanJan

0202

%%

Science & Medical:Science & Medical:Reversal in AttritionReversal in Attrition

00

22

44

66

88

1010

19971997 19981998 19991999 20002000 20012001

4.14.1

6.06.0

8.58.5

5.25.2

4.04.0

Marketplace Impact:Marketplace Impact:Major New ContractsMajor New Contracts

450 ScienceDirect contracts signed;450 ScienceDirect contracts signed;increase of 50% over 2000increase of 50% over 2000

Consortium deals in Switzerland, Eastern Consortium deals in Switzerland, Eastern Europe, Italy, Germany, New JerseyEurope, Italy, Germany, New Jersey

Over 50% of ScienceDirect contracts now for Over 50% of ScienceDirect contracts now for three year period three year period

Health Sciences: Health Sciences: Strategic PrioritiesStrategic Priorities

Upgrade management effectivenessUpgrade management effectiveness– Build one cohesive market driven organisationBuild one cohesive market driven organisation– New management team New management team

Develop superior productsDevelop superior products– Step up product development and publishing Step up product development and publishing

programmesprogrammes

Major upgrade of sales and marketing Major upgrade of sales and marketing Develop superior online capabilities and Develop superior online capabilities and

products to accelerate growthproducts to accelerate growth

Health Sciences:Health Sciences:Product, Sales/Marketing, Organisation UpgradeProduct, Sales/Marketing, Organisation Upgrade

Upgrade Sales & MarketingUpgrade Sales & MarketingUpgrade Sales & MarketingUpgrade Sales & Marketing Integrated into 2 functions - US and international

Integrated into 2 functions - US and international

Revitalise Core PublishingRevitalise Core PublishingRevitalise Core PublishingRevitalise Core Publishing

Global title planning Product quality review

Specialist editionsInfill acquisitions

Global title planning Product quality review

Specialist editionsInfill acquisitions

Develop Superior Online Develop Superior Online CapabilitiesCapabilities

Develop Superior Online Develop Superior Online CapabilitiesCapabilities

Extensive research programmeMD Consult handheld/PDA

products launchedInteractive courseware

Extensive research programmeMD Consult handheld/PDA

products launchedInteractive courseware

Integrate Specialist DivisionsIntegrate Specialist DivisionsIntegrate Specialist DivisionsIntegrate Specialist Divisions Single communications/advertising division for pharmaceutical sector

Single communications/advertising division for pharmaceutical sector

Integrate SystemsIntegrate SystemsIntegrate SystemsIntegrate SystemsGlobal product database

Integrated fulfilmentConsolidated purchasing, etc.

Global product databaseIntegrated fulfilment

Consolidated purchasing, etc.

Science & Medical:Science & Medical:2002 Priorities2002 Priorities

Maintain ScienceDirect momentum on key Maintain ScienceDirect momentum on key performance yardsticks: usage, penetration and performance yardsticks: usage, penetration and attritionattrition

Deliver on new product initiatives programme Deliver on new product initiatives programme driving additional revenuesdriving additional revenues

Implement core medical growth programmeImplement core medical growth programme Finalise online medical strategy; start Finalise online medical strategy; start

implementationimplementation Complete Harcourt integration, deliver revenue and Complete Harcourt integration, deliver revenue and

cost targetscost targets

Legal:Legal:2001 Strategic Milestones2001 Strategic Milestones

Continued product upgrade:Continued product upgrade:content, customisation, functionality content, customisation, functionality

Strengthen targeted marketing/sales effortsStrengthen targeted marketing/sales effortsbehind upgraded products behind upgraded products

Monetise increased usageMonetise increased usage Improve print performances withinImprove print performances within

online migration strategy online migration strategy ON TRACKON TRACK Adopt LexisNexis as global brandAdopt LexisNexis as global brand

and product platformand product platform ON TRACKON TRACK Expand geographical presenceExpand geographical presence

in key marketsin key markets XX

LexisNexis:LexisNexis:Continued US Product UpgradeContinued US Product Upgrade

Enhanced Enhanced ContentContent

Enhanced Enhanced ContentContent

• Case Summaries/ Annotated Codes

• Integrated tax content

• Case Summaries/ Annotated Codes

• Integrated tax content

• ComprehensiveComprehensiveresearch offeringresearch offeringgaining preferencegaining preference

• #1 source for tax #1 source for tax materialmaterial

• ComprehensiveComprehensiveresearch offeringresearch offeringgaining preferencegaining preference

• #1 source for tax #1 source for tax materialmaterial

Enhanced Enhanced NavigationNavigationEnhanced Enhanced NavigationNavigation

• E-Treatises – linking of primary law to analytical treatises

• E-Treatises – linking of primary law to analytical treatises

• Substantial increaseSubstantial increasein analytical treatises in analytical treatises searchessearches

• Substantial increaseSubstantial increasein analytical treatises in analytical treatises searchessearches

Enhanced Enhanced FunctionalityFunctionality

Enhanced Enhanced FunctionalityFunctionality

• Smartlinx – public records search

• Search Advisor/Core Terms - advanced search system

• Smartlinx – public records search

• Search Advisor/Core Terms - advanced search system

• Smartlinx - $6m in new Smartlinx - $6m in new contracts in 6 monthscontracts in 6 months

• Smartlinx - $6m in new Smartlinx - $6m in new contracts in 6 monthscontracts in 6 months

CustomisationCustomisationCustomisationCustomisation • Integration into intranets• Nexis - E-solutions • Integration into intranets• Nexis - E-solutions

• Over 300 customisations Over 300 customisations for law firmsfor law firms

• 500 customised versions 500 customised versions of nexis.comof nexis.com

• Over 300 customisations Over 300 customisations for law firmsfor law firms

• 500 customised versions 500 customised versions of nexis.comof nexis.com

Marketplace Impact:Marketplace Impact:Positive US Key Performance IndicatorsPositive US Key Performance Indicators

Turnaround in revenue growth; outperformed Turnaround in revenue growth; outperformed marketmarket

Competitive preference in law schools Competitive preference in law schools Outstanding growth in online usageOutstanding growth in online usage Major new contracts wonMajor new contracts won Market acceptance of new LexisNexis Market acceptance of new LexisNexis

productsproducts

00

11

22

33

44

55

66

Marketplace Impact:Marketplace Impact:Turnaround in US Revenue GrowthTurnaround in US Revenue Growth

1998 1999 2000 2001

%%

+5%+5%

+2%+2%

+3%+3%

+2%+2%

Outperformance of market growth of 4%Outperformance of market growth of 4%Outperformance of market growth of 4%Outperformance of market growth of 4%

LexisNexis in Law Schools (%)LexisNexis in Law Schools (%)

Marketplace Impact:Marketplace Impact:US Law School PreferenceUS Law School Preference

00

1010

2020

3030

4040

5050

6060

19971997 19981998 19991999 20002000 20012001FallFall FallFall FallFall FallFall FallFall

15151919

3232

54545050

Marketplace Impact:Marketplace Impact:US Online Usage Growing RapidlyUS Online Usage Growing Rapidly

2020

4040

6060

8080

19991999 20002000 2001200100

30% Increase in Commercial Searches30% Increase in Commercial Searches100100 9595

5757

7373

Overall online revenue growth: 7%Overall online revenue growth: 7%Overall online revenue growth: 7%Overall online revenue growth: 7%

mm

Marketplace Impact:Marketplace Impact:Major New ContractsMajor New Contracts

Major new Legal contractsMajor new Legal contracts– Preferred vendor agreements closed with five of top US Preferred vendor agreements closed with five of top US

law firmslaw firms– Contracts volume increased more than 25% in Small Contracts volume increased more than 25% in Small

Law Firm marketLaw Firm market

Major new Nexis contractsMajor new Nexis contracts– US Federal Law Agencies, US Immigration and US Federal Law Agencies, US Immigration and

Naturalization Service, Sprint, Proctor & Gamble, BBC, Naturalization Service, Sprint, Proctor & Gamble, BBC, RothschildsRothschilds

Major multi-year contracts signed with Major multi-year contracts signed with governments of Hong Kong and Australiagovernments of Hong Kong and Australia

LexisNexis InternationalLexisNexis International

Over 25% growth in online revenues Over 25% growth in online revenues – UK legal online revenues doubledUK legal online revenues doubled

Superior online productsSuperior online products– 26 new specialist services in UK26 new specialist services in UK– online version of key legal encyclopaedia and legal portal online version of key legal encyclopaedia and legal portal

launched in Francelaunched in France

Development of integrated global platform for superior Development of integrated global platform for superior online products in all markets online products in all markets

Asia Pacific and Latin AmericaAsia Pacific and Latin America– Strong performance in Asia PacificStrong performance in Asia Pacific– Latin America impacted by economic conditionsLatin America impacted by economic conditions– New organisation and management to drive growthNew organisation and management to drive growth

Legal:Legal:2002 Priorities2002 Priorities

Further upgrade of electronic product: content, Further upgrade of electronic product: content, functionality, customisation to achieve functionality, customisation to achieve preferred product statuspreferred product status

Accelerated growth of online usage; monetise Accelerated growth of online usage; monetise Maintain competitive preference in law schoolsMaintain competitive preference in law schools Implement margin improvement programme – Implement margin improvement programme –

towards mid-20s targettowards mid-20s target Accelerate global expansion: geography, global Accelerate global expansion: geography, global

platform, branding, organisationplatform, branding, organisation

Education:Education:2001 Strategic Milestones2001 Strategic Milestones

Maintain momentum in K-12 Maintain momentum in K-12 – achieve #1 overall market share in 2001 adoptionsachieve #1 overall market share in 2001 adoptions – secure existing highly regarded managementsecure existing highly regarded management – maintain product development momentummaintain product development momentum

Maintain momentum in TestingMaintain momentum in Testing– exploit leadership position to capture growth exploit leadership position to capture growth – expand in-house scoring capabilityexpand in-house scoring capability ON TRACKON TRACK

Develop successful e-strategyDevelop successful e-strategy– complete research programme complete research programme – finalise e-strategy programme finalise e-strategy programme

Integrate Rigby and Steck-Vaughn Integrate Rigby and Steck-Vaughn Complete Thomson on-saleComplete Thomson on-sale

OutperformOutperform

US Education Market*US Education Market*Growth %Growth %

1997 1998 1999 2000 20011997 1998 1999 2000 2001

1313 1212 22 1313 7-87-8

Harcourt Education**Harcourt Education**Growth %Growth % 992121

xx

Note:Note: ** US Education Market represent total K-12 textbook sales as reported by Association ofUS Education Market represent total K-12 textbook sales as reported by Association of

American Publishers (AAP) for years 1997-2000. 2001 Harcourt estimate.American Publishers (AAP) for years 1997-2000. 2001 Harcourt estimate.**** Harcourt Education sales include elementary, secondary, and supplemental (Steck-Vaughn).Harcourt Education sales include elementary, secondary, and supplemental (Steck-Vaughn).

Education: Education: Outperformance of MarketOutperformance of Market

333344 1111

# 1# 1# 1# 1ScienceScience

# 3# 3# 1# 1Social StudiesSocial Studies

# 3# 3# 1# 1MathematicsMathematics

# 1# 1# 1# 1Language ArtsLanguage Arts

#1#1# 3# 3Reading/LiteratureReading/Literature

SecondarySecondaryElementaryElementary

Overall Overall # 1# 1

Overall Overall # 1# 1

Education: Education: Performance in 2001 AdoptionsPerformance in 2001 Adoptions

Education:Education:E-learning ProgrammeE-learning Programme

E-strategy:E-strategy:Major research programme to determine customer needs Major research programme to determine customer needs and future strategyand future strategy

E-content:E-content:Technology programme established in-house, supported Technology programme established in-house, supported by Riverdeep allianceby Riverdeep alliance

E-professional development:E-professional development:Acquisition of leading online provider: Classroom Acquisition of leading online provider: Classroom ConnectConnect

E-testing:E-testing:Increased investment in classroom testing and Increased investment in classroom testing and electronic scoringelectronic scoring

K-12 Education Market:K-12 Education Market:Future GrowthFuture Growth

Average growth for past 5 years: 8-9% per yearAverage growth for past 5 years: 8-9% per year Consistent increase in spend per pupilConsistent increase in spend per pupil Enrolment slowing but growingEnrolment slowing but growing Significant increase in federal spendingSignificant increase in federal spending Political will at state level remains strongPolitical will at state level remains strong Rapid testing growth will be Rapid testing growth will be

maintained/acceleratedmaintained/accelerated

Over next 3-5 years, good growth in K-12 marketOver next 3-5 years, good growth in K-12 marketOver next 3-5 years, good growth in K-12 marketOver next 3-5 years, good growth in K-12 market

Education Education

Consistent success in US schools publishingConsistent success in US schools publishing On track to deliver above market growth in On track to deliver above market growth in

20022002 Research based E-strategy established; Research based E-strategy established;

measured implementation underwaymeasured implementation underway International business and global development International business and global development

on trackon track Good medium to long term market outlookGood medium to long term market outlook

Education:Education:2002 Priorities2002 Priorities

Win greatest share of new K-12 basal and Win greatest share of new K-12 basal and supplementary spending: US and internationalsupplementary spending: US and international

Win greatest share of educational testing contractsWin greatest share of educational testing contracts Establish strong core competencies and focus in Establish strong core competencies and focus in

electronic product development and saleselectronic product development and sales Ensure basal/supplementary publishing Ensure basal/supplementary publishing

programmes on track for 2003/2004 growthprogrammes on track for 2003/2004 growth Organisation: appoint division head; align Harcourt Organisation: appoint division head; align Harcourt

values/culture with Reed Elseviervalues/culture with Reed Elsevier

Business:Business:2001 Strategic Milestones2001 Strategic Milestones

Maintain print share momentum throughMaintain print share momentum throughupgraded product/sales programmesupgraded product/sales programmes

Maximise revenues and returnsMaximise revenues and returnsfrom internet programme from internet programme

Drive global strategy:Drive global strategy:organisation, portfolio, platforms, acquisitions/disposalsorganisation, portfolio, platforms, acquisitions/disposalsON TRACKON TRACK

Complete integration ofComplete integration ofMiller Freeman Europe and CMD Group Miller Freeman Europe and CMD Group

Respond quickly to changingRespond quickly to changingeconomic environmenteconomic environment

Significant decline in revenues in second Significant decline in revenues in second half; costs cut aggressively; margin held half; costs cut aggressively; margin held

USUS

Continuing Tough Markets in B2B Continuing Tough Markets in B2B

Continental Continental EuropeEurope

Subscription and circulation holding up; Subscription and circulation holding up; advertising slowdown in second half advertising slowdown in second half

UKUK Revenue decline in second half; weakness Revenue decline in second half; weakness in IT spread to other sectorsin IT spread to other sectors

Europe & Rest of World robust; weakness Europe & Rest of World robust; weakness in US autumn showsin US autumn shows

GlobalGlobalExhibitionsExhibitions

Outperformance of market; small decline in Outperformance of market; small decline in revenues and profitrevenues and profit

OverallOverall

Business: Business: Outperformance of MarketOutperformance of Market

Leadership positions in almost all sectors Leadership positions in almost all sectors

Geographic and sector spreadGeographic and sector spread

Investment led momentum has built shareInvestment led momentum has built share

Effective management of costsEffective management of costs

Continued strong online growthContinued strong online growth

Broadcasting & CableBroadcasting & Cable +12%+12%EDNEDN +2%+2%Interior DesignInterior Design +4%+4%Multichannel NewsMultichannel News +3%+3%VarietyVariety +2%+2%

CahnersCahners

EBIEBIBizzBizz

+3%+3%DistrifoodDistrifood

+6%+6%Fem/De WeekFem/De Week

+5%+5%Groenten & FruitGroenten & Fruit

+9%+9%

Based on % gain in share of ad Based on % gain in share of ad pages January - December 2001; pages January - December 2001; excludes yield effectsexcludes yield effects

RBIRBIComputer WeeklyComputer Weekly

+10%+10%Electronic WeeklyElectronic Weekly

+8%+8%Farmers WeeklyFarmers Weekly

+11%+11%Flight InternationalFlight International

+6%+6%New ScientistNew Scientist

+ 5%+ 5%

Business:Business:Market Share GainsMarket Share Gains

00

2020

4040

6060

8080

100100

120120

19991999 20002000 20012001

$m$m

2222

5757

9595

Business:Business:Total Online Revenue GrowthTotal Online Revenue Growth

Business:Business:2002 Priorities2002 Priorities

Deliver above market revenue growth in all key Deliver above market revenue growth in all key marketsmarkets

Further upgrade magazine quality and sales Further upgrade magazine quality and sales effectivenesseffectiveness

Build more integrated global B2B business: brands, Build more integrated global B2B business: brands, sectors, customerssectors, customers

Achieve meaningful margin improvement at Achieve meaningful margin improvement at CahnersCahners

Drive internet solutions to achieve double digit Drive internet solutions to achieve double digit revenue growthrevenue growth

Reed Elsevier BrandingReed Elsevier Branding

00

200200

400400

600600

800800

10001000

Reed Elsevier Internet RevenuesReed Elsevier Internet Revenues

1999 2000 2001 2002

£m£m

TargetTarget

ActualActual 10001000

436436

120120

750750

12001200

Reed Elsevier:Reed Elsevier:Key Objectives For 2002Key Objectives For 2002

Maximise above market organic growth from Maximise above market organic growth from four core businessesfour core businesses

Execute and deliver on all strategic milestonesExecute and deliver on all strategic milestones Ensure Harcourt achieves growth objective; Ensure Harcourt achieves growth objective;

complete integration wellcomplete integration well Improve operating margin further through Improve operating margin further through

increased efficiencyincreased efficiency Deliver double digit earnings growthDeliver double digit earnings growth

Strong business fundamentals and financial positionStrong business fundamentals and financial positionStrong business fundamentals and financial positionStrong business fundamentals and financial position

ConclusionsConclusions

Strong organic growth across all businesses compared Strong organic growth across all businesses compared to marketto market

Strong organic growth across all businesses compared Strong organic growth across all businesses compared to marketto market

On track to deliver 2002 goals of above-marketOn track to deliver 2002 goals of above-marketrevenue and double-digit profit growthrevenue and double-digit profit growth

On track to deliver 2002 goals of above-marketOn track to deliver 2002 goals of above-marketrevenue and double-digit profit growthrevenue and double-digit profit growth

Harcourt acquisition has acceleratedHarcourt acquisition has acceleratedprogress furtherprogress further

Harcourt acquisition has acceleratedHarcourt acquisition has acceleratedprogress furtherprogress further

Reed Elsevier strategy proving effectiveReed Elsevier strategy proving effectiveReed Elsevier strategy proving effectiveReed Elsevier strategy proving effective

Preliminary Results 2001

AppendicesAppendices

Turnover: ReconciliationTurnover: Reconciliation

%%changechange€€mm

% % changechange£m£m

+19%+19%7,3427,342+21%+21%4,5604,5602001 Turnover2001 Turnover

+1%+1%7070+3%+3%126126Currency translation effectCurrency translation effect

-5%-5%(294)(294)-5%-5%(179)(179)DisposalsDisposals

+5%+5%279279+5%+5%170170Other Other acquisitionsacquisitions

+3%+3%136136+3%+3%8383Base businessesBase businesses

6,1806,1803,7683,7682000 Turnover2000 Turnover

HarcourtHarcourt 592592 +16%+16% 971971 +16%+16%

£37m/€60m£37m/€60m

£135m/£135m/€€217m217m

£82m/ £82m/ €€132m132m

£6m/€10m£6m/€10m £23m/€37m£23m/€37m

£67m/£67m/€€108m108m£69m/ £69m/

€€111m111m

£8m/€13m£8m/€13m

£3m/€5m£3m/€5m

Investment £10m/€21m lower at £260m/€419mInvestment £10m/€21m lower at £260m/€419m Cost savings up £27m/€39m to £170m/€274m excluding additional B2B actions taken during 2001Cost savings up £27m/€39m to £170m/€274m excluding additional B2B actions taken during 2001

InvestmentInvestment Cost SavingsCost Savings

ScienceScience LegalLegal BusinessBusiness EducationEducation CentreCentre

Investment and Cost SavingsInvestment and Cost SavingsPre-HarcourtPre-Harcourt

Average rates:Average rates:

per £1per £1 20012001 20002000

US DollarUS Dollar 1.441.44 1.511.51

Euro Euro 1.611.61 1.641.64Euro37%

Other5%

UK Sterling

24%

US Dollar34%

Average rates:Average rates:

per €1per €1 20012001 20002000

US DollarUS Dollar 0.890.89 0.920.92

Sterling Sterling 0.620.62 0.610.61

Currency Profile:Currency Profile:Adjusted Profit Before TaxAdjusted Profit Before Tax

20012001 20002000 20012001 20002000£m£m £m£m €€mm €€mm

Adjusted operating cash flowAdjusted operating cash flow 1,006 1,006 775775 1,6201,620 1,2711,271

InterestInterest (114) (114) (104)(104) (184)(184) (171)(171)

TaxTax (178)(178) (141)(141) (287)(287) (231)(231)

DividendsDividends (255)(255) (196)(196) (411)(411) (321)(321)

Free cash inflowFree cash inflow 459 459 334334 738 738 548548

12 months to 31 December12 months to 31 December

Free Cash FlowFree Cash Flow

Exceptional ItemsExceptional Items

333313013020208181Net tax creditNet tax credit

(49)(49)(117)(117)(30)(30)(72)(72)Exceptional charge before taxExceptional charge before tax

140140414185852626Net profit on sale of fixed asset Net profit on sale of fixed asset investments and businessesinvestments and businesses

(189)(189)(158)(158)(115)(115)(98)(98)Charged to operating profitCharged to operating profit

(63)(63)(102)(102)(38)(38)(63)(63)Acquisition related costsAcquisition related costs

(126)(126)(56)(56)(77)(77)(35)(35)Reorganisation costsReorganisation costs

20002000€€mm

20012001€€mm

20002000£m£m

20012001£m£m12 months to 31 December12 months to 31 December

(16)(16)1313(10)(10)99Total exceptional credit/(charge)Total exceptional credit/(charge)

TotalTotal Proceeds 2000/2001Proceeds 2000/2001: : £300m/€482m£300m/€482mTotalTotal Proceeds 2000/2001Proceeds 2000/2001: : £300m/€482m£300m/€482m

Disposals ProgrammeDisposals Programme

OAG WorldwideOAG Worldwide Cahners Travel GroupCahners Travel Group BowkerBowker FiscountFiscount EncyclopaediaEncyclopaedia Tuition businessesTuition businesses SpringhouseSpringhouse RTISRTIS REZsolutionsREZsolutions

US packaging exhibitionsUS packaging exhibitions US metal titlesUS metal titles US automotive & trucking titlesUS automotive & trucking titles US contractor titleUS contractor title US food & manufacturing US food & manufacturing

processes titlesprocesses titles UK retail, automotive, shipping, UK retail, automotive, shipping,

and electrical titlesand electrical titles US exhibitionsUS exhibitions KG SaurKG Saur

Balance SheetBalance Sheet

9249241,4161,416574574863863

Net debtNet debt 6976975,2965,2964334333,2293,229

Other net liabilities/minoritiesOther net liabilities/minorities

4,8964,8964,7844,7843,0413,0412,9172,917Shareholders’ fundsShareholders’ funds

6,5176,51711,49611,4964,0484,0487,0097,009

247247395395153153241241InvestmentsInvestments

670670802802416416489489Tangible fixed assetsTangible fixed assets

6,6446,64411,02611,0264,1274,1276,7236,723Goodwill/intangible assetsGoodwill/intangible assets

20002000€€mm

20012001€€mm

20002000£m£m

20012001£m£m

(1,044)(1,044)(727)(727)(648)(648)(444)(444)Working CapitalWorking Capital

6,5176,51711,49611,4964,0484,0487,0097,009

Dividend EqualisationDividend Equalisation

Reed International (p)Reed International (p)

20012001 20002000 %%ChangeChange

InterimInterim

20012001 20002000 %%ChangeChange

FinalFinal

3.103.10 3.103.10 7.407.40 6.906.90 7%7%

UK tax credit rateUK tax credit rate

Reed Int (gross) (p)Reed Int (gross) (p)

Equalisation ratioEqualisation ratio

Exchange rate (€:£)Exchange rate (€:£)

Elsevier (€)Elsevier (€)

10%10% 10%10%

3.443.44 3.443.44

1.5381.538

1.631.63

0.090.09

1.5381.538

1.621.62

0.090.09 0%0%

0%0%

10%10%

8.228.22

1.5381.538

1.631.63

0.210.21

10%10%

7.677.67

1.5381.538

1.571.57

0.190.19 11%11%

Acquisition of Harcourt:Acquisition of Harcourt:Proforma Profit and LossProforma Profit and Loss

9959956186182,0122,0121,2501,250

6056053763761,2381,238769769Education & TestingEducation & Testing

390390242242774774481481STMSTM

RevenuesRevenues€€mm£m£m€€mm£m£m

Note: The above excludes Harcourt General, Inc central costs.Note: The above excludes Harcourt General, Inc central costs.

49%49%

49%49%

50%50%

% of full year % of full year proforma in post-proforma in post-acquisition periodacquisition period

232232144144418418260260

1421428888246246153153Education & TestingEducation & Testing

90905656172172107107STMSTM

Adjusted Operating ProfitAdjusted Operating Profit

55%55%

58%58%

52%52%

ProformaProforma12 months to 12 months to 31 Dec 200131 Dec 2001

Results Results consolidated from consolidated from

12 July 200112 July 2001

This presentation contains forward-looking statements within the meaning of Section 27A ofthe US Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of1934, as amended. These statements concern future matters, such as the features andfunctions of, and markets for, products and services offered by Reed Elsevier, and ReedElsevier’s business plans and strategies. Forward-looking statements are based on the currentexpectations of the management of Reed Elsevier and are subject to risks and uncertainties.Actual results and events could differ materially from the results discussed in the forward-looking statements. Factors which could cause or contribute to differences in results include,but are not limited to, general economic conditions and business conditions in Reed Elsevier’smarkets, customers’ acceptance of its products and services, the actions of competitors,changes in law and legal interpretation affecting Reed Elsevier’s intellectual property rights,and the impact of technological change. Reed Elsevier is not under any obligation (andexpressly disclaims any such obligation) to update or alter its forward-looking statementswhether as a result of new information, future events or otherwise.

This presentation contains forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. These statements concern future matters, such as the features and functions of, and markets for, products and services offered by Reed Elsevier, and Reed Elsevier’s business plans and strategies. Forward-looking statements are based on the current expectations of the management of Reed Elsevier and are subject to risks and uncertainties. Actual results and events could differ materially from the results discussed in the forward-looking statements. Factors which could cause or contribute to differences in results include, price and currency fluctuations; the impact of electronic or other distribution formats; legislative, fiscal and regulatory developments and political risks, general conditions in the businesses, actions of competitors and general economic conditions. Reed Elsevier is not under any obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.