Springer Science+Business Media

Overview 2009

2009

Springer Science+Business MediaABCE

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Springer Science+Business Media – Overview 2009

Table of Contents

Springer Science+Business Media

General Overview and Financial Performance 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Business Development Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

New Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Cooperations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Key developments in FY 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Events after the balance sheet date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Springer Science+Business Media – Overview 2009

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Springer Science+Business Media General Overview and Financial Performance 2009

General Overview For Springer Science+Business Media (Springer), 2009 was, overall, a very challenging year. STM markets continued to be affected by the global recession and constrained governmental bud-gets. However, the downturn has increased the speed of change within the library market, which includes a move to more electronic resources, and this provides an opportunity for Springer.

Going forward, we intend to move increasingly and rapidly towards becoming not only the most pure play science publisher with applied science professional publishing in certain local markets in the industry, but also complete our transformation from print publishers to electronic database publisher over the next five years. This will make Springer an “e-first” company with print prod-ucts available as an additional service.

This overview contains a selection of business development activities and a summary of our financial performance in 2009. For more information on our business development activities, please visit the “About us” section on www.springer.com.

Business Development Highlights

New productsIn February, Springer launched AuthorMapper.com, a free analytical tool for discerning trends, patterns and subject experts within the scientific research community. In April, SpringerExem-plar.com was launched – a free linguistic tool designed to support the publishing process for authors, editors and the scientific community in general.

Also in April, Springer launched stemcellgateway.com, a one-stop destination resource designed to support the stem cell research community and foster the exchange of information among researchers in this field. In October 2009, Springer launched a similar platform, The NeuroNet-work, for professionals researching and studying the brain.

In July, a new subscription e-product, SpringerImages, a growing collection of over 1.5 million scientific images, tables, charts and graphs, spanning all scientific subject areas was presented to the market.

In early December, SpringerMaterials, an extensive, unique and fully evaluated data collection in all areas of physical sciences and engineering, was launched.

CooperationsDuring 2009, Springer signed a number of publishing cooperation agreements with societies, research funders and academies of sciences, including:

7 a partnership with the American Society for Biochemistry and Molecular Biology to publish the Encyclopedia of Molecular Life Sciences, an 11-volume work which will be published both in print and electronically

7 a co-publishing agreement with the Indian Statistical Institute for their publication Sankhya – The Indian Journal of Statistics

7 an agreement with the International School for Advanced Studies in Trieste, Italy to publish the Journal of High Energy Physics, one of the most prestigious journals in this discipline

7 a partnership with the Society of Wetland Scientists to publish Wetlands

7 a publishing cooperation agreement with the Royal Swedish Academy of Sciences for AMBIO

7 a publishing agreement with the International Biometric Society for the Journal of Agricul-tural, Biological and Environmental Statistics.

General Overview

Business Development

Highlights

New Products

Cooperations

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Financial PerformanceThe table below represents Springer’s key financials for FY 2009.

Springer Group Key Financials

in EUR m 2009 2008

Revenues 845 859

EBITDA (adjusted) 275 285

FTE (avg .) 5 .708 5 .592

Return on Sales 32,5 % 33,2 %

Cash Conversion 94 % 104 %

Springer achieved sales of € 845 m in fiscal year (FY) 2009 which is a decline of approximately 2 percent compared to FY 2008. FY 2009 adjusted EBITDA is € 275 m, which is down approx-imately 3 percent from FY 2008.1 FY 2009 performance was again mainly driven by Springer’s STM division with Springer’s Professional publishing division experiencing a decline in sales and profits due to the strong recession in some of Springer´s key professional publishing segments.

1 Growth rates as stated in this summary report below relate to year-on-year underlying growth. This is calculated by eliminating the impact from the change in underlying currency exchange rates, the impact from acquisitions /divestments and from exceptional / non-recurring expense in the respective periods. Management considers “adjusted EBITDA”, which excludes such exceptional or non-recurring income / expense items as a suitable measure when analysing the development of Springer’s financial performance over time or when comparing Springer’s financial results to those of Springer’s peers.

Financial Performance

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Key developments in FY 2009 were:7 Continuation of Springer’s portfolio strategy that focuses on core STM publishing and local

language/professional extensions of key STM areas

– Springer divested non-STM programs (architectural and design books in Switzerland and the US) and subscale non-English language programs (medical professional in Switzerland) in FY 2009

– Divestment of non-core Professional content in FY 2009 – Continued development and marketing of new products in our core STM market in

FY 2009: the SpringerMaterials and SpringerImages databases were brought to the market as stand alone, subscription-based products

– Selective journal acquisitions / launches in core publishing segments – Continued growth in STM content output (frontlist book titles, journal issue output) in

FY 2009

7 Accelerated move to becoming an entirely electronic publishing / information provider

– Further growth of electronically available content base to currently more than six million documents

– Strong emphasis on content formats that enhance searchability and referencing: usage of Springer’s electronic content base grew by more than 20 percent in FY 2009

– Continued emphasis on growing the base of established e-Book package customers in the institutiona / library segment (Springer grew its installed eBook package customers by approximately 20 percent in FY 2009

– Springer increased the share of print-to-order-ready (digital) frontlist book titles to above 50 percent in FY 2009

7 Continued focus on organic growth in the core STM segment

– Further build-up of presence in emerging markets (in FY 2009, offices / representatives added in: Korea, United Arab Emirates, Australia, South Africa)

– Expansion of the sales organization to serve non-traditional customer groups (corporations, second / third tier academic libraries and institutions)

– Support alternative business models (Springer’s open access activities grew by more than 20 percent in FY 2009) and develop new models better tailored to the needs of new customer groups

7 Reshape and adapt publishing units in the Professional division to maximize benefits from an future improvement in the business environment

– Approximately 100 FTEs were eliminated in Springer’s Professional division organization in FY 2009

– In Germany, separate Professional medical publishing units were integrated into a single organization during FY 2009

7 Continued focus on increasing organizational efficiency

– Full service outsourcing of journal / book production / typesetting was extended in FY 2009

– Offshoring extended to finance / accounting in US and Germany – Further optimization of locations achieved in FY 2009 (US, UK)

Key developments

in FY 2009

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Key developments impacting Springer’s operating and financial performance in FY 2009 were (excluding the impact of changes in the underlying currency exchange rates):

7 STM Global journal subscriptions achieved slight growth in FY 2009 with growth in new products compensating journal contract / revenue losses created by currency devaluations.

7 In line with the long term trends, STM Global journal non-subscription business models declined as the online journal archive product had reached its sales peak in FY 2008 and jour-nal reprint sales declined.

7 STM Global (print) book sales faced a difficult market particularly in the US territories while online book sales to institutions grew by more than 20 percent thereby increasing Springer’s penetration and share in this segment.

7 STM open access publishing unit BioMed Central saw strong growth of approximately 20 percent vs. FY 2009 based on growing article submission and publication volumes

7 STM other publishing / imprints: Springer’s STM licensing business showed a solid develop-ment vs. FY 2008 (+23 percent) in line with overall content volume/usage growth; other STM segments and imprints (healthcare communication, computer books, local STM) stabilized following reorganizations and efficiency measures in these business units.

7 Springer’s STM service units in India showed strong results in FY 2009 (+ 10 percent) with volume increases offsetting pricing pressures at SPS and Crest achieving break-even results.

7 Professional publishing activities in Germany were hit by the severe downturn in advertis-ing volumes; in particular Springer’s Transport / Automotive unit and the magazine segment within the Business / Technology unit were exposed to this development. The Professional book segments, medical journals and driving school/education units saw broadly stable results leading to an overall decline of operating results by 11 percent in FY 2009 in this division; the Dutch Professional publishing units faced a similar mix of developments and ended the year 24 percent down from FY 2009.

7 Within its corporate units, Springer continued to benefit from efficiency measures leading to 5 percent overall reduction in corporate expenses.

Springer’s operating cash generation in FY 2009 was 94 percent (FY 2008: 104 percent). Key drivers of this development were the lower operating result, higher exceptional/restructuring expenses and significantly reduced impact from the change in group working capital in FY 2009. While working capital positively contributed to the FY 2009 cash generation, the impact was substantially less pronounced than in FY 2008 which had benefited both from journal renewals invoicing that had been delayed from FY 2007 and also from the improved and expanded rapid renewal program at the end of FY 2008.

Within Springer’s investment cash flows in FY 2009, capital expenditure remained broadly at FY 2008 levels. Content investment was driven by the growth of contractually agreed co-publish-ing payments and the expansion of Springer’s eBook database-related investments.

With respect to Springer’s financing cash flows, interest payments relating to Springer’s senior, junior and mezzanine debt facilities came down from FY 2008 levels as a result of debt repay-ments and also as a consequence of the lower interest base rates that impacted overall interest expense in the unhedged part of Springer’s interest-bearing financial debt. Inflows and repay-ments relating to Springer’s financial liabilities reflect repayments on Springer’s senior loans as well as drawings/repayments under Springer’s Revolving Credit Facility. Throughout FY 2009, Springer was in compliance with all financial covenants as set by the respective financing agree-ments.

Key developments

in FY 2009

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OutlookSpringer is active in global STM (academic) publishing and in professional/trade publishing areas mainly in Germany and the Netherlands. Springer’s STM business predominantly consists of English-language academic content which is sourced and sold globally. Fundamental drivers of this segment such as global research funding, article publication volumes, number of profes-sionals/students in research and educational institutions, content usage, etc. have shown stable growth in the past and are not expected to reverse in the mid- or long-term. Supported by these developments, the global STM market achieved growth rates between 4 percent and 5 percent p.a. in the years preceding the latest global economic downturn. Historically, the STM market has proven to be less correlated with the general economic cycle than any other publishing or media segments. During FY 2009, the global recession seems to have bottomed out with global key indicators slowly improving. Mid-term development, however, still appears to be uncertain and volatile in most of the established markets while emerging economies seem to have again reached growth rates comparable to pre-crisis levels.

As a result of the still mixed and unclear global economic outlook, Springer continues to expect reduced mid-term growth rates in the STM market segment relevant to Springer over the next three to five years. Based on its excellent position in this market, Springer is likely to be in a posi-tion to somewhat outperform market growth over the next years. Springer expects the following key developments relevant to its operations:

7 STM Global journal subscriptions are expected to show only moderate growth as budgetary pressure will prevail in the institutional customer segment. Springer expects such pressures to be stronger in the US markets than in Europe.

7 STM Global non-subscription journal business models are expected to grow slightly with new business models (prepaid, pay-per-view) benefiting from the increased availability of elec-tronic content.

7 Springer expects the STM Global book publishing segment to grow slightly with growth in electronic book formats overcompensating the continued decline in traditional print book sales.

7 STM Open access publishing is expected to continue to show strong growth, both as a stand-alone business (BioMed Central) and as an add-on to the traditional subscription-based jour-nal model.

7 Springer’s other STM units and local imprints are expected to benefit from the reorganizations executed in FY 2009 (healthcare communication, computer / software publishing) as well as from a slight recovery in the respective publishing segments (particularly in computer/soft-ware).

7 The Indian prepress service units (STM services) are likely to face continued pricing pressure and gradual substitution by enhanced editing software. Both developments are likely to per-manently depress margins in this segment.

7 The Professional publishing units in Germany and the Netherlands are expected to benefit from restructuring measures executed in FY 2009 and a slow recovery of the relevant advertis-ing markets.

Outlook

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Events after the balance sheet dateIn December 2009, Springer’s majority shareholders entered into an agreement to sell all out-standing shares in Springer to funds managed by EQT and to a fund managed by the Singapore Investment Authority (GIC). This transaction closed in February 2010. Following the acquisition of the shares in Springer, EQT and GIC funds injected EUR 435 m of equity into Springer through a capital increase. These funds, together with newly arranged senior and mezzanine loans, were applied to fully pay back Springer’s existing senior, junior and mezzanine loans. As a result of this refinancing, Springer reduced its overall leverage, significantly improved the maturity profile and restored covenant headroom of its debt financing. Following the arrangement and funding of these new debt facilities, Springer closed out its previous interest rate hedging (SWAP) agree-ments and arranged new interest rate hedging contracts thereby transforming more than 85 per-cent of its current variable interest exposure into fixed rate agreements.

Events after the

balance sheet date

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Contacts

Corporate Communications

Eric Merkel-SobottaEVP, Corporate Communications

Springer Science+Business Media Heidelberger Platz 3 14197 Berlin Germany

e-mail eric.merkel-sobotta@springer.comtelephone +49 30 827 87 54 34

Investor Relations

Milan WielingaEVP, Mergers & Acquisitions / Investor Relations

Springer Science+Business Media Prins Hendrikstraat 17 7001 GK Doetinchem The Netherlands

e-mail milan.wielinga@springer.comtelephone +31 314 376 040

Contacts