REED ELSEVIER

Preliminary Results 1999

StrategyPresentation to Analysts

24 February 2000

Mark Armour

Chief Financial Officer

Adjusted Profit and Loss

1999 1998 £m £m constant

Turnover 3,390 3,191 5,153 4,749 +5%

Adjusted operating profit 792 813 1,204 1,210 -3%

Operating margin 23.4% 25.5% 23.4% 25.5%

Net interest expense (82) (40) (125) (60)

Adjusted profit before tax 710 773 1,079 1,150 -9%

Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items

% change1999 1998 €m €m

£m - Turnover - €m £m - Operating Profit - €m

Science

Underlying turnover and operating profit up 2% Adverse impact on subscription renewals of currency Over 25% of journal revenues include ScienceDirect Weakness in Excerpta Medica and France

Turnover up 5%; Operating profit up 5%; Margin 35.4%

223

332351

231

0

100

200

300

400

622

926 991

652

0

200

400

600

800

1000

1998 1999 1998 1999 1998 1999 1998 1999

Legal

Underlying revenue up 5%; operating profit down 12%

Low revenue growth and increased investment at LEXIS-NEXIS

Non US performed strongly, particularly UK and France

Good sales and profit growth at Educational

Turnover up 13%; Operating profit down 4%; Margin 24.9%

1107

16481927

1268

0

500

1000

1500

2000

2500

322

479 480

316

0

100

200

300

400

500

1998 1999 1998 1999 1998 1999 1998 1999

£m - Turnover - €m £m - Operating Profit - €m

Business

Underlying revenue up 1%; operating profit down 11%

Cahners revenues flat; profits down 40%; restructuring implemented in second half

Recovery in advertising demand in Europe in second half

Strong growth in annual exhibitions and launches

Turnover up 2%; Operating profit down 9%; Margin 16.7%

1434

2134 2235

1470

0

500

1000

1500

2000

2500

268

399373

245

0

100

200

300

400

500

1998 1999 1998 1999 1998 1999 1998 1999

£m - Turnover - €m £m - Operating Profit - €m

Adjusted Profit Before Tax - Reconciliation

1998 Adjusted profit before tax 773 1,150

Base businesses (58) -8% (86) -8%

Acquisitions 1 - 1 -

Disposals (9) -1% (13) -1%

Currency translation effect 3 +1% 27 +3%

1999 Adjusted profit before tax 710 -8% 1,079 -6%

% % £m change €m change

Cash Flow

1999 1998 1999 1998£m £m €m €m

Adjusted operating cash flow 780 808 1,186 1,203

% conversion 98% 99% 98% 99%

Free cash flow 186 246 284 366

Acquisition spend (166) (1,232) (252) (1,833)

Exceptional items (61) 647 (93) 962

Total cash outflow (41) (339) (61) (505)

Earnings and Dividends

Adjusted EPS -8% -5%Equalised dividends -33% -31%

Growth versus 1998

Dividend Policy

Policy realignment to support investment in Internet driven growth strategy

Reduction by one third from 1998 level

£115m/€185m funds released

1999 total dividend 10.0p/€0.27

2000 interim and final dividends realigned

Long term dividend cover target of at least two times

Crispin Davis

Chief Executive Officer

Highlights

New Internet based strategy for growth

Three core businesses supported by brands, content, market reach and scale

Significant, detailed £750m/€1,200m 3 year investment programme

Strengthened management, re-emphasis of core disciplines and cost savings

Commitment to superior shareholder returns

Vision

Indispensable partner of scientist, lawyer and business professional

Demonstrably superior information driven services and solutions, increasingly via the Internet

Global capability and leadership in targeted sectors

Organisational focus on customer, innovation and speed

2002 : Above market revenue growth Double digit earnings growth

Focus on Science, Legal and Business

$6bn

$7bn

$10bn+

$8bn

Science and Medical

Legal and Tax

Business Magazines

Business Exhibitions

Global Market Size

4-5%

5-6%

5%

6-7%

Future Growth

Large and Growing Markets

1

Market position

Science No.1

Legal (US) No. 2

Legal (ROW) No.1 or 2

Business magazines No.1 in US, UK and Netherlands

Business exhibitions No. 2

Focus on Science, Legal and Business

Strong Market Positions

1

Leading Brands and Premium Content

Focus on Science, Legal and Business1

Upgrade Management Effectiveness

Unitary management structure

Creation of 3 global business divisions

New management appointments to drive strategy

Organisational separation of Internet activities

Redefinition of head office structure and role

Significantly enhanced incentive schemes

2

Deliver Demonstrably Superior Products and Services

Internet is prime focus

High value-added content

Ease of use and functionality

Customisation

Solutions, not just information

3

Internet Revenue Development

£1bn/€1.6bn Internet revenues in 2002 through migration/new revenue streams

0

200

400

600

800

1000

1999 2000 2001 2002

0

400

800

1200

1600

120

400

700

1000£m €m

Substantial Upgrade of Marketing and Sales Programmes

Significant expansion of sales and customer service

Focus on new user opportunities; expansion into new markets

Customised pricing to reflect product value and customer needs

Innovative, stand-out marketing behind “e” initiatives

4

Significant Increase in Investment Spend

0

100

200

300

1997 1998 1999 2000

0

100

200

300

400

500

5

5060

80

260

£m €m

Investment Spend by Division

£m €m

35 3015

0

50

100

150

Science Legal Business

1999 2000

240

180

120

60

0

35

115110

Aggressive Cost Saving Programme

Total savings of over £170m/€270m

– 7% of 1999 cost base

– headcount reduction of 1,500+

– over £130m/€210m to be realised in 2000

Total restructuring cost up to £250m/€400m

– £161m/€244m has been charged in 1999

6

Cost Savings - By Division

38%10%

14%

38%

Legal Business Centre/Cross business unit Science

Build Global Capability and Leadership

Global leadership is target in all 3 sectors

Increasing globalisation driven by Internet

Global divisional management and brand development

Legal expansion in Continental Europe and South America

Business to Business expansion in Continental Europe, Asia and South America

7

US South UK ContAsia America Europe

Science

Legal

Business

Geographical Presence

Target In-fill Acquisitions/Alliances to Accelerate Progress

Enhance content/services for Internet portals

Accelerate geographical expansion

Increase emphasis on alliances for Internet capabilities

$100m venture investment fund to support 3 core businesses

Strong balance sheet to support investment

8

Key Acquisitions and Internet Alliances

Science

Legal

Business

Acquisitions

Cell Press

Library Tools

Eclipse

FT Profile

Market Cast

Interbev

Internet Alliances

Links to STM publishers

Justice Link

IBM

Partminer

U-bid

Microsoft

Science: Strategic Initiatives

Development of ScienceDirect; content and functionality

Expansion and customisation to new usage groups

Accelerated migration to electronic, supported by revised pricing

Strengthened sales operation

Upgrade back office and editorial systems

Family of Solutions

Academic & Government

Science NavigatorScience Navigator

ProSD OnsiteSD OnlinePhysics Direct

ScienceDirectWeb Editions

PhysicsWeb Editions

SciTech Web

Industrial & Corporate

Engineering Navigator

Chem. NavigatorBioMed Navigator

Engineering Web Editions

ChemWeb EditionsBioMed Web

Editions

Tech WebChem WebBioMed Net

Professional & Society

Medical VillagePaper VillageComputer Village

MedWeb EditionsCardioWeb EditionsNeuroWeb Editions

Med WebCardioSourceNeuro Web

SOLUTION

SETS

Growth in Core

Markets

Migration of Print

Customers

New Market Development

MARKETS

Increased customer loyalty

Science: Growth Path

Migration to ScienceDirect

Better product/Higher usage

New sectors

Infill acquisitions

Opportunity

Today

Over 60% of Scientific revenues from Internet by 2002

Legal: Key Initiatives

Deliver demonstrable product superiority for online legal research

Customisation of online products, e.g. large law, small law

More aggressive and targeted sales and marketing

Focus on early adoption at law schools

Expansion into related professional areas

Build global capability, brands and leadership

Aggressive marketing and sales programmes

Legal: Growth Path

Superior online research product

User preference and share shift

New geographic and sector markets

Infill acquisitions

Opportunity

Today

40% of Legal revenues from Internet by 2002

Business to Business: Strategic Initiatives

Create sector leading Internet portals

Expand value chain into e-commerce

Improve growth from core magazines and exhibitions portfolio

Expansion in Continental Europe, Asia and South America

Rationalisation of print and exhibition portfolio

Business to Business: Internet Focus

GlobalVerticalPriorities(Learn, Find, Buy)

Entertainment

Horizontal Opportunities Jobs, News, etc.

New Organisation& Technology Alliances

ManufacturIng

Electronics

Construction

etc.

Business to Business: Linking to e-Transactions

InternetTrading

Manufacturing.Net

Chemical News

Interactive

Air Transport Intelligence

@ComputerWeekly

Estates Gazette

InteractiveTotaljobs.com

Variety.com

E-Insite

Buildingteam.com

Chemicals

Aerospace

IT

Real Estate

Recruitment

Entertainment

Electronics

Construction

Manufacturing

Print and exhibitions investment

Business to Business: Growth Path

Full service Internet portals

Traffic and e-commerce expansion

Infill acquisitions

Opportunity

Today

10+% of Business to Business revenues from Internet by 2002

Geographical expansion

Reed Elsevier: Conclusions

Strongly positioned businesses

Robust, customer led growth strategy and plans

Internet opportunity is fundamental

Major investment programme

Organisational issues being addressed

Clear and progressive growth targets

Total commitment to execution

APPENDICES

Turnover - Reconciliation

% % £m change €m change

1998 Turnover 3,191 4,749

Base businesses 77 +3% 115 +3%

1998 & 1999 acquisitions 134 +4% 198 +4%

Disposals (46) -1% (68) -1%

Currency translation effect 34 - 159 +3%

1999 Turnover 3,390 +6% 5,153 +9%

Dividends

Interim Final

1999 1998 % change 1999 1998 % change

Reed Int (p) 4.60 4.60 0% 5.40 10.40 -48%

UK tax credit rate 10% 20% 10% 10%

Reed Int (gross) (p) 5.11 5.75 -11% 6.00 11.56 -48%

Equalisation ratio 1.538 1.538 1.538 1.538

Exchange rate (€:£) 1.50 1.50 1.62 1.47

Elsevier (€) 0.12 0.13 -8% 0.15 0.26 -42%

Reported Profit Attributable

1999 1998 £m £m

Adjusted profit attributable 527 571 801 850

Amortisation of goodwill andintangible assets (373) (332) (567) (494)

Exceptional items (217) 533 (329) 793

Reported profit attributable (63) 772 (95) 1,149

Reed International EPS (3.4)p 34.7p

Elsevier EPS €(0.07) €0.81

1999 1998 €m €m

Sales by Market and Type - Continuing Businesses

Sales by Market Sales by Type10%

56%

13%

7%

14%

Rest of World North America

Rest of Europe The Netherlands

UK

18%

24%

9%10%

39%

Circulation Advertising

Exhibitions Other

Subscriptions

Currency Profile Adjusted Profit Before Tax

Exchange rate to £1:

1999 1998

US Dollar 1.62 1.66

Dutch guilder 3.35 3.28

Euro 1.52 1.49

Swiss franc 2.43 2.40

36%

30%

28%

6%

US Dollar UK Sterling

Euro Zone Other

Free Cash Flow

1999 1998 1999 1998 £m £m €m €m

Adjusted operating cash flow 780 808 1,186 1,203

Interest (81) (45) (123) (67)

Tax (173) (144) (262) (214)

Dividends (339) (362) (515) (540)

Other (1) (11) (2) (16)

Free cash inflow 186 246 284 366

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