RELX PLC (RELX) 2011 Q2 法說會逐字稿

Well, good morning, ladies and gentlemen, and welcome to Reed Elsevier's interim results presentation. For all of you who've come, thank you so much for coming. And for those of you who are joining on our webcast, thank you for listening in.

I'm pleased to be able to report that in the first half of 2011 we had underlying revenue growth in each of our businesses, if of course we exclude the net cycling out effect of the biennial exhibitions. Combined with good growth in operating margin, reflecting both a change in business mix and margin improvement in three of our businesses, this has resulted in a return to growth in adjusted earnings per share of 5% for both PLC and NV.

Reported earnings per share are again strongly ahead, being up 20% in both PLC and NV. And it's also interesting to note that we are now in a position where no restructuring costs were taken as exceptional during the period.

Given the resumption of growth in EPS, the Board is pleased to be able to recommend an increase in dividends; 5% for PLC and 1% for NV. That difference, as you know, reflects only movements in the sterling/euro exchange rates between the dividend announcement dates.

I believe that improved market conditions and the sharp focus, which Erik and his team have brought on value creation and operational execution, should sustain a continued improvement in performance.

Mark will now take you through the results, and Erik will then go through the businesses and outlook in more detail.

Thank you, Chairman. Good morning. Well, the first half results reflect the financial progress of Reed Elsevier. We saw underlying revenue growth in each of our businesses, as the Chairman mentioned, excluding the net cycling out of biennial exhibitions, reflecting the improved market environment; new product introduction; expanded sales and marketing; and the other actions taken to improve the business.

Underlying revenue growth was 1%, or 3% excluding the biennials, and underlying operating profit growth was 2%.

Taking into account net disposals and currency translation effects of a weaker US dollar revenues were 3% lower, both in sterling and in euros. The adjusted operating margin was up 130 basis points at 26.6%.

And adjusted earnings per share were up 5%, both for Reed Elsevier PLC and Reed Elsevier NV, and also up 5% at constant currencies.

As the Chairman mentioned, our reported earnings per share, which include amortization of acquired intangibles, acquisition-related costs, gains and disposal losses, and all deferred tax effects, were up 20% for each of Reed Elsevier PLC and Reed Elsevier NV.

Cash flow was good, with 93% conversion of operating profit into cash in the last 12 months to June 30.

And our financial position is strong, with net debt-to-EBITDA of 2.4 times at June 30, on a pension and lease-adjusted basis.

I am presenting the figures today in sterling; the same charts with the euro figures can be found in the appendices to the presentation. With the average euro/sterling exchange rate unchanged between the first half and the comparative period, the growth rates for profit and loss items are in fact the same in both sterling and in euros.

The first chart sets out the adjusted profit and loss figures, with a 3% decline in revenues at the reported sterling exchange rates; a 2% increase in adjusted operating profit; adjusted pre-tax profits up 6%; adjusted net profit up 5%. I'll talk more about these items as we go through the presentation, and I'll mostly be focusing on growth at constant currencies.

Looking at the components in turn, starting at the right-hand column, revenue growth was 1%, with profit growth of 2%, and an underlying margin improvement of 20 basis points in the first half.

Including disposals and acquisitions, at constant currencies, revenues were down 1% with profits up 3%. The margin up 90 basis points, mostly reflecting the disposal of low margin or unprofitable assets, particularly the RBI US controlled circulation title sold last year.

At reported exchange rates, revenues declined 3%, which included a 2 percentage point currently translation effect of a weaker US dollar. The currency translation effect is only 1% on adjusted operating profit, and that includes hedging benefits from our multi-year subscription currency hedging program and other currency translation effects, which added 40 basis points to the reported margin.

It's perhaps worth reiterating that in our definition of underlying we exclude all acquisitions and disposals made both in the year and in the prior year to give a secure like-for-like comparison. A number of other companies include small acquisitions in their definition of underlying, which can distort growth comparisons.

The next two charts summarize the constant currency growth rates across our businesses for revenue and adjusted operating profit, both in total and underlying. Erik will go into more detail later on the performance of each business and outlook.

Elsevier saw underlying growth of 2%; LexisNexis Risk Solutions was up 4%; Legal & Professional up 1%; Reed Exhibitions down 4%; and RBI up 2%; giving the overall 1% underlying revenue growth for Reed Elsevier.

Excluding the biennial show cycling effects, Reed Exhibitions saw underlying growth of 10%. And as noted earlier, without these effects, Reed Elsevier first half underlying revenue growth would have been 3%.

The difference between the total and underlying growth figures is most marked RBI, and reflects the portfolio restructuring in that business.

For adjusted operating profit, underlying profit growth was 4% at Elsevier; 6% at Risk Solutions; down 2% at Legal & Professional; down 8% in Exhibitions, driven by cycling; and up 12% at RBI; to give the overall Reed Elsevier underlying profit growth of 2%. Again, the main difference between the total and underlying figures is in RBI, reflecting the portfolio changes.

My next chart sets out how the underlying operating profit performance is derived from changes in revenue and of the cost base. In Elsevier, underlying costs grew 1%, against revenues up 2%, to deliver the 4% profit growth. Cost increases from business growth and spending on new product and market initiatives were largely offset by tight cost control.

At Risk Solutions, underlying cost growth was 2%, also reflecting the business growth and continued investment in new product initiatives, offset by further cost savings, particularly in technology integration. This converted a 4% underlying revenue growth to 6% profit growth.

In Legal & Professional, underlying profits were 2% lower on 1% revenue growth, with underlying cost growth of 1%, with increased spending on new product initiatives and in sales and marketing, mitigated by continuing cost actions.

In Reed Exhibitions, lower revenues and profits were driven by the net cycling out of biennial exhibitions. The cost reduction, at 2%, would have been greater but for the accelerated launch program and higher show spend as markets recover.

At RBI, underlying costs were flat, reflecting the cost actions taken to streamline the business, while the business returned to revenue growth at 2%. This gave underlying profit growth of 12%.

Overall, underlying cost growth for Reed Elsevier in the first half was 1%. Taking into account the disposal of marginal and unprofitable businesses, total costs for Reed Elsevier declined 2% first half on first half at constant currencies to deliver the 3% overall profit increase on slightly lower revenues.

Adjusted operating cash flow in the first half represented 89% of operating profits, and for the last 12 months to June 30, 93% (sic - see slide 10). These are lower percentages than in the prior year, reflecting higher capital spending; and in respect to the first half, earlier timing of subscription renewals, which benefited the prior year cash flows. The lower depreciation costs reflect some accelerated depreciation and disposals in 2010, and currency translation effects.

CapEx will be higher in the second half on new product development and infrastructure build. The second half will also see the seasonable reduction in working capital.

Below the operating profit level, net interest expense was lower, due to term debt redemptions last year, the expiry of certain swaps, and the impact of a weaker dollar on the predominantly dollar-denominated debt.

The effective tax rate is 0.6 percentage points higher than last year's average rate, reflecting the geographic mix of the increase in pre-tax profits.

My next chart shows how the Reed Elsevier net profit is divided between Reed Elsevier PLC and Reed Elsevier NV. With the average number of shares in issue largely unchanged, the 5% increase in adjusted net profit, in both sterling and euros, flow through to the 5% growth in adjusted earnings per share for both companies.

This next chart sets out the adjustments we make to the reported IFRS pre-tax figures in arriving at the adjusted figures which are used as key performance measures. The principal item and note is that there are no exceptional restructuring costs in 2011, the 2010 costs being related to the RBI restructuring.

The acquisition integration costs principally relate to the technology integration within Risk Solutions in the third year of the three-year choice point integration program.

Free cash flow before dividends was down 23%; this principally relates to changes in tax payments with a resumption of more normal tax payments this year. In 2010, we benefited from significant tax repayments from prior years, relating to crystallized tax losses on RBI retained assets.

Cash paid in respect of restructuring and acquisition integration is, in fact, coming down as the programs are completed, and the 2010 comparative figure benefited from more tax repayments from prior year items.

The first half free cash flow post dividends is seasonally low for two reasons; firstly, operating cash flows are weighted to the second half, reflecting the timing of subscription receipts and advanced deposit; and secondly, the May dividend is the much larger of the two dividends paid in the year.

Turning to the movement in net debt, I have included here both sterling and dollars, as most of our debt is denominated in US dollars. The sterling net debt has hardly changed in the first half, with a seasonally low free cash flow and currency translation effects, largely matched by acquisition spend.

As noted earlier, net debt-to-EBITDA was 2.4 times on a pensions and lease-adjusted basis.

No major changes in the balance sheet. In sterling, the currency translation impact on balance sheet values of the decline of the US dollar over the period was largely offset by the strengthening of the euro over the six months.

Lastly, dividends. The equalized interim dividends are up 5% at 5.65p for Reed Elsevier PLC, and up 1% at EUR0.11 for Reed Elsevier NV. The difference in the growth rate reflects the 4% strengthening of the euro against sterling since July 2010, when last year's interim dividends were declared.

Due to the converse of the respective dividend growth rates in 2010, we saw a flat Reed Elsevier PLC dividend for the year and an increase of 3% for Reed Elsevier NV, reflecting year-on-year euro weakness. The equalization calculation for the dividends are set out in the appendix.

Thank you. Now let me pass over to Erik.

Good morning, and again thank you for coming and for taking the time to be here today. As you already heard from Mark, the first half saw underlying revenue growth in all businesses, excluding biennial show cycling. But perhaps more importantly, we saw improving performance from our large subscription and data businesses across Reed Elsevier. We'll look at that in a second.

In addition, our more cyclical businesses recovered more firmly than before. And you also saw that our adjusted operating margin was up, and that will return to growth in earnings per share.

Elsevier, as expected, saw relatively modest revenue growth of 2% and profit growth of 4% as cost efficiency and process innovation continue to offset new product spend.

Science & Technology grew 4%. Research journals saw good growth as global research activity continued to grow in line with long-term historical trends. Global research spend used to run maybe 6%/8% growth in the early 2000s, mid-2000s, slowed a bit in 2009, and now there are all real indications that projections now are really that 10% and 11%, it has now continued to grow, and probably back to 4%, or something in that range.

We've seen new article submissions come in, in a high single-digits on a 12-month run rate. The last few months it's even been higher than that. Number of articles accepted, articles published growing at the long-term run rates of 4% a year. Number of citations, which is a big indicator also of research activity, continues to grow at about 6% a year. So activity levels are very much in line with what you'd expect.

The budget environment are very varied by customer, by customer type, by geography, but also by individual customer and their individual situations. However, it may be interesting to note that the number of customers taking our broad collections continue to grow strongly, in line with the historical trends.

Reference education, meaning our historical book and education business, so strong growth in electronic revenues, offset by print declines. Databases and tools saw good growth and an active new product pipeline.

Health Sciences was flat overall. Medical research saw good growth, very much in line with S&T growth, and they had the same trends as we saw in S&T research.

Clinical reference and decision support saw good growth in online revenues and online solutions, somewhat moderated by format migration and, therefore, some declines in our print reference businesses.

Nursing and health professional education, primarily US business, also saw print declines, with lower US enrolments. And those happen in career schools, primarily due to the anticipated gainful employment legislation changes, and also in state-funded schools, due to the bid mixed budget environment and community colleges and other local educational institutions that educate nursing and health professionals.

As a result of these reduced enrolment numbers, you also saw some of the flow back of inventory that had been shipped out under the old runner that came in, in the first half of the year. We expect this to gradually return to normal, but we do not expect a bounce back.

Interestingly enough, in nursing and health professionals, we also saw continued good growth in online solutions.

Pharma promotion was stable in the US in the first half, but the European weakness continued.

I think overall for Health Sciences, although the whole business was flat for the first half, I think it's very interesting to note that electronic revenues grew in the high single-digits across all these businesses, and that, that growth was offset by the declines in european pharma and in print books.

Risk Solutions grew 4%, with good growth in data and analytics across all our different business segments, as you'll see in a second, and this positions the overall business well for future growth, exactly as we explained to you at our seminar in May.

Profits grew 6%. Our spend on new product pipeline was offset by further cost savings. And I should probably also mention that we did open source elements of our HPCC technology to get external use cases and external engagement in further accelerating the platform development than on proprietary algorithms for the platform.

Within Risk Solutions, insurance data and analytics grew 7%, driven by strong new product pipeline across the insurance companies work flow.

The insurance software business, however, declined 25%. Now just to put this into perspective, it's roughly GBP7 million in the first half of the year. You may recall that we highlighted this in the April IMS. We said that this business had a slow start to the year in the first quarter, and that continued at similar rates in a second quarter. And at this point, we don't see that changing materially for the rest of this year.

Government grew 2% as federal budgets in the US were constrained a bit by some of the current discussions about Federal budget ceilings and other issues. But we also saw significant interest from states in our solutions that help them discover and prevent fraud, waste, and abuse of their welfare programs.

Business services grew 5%, with significant recovery across almost all our markets compared to last year; financial services at 7%, corporate markets at 4%. It's only, I think, the real estate-related data pulls in the US, they're still not recovering to the level that you might hope.

Screening grew 6% as good growth was continuing, but in a slightly more subdued US hiring environment, compared to the sharp rebound in hiring that we saw last year and the sharp rebound in screening revenues that we saw last year.

So, overall, as you can see, with the exception of the software business, that this year we have more balanced set of growth rates across the Risk business compared to last year.

Legal & Professional returned to underlying revenue growth of 1%, with margins broadly flat in the first half to the first half 2010, as expected. And as we've said before, for the full year we expect the margin to be broadly flat compared to the prior year's full-year margin. And we think that we can accomplish this as we continue to focus on operational efficiency to offset the increase spend on product development.

US law firms grew 1%. And while legal markets have essentially stabilized, we think that the current pace of recovery in these markets appears to be relatively muted. But in that environment, for us, we see new sales continuing to be higher, continuing to grow strongly, and we've seen a return to solid usage growth for our products and solutions.

US corporate government and academic markets were flat, with growth held back by continuing, but moderating, declines in corporate news and business, our separate service there, still declining 7%. But we see in these markets that the budget environments are stabilizing and we're seeing a gradual improvement compared to what we saw last year.

International grew 2%, as strong growth in online was largely offset by continuing format migration from print.

Exhibitions saw a return to good underlying revenue growth of 10% excluding cycling, thanks to strong growth in annual shows and accelerated new launches. Underlying costs were down 2%, with ongoing investments in those new launches and technology partly offsetting the cycling out cost benefits that you would see.

For the full year, we expect continued good growth in annual shows and continued good growth from new launches, and the net cycling out of biennial shows will have a smaller effect in the second half for the full year than it did in the first half.

As we can see here, all major regions saw return to good growth. Europe grew 7%; North America grew 14%, with strong growth across all sectors; the rest of the world on average grew 10%, with more than 20% underlying growth in China, Brazil, Russia, and some other emerging markets.

But perhaps most notably in this category is the fact that Japan continued to show good growth, despite the effects of the earthquake. And thanks to what I would describe as a near heroic effort by our local management team, no shows were cancelled.

Reed Business Information, the turnaround here is progressing very well. Underlying revenue growth returned to 2% growth, and those trends that you see in the business are largely expected to continue. We saw significant increase in the margin, both from some of the portfolio changes that we made, as well as from the fact that we're continuing to increase efficiency in our remaining businesses.

Our major data services on average grew 10%, and that includes strong growth in ICIS, Bankers Almanac, XpertHR, offset by real weakness in RCD, our construction data business, essentially flattish for the year.

Major marketing solutions grew 7%, leading brands returned to growth of 2%, and other business magazines still declined. Even though print advertising declines are moderating, they're more than offsetting the growth we're seeing online. And in this portfolio bucket, we continue to reshape the asset base and we did a few divestitures during the first half.

So, in summary, in the first half our growth trajectory improved across the company as the large subscription and data revenues strengthened and the more cyclical businesses recovered more firmly than before.

Going forward, we see the positive momentum continuing to build across our business. And with our management teams focused on creating value in each one of our businesses, we continue to expect a gradual improvement in the overall performance of Reed Elsevier.

Thank you. And now let's move on to some questions.

Three questions. Firstly, just on the currency hedging, could you talk about the sustainability of that going through into the second half? And I think you should see a positive benefit also in 2012, looking at the rolling hedge there.

Secondly, just on contract renewal within Elsevier, you keep hearing of the odd story of contract renegotiation, but maybe could you quantify the proportion of customers that you've seen actively trying to seek to renegotiate either their packages or their contracts, say, over the last six months, if any at all?

And then thirdly, second half is usually seasonally stronger, you did 5% earnings growth in the first half, shouldn't we expect gradual improvement on that in the second half?

I'm going to let Mark cover your first and third question here in a second, but maybe I'll first talk about the contract renewals.

The contract renewals happen, as you know, mostly second half of the year before the year end, and then rolling into the beginning of the year in some countries and some regions. And I think it's very important to note that every customer is different.

Every customer's situation is very different from the other one because they spend different amounts on research, they see different shape of the research priorities they're funding, and so on. Therefore, they want to allocate their research spending well; that's 99% of their spend.

And the 1% that goes into things like what we provide then aligns with the rest. So, therefore, every year we talk to every customer for a long period of time for those that are up for renewal and we go through and discuss what their priorities are, and what their needs are, and what their issues are. And every customer is different and we're not going to comment on any one specific customer in a situation like this.

But net-net, what you see in terms of the outcome of those negotiations, the outcome of those contracts are the growth rates that you see here, the blended average. And that is across industry segments, across funding sources, across geographies; includes corporate customers, includes corporate funding of academic libraries, academic research environments, and so on. And it all adds up to the blended rate you see here, of roughly 4% growth this year.

And so, therefore, to answer your specific question, have we seen any specific number that's any different this year from a typical year, the answer is, no.

We went out early when the downturn happened and we started to engage with our customers much more actively one at a time when we saw the economic downturn in anticipation of the downturn. And we re-worked with some of them how their funding research environment changed and aligned what they wanted from us with those needs. And we worked that way through that over the last couple of years.

And if you say at this year -- we're essentially this year going through a process that is the standard renewable process, which is where we have some annual contracts, some annual agreements with customers, some [are annual] situations, and then we have the rest of the subscription base is on average running on a three-year term and, therefore, in a typical year, if you just do those numbers roughly, you, therefore, see 25% of your long-term contracts coming up for discussion every year, and that's what's happened this year.

And there are always individual exceptions and individual situations that are unique, and every year there are several of those, but that's been the case since we started to have real contract discussions with our customers. This year, for example, Libya is not an easy one.

But I'll let Mark --

On the currency hedging, what you're seeing is the weakness of sterling gives a -- should increase the profitability of the UK originating internal subscriptions. And the weakness of sterling that happened dips into our hedge rates slowly over time and so that benefit to our results comes in over time. The same way that you saw in the mid-'00s, where the collapse of the dollar worked its way through into our results over a period of time, which had a drag effect on the growth, particularly of Elsevier.

So what you saw in the first half was this hedging lag effect had a 4% profit growth improvement effect for the Elsevier business and, in fact, I've included an appendix to the presentation on slide 52, showing the margin effect of that. So the hedging effect had a 4% impact in getting from constant to reported growth for the Elsevier division, and a 0.9 percentage point pick up in terms of margin.

Now, the Elsevier business has lower profits in the first half than in the second half because of the seasonality of the business so the effect for the year as a whole won't be quite as strong as that, but it will persist into the second half.

Going into 2012, you will see some additional effect, although it won't be as significant as it has been in 2011. And that's again, if you like, the air going into the balloon as the lower sterling gets into the hedge rates, in the same way the air came out of the balloon as the dollar declined in the early '00s and through the mid '00s.

Just [in terms of] the earnings commentary.

The earnings commentary?

Usually, seasonally the second half's stronger, [25%] earnings growth in the first half, shouldn't we expect a gradual [improvement]?

Yes, well, I think, as we've said in the statement, we expect to continue to see gradual improvement in performance. And I think that's about as much numeric guidance as we've given in the statement today.

Three questions. Just have three questions. The first one is just on new product launches. Can you give us some indication as to how well they've gone, so specifically SciVerse, but also things like Lexis Advance for Solos, and also Lexis Advance for Associates?

The second question is really just in terms of Legal & Professional margins. How confident are you that over time those can be improved, given that they're at trough levels at the moment?

And the third question is really just in terms of Risk Solutions. It's typically been one of your fastest-growing businesses, and there's obviously been some issues in terms of enterprise software, but longer term, can we expect the growth to reaccelerate? Can you give us your thoughts on that?

Okay, let me take each one of those here. New product launches, as you mentioned -- you mentioned a few examples, I'll address those.

SciVerse is changing the environment. It's sort of a platform redesign to change the environment from product -- what you look at as ScienceDirect as a product for research, for deep research that contains all the full text articles that the Scopus environment, the searching across the world of all scientific materials, the broadest database, so everything published in the world.

And SciVerse is a way to integrate these into one environment where you can search and build around it, and you can build applications, and so on. We have had -- so I see SciVerse as essentially the beginning of a new generation of interacting in terms of how you do scientific research, how you then build applications to build [into research], how you search, and so on. So SciVerse has gone well as the foundation move that, that is, if you see what I'm saying.

Another example on the Science side is we introduced in the last six months SciVal Strata, which is a product on top of the SciVal platform, which is part of our integrated Scopus data of course but built on top. But the product, called SciVal Strata, that's there for institutions to be able to evaluate performance and history of specific researches, or group of researches in specific categories, to target recruiting and funding decisions, and so on, around that.

So that's a product feature that's put on top of these environments, so I think that's the way you have to see them. And they're being rolled out continuously, and I think at a slightly higher pace than we had a few years ago. But I think that you've got to look at them as a sequence, and we're really pleased with how they're going.

You looked at Lexis Advance for solos, I think you said, was one. That was of course launched late last year and was, while not intended to be significant in financials, as I think we told you then as well, a very important one for us in terms of technology and technology integration. Because that was the first rollout of our integrated new solution set from the absolute front-end customer user interface on the screen, all the way through inside out operations, back office systems to billing, customer service, all the way through in our integration. And that's operating well, it's going well, our customers like it. But it's targeted to a very small, sort of need set in the first rollout.

Lexis Advance for Associates has been announced to the market and previewed with customers, but it's not out in a commercial sense at this point. So people like it, but it's not for commercial availability.

You asked about -- second one, you said margins; that was specifically the Legal margins, right? That's what you asked? Yes. As I think again we said before, the Legal margins for this year -- for the first half flat to last year roughly, for this full year we expect them broadly flat to last year's full year.

Over time, as we see a continuous sort of return to revenue growth, we do expect that these margins will gradually recover and that we'll then gradually continue to see, with revenue growth, cost growth below revenues, and, therefore, gradual market expansion over a period of time.

Do you think you can get back to historic normal levels of above 20%?

I think at this point, and I think I said this before as well, that we don't like, in any of our businesses, to set long-term margin targets or margin expectations. By definition, I think if you do that, that becomes your ceiling.

And I think in all our businesses we have some high margin business, some lower margin businesses. I think we need to operate with a mindset that our businesses are here to drive value for the customers, that's the number one priority; continue to understand how it is we do that and how they make money; how it is they spend money; how we can help them do that.

And we need to operate that machinery in a way that we constantly challenge ourselves, our internal cost structure, processes and geography, to try to see if every year we can try to keep on an annualized regular growth rate basis the costs growth below the revenue growth.

And if you have that mindset, I think over time you ultimately continue to have better margin progression across Reed Elsevier, even though at any given point in time you can trust [me] we don't set a target. But we think that philosophy is a better operating philosophy because we have margins at 13 in some places and over 30 in others.

Last question, you said Risk growth. I just want to make sure I understand exactly what you're saying. I think you're saying the long-term growth potential for Risk is what you're really looking at. I say it is exactly as we said, as we thought, as we explained in our seminar.

If you look across the pie of revenue streams in Risk, we have data and analytics in all the different business segments, Risk -- so insurance is of course the largest. But then we have other large data and analytics business segments; they're all growing very well right now, and they're all returning to a balanced growth across those businesses.

Risk's growth this year is not so much dependent on the rebound of screening, which was sort of a temporary rebound.

So we think that the fundamental growth potential for Risk in data and analytics is exactly what we said before. The fact that we operate an enterprise software business for policy administration to commercial insurance carriers that's installed on a software so perpetualizes and maintenance basis under separate brand name there, that this year had a few months delay in getting through new software installed and sold, does not in any way change our growth outlook for the data and analytics business of Risk.

Just a follow-up in terms of the new product launches. Can you maybe just talk about what kind of impact we should expect that to have in terms of revenues for Reed Elsevier, so, for example, in Legal, with these new legal products, SciVerse, in terms of Elsevier?

I see our pipeline of new product launches as the business that we are in. I don't think here that you should see these as something that is different from the business trajectory that we are operating.

We have launched new products over the past. You're talking about SciVerse. If you go back 15 years, science journals were essentially printed and shipped through agents, and we've continued to upgrade and redefine the electronic environment all the time, and launch products on top, and so on.

And I think that, that is what sustains a certain growth rate in this business; that you continue to see, as your business, not to sell a product but as selling an improved outcome that has economic value to a professional customer. And if you continue to identify the professional outcomes that you can sell to and you adjust your solution set to that then you're going to continue to grow revenues.

In Risk, for example, to pick that illustration since we just had a seminar, you saw the layout, for example, in the insurance workflow; the whole issue of how this insurance company operate. And from a history of having data in one [spec] in that workflow, you can then take that data and you can build in solution sets that can be used in other steps of the process that you can figure out what it is you build, what you use the data for, and how much of a quantifiable impact that has on the customer so they will acquire those products, use those products, and use your data more. And that's how you can continue to drive growth rate like that over time year in and year out, because you continue to launch products and do that.

So we do not see this pipeline of new products, any one that you mentioned, or any of the others, as being the one-step change that all of sudden is priced differently or drives a new revenue stream at this point. There may be in some of our businesses at some point, we saw that.

But we also see, to pick another very simple example, in Exhibitions. We think Exhibitions is an organic growth player. It's an organic growth player where you leverage your skills sets, your capabilities, your brands, your global network, your professionalism, your technology, and your data, across the business, and you continue to improve your exhibitions and you continue to launch exhibitions on an ongoing basis. That's why they accelerated the rate, and that drives organic growth.

So it's a part of the organic growth equation. But it is not something I would say that new product's going to give this much and here is how it's going to change Reed Elsevier.

Three questions, please. Firstly, with Thompson Reuters announcing the disposal of its healthcare business and Wolters Kluwer announcing disposal of its pharma business, what are your thoughts regarding your asset mix in Health Sciences?

Secondly, can you please provide an update as to how efforts to tap into new budgets and universities through productivity tools have progressed? Specifically, have you seen an increase in uptake in SciVal contracts in H1 '11?

And finally, could you please provide an update on the progress of your plans to extend your Risk Solutions business into new geographies? And can you please provide more details on the issues of the software license business within Risk Solutions? Thanks.

Okay, let's do each one of these. Thompson health and Wolters Kluwer health, yes, they all have their reasons. Thompson health, I think, had one description of why it is they are selling their health business; and I think Wolters Kluwer has positioned partial sale of theirs slightly differently.

From our perspective, our Health business is an umbrella business for health-oriented, of course, information and solutions. Within that umbrella we have some very strong content assets, and we have some very strong tools inn certain segments, electronic solutions. We think in the long run that there is an attraction to having that high quality content, and we think the health markets in general will continue to see growth.

However, from our perspective, we do see a format transition. This is still a business that is just over 60% print, which means that we are seeing a format transition. And a format transition in any business can have a little bit of a bumpy road, and is not always that every half year or every year that the revenue growth is exactly aligned with a steady format transition. So we have that still left in some of the Health book businesses.

And then you have the pharma promotional business that we're in also, which has gone through a very difficult time because of the pharma industry changes, of course.

Now, if you look at those, some of those you could argue are transformations over a period of time, some are partly cyclical as well. But some of them are structural. And the way we see it at this point is that we will continue to work on our Health business, and continue to reshape the portfolio inside there.

We did sell in the past 12 months the Excerpta Medica business, which was a pharma project-based business that we owned that we sold. And we could see us continuing to shape that portfolio by looking at small acquisitions and reshaping in our small divestitures. But we don't look at, we're not considering at this point, anything that looks like what Thompson is doing, which is put the whole thing out. That's not something we're currently considering.

You asked a question of SciVal. SciVal is, again, an umbrella name of an institutional performance and planning tool platform. And on top of that, we then put new product launches, such as the SciVal strata, and we continue to roll those out. SciVal Spotlight has been out, which really is a tool for countries and institutions to benchmark their performance. SciVal Strata, as I said, is for researchers or groups of researchers to allocate funding, and to target recruiting and collaborations, and so on.

And we also have things like SciVal Funding, which was about the funding sources, and so on.

So we see this -- again, a little bit like my answer to Polo here, that this is a foundation starting with Scopus, and then all the things on top that you then continue to roll out new applications and tool on top that overall builds to create the growth rate that you are seeing; in this case inside Elsevier S&T over time.

But these tools I think are more important in the value they bring and the importance they have to the institutions and how they link are primary content to our database content to decision making and funding allocation. That's why they're so important.

As you know typically, the research funding and the spending in a research institution, order of magnitude, 1% of it goes onto information-related tool. And the whole issue about the economics, about how they spend and allocate the 99%, who they collaborate with, can have significant impact on how the efficiency and the effectiveness of that spend. So that's what those tools are.

So they are continuing to grow. They have been launched. We continue to launch new. But, again, back to Polo's question, I wouldn't expect that this is something where you'd say where is the incremental exact revenue on Elsevier's $3 billion in the near term?

You said Risk in new geographies. We are looking at several different locations. We are experimenting and talking to people in different locations. The only one that we have announced is that we will have a solution out in the UK in 2012, and that one is being ramped up and we believe is on track.

The last question, software in Risk, that's what you said, right, the software solutions business? Again, to be very precise, this is one business in Risk where we build software in order to sell software. In all our other businesses, we build software in order to use software to sell data and analytics. See the difference?

So this is the segment we actually sell software. We sell it as packaged software, enterprise software, that's then installed in the enterprise installation system, sold at the petrol license sale, plus maintenance base, is traditional software model, and, therefore, is very dependent on the pipeline new sales being closed and installed. So it's a different model from our data and analytic subscription and end usage models.

And we did see delays in the first half of this year for several reasons. One is that insurance carriers are deferring capital spend on issues like this because they had pending and larger catastrophic losses during this time period than you would expect, and so they were a little hesitant. Then, in addition, we're seeing some trends here from integrated end-to-end policy administration software to slightly more broken up pieces. And in that transition, we probably shouldn't be surprised to see that it takes a little longer than to adjust and put these in.

So, does that answer your question?

Yes, thank you.

Okay, great. Thank you.

A couple of questions. Bloomberg and Bloomberg Laws have made noises about trying to accelerate their entry into the legal research market, and in particular they are informally talking with their customers about trying to push a flat price in solution, how do you envision LexisNexis protecting its market share in an environment where someone is trying completely different pricing scheme?

And second question, since you did mention one country, Libya, I will ask about another troubled contract, which is the Research Libraries UK. Just last week the Executive Director of Research Libraries UK in an interview said fundamentally something along the lines of the fact that Elsevier made a proposal; it was nowhere near what they need to offer in order to reach a contract, and reiterated that, fundamentally, contracts that were signed in the past are not sustainable in the current environment. What's your sales force missing if your customers are so desperate?

Okay, let me answer both of those. Bloomberg, you said on the legal side, Bloomberg is a very, very big company. They're very good at what they do. We have a lot of respect for them as a company. But I think they've being going at this legal market in different ways for a long period of time, and I think for them to build out a broad based legal comprehensive information tool to all markets that would rival the large providers is a large task.

They have redesigned their front-end interface and done different things. But when it specifically comes to the pricing issue, there have been a fair amount of comments out there that have said that they were going out with lower pricing, or other things like that.

I think what we see from serious industry studies, or people who have actually reported, or people who are being commenting publicly on this specific situation, they would actually say that they have actually not gone in with something that's a low priced solution. If anything, if you do a like-for-like comparison, they're going in at something that is not lower than what you would see from the other market providers.

But it's flat?

Well, there are lots of different ways to define the specific pricing and how it is used, what you include, and who you compare to, and so on, so I don't want to get into any one specific pricing model of the competitors that is not out in the public. But I think the way people are commenting on it, it's not quite clear I think in public that this is something that's either lower or higher, ultimately end up being flat. The question is how you set your flat pricing. What does it depend on? So I'm not sure that, that is exactly what they are doing, or will be doing.

On your question about a specific customer, as I said before, I don't want to comment on any one specific customer, anyone specific situation. All the customers that we work with have very important situations that are unique to them. They're absolutely unique situations in every single customer. And they have unique history, they have unique research priorities, unique funding sources, unique timing of contracts and currency, all these other issues that come into it, so I'm not going to go in and comment on any one of them in particular at the time when something is actually going through a process of regular interaction.

Two things. First, in the legal market, and particularly the US legal market, could you just update us on how you're doing competitively in the legal research market versus the business of law components of that market that you serve, and what the trends are in each of those segments?

And the second thing is more broadly on acquisitions. You've done a little bit of acquisition spend in the first half, the balance sheet looks now like there's headroom appearing there, could you maybe tell us about your priorities there, and remind us what your acquisition hurdle rates might be?

Yes, US legal, and I think you asked specifically about what you refer to as research side versus business of law? Yes. There are many different ways to cut what you do in legal, or whether it is research, or litigation, or public records business, or whether it is marketing solutions, or business, so on, and different companies use slightly different labels. We don't organize exactly the way you label it, and other people organize slightly differently.

So if you looked at -- in our growth rates, we don't see fundamentally different trends in our different portions of the legal markets like this. Of course, there's some differences in every half year, but I think that the one situation, just to give you an example that we use to talked about, the whole web listing Martindale-Hubbell web services, and so on, which was an old print directory that faded, we have now gotten back to a situation where they're being rebased and it's stabilized, and so on.

So, therefore, I think at this point it's not like they are any material differences in the overall trends that we see in those markets, the way we look at our participation in them.

Of course, if we then take a very, very small slither and say, but what's happening in the billing segment to small offers, you're going to see lots of variation in the small portion. But if you talk about the big large bucket, to us, we don't see materially different trends in the range.

We have our strengths, and other companies have their strengths. Of course, if you ask another company they will emphasize they're strengths, and of course if you talk to us we'll emphasize our strengths. And I think historically they're have been different strengths at different times for different players, and I think those difference continue, no matter how hard we try to market our strengths or others try to market theirs.

The second question was acquisitions. We've said over time, and we've said it recently again, the main priority at Reed Elsevier is to drive value creation through organic growth strategies in each business, to make sure that we create value for our customers and that we create value in each business by growing them organically.

We leverage our current assets, and we invested those, and continue to grow them, and have an active new product pipeline. That's the priority for the business.

When we have decided, which we have in each business, what the target segments are and which organic growth strategies we want to pursue, if we then see acquisitions that can help us on that path, on that strategy, that can add to that growth, then we will look at them very, very seriously. And we continue to look at acquisitions all the time seriously in our different sub-segments. We've done that over the last two years; we continue to do so.

What has -- the outcome has been, as you pointed out, that every year we buy a few companies, and last couple of years they've been companies that cost a few million, or a few tens of millions. Now, I can definitely see that in our environment, that as we pursue those strategies that way, that once in a while that you might come up with a company that cost a few hundred million. That's the growth strategy that we're looking at.

So, can those come up? Could they have come up last year? Could they come up this year? Can they come up next year? They could. But it doesn't change our strategy, and we do not look at acquisition strategy differently based on our balance sheet ratios.

If you look at the balance sheet ratio by itself, you say at today's half year, at 2.4 times net debt-to-EBITDA on a pension lease-adjusted basis, we're very much in a comfortable zone for us where we don't think that this is a problem in any way. So we can pursue our strategies for the valuation creation that we want to do in our businesses, and that's what we just talked about.

A couple of questions. Firstly, on Exhibitions, you're talking about 40 new launches, how should we be thinking about the margins this year and next year, and the impact of those launches on the overall operating margins?

And the second question is, sorry, back to Legal again, 1% growth in North America, how should we be thinking about that in the second half, and in next year? Is the market strong enough to take price increases for some of these new products? Or should we not be thinking about it that way?

First question, margins in Exhibitions with launches, the run rate of launches last year, I can't remember the exact final number, but let's say last year was in the mid-30s of number of new launches in 2010. This year, let's say it's going to be, for the full year, in the 40s; that is not going to have a material impact on the margin for the overall business for this year versus last year.

The bigger question around Exhibitions, of course, what is the continuing growth rate organically in the business and -- if you see a 10% -- then you have the cycling effects, of course, for the full year. So for this year versus last year, I would say the launch differential will not have a big effect by itself.

Legal, the growth of 1% so far this year; at this point, that's in line with what I think we see the kind of -- what I would describe as, a new muted recovery in the legal industry. But it is not a recovery in the legal industry I think has come all the way through in terms of employment hiring and all these different things.

There is some conflicting data points for the first half of the year, but they all have one thing in common, and that is that they're not moving very much. Even though they're slightly different, they're not moving very much. So even though we see increased activity, increased demand for law firms and some of those activity levels picking up, the strong hiring and push hasn't taken off yet.

So, therefore, if you look into second half, we don't see the world being much different from what it is right now. But if you then start looking at what you see into next year, and so on, quite frankly, it's driven a lot by business activity and legal market activity, maybe even more than driven by what we are doing in it.

Just two questions. Mark, you indicated that CapEx in the second half would be a bit higher than the first half, are we nudging towards [GBP350 million] on a full-year basis rather than [GBP300 million]? And if so, does it stay at that level? Or does it grow further from that level in the out years.

And then on dividend cover, because of the way currencies moved, the cover on the euro dividend over time has slipped a bit, do you want to put a floor on dividend cover so we can think about when you might actually have to freeze the dividend if currency moves the wrong way?

Back in February, I said that our long-term expectation was that CapEx would be round about 5% of revenues with the current portfolio and that, that would move around a bit depending on the timing of capital spend. Clearly, with the investment going into new products and infrastructure in the Legal & Professional business at the moment, where we've got a bulge coming through, so it's more likely to be 6% this year than 5%. It was 5% in the first half, but that will step up in the second.

In terms of dividend cover, the dividend cover for Plc was 2.2 times on the last 12 months to June 30, and 1.9 times for NV. Last year, for the calendar year it was 2.1 times for PLC, and 1.9 times for NV. That is because of the way that the equalization of the dividends works; there's this imputed tax credit that NV shareholders enjoy.

Our stated goal is to maintain at least 2 times dividend cover over the longer term and so we don't see 1.9 times as anything particularly out of synch that needs to be redressed in that -- with any -- in any short-term environment.

Our expectation is, is that earnings growth continues to gather momentum and dividends grow as well, that over the longer term that will come back quite naturally.

Three questions. First, again on the Risk and your insurance clients, are these the same clients in the software business or in the data business spending plus 7% for data and minus 25%, or whatever it is, for the relative number for software?

Secondly, in terms of bigger picture strategy, in the past I thought you were leaning towards a preference for a subscription business, and given that the M&A market is a bit stronger now we could expect some more movement or exiting more cyclical business, is this your idea now? Or you're very happy with keeping a stronger presence in cyclical?

Lastly, on the new products in Science, we understand that for the first time those search engine, under whatever name they go, do include all of the content available for free on the net, is that correct? And is that a change of strategy which maybe signals that the open sources, open archive content is actually becoming more relevant for your clients?

Okay, let me do the first one here. You said on insurance software clients; they are sometimes the same parent company because we are essentially selling data and analytics to essentially all insurance companies. So it's often the same parent company, I should say.

It is sometimes the same insurance business, but most of this business is, as I said, geared towards commercial carriers. It's end-to-end policy administration, software in commercial carriers; often a different department, different function, different set up, and they are not as linked as you might imply by your question.

Even though, if you serve a large customer in one way over here, in one division, under one brand name, and you serve another -- you serve them in a different way over here with software for this under, again, a different brand, a different way, a different business model, we always think of our customers, and we always think about how we create value for them. But they are not like.

For example, the linking about SciVal, or Spotlight, or Strata, or something; you're using the same platform and you're using -- building different tools for the users to do it that way. These are separate business models, under separate brands operating, so selling different sets of solutions but to the same parent company as an insurance carrier, often.

Second question was our cyclical businesses. I think I've said this before, that some of our cyclical businesses are good, long-term growth businesses that are targeting professionals and their institutions, where we cost a small piece of their total cost structure, where leveraging our tools information can have a significant important effect on their overall economics. And we believe that the whole model, which is professionalizing and leveraging more technology and data, and so on, is, therefore, very suitable to a professional solutions business like ours.

If they have some cyclicality in them, we do not see that as a problem per se, as long as they're not structurally challenged, or in other ways a bad business, a bad returns.

On the other hand, there are some businesses that you then say they do not fit the criteria of professional end users, targeting professional institutions, helping their economics, and going in that direction. So, therefore, we will continue to look at our portfolio, and look at assets that we can add to accelerate our growth, or assets that we can exit on an ongoing basis. That is going to happen at Reed Elsevier on the level below the divisional structure that you see today.

For example, best example is RBI is an umbrella name for sets of business under Reed Business Information. We are not considering selling an umbrella of Reed Business Information. We are considering, and we're actively, actively, working on the portfolio underneath Reed Business. And even in the last six months, we bought a few businesses and we sold a few businesses, and I expect that rate to continue. The rate might go up, the rate might go down, but the approach will stay that way in the near future, or in the foreseeable future I should say, that we can think about. That is our strategy to operate that way.

Last question, I'm not fully sure I understood what you meant, I'm really sorry, could you just try to say exactly what it is you're --?

Sure. I was under the impression that ScienceDirect and Scopus very rarely in the past included any source which was not part of Reed Elsevier, was not a paying source, in other words, didn't include any open access source from the Internet, which are all listed under Google Scholar, whilst I understand that SciVal for the first time opens up to open access sources as well.

Well, I'm not sure that while technically correct, when you say -- ScienceDirect has always had what we publish. Scopus has always had everything published by everybody else, that is [PRU'd] in quality, and real solid published research indexed across the world, the largest source for that.

Then, we have had a very long running service called Scirus that has operated for a very long time, that has indexed the non-full text article period or document, such as presentations. If you write a thesis it would be in there; it would be draft papers; it would be lots of other type of scientific documents and materials that exist in institutional repositories and on the web in different places that you can link, and sort, and work with, which actually represent a very large part of the amount of scientific data and materials available. We've now integrated all of these into our different platform.

So there is no fundamental shift in philosophy in any way from Elsevier on this, other than we continue to provide a range of tools that help you with looking at, and finding, and working with scientific research material, tools, other types, and to integrate them, and link them, find them, etc. So we've now slightly changed our integration level of the different tools, and so on, and relabeled some of them on integrated platforms, but there's no philosophical difference and no indication that there's anything different to the business model.

Thank you.

I just have one question actually on STM, and the academic journals, and the 4% growth. I was just wondering whether you could talk about the geographic profile of growth. Because the inference was that, that 4% should be what we should expect, but I was wondering whether there was any significant divergence between essentially developed markets, and emerging markets, and, therefore, embedded in that inference is a slower growth outlook for developed markets and academic.

Well, the growth is -- you can aggregate it in many different ways. You can aggregate them by geography of the institution, you can aggregate it by where the research is funded from, by source of research funding. Is it government funded, or is it privately funded, which, as you know, is not clear. A very large -- actually majority of world R&D spend is not government funded.

And you have very different ratios and different places also on the academic institutions. As you probably know, in the US, 70% of academic institutions are publicly funded; 30% private. In Japan, it's more like 55%/45%. Japan's our second largest market. You look at many other countries, more like 90%/10%.

So it's funding source; it is geography of the research conducted; it's geography of the research funding; and it's the source, the type. We also have corporate customers, corporate research funding, which is a large part, as I said.

So there are lots of these different slices you can take. And of course you can take -- you can come up with an example. You can pick a country today that is in a difficult economic situation and slow economic growth and, therefore, where they're not increasing some of these spend levels and they're currently going through a little bit of a dip.

You can also find institutions in some of those same locations that had a dip two years ago, or even three years ago now, that have taken down their spend and their views and now are growing rapidly again. Even though they can sit right next to each other geographically, they can have very different funding profiles, and very different strategies, and try to do different things with the research so it's not so clear that you'd say, if I take it by geography it's a big difference.

Having said that, I think we all would expect that no matter what the funding source, or how you do it, that the research growth rate differentials that you've seen over the last few years -- if you look at number of articles published, number of researchers, or citation share, equality share, all those different things, that we have seen for the last several years, an increase in share and activity in China, an increase in share and activity in India, and so on, and there are a few other large countries of course where you see that, and we don't expect that relative -- the relative direction of that to change in the near term.

It has changed back and forth over time, but there are lots of different data sources out there to describe where is the research activity levels going by location of researcher. And those are clearly going more in line with where you see global economic growth, the relative shares. So there's nothing unique about this over the longer term, or over the medium term. But in any one year, in any one institution, or any one set of institutions, it might not be exactly what you think, because they might have gotten hit later and preserved spending, or gotten hit earlier.

A couple of questions. Firstly, on Legal, while we hear what you say about the market environment not being great, I think it has become a bit more apparent over recent quarters that your peer group, whether it's Thomson Reuters, or even Wolters Kluwer, are going a bit faster, and some of the survey data suggests that the legal markets maybe picking up a bit faster than Reed, so what do you think about that?

Secondly, just going back to the question about earnings growth, for management to get paid you need to do 9% compound earnings growth over this year and next year; you've done 5% at the half year, you didn't seem that enthusiastic about a bigger pick up in the second half, have you given up on a 9% compound target for the next two years?

The first one here, the legal market, if you look at the legal survey data, some of them say that legal hiring this year has been flat, some of them say it's up a little bit, some even say it's down a little bit. So if you look at actual hiring, and you look at employment in large law firms, it's pretty muted.

If you look at activity levels in terms of business activity, if you look at some legal demand, and those kind of issues, they're picking up faster. That's why I say that our new sales are up significantly, continuing to grow strongly, and our usage is up firmly. So, therefore, as I say, we are seeing that activity level pick up.

Now, even if you've seen a pick up in those things, it's not clear always that, that directly links to the revenue recognized in that time period because of contract periods, the contract subscriptions. We had a decline over a couple of years, and you renew contracts over a couple of years, and so on, so you see contract renewals coming through and bundling in print, or transaction processing, and so.

So it's not the online spend that's relevant; it's the total spend you get from a firm that's relevant, from all these different sources. Some of those roll through as the economy slow down and law firms slow down. So even if you see it pick up right now, you then have, like we have in many of our subscription markets, the long-term contract delay effect, and so on.

So that's why I'm saying, if you see -- will you see a quick rebound in any of our legal markets at any given point in time? I think the probability of quick fluctuations up or down, in particular are now on the upside since that's what we're discussing, is not so great, the idea of seeing quick big rebounds. That's why we say we're likely to see a gradual.

When you say the comparison to others, we've competed against these companies you mentioned for 15 years, essentially, in several different markets, the European legal markets against Wolters Kluwer, but also Thomson, that you mentioned; and also in the US market, of course, for well over a decade. And if you look at relative growth rates over that time period, overall, over a long time period, they have been relatively similar.

If you look at it in any one year, in any six-month period, 12-month period, even an 18-month period in the past, you can see some differentials coming in here and there as the different companies emphasize their strengths; roll out their new product set; roll out a new content set; go on a new marketing effort, and do something like that. You can see some differences for (inaudible). And things go up and down, in terms of whether you look at revenue growth rates, or preference, and for different tools, and so on.

Having said that, again, we have different strengths; the others have different strengths. When you have a situation that happened early last year, that one of the large competitors go out with a very, very large investment effort and built over many years, and a very large marketing effort and sales effort to promote and build, and so on, those could be the situations where you would see a differential in growth rate, where they might be able to capture or get price increases, or capture extra spend, or sell up and get higher, bigger bundles, and so on. You might be able to see those for a period of time.

Last year, if you look at the actual comparable growth rate for the full year, we didn't see much of that at the end of the year. I think is the right way. There may have been a little bit of it, but we didn't see much.

I think it's very possible that if you look at this year, in the first half, that, because of all those efforts, if you have your big products out in certain markets, and you have, say, it's a new one, it's worth more, I'm pricing it higher, and so on, if there is some rebound that they will be able to capture, higher pricing, bigger total bundle spends on some of those during that time period, and if those things will continue the way they have historically.

That has been -- those have been the historical trends, and I wouldn't think that would be unusual if you would see, in this six-month period, or one of these six-month periods, that there would be some growth rate differentials.

I think our growth rate differential, what we have now compared to a year ago, as you see, is a few percentage points ahead of where we were in the first half last year, and I think pretty much as we expected to see as the market recovered gradually. But I don't -- I can't tell you exactly what the others are doing, or what's in or out, and so on. But it wouldn't be surprising if at some time period with different product phasing, and so on, you would see some differential.

Earnings. You said, in order to get paid you have to have 9% EPS. Now, I think, we have only disclosed on EPS the ranges that are in our long-term compensation plan, and, as you all probably know, that they take on earnings, specifically, which is one-third of it; they take the average earnings per share growth rate in 2011 and 2012. And the range there is you start earning at 5% average and you max out at 9%, so that's the range, it's the 5% to 9%.

So I appreciate your concern for me not getting my maximum on this component, but those are all the things we have said so I'm not going to go any further into that.

A couple of questions related to next year. Could you just remind us, what is the cycling-in effect next year? Is it just a reversal of the 8% or 10% that you're suffering this year? Or are there other quadrennials that come in?

Secondly, it seems there's a spate of product launches at the moment, do you think that pace will be maintained next year? Or do you think it'll come off a little bit?

And then on journal pricing, I appreciate it's a little bit early, but do you think it's appropriate to put through inflationary price increases next year? Or would that be aggressive in the austerity environment?

Show cycling; we have a page in the back that shows the history of show cycling by year. And if Mark helps me, tell me exactly which page it is?

Page 53.

Slide 53 has the historic show cycling. For the full year, I think the cycling effect has varied from 7% to 11%. Is that what it shows?

Yes.

Am I remembering correctly? So if you say, on average the show cycling is more like what you said, 8, 9, 10 points, of course it varies because there are some triennials in there by a point or two. But there's much more variation in the success of the shows and the economic growth drivers in the industry than whether you get that last 1 point right on the triennial.

So if you think that the pattern is on average what that sheet says, and you take the average of those, I think you're going to estimate cycling pretty close, and pretty accurately.

It may be worth just adding that the 14% effect you can see in the first half will be more muted for the year as a whole. And there is a net cycling out also in the second half. But what you saw in the first half was that, particularly the large [Mustrascavania] show, which took place in the first half of 2010, didn't happen; and the second half, you have the Batimat show, which last took place in 2009, coming in. So, actually, the cycling effects are uneven in the halves.

But that's a regular pattern. Every year, the cycling effects are bigger in the first half than the second half because it happens, so every other year it's in, every other year it's out. But the full-year numbers, which I think you're asking, are -- so you can look after that trend.

Second question was the activity level on product launches. The way I interpret what you're saying is you look across Reed Elsevier. Yes? I don't look at it as a temporary burst of new products. I look at it as, perhaps, a slightly higher level than we would have seen if you look back a little bit. But it's not a material change in philosophy or approach, and it's not a burst.

It is something that we expect to stay very active on product innovation and launches, consistent with the theme around we are here to drive organic growth in the business over a long period of time. And to do that you need to, therefore, create value for professional customers, and keep innovating and delivering new products, tools, and sets around that; and also keep upgrading and integrating platforms to make sure that they stay ahead of what your customers actually get value from.

So there will be some fluctuations in and out as you have new platform redesigns in one business versus another, so of course there look like there's some lumpiness to it. But it's not a temporary burst.

Last question was on pricing. Well, as you, I think, know, the business in Science has really changed over the last 10/15 years, from being a business where you subscribe to a journal and have a price, to a business where, essentially, less than 10% is that kind of subscription.

And what it's really about is institutional research spend, and it's about research priorities and research tools. And it's a question of who you include, and who needs what research, and what tools, for what period of time, and in which way. And they're multi-year contracts that often take several months to discuss, lay out, and analyze, and so on, and, therefore, I think the only relevant measure in the end is what's the overall spend growth, if you look at it that way, to get the research information tools that you want over the next several years. And that's what I'm saying, if you look at the --

At this point, we haven't spent; as you said, it's a little early. We haven't looked at next year yet. But our starting point is always to say, until we've looked at it, we assume that the general spending increase environments are likely to be more similar to this year going forward than anything else. So you say, well, unless you see that it changes, you assume it's similar.

So, therefore, until we've actually started looking at it, I don't have any specific assumptions that it will be materially different. But that's not our guidance at this point. It's not our view at this point; it's just we haven't started looking at it to that extent yet.

Just two quick follow-ons, please. I just wonder, on Exhibitions, whether you can give us a flavor of those annual shows held already this year, just in terms of the forward booking trends for next year. I don't know whether, I know there's always timing differences, you can just give us a flavor of mid single-digit/high single-digit; what sort of range that might be looking year on year?

And then just to clarify on the 4% Science organic growth. I know Informer had mentioned that there was some phasing benefits in their half-year numbers, so just to clarify whether that 4% benefited at all, you think, from any particular phasing or timing of renewals.

Okay, forward bookings, I know that some companies are very precise in forward bookings and mention numbers very explicitly. We don't do -- we don't disclose specific numbers of forward bookings because we manage and we track, literally a day-by-day, week-by-week, forward booking curve.

And there are lots of different types of bookings; there are reservations; there are firm bookings; there are spend; there are volume; there are changes. So there are lots of different issues here and we have very sophisticated curve models that do all of these.

And in the end, the thing that really drives revenues is how do they behave in the last few months and weeks coming up towards the show because that's when the curve is -- how's the curve trending? Are you in a place where people are falling off and canceling out, or are you in a trend where it's accelerating, and so on?

So they are not as meaningful as I think we would all like them to be, so it would have been easier to predict. But if you say that the run rates that we have right now, if you try to say an average of what are we seeing right now, I would put it in the category of, broadly speaking, high single-digits, mid to high single-digits, if you did it [that way]. It's that kind of a like for like, show by show type of thing. But that's a broad average here.

Now, you're talking -- you're averaging shows that this year we see China, Brazil, and so on, Russia, several other places, growing 20%-plus, and others growing in the single-digits. So you're averaging now, and I'm not sure that I would take it as a big indicator in any way. I think we can tell you a lot more as we get later into the year about what we're seeing going forward. I wouldn't take it now as any real prediction on next year.

And, sorry, just on the academic?

Sorry, I missed that one, I'm sorry. The 4%, is there any facing in Science and Technology for the first half of the year, right? Well, as far as we can see, there is no facing anomaly in the first half right now.

We do have some businesses there, as you know, that are reference and individual purchases that can be purchased any time during the year, and so our reference educational things have publishing timing. We also have some things that are one-off purchases, databases and back files, and things like that, that tend to come in different parts of the year. But if you look at what happened in the first half, and is this an accurate reflection of what happened in the first half, I'd say, yes, we haven't identified anything in the first half that wasn't representative.

One question on the Exhibition business. The margin declined by almost 40 basis points, could you talk us a bit through the reasons for this decline and the share of the reasoning in the full year-on-year decline? Thanks.

Yes, the primary issue here is cycling, because you're comparing, right? I just want to make sure, you're looking at last year first half margins to this year first half margins? Yes.

The margins in the first half, because of cycling, are significantly higher than the full-year margins. But because you have cycling in and cycling out, the cost of declines don't come as fully as the cycling-out revenue declines because you still operate business, and so on, in the cycling out years. So it's almost exclusively an issue of the cost effects of cycling versus the revenue effects of cycling.

I don't have any specific reason to say that are margins fundamentally behaving any differently now than they were a year ago, if you try to do a like for like basis, no.

Okay, thanks.

Okay, well, thank you very much for coming and for taking the time to be here today.