PROGRESS ON STRATEGY

August 2003

Throughout the first half of 2003, we have continued to rigorously execute on our strategy whilst managing the business through a challenging economic environment. Although the fundamentals of our strategy, first announced in 2000, are unchanged, the emphasis is moving more sharply now towards product innovation and market expansion to drive superior revenue growth.

Focus on core businesses, to maximise immediate growth potential

The business has been reshaped and refocused: four core businesses in attractive long term growth markets; leading global positions in each; strong subscription revenues and reduced advertising exposures; and strong cashflow dynamics. The structure is right and the emphasis now is on organic development supplemented by selective acquisitions.

Significantly upgrade management and organisation effectiveness

Organisational effectiveness has been upgraded: clear responsibilities and accountability; strong management teams; continuous building of depth of talent; a range of initiatives on training and development, values and culture, and internal communication.

More effective marketing and sales programmes and a major upgrade of product, leveraging internet technology to deliver superior services to customers.

A dramatic step up in product, sales and marketing, and related investment: global leader in online scientific information; online legal information services transformed; significant and persistent share gains in schools education and business to business, and new electronic services; internet revenues now over £1 billion/1.6 billion, beating the original target set three years ago.

Significant increase in investment to drive revenue growth

Annual investment spend in 2002 approaching £300 million/480 million, compared to £80 million/120 million in 1999. These on-going levels of investment will continue to deliver real competitive advantage and above market growth.

Aggressive cost savings programmes

The cost base has been restructured: over £350 million/550 million of annual cost savings realised; continuous focus on improving operational efficiency; a leaner, faster moving, higher quality organisation.

Expand geographically to build global capability and leading positions

Global capabilities are being built: in medical publishing and schools education through the acquisition of Harcourt; development of global online platforms in Science and Legal; content and service acquisitions in the US, Europe and Latin America.

Continue to target acquisitions/alliances to accelerate achievement of strategic goals

Whilst the focus is on maximising the growth potential in the existing core businesses through organic development, bolt-on acquisitions are also playing an important role in expanding our services and accelerating growth. This year they include: the Holtzbrinck STM publishing business in Germany, adding to our international Health Sciences business with high quality German language medical publishing and strong local marketing and distribution channels for versioned international content; the Dolan Media public records business aimed at the credit market which fits well with the fast growing LexisNexis risk solutions business; Applied Discovery Inc providing high growth electronic legal discovery applications for US litigation lawyers. All three acquisitions are in strong growth sectors and are demonstrating good revenue growth.

Strategy for the business segments

Science & Medical: expand content and online functionalities; upsell to existing customers and widen distribution to new customers; add new services and redeploy content in new geographies; drive usage and add customer value.

Legal: expand content and online functionalities; customise solutions for individual markets; establish a global online platform; add to content globally through editorial investment and selective acquisitions; add new information services and tools; drive usage and add customer value.

Education: develop market leading textbook programmes and expand the curriculum range; develop electronic learning resources; grow the testing business through organisational development and investment in new classroom based resources and online services; expand geographically where financial returns are attractive; expand the online professional development services.

Business: upgrade and develop the portfolio of titles, exhibitions and services to expand the market and win share; manage yields; expand online services around proven business models; add further subscription services; expand geographically leveraging the brands, content and skills.