McGraw-Hill Companies reported that company-wide revenue for the second quarter of 2008 had declined 2.6% to US$ 1.7 billion.  Education Services increased by 3.6% to US$670.8 million.  Financial Services (S&P) are still negatively impacted by the effects of the credit crunch.  Revenues declined by 10.4% to US$735.5.    Information & Media revenue grew by 6.8% to US$266.9.

It should be noted that not all the news from S&P is bleak.  While structure finance is still a problem, S&P’s diversification strategy  buffers it against the decline in issuance.   There is upside potential in international markets where S&P is well positioned to tap growth potential.  S&P will further invest in indices and analytica tools, evaluation and research services.  It is encouraging to note that S&P’s investment services reported a growth of 22.8%, notwithstanding the credit crunch.

The potential legal fall-out from the subprime debacle may be less than feared as McGraw-Hill won its first court decision related to subprime litigation.

S&P is in relative good shape to weather the fall-out of the subprime debacle.  It had already new chief executive in place when the subprime crisis unfolded.  It also added new talent from outside the firm to speed up change in its ‘rating culture’.  S&P went public with a series of initiatives (open website) to improve transparency and to educate users well before others did!

Source:  McGraw-Hill Companies Q2 earnings release

BIIA Newsletter July / August 2008 Issue