lagardère media - lagardere.com · - recurring ebit as % of revenues - (*) ex dtt costs. 14 Æwhat...
TRANSCRIPT
INVESTOR DAYJune 1, 2006
Lagardère Media
2
Contents
What have we achieved so far? ---- p. 3 to 11
What next? -------------------------------- p. 12 to 25• Achieving 2007 margin targets• Accelerating top-line growth & market consolidation
2007-2012 growth guidance --------- p. 26 to 28
3
What have we achieved so far?
Lagardère Media
4
• Reshaping the Group:- Refocusing on media activities, now completed with EADS exposure
reduced to 7.5% in April 2006- Exiting low profitability media activities: Printing, Grolier, Billboards,
Club Internet- Focusing on a few key leading positions: Books, Magazines,
Distribution, Radio, TV production - Increasing profitability & free cash flow
• Identifying future growth opportunities:- Market consolidation: under way in Books (Europe, US), in Magazines
(US, Europe, Asia), in Distribution (Europe)- Emerging markets (Russia, Eastern Europe, China): €775m revenues in
2005 (10% of total revenues)
- Development of digital: currently 3% of Lagardère Media revenues
• Building up an investment capacity of around €4bn from:- Cash-flow generation- Gains on divestments
Lagardère MediaLagardère Media has prepared for growth in recent years by:
5
Source: Lagardère Media
Lagardère Media: 75% of revenues generated by tier one national & international positions
Lagardere Media weighted average market share(in %)
Estimated annual market growth
(2005-2010)
Revenues (except HDS: gross profit)
HDSHFMHachette LivreLagardere Active
DistributionSpain
Virgin
Duty FreeFrance
Magazine France
MagazineUSA
MagazineJapan
MagazineSpainMag
Italy
MagUK
Books Spain
Books UK
Partworks
Books France
National distribution USA
Distribution Belgium and Switzerland-2%
0%
2%
4%
6%
Relay
Radio Eastern Europe
Distribution Eastern Europe
Radio France
TV production France
Cable and satellite TV France
Magazine Emerging markets VirginMega
France
0% 10% 20% 30% 40% 50%
6
Lagardère Media: Strong ROCE
Lagardère Media activities have the abilityto generate high levels of ROCE
• Books:- Trade France (excl. Editis acquisitions): +- Education France (excl. Editis acquisitions): +59%- Partworks: +49%
• Magazines:- Spain: +57%- France: +50%
• Distribution:- Relay: +
• LA Broadcast: +42%
∞
∞
7
Lagardère Media: improved operating leverage
Profitability and ROCE have improvedconsistently since 2002:
CAGR 02-05:
ROCE: +4.1% since 2002
• Revenues: +3.6%- Organic growth: +2.4%- Effect of acquisitions: +3.3%- Effect of divestments: -0.3%- Effect of exchange rates: -1.9%
• Operating income: +10.8%
8
Lagardère Media:A balanced portfolio of activities
2005 Recurring EBIT breakdown2002 Recurring EBIT breakdown
Books38%
Press
32%
Distribution21%
Audiovisual9%
Books25%
Press
47%
Distribution24%
Audiovisual4%
9
2002-2005: Acquisitions track record
Strict investment criteria with expected IRR risingto reflect risk level (excl. leverage)
Track record: a few highlights
• Editis: 1% to 2% above the expected IRR• Hodder Headline: 1% to 2% above the expected IRR• Newslink: higher than the expected IRR• Fujin Gaho: significantly higher than the expected IRR
• Recent transactions: - TWBG: trading ahead of expectations- Canal+ France: acquisition price at the low end of
market expectations
10
Lagardere TSR was one of the strongest in the industry
WH SmithTimeWarner
Comcast
GannetEMI M6 RCS
Tribune PearsonDirect TV
Disney
TF1 News Corp
Reuters
RTLEmap
ClearChannel
ElectronicArts
ReedMicrosoft
Thomson Mondadori
Mc GrawHill
Ebay
Amazon
Yahoo
Iliad (2)
Google(3)
(excluding internet pure players)(1) 01/01/02 - 12/30/05 (2) Iliad IPO: 1/29/04 (3) Google IPO: 8/18/04 Note: TSR = Annual total return of a stock to an investor during the period (capital gains; dividends (reinvested); free shares) Source: Bloomberg
Total Shareholder Return 2002-2005 (1)
(in %)
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%27% 44% 45% 84% 219%
11.6%
2002-2005: Total Shareholder Return
11
Lagardère Media
What have we achieved so far?
• International tier one positions in Books, Magazines, Distribution, Radio
• A business culture focused on improved profitability and delivery of strong ROCE
• A balanced asset portfolio• A successful asset portfolio management
12
What next?
• Achieving 2007 margin targets
• Accelerating top-line growth & market consolidation
- In traditional activities- In digital businesses
Lagardère Media
13
2005-2007: Margin targets
Lagardère Media will achieve its stated targets.By 2007, each division will be tier one in profitability terms.
Books
Press
Distribution Services
Audiovisual (*)
2005 2007
11.5%
8.7%
2.8%
8.7%
11.3%
11.7%
3.5%
8.9%
• Top-line growth inducing incremental EBIT margin
• Cost reduction programs
• Portfolio management
• Selective divestments
• Acquisition synergies
• Economies of scale
- Recurring EBIT as % of revenues -
(*) ex DTT costs
14
What will happen post 2007?
Two imperatives:
• Improve top-line growth• Continue to consolidate our markets worldwide
Lagardère Media’s 2006-2012 strategy
15
Lagardère Media’s 2006-2012 strategyLagardère Media’s growth strategy is based on two drivers
• Continued investment in creativity and content(talent management)
• Selective and attractive consolidation of some segments (business/country)
• Selective growth in some emerging markets (Eastern Europe, Asia, Russia, Latin America)
These growth objectives are built upon Lagardère’s financial resources (about €4bn)
• Leverage on existing businesses (brands, content, networks)
• Development of new national digital businesses
• Selective investments (digital broadcast and other)
Increased developments in digital businesses
Growth in traditional activities
16
2006-2012: Investment in creativity and contentExamples from 2004-2005
PressBooks AudiovisualDistribution
Services
• 40 new products p.a. (Partworks)
• Marabout, Mangas, audio books(Illustrated)
• Timoon (Youth TV production)
• Filles TV(channels)
• Licensing• Improving technical coverage and services (radio)
• Gourmet food: Australian Gourmet traveller, Godiva, etcConvenience stores: Hub, Relay services, Mini market, etcPress cafés: Relay café, Voyage café(Travel retail)
• New concepts with larger food/café offering: Journo, Café press, Inmédio café, etc (retail media andentertainment)
• Diversification in distribution
• Choc, Public and Guts(France)
• Shop (Holland)• Ana Rosa,
Nova (Spain)
17
2006-2012: Market Consolidation (1/2)The segments in which Lagardère Media competes are still fragmented, leading to a trend towards consolidation
(1) Consumer magazines (2) Trade books(3) USA, France, UK, Germany, Italy, Spain, Japan (4) USA, UK, France, Spain (5) more than 1,000 competitors, average revenues: €30mSources: PriceWaterhouse Coopers, ZenithOptimedia, HFM, Hachette Livre, DDM, PPA Marketing, annual reports
Magazines (1)Magazines (1) Books (2)Books (2)
Weighted average market share
(in %)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedcountries (3)
Emergingmarkets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedcountries (4)
Emergingmarkets
47%
53%
Others(5)
Top 3
17%
83%
Others
Top 341%
59%
Others(5)
Top 3
20%
80%Others
Top 3
18
PressBooks AudiovisualDistribution
Services
• USA Trade: €11.9bn / Lag ms: 3%
• Spain Trade: €1.3 bn / Lag ms: 7%
• UK Education: €0.8 bn / Lag ms: 7%
• UK Trade:€2.6 bn / Lag ms: 17%
•News & GiftEastern Europe:€0.4bn / Lag ms: 23%Germany:€0.5bn / Lag ms: 14%USA:€0.9bn / Lag ms: 3%
•NewsstandsEastern Europe:€1.8bn / Lag ms: 9%
•Press wholesaleEastern Europe:€0.7bn / Lag ms: 22%
•Duty FreeAsia:€3.4 bn / Lag ms: 0%
• USA:€24bn / Lag ms: 4%
• UK: €5bn / Lag ms: 3%
• Italy: €3bn / Lag ms: 9%
• Japan: €5bn / Lag ms: 3%
Lagardère Media consolidation options
Investment strategy• Gradual and step by step investments• Consistent with Lagardère Media's margins targets
2006-2012: Market Consolidation (2/2)
Books: publisher net sales, excluding professional books, including services in education; Press: circulation (retail sales) + advertising; Distribution Services: Eastern Europe: Poland, Hungary and Czech Republic; Asia: strong positions in news & gift in Singapore, Hong Kong and Australia; Audiovisual: radio; Eastern Europe: Poland and Czech Republic
• Eastern Europe:€0.1bn / Lag ms: 28%
• Russia: €0.1bn / Lag ms: 26%
19
2006-2012: Growth in emerging markets (1/2)Emerging markets have started to catch up and now account for 10% of 2005 Lagardère Media revenues
- Developed countries -- Emerging markets* -
Annual market growth
(2005-2010)(in %)
0%
1%
2%
3%
4%
15%Books
Distribution
RadioMagazine
$4bn $3bn $17bn$1bnMarket size 2005 $36bn $148bn
Books
Distribution
Radio
Magazine
$30bn $50bn
*Emerging markets: Eastern Europe and Russia, China, India
20
2006-2012: Growth in emerging markets (2/2)Examples of current positions and development options
PressBooks AudiovisualDistribution
Services
• Number 3 in Russia with a 9% market share
• Among top 3 players in women’s magazines in China
• Strong presence in specific segments in South America (Larousse andAnaya in Mexico, Aiqué in Argentina)
• Number 1 in Czech republic with a 33% market share
• Number 2 in Poland with a 26% market share
• Number 1 in Russia (Radio)
• Strong position in news & gifts in Poland, Hungary and Czech Republic with a 23% market share
• Number 1 in press distribution in Hungary with a 97% market share
• China• Russia• India
• Latin America• China• India• Eastern Europe
• Eastern Europe• North Africa• Asia
• Eastern Europe• Asia
Development options
21
• Digital will bring:- improvements to existing business models
= facilitating access to our products rather than substitution
- incremental revenues at higher margin= new business models
• Digital revenues should grow from 3% in 2005 to 10% in 2010
Increasing Digital ExposureDigital Opportunities
22
• Improving revenue growth with better product exposure:- Online book sales: biggest selection available 24/24- Digital Education Newsstand (KNE) facilitating teachers’ choices- Online magazine subscription: + 15,000 US subscribers- Radio program downloads: Europe 1- Advertising sales packages: performance based and multiplatform (LAP)
• Improving margins:- Reducing bricks & mortar costs
= printing, shipping, postal costs, broadcasting & video delivery costs, etc- Improving marketing tools and customer databases- Leveraging technological costs over a broader basis
Increasing Digital Exposure Improving existing business models
23
A new generation of products…:
• VOD and Legal downloading: Virginmega.fr• Chanelling realtime content into magazines and books
- Daily content on Media Websites & Schoolastance sites- Triggering user-generated content
• Video everywhere- Magazine brands turned into TV: Public.tv- Radio turned into podcast: Europe 1 daily
• Global networking starting with ELLE: US- France- Asia• Mobile content: text, audio, video (Canal J on Canalsat Mobile)
Increasing Digital ExposureEntering New Business Models (1/2)
24
… opening up new business models:
Increasing Digital ExposureEntering New Business Models (2/2)
MagazinesBooks Mobile contentRadio & TV
Advertising
Click through& SponsoringSubscription Pay Services
Circulation & Advertising
Single Unit Purchase
Europe 1 MobileCanal J on Canalsat Mobile
Experimenting:advertising,
pay per use, flat fees
Single Unit Purchase
addadd add add
Exa
mpl
es:
Schoolastance www.caranddriver.comDownloading on
www.MCM.frwww.Europe2.fr
25
Existing digital developments
PressBooks AudiovisualDistribution
Services
• Education websites: KiosqueNumériqued’Education(KNE)
• Media websites: routard.fr, etc
• DTT: Gulli, Europe 2 TV, Canal J
• Legal down-loading and VOD: VirginMega.fr
• Media websites: Europe 1, Canal J
• Radio and Video podcasting:Europe 1, Canal J
• Mobile: MCM TOP, E1 Podcast news
• Digital distribution: hdsdigital
• Legal downloading and VOD: VirginMega.fr
• Digital magazines: Elle, Woman’s Day, Car and Driver
• Media websites: Car and Driver, Elle, Choc, Guts, etc
• Rich media: Public TV, etc
2006-2012: Leverage on existing businesses
26
Lagardère Media
2007 – 2012 growth guidance
27
2007-2012 growth guidanceLagardère Media will grow profitably by 6% - 8% CAGR over the next five years
2007 revenues
Emerging markets
2012 revenues
Organic growth in developed countries
Growth in digital activities
Acquisitions
6% to 8% CAGR
28
2007-2012 growth guidanceLagardère Media’s objective is to improve profitability by 2007 and accelerate growth by 2012 (maintaining 2007 profitability)
2002
2005
2007
2012
2002-2005
2007-2012
3.8% per year
Between 6% and 8% CAGR, with a mix of organic growth and accretive acquisitions
Profitability increase
Profitability increase GrowthGrowth
Operating income(as % of revenues)
4.8%
6.4%
6.8%
>6.8%
Note: 2002 and 2003 French GAAP; 2004 to 2010: IFRS
Annual growth guidance will be fine-tuned in 2007 once margin targets have been achieved