Lagardere Sa · EURONEXT:MMB
Lagardere Sa — Hachette Distribution Services — Investor Day (February 2005)
61 slides from Lagardere Sa's investor day presentation, Feb 1, 2005
Slide 1: Hachette Distribution Services Investor Day
Hachette Distribution Services INVESTOR DAY PARIS February 1, 2005 1
Slide 2: Agenda
AGENDA ÎHDS: world leader in press distribution and travel retail ÎA strong track record of growth ÎGrowing and creating value in ECE 2
Slide 3: HDS Mission Statement
HDS Mission Statement Î Hachette Distribution Services (HDS) is a company dedicated to marketing media products and convenience services to its customers all over the world Î Our mission is to facilitate access to the diversity of ideas and cultures 3
Slide 4: 2003 consolidated sales: €4,333m
Equal split between Retail and Distribution 2003 consolidated sales: €4,333m Travel Retail Press 29% Distribution 49% Retail of Media & Entertainment Products 22% 4
Slide 5: 68% of HDS sales are outside France
68% of HDS sales are outside France Travel Retail: nearly ¾ in France Distribution: mainly in Europe & America America & Rest of ASPAC Europe 7% 20% America & France ASPAC Rest of 73% 41% Europe 59% Retail of Media & Entertainment Products: mainly in Europe America & ASPAC 7% Rest of France Europe 4
Slide 6: HDS: a world leader in Travel Retail
HDS: a world leader in Travel Retail 2003 Sales 4000 (€m) 3500 Food & Beverage Travel Retail 3000 Specialty Travel Retail News&Gift Travel Retail 2500 2000 1500 1000 500 0 Aldeasa Heinemann Elior Dufry Compass/SSP BAA - WDF Nuance DFS HDS Autogrill 6 Sources: annual reports, HDS estimates – only tra
Slide 7: Development of our Travel Retail activities in 2004 (I)
Development of our Travel Retail activities in 2004 (I) ÎRelay: our world brand continued to grow z Successful rollout of our new store design z 100 new Relay stores in 2004 Paris Paris 7
Slide 8: Development of our Travel Retail activities in 2004 (II)
Development of our Travel Retail activities in 2004 (II) ÎIn airports, Aelia continued to expand z Effective response to collapse of Terminal E z Penetration of the UK with Belfast and Luton airports Belfast Airport Luton Airport (London) 8
Slide 9: Development of our Travel Retail activities in 2004 (III)
Development of our Travel Retail activities in 2004 (III) ÎSpecialty retail formats in train stations and airports z Over 10 openings of Virgin and Payot Libraire points of sale in travel locations z New concepts to meet the needs of customers and landlords (L’Occitane, Godiva, Dans Mon Panier Neuf,
Slide 10: Outlook for HDS Travel Retail
Outlook for HDS Travel Retail ÎTravel retail will remain one of HDS’s main growth drivers ÎNew country openings for Relay ÎNew airports for Aelia ÎNew store concepts in all platforms Australia Canada Poland Singapore USA 10
Slide 11: Retail of Media & Entertainment Products (I)
Retail of Media & Entertainment Products (I) ÎOver 1,060 press stores in city centers and shopping malls z 90 openings in 2004, first stores in Russia z Inmedio now the leading brand in central Europe, present in 4 countries Moscow Bucarest 11
Slide 12: Retail of Media & Entertainment Products (II)
Retail of Media & Entertainment Products (II) ÎVirgin Megastore is back on track, and has successfully established its new commercial formula z With 54 megastores (Virgin, Le Furet du Nord and Payot Libraire), HDS operates a strong network in France and Switzerland ÎVirginMega.fr (a joint company be
Slide 13: Outlook for Retail of Media & Entertainment Products
Outlook for Retail of Media & Entertainment Products ÎHDS now has a proven model for growth in press retail in central Europe z Selective openings in premium locations z Development in new countries ÎVirgin Megastore will consolidate its positions Virgin Le Furet du Nord Inmedio Payot Metz Lille Sav
Slide 14: Press distribution is about service to publishers and retailers
Press distribution is about service to publishers and retailers Publisher B Publisher C Publisher A National distributor: sales promotion, relationship with publishers, monitoring of wholesalers Press wholesalers: reliable and cost-effective distribution of press, monitoring of retail network Wholes
Slide 15: Unique position in Press Distribution
Unique position in Press Distribution ÎHDS is by far the most international player in press distribution z Strong network in order to share best practice and maintain operational excellence z Proven ability to enter new markets and participate in privatizations z Ever-expanding network of press-impo
Slide 16: Objectives for Press Distribution
Objectives for Press Distribution ÎMaintain operational excellence z Keep costs low while innovating and developing new services ÎGrow market share z Outstanding service, aggressive commercial activity ÎContinue to diversify our wholesale companies z Distribute new products and services to retail ne
Slide 17: Agenda
AGENDA ÎHDS: world leader in press distribution and travel retail ÎA strong track record of growth ÎGrowing and creating value in ECE 17
Slide 18: Weak market growth since 2000
Weak market growth since 2000 Annual growth in HDS’s main markets, 2000-2003 Europe North America Asia Drivers Travel Retail +2% / +3% -1% / +1% -2% / 0% Air traffic, rail traffic Books / music / video Media & Entertainment Products +1% / +2%(1) N/A N/A / games / magazines Press Distribution 0% / +1
Slide 19: HDS has a strong track record
HDS has a strong track record Sales growth EBIT growth €m Sales €m EBIT 5 000 100 61 92 3,294 4,333 4 500 90 4 000 80 + 14.7% CAGR + 9.6% CAGR 3 500 70 3 000 60 2 500 50 2 000 40 1 500 30 1 000 20 500 10 0 0 2000 2003 2000 2003 19
Slide 20: Acquisitions have played a major role
Acquisitions have played a major role Half of HDS’s growth comes from Split of €491m sales acquisitions from companies acquired since 2000 Split of €1,039m sales increase (2000 – 2003) 100% 100% 17 90% 90% Australia (40%) 80% 80% 548 Organic 230 70% 70% growth 60% 60% Travel Retail France 50% 50% 40
Slide 21: Retail has grown faster than distribution
Retail has grown faster than distribution Sales growth 2000-2003 €3.3bn €4.3bn 100% 90% Press 80% distribution: 49% + 5% p.a. 70% 55% 60% 50% 40% 15% 22% Retail: 30% +14% p.a. 20% 30% 29% 10% 0% 2000 2003 Travel Retail Media & Entertainment Press Distribution 21
Slide 22: Forecast growth in HDS's markets
Forecast growth in HDS’s markets Forecast annual market growth, 2004-2007 Europe North America Asia Drivers Travel Retail +2% / +3% +1% / +2% +2% / +3% Air traffic, rail traffic (1) Books / music / video Media & Entertainment Products 0% / +1% N/A N/A / games / magazines Press Distribution 0% / +1%
Slide 23: HDS will continue to grow
HDS will continue to grow HDS: organic growth forecasts Overall growth: 3% 100% 90% Press 80% 1 – 2% p.a. Distribution 70% 60% Media & 50% 4 – 5% p.a. Entertainment Products 40% 30% 20% Travel Retail 4 – 5% p.a. 10% 0% 2003 2007 23
Slide 24: Balanced profitability across all segments
Balanced profitability across all segments Business contribution(*) as % of conso. sales 2003 N&G Travel Retail Travel Retail 2,9% Specialty & Duty Free Newsstands Retail of Media & 0,9% Entertainment Products Media Entertainment Products National Distribution Press Distribution 2,9% Wholesale 24 (*
Slide 25: Agenda
AGENDA ÎHDS: world leader in press distribution and travel retail ÎA strong track record of growth ÎGrowing and creating value in ECE 25
Slide 26: Growing and creating value in ECE
Growing and creating value in ECE Î By acquisition (Hungarian example) Î Greenfield (Polish example, similar story in Czech Republic) Î By building a portfolio of projects 26
Slide 27: Distribution Services map of Europe
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Slide 28: Acquisition: Lapker - Hungary
Acquisition Lapker - Hungary 28
Slide 29: Historical background
Historical background Î 1994-1998: z After extensive preparation, rapid privatization process of Magyar Posta’s fragmented press distribution sector (7 wholesalers and 1,300 kiosks) in 1997-1998 Ö Successful bid by Lapker (85% HDS, 15% publishers) Î 1998-1999: z Fierce competition for distribution t
Slide 30: The transformation plan: Lapker 2001
The transformation plan: “Lapker 2001” Î Operating costs cut by 30%-35% Î Improved quality of service Î More customer-focused approach Î New services to: z publishers z stores Î Cultural changes based on initiative, efficiency, expertise and team spirit 30
Slide 31: Retail modernization: Achievements
Retail modernization: Achievements Î Modernization of the retail network z Relay z Inmedio Î Modern retail chain management methods z Training z IT z NRI z etc Î Secured press market share & profitability growth 31
Slide 32: A major player in the press market
A major player in the press market Î 97% market share in distribution (single copy sales) Î >30% market share in press retail z 110 Relay z 120 Inmedio z 950 kiosks 32
Slide 33: Our store formats in Hungary
Our store formats in Hungary 33
Slide 34: Company profile: 2003
Company profile: 2003 Î Sales = €300m Î EBIT = €15m Î EBIT/sales = 5.0% Î EBIT/capital employed = 81% Î Value creation = €10m 34
Slide 35: Keys to success
Keys to success Î Effective privatization preparation/negotiation Î Delivering more than we promised Î Strong management Î Clear strategy Î Efficient support from HDS Î Self-belief 35
Slide 36: Greenfield: HDS Polska - Poland
Greenfield HDS Polska - Poland 36
Slide 37: Sustained growth
Sustained growth ÎOctober 1997: z CEO hired ÎNovember 18, 1998: z First store opened ÎJune 2001: z 100 stores ÎJuly 2002: z First profit … and profitable ever since ÎDecember 2004: z 272 stores (3rd largest chain in the HDS Group) : 101 Relay 163 Inmedio 8 Voyage Café 37
Slide 38: Company profile 2004
Company profile 2004 Î EBIT/ sales = 3.9% Î EBIT/capital employed = 34% Î Cash contributor, despite rapid expansion (1 store per week) Î Main competitors: Ruch, Kolporter, Empik 38
Slide 39: Building on success
Building on success Î Development of new concepts z Voyage and Inmedio café Î Exporting Inmedio brand z Leverage on mall developers Î Leveraging management team (see Russia) 39
Slide 40: Our store formats in Poland
Our store formats in Poland 40
Slide 41: Keys to success
Keys to success Î Entry at the right time (start of international investment in retail) Î Right management Î Optimum exchange of know-how between HDS and experienced local management team Î Best of both worlds z Focus on value creation and ROI vs. size z Store concept and locations z NRI z HR 41
Slide 42: Our store formats in Czech Republic
Our store formats in Czech Republic 42
Slide 43: Building a portfolio of projects
Building a portfolio of projects Other ECE countries 43
Slide 44: Historical background
Historical background Î Fall of the Berlin wall Î Start-up in ECE through our German entity Î Low-cost start-ups focused initially on international press 44
Slide 45: Status today
Status today Î All companies are profitable Î Systematic review of markets: choosing the right z time z speed z method for further development. 45
Slide 46: Methodology
Methodology Î Business plan Î Go/no-go Î Pilot (when applicable) Î Go/no-go Î Monthly visit and follow-up Î Strategic framework, market trends and results guide daily decisions 46
Slide 47: 3 categories
3 categories Î Decision taken/pilot launched in: z Romania z Russia Î Thanks to success of operations, BP to be launched in: z Bulgaria z Slovakia z Serbia Î Other “top of the list” countries: z Ukraine (political change) z Croatia 47
Slide 48: ECE - Key indicators for 2004
ECE - Key indicators for 2004 12,000 8 10,058 7.3 7 10,000 6 8,000 5 6,000 4 3.3 2,796 3 4,000 2 2,000 1 0 0 Czech Hungary Slovak Russia Poland Bulgaria Romania Serbia Republic Republic And Montenegro GDP per capital (USD) GDP growth (%) 48 Source: IMF
Slide 49: MMP in Romania
MMP in Romania A new start in retail 49
Slide 50: Background
Background Î HDS was already present in press distribution (mainly international) Î New management hired to work on development strategy ÖDecision to build a retail network, synergetic with our distribution activities Creation of a chain of Inmedio & Relay stores in big cities Target for end 200
Slide 51: Key figures – retail project
Key figures – retail project ÎBP: z IRR = 31.2% z NPV = €3.9m (total project) z Minimum cash position = -€1m z Cumulative investment over 5 years = €2.9m ÎPilot: z Average annual sales > €160k z Profitability >7% z ROI >40% z Even in the development period, company net profit at breakeven ÎDecision
Slide 52: Our formats in Romania
Our formats in Romania 52
Slide 53: Russia
(Distribution Services )) H HDS PRESS POINT C I S) INTERNATIONAL | 53 | LAGARDERE
Slide 54: HDS CIS
HDS CIS Î After extensive strategic analysis, decision to start greenfield retail operations, under HDS Polska’s supervision Î Creation of a chain of POS, starting in Moscow Î 185 POS due to be opened by 2009: 95 Relays, 90 Inmedio in shopping malls 54
Slide 55: Key figures – HDS CIS retail project
Key figures – HDS CIS retail project ÎBP: z IRR = 20.3% z NPV = $7.9m (total project) z Minimum cash position = -$6.1m z Cumulative investment over 5 years = $7.0m z 2009 EBIT = $1.1m at 2.1% of sales ÎPilot: z First shop opened in December 2004 55
Slide 56: Bulgaria, Slovakia, Serbia
Bulgaria, Slovakia, Serbia 56
Slide 57: Bulgarpress, IPS & Global Press today … and tomorrow
Bulgarpress, IPS & Global Press today … and tomorrow Now: Retail Company Start Market Share Domestic press plans plans Int’l press 1993 > 90% Chains? Segment well-established At least 1991 > 90% Greenfield not possible one BP in 2005 Distribution to chains 2001 > 90% National distribution (9% M.S.)
Slide 58: New market opportunities
(Distribution Services )) New market opportunities | se | LAGARDERE
Slide 59: Ukraine & Croatia - Key indicators
Ukraine & Croatia - Key indicators 2003 Ukraine Croatia Population 47.6m 4.4m GDP per capita 1,293 7,300 ($) GDP growth 12.5% 3.7% Inflation 8.2% <2.0% Why? Size, political change Development, tourism 59 Source: IMF World Economy Outlook Sept. 04 and local statistics
Slide 60: HDS in ECE – Overall outlook
HDS in ECE – Overall outlook 60
Slide 61: Outlook for 2008 (existing projects only)
Outlook for 2008 (existing projects only) Number of countries* 8 Number of stores 2,000 Staff 1,300 Sales (€m, 100%) 520 EBIT (€m, 100%) 26 + many new ideas … 61 * Bulgaria, Hungary, Poland, Czech Republic, Romania, Russia, Serbia, Slovakia
Hachette Distribution Services — Investor Day (February 2005) on 6ix