Lagardère Media. INVESTOR DAY June 1, 2006

Transcription

1 Lagardère Media INVESTOR DAY June 1, 2006

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 growth guidance p. 26 to 28 2

3 Lagardère Media What have we achieved so far? 3

4 Lagardère Media Lagardère Media has prepared for growth in recent years by: Reshaping the Group: - Refocusing on media activities, now completed with EADS exposure reduced to 7.5% in April 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 4 Building up an investment capacity of around 4bn from: - Cash-flow generation - Gains on divestments

5 Lagardère Media: 75% of revenues generated by tier one national & international positions Magazine Emerging markets Radio Eastern Europe VirginMega France 6% Estimated 4% annual market growth ( ) 2% 0% -2% Magazine USA Mag UK Magazine Japan Mag Italy Virgin Books Spain Magazine France Books UK Partworks TV production France Magazine Spain Distribution Spain Distribution Eastern Europe Radio France Books France Cable and satellite TV France Duty Free France Relay National distribution USA Distribution Belgium and Switzerland Revenues (except HDS: gross profit) 0% 10% 20% 30% 40% 50% Lagardere Media weighted average market share (in %) HDS HFM Hachette Livre Lagardere Active Source: Lagardère Media 5

6 Lagardère Media: Strong ROCE Lagardère Media activities have the ability to 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% 6

7 Lagardère Media: improved operating leverage Profitability and ROCE have improved consistently since 2002: CAGR 02-05: 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% ROCE: +4.1% since

8 Lagardère Media: A balanced portfolio of activities 2002 Recurring EBIT breakdown 2005 Recurring EBIT breakdown Audiovisual 4% Audiovisual 9% Distribution 24% Books 25% Distribution 21% Books 38% 47% Press 32% Press 8

9 : Acquisitions track record Strict investment criteria with expected IRR rising to 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 9

10 : Total Shareholder Return 20.0% 27% 44% 45% 84% 219% 15.0% 10.0% Total Shareholder Return (1) (in %) 5.0% 0.0% -5.0% 11.6% -10.0% -15.0% % Clear Reuters Channel Time Comcast Warner EMI M6 Micro Thomson Gannet Reed Disney RCS Mon soft dadori Tribune Direct TV TF1 Pearson WH SmithNews Corp Emap Electronic Ebay Yahoo Google (3) Arts RTL Mc Graw Amazon Iliad (2) Hill Lagardere TSR was one of the strongest in the industry (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

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 11

12 Lagardère Media What next? Achieving 2007 margin targets Accelerating top-line growth & market consolidation - In traditional activities - In digital businesses 12

13 : Margin targets - Recurring EBIT as % of revenues Books 11.5% Press 8.7% Distribution Services 2.8% Audiovisual (*) 8.7% (*) ex DTT costs 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 Lagardère Media will achieve its stated targets. By 2007, each division will be tier one in profitability terms. 13

14 Lagardère Media s strategy What will happen post 2007? Two imperatives: Improve top-line growth Continue to consolidate our markets worldwide 14

15 Lagardère Media s strategy Lagardère Media s growth strategy is based on two drivers Growth in traditional activities 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) Increased developments in digital businesses Leverage on existing businesses (brands, content, networks) Development of new national digital businesses Selective investments (digital broadcast and other) These growth objectives are built upon Lagardère s financial resources (about 4bn) 15

16 16 Books 40 new products p.a. (Partworks) : Investment in creativity and content Examples from Marabout, Mangas, audio books (Illustrated) Press Choc, Public and Guts (France) Shop (Holland) Ana Rosa, Nova (Spain) Distribution Services Gourmet food: Australian Gourmet traveller, Godiva, etc Convenience stores: Hub, Relay services, Mini market, etc Press cafés: Relay café, Voyage café (Travel retail) New concepts with larger food/café offering: Journo, Café press, Inmédio café, etc (retail media and entertainment) Diversification in distribution Audiovisual Timoon (Youth TV production) Filles TV (channels) Licensing Improving technical coverage and services (radio)

17 : Market Consolidation (1/2) The segments in which Lagardère Media competes are still fragmented, leading to a trend towards consolidation Magazines (1) (1) Books (2) (2) Developed countries (3) Emerging markets Developed countries (4) Emerging markets 100% 100% 90% 90% Weighted average market share (in %) 80% 70% 60% 50% Others (5) 53% Others 83% 80% 70% 60% 50% Others (5) 59% Others 80% 40% 40% 30% 20% 10% Top 3 47% Top 3 17% 30% 20% 10% Top 3 41% Top 3 20% 0% 0% (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: 30m Sources: PriceWaterhouse Coopers, ZenithOptimedia, HFM, Hachette Livre, DDM, PPA Marketing, annual reports 17

18 Books : Market Consolidation (2/2) Lagardère Media consolidation options Press Distribution Services Audiovisual 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% USA: 24bn / Lag ms: 4% UK: 5bn / Lag ms: 3% Italy: 3bn / Lag ms: 9% Japan: 5bn / Lag ms: 3% News & Gift Eastern Europe: 0.4bn / Lag ms: 23% Germany: 0.5bn / Lag ms: 14% USA: 0.9bn / Lag ms: 3% Newsstands Eastern Europe: 1.8bn / Lag ms: 9% Press wholesale Eastern Europe: 0.7bn / Lag ms: 22% Duty Free Asia: 3.4 bn / Lag ms: 0% Investment strategy Gradual and step by step investments Consistent with Lagardère Media's margins targets Eastern Europe: 0.1bn / Lag ms: 28% Russia: 0.1bn / Lag ms: 26% 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 18

19 : Growth in emerging markets (1/2) Emerging markets have started to catch up and now account for 10% of 2005 Lagardère Media revenues - Emerging markets* - - Developed countries - 15% Magazine Books Radio Distribution Annual market growth ( ) (in %) 4% 3% Radio Books 2% Distribution Magazine 1% 0% Market size 2005 $4bn $3bn $1bn $17bn $30bn $36bn $148bn $50bn *Emerging markets: Eastern Europe and Russia, China, India 19

20 : Growth in emerging markets (2/2) Examples of current positions and development options Books Press Distribution Services Audiovisual Strong presence in specific segments in South America (Larousse and Anaya in Mexico, Aiqué in Argentina) Development options Latin America China India Eastern Europe Number 3 in Russia with a 9% market share Among top 3 players in women s magazines in China China Russia India 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 Eastern Europe Asia Number 1 in Czech republic with a 33% market share Number 2 in Poland with a 26% market share Number 1 in Russia (Radio) Eastern Europe North Africa Asia 20

21 Increasing Digital Exposure Digital Opportunities 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

22 Increasing Digital Exposure Improving existing business models 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 22

23 Increasing Digital Exposure Entering New Business Models (1/2) 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) 23

24 Examples: Increasing Digital Exposure Entering New Business Models (2/2) opening up new business models: Books Magazines Radio & TV Mobile content Single Unit Purchase Circulation & Advertising Advertising add add add Single Unit Purchase add Subscription Click through & Sponsoring Schoolastance Pay Services Downloading on Experimenting: advertising, pay per use, flat fees Europe 1 Mobile Canal J on Canalsat Mobile 24

25 : Leverage on existing businesses Existing digital developments Books Press Distribution Services Audiovisual Education websites: Kiosque Numérique d Education (KNE) Media websites: routard.fr, etc Digital magazines: Elle, Woman s Day, Car and Driver Media websites: Car and Driver, Elle, Choc, Guts, etc Rich media: Public TV, etc Digital distribution: hdsdigital Legal downloading and VOD: VirginMega.fr DTT: Gulli, Europe 2 TV, Canal J Legal downloading and VOD: VirginMega.fr Media websites: Europe 1, Canal J Radio and Video podcasting: Europe 1, Canal J Mobile: MCM TOP, E1 Podcast news 25

26 Lagardère Media growth guidance 26

27 growth guidance Lagardère Media will grow profitably by 6% - 8% CAGR over the next five years Acquisitions Organic growth in developed countries Emerging markets Growth in digital activities 2007 revenues 6% to 8% CAGR 2012 revenues 27

28 growth guidance Lagardère Media s objective is to improve profitability by 2007 and accelerate growth by 2012 (maintaining 2007 profitability) Profitability Profitability increase increase Growth Growth Operating income (as % of revenues) % % per year % 6.8% >6.8% Between 6% and 8% CAGR, with a mix of organic growth and accretive acquisitions Annual growth guidance will be fine-tuned in 2007 once margin targets have been achieved Note: 2002 and 2003 French GAAP; 2004 to 2010: IFRS 28