Hachette Distribution Services - Lagardere.com...12 Retail of Media & Entertainment Products (II)...
Transcript of Hachette Distribution Services - Lagardere.com...12 Retail of Media & Entertainment Products (II)...
1
Hachette Distribution ServicesINVESTOR DAY
PARISFebruary 1, 2005
2
AGENDA
HDS: world leader in press distribution and travel retail
A strong track record of growth
Growing and creating value in ECE
3
HDS Mission Statement
Hachette Distribution Services (HDS) is a company dedicated to marketing media products and convenience services to its customers all over the world
Our mission is to facilitate access to the diversity ofideas and cultures
4
Equal split between Retail and Distribution
2003 consolidated sales: €4,333m
Retail of Media &
Entertainment Products
22%
Travel Retail29%Press
Distribution49%
5
68% of HDS sales are outside France
Travel Retail: nearly ¾ in France
France73%
America & ASPAC
7%Rest of Europe
20%
Rest of Europe
46%
America & ASPAC
7%
France47%
Rest of Europe
59%
America & ASPAC
41%
Distribution: mainly in Europe & America
Retail of Media & Entertainment Products: mainly in Europe
Geographical breakdown of HDS consolidated sales in 2003
6
HDS: a world leader in Travel Retail
2003 Sales(€m)
0
500
1000
1500
2000
2500
3000
3500
4000
Com
pass
/SSP
Aut
ogri
ll
DFS
HD
S
Nua
nce
Duf
ry
Ald
easa
BA
A -
WD
F
Elio
r
Hei
nem
ann
Food & Beverage Travel Retail Specialty Travel RetailNews&Gift Travel Retail
Sources: annual reports, HDS estimates – only travel retail sales shown here
7
Development of our Travel Retail activities in 2004 (I)
Relay: our world brand continued to growSuccessful rollout of our new store design100 new Relay stores in 2004
Paris Paris
8
Development of our Travel Retail activities in 2004 (II)
In airports, Aelia continued to expandEffective response to collapse of Terminal EPenetration of the UK with Belfast and Luton airports
Belfast Airport Luton Airport(London)
9
Development of our Travel Retail activities in 2004 (III)
Specialty retail formats in train stations and airportsOver 10 openings of Virgin and Payot Libraire points of sale in travel locationsNew concepts to meet the needs of customers and landlords (L’Occitane, Godiva, Dans Mon Panier Neuf, Bijoux Terner, Voyage Café… )
Paris Gare du Nord Paris Gare de Lyon
10
Outlook for HDS Travel Retail
Travel retail will remain one of HDS’s main growth drivers
New country openings for Relay
New airports for Aelia
New store concepts in all platforms
Australia Canada Poland Singapore USA
11
Retail of Media & Entertainment Products (I)
Over 1,060 press stores in city centers and shopping malls90 openings in 2004, first stores in RussiaInmedio now the leading brand in central Europe, present in 4 countries
Moscow Bucarest
12
Retail of Media & Entertainment Products (II)
Virgin Megastore is back on track, and has successfully established its new commercial formula
With 54 megastores (Virgin, Le Furet du Nord and Payot Libraire), HDS operates a strong network in France and Switzerland
VirginMega.fr (a joint company between HDS and LAB) is the no.1 legal music downloading platform in France
Ahead of Apple’s iTune and FNAC’sfnacmusic.com
Virginmega.fr
13
Outlook for Retail of Media & Entertainment Products
HDS now has a proven model for growth in press retail in central EuropeSelective openings in premium locationsDevelopment in new countries
Virgin Megastore will consolidate its positions
Virgin Metz
Le Furet du Nord Lille
Inmedio Savoya Park
Payot Sion
14
National distributor:
Wholesaler X
Publisher CPublisher B
sales promotion, relationship with publishers, monitoring of wholesalers
reliable and cost-effective distribution of press, monitoring of retail network
Publisher A
Wholesaler Z
Press wholesalers:
Press distribution is about service to publishers and retailers
15
Unique position in Press Distribution
HDS is by far the most international player in press distributionStrong network in order to share best practice and maintain operational excellenceProven ability to enter new markets and participate in privatizationsEver-expanding network of press-import specialists, offering better service to exporting publishers
Very strong position wherever presentIn press distribution, size mattersHDS has a proven ability to win and retain customers
16
Objectives for Press Distribution
Maintain operational excellenceKeep costs low while innovating and developing new services
Grow market shareOutstanding service, aggressive commercial activity
Continue to diversify our wholesale companiesDistribute new products and services to retail networks
Penetrate new countries Seize opportunities in developing markets
17
AGENDA
HDS: world leader in press distribution and travel retail
A strong track record of growth
Growing and creating value in ECE
18
Weak market growth since 2000
Annual growth in HDS’s main markets, 2000-2003
(1) Market trend in France only
Europe North America Asia Drivers
Travel Retail +2% / +3% -1% / +1% -2% / 0% Air traffic, rail traffic
Media & Entertainment Products +1% / +2%(1) N/A N/A Books / music / video / games / magazines
Press Distribution 0% / +1% -1% / 0% N/A Press market
Source: Best’n Most, Eurocontrol, HDS Estimates
19
HDS has a strong track record
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2000 20030
10
20
30
40
50
60
70
80
90
100
2000 2003
€m Sales
Sales growth EBIT growth
3,294 4,333
€m EBIT
61 92
+ 14.7% CAGR+ 9.6% CAGR
20
Acquisitions have played a major role
Half of HDS’s growth comes from acquisitions
Split of €1,039m sales increase (2000 – 2003)
Split of €491m sales from companies acquired since 2000
491
548
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Organicgrowth
Acquisitions
244
230
17
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Australia (40%)
Travel RetailFrance
Virgin Group
21
Retail has grown faster than distribution
€4.3bn€3.3bn
Pressdistribution: + 5% p.a.
Retail:
+14% p.a.
Sales growth 2000-2003
30% 29%
15% 22%
55% 49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2003Travel Retail Media & Entertainment Press Distribution
22
Forecast growth in HDS’s markets
(1) Market trend in France only
Forecast annual market growth, 2004-2007
Europe North America Asia Drivers
Travel Retail
Media & Entertainment Products
Press Distribution
+2% / +3% +1% / +2% +2% / +3% Air traffic, rail traffic
0% / +1% (1) N/A N/A Books / music / video / games / magazines
0% / +1% 0% / +1% N/S Press market
Source: ACI, HDS estimates
23
HDS will continue to grow
4 – 5% p.a.
4 – 5% p.a.
1 – 2% p.a.
20072003
HDS: organic growth forecastsOverall growth: 3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
PressDistribution
Media &EntertainmentProducts
Travel Retail
24
Balanced profitability across all segments
Business contribution(*) as % of conso. sales 2003
N&G Travel Retail
Specialty & Duty Free
Newsstands
Media Entertainment Products
National Distribution
Wholesale2,9%
Travel Retail
Retail of Media & Entertainment Products
Press Distribution
2,9%
0,9%
(*): Business contribution: operating profit before head office costs
25
AGENDA
HDS: world leader in press distribution and travel retail
A strong track record of growth
Growing and creating value in ECE
26
Growing and creating value in ECE
By acquisition (Hungarian example)
Greenfield (Polish example, similar story in Czech Republic)
By building a portfolio of projects
27
28
Acquisition
Lapker - Hungary
29
Historical background
1994-1998: After extensive preparation, rapid privatization process of Magyar Posta’s fragmented press distribution sector (7 wholesalers and 1,300 kiosks) in 1997-1998
Successful bid by Lapker (85% HDS, 15% publishers)
1998-1999: Fierce competition for distribution to chains
1999:Creation of Kisker, Lapker’s retail company: new formats in travel retail and shopping malls
30
The transformation plan: “Lapker 2001”
Operating costs cut by 30%-35%
Improved quality of service
More customer-focused approach
New services to:publishers
stores
Cultural changes based on initiative, efficiency, expertiseand team spirit
31
Retail modernization: Achievements
Modernization of the retail networkRelay
Inmedio
Modern retail chain management methodsTraining
IT
NRI
etc
Secured press market share & profitability growth
32
A major player in the press market
97% market share in distribution (single copy sales)
>30% market share in press retail110 Relay
120 Inmedio
950 kiosks
33
Our store formats in Hungary
34
Company profile: 2003
Sales = €300m
EBIT = €15m
EBIT/sales = 5.0%
EBIT/capital employed = 81%
Value creation = €10m
35
Keys to success
Effective privatization preparation/negotiation
Delivering more than we promised
Strong management
Clear strategy
Efficient support from HDS
Self-belief
36
GreenfieldHDS Polska - Poland
37
Sustained growth
October 1997: CEO hired
November 18, 1998: First store opened
June 2001: 100 stores
July 2002: First profit … and profitable ever since
December 2004: 272 stores (3rd largest chain in the HDS Group) :
101 Relay163 Inmedio8 Voyage Café
38
Company profile 2004
EBIT/ sales = 3.9%
EBIT/capital employed = 34%
Cash contributor, despite rapid expansion(1 store per week)
Main competitors: Ruch, Kolporter, Empik
39
Building on success
Development of new conceptsVoyage and Inmedio café
Exporting Inmedio brandLeverage on mall developers
Leveraging management team (see Russia)
40
Our store formats in Poland
41
Keys to success
Entry at the right time (start of international investment in retail)
Right management
Optimum exchange of know-how between HDS and experienced local management team
Best of both worldsFocus on value creation and ROI vs. size
Store concept and locations
NRI
HR
42
Our store formats in Czech Republic
43
Building a portfolio of projectsOther ECE countries
44
Historical background
Fall of the Berlin wall
Start-up in ECE through our German entity
Low-cost start-ups focused initially on international press
45
Status today
All companies are profitable
Systematic review of markets: choosing the right timespeedmethod
for further development.
46
Methodology
Business plan
Go/no-go
Pilot (when applicable)
Go/no-go
Monthly visit and follow-up
Strategic framework, market trends and resultsguide daily decisions
47
3 categories
Decision taken/pilot launched in:RomaniaRussia
Thanks to success of operations, BP to be launched in:BulgariaSlovakiaSerbia
Other “top of the list” countries:Ukraine (political change)Croatia
48
ECE - Key indicators for 2004
7.3
2,7963.3
10,05812,000
10,000
8,000
6,000
4,000
2,000
0
8
7
6
5
4
3
2
1
0Czech
RepublicHungary Slovak
RepublicBulgariaRussia Romania Serbia
AndMontenegro
Poland
GDP per capital (USD)
GDP growth (%)
Source: IMF
49
MMP in RomaniaA new start in retail
50
Background
HDS was already present in press distribution (mainly international)
New management hired to work on development strategyDecision to build a retail network, synergetic with our distribution activities
Creation of a chain of Inmedio & Relay stores in big citiesTarget for end 2007: 80 points of sale, including 20 Relays
51
Key figures – retail project
BP:IRR = 31.2%NPV = €3.9m (total project)Minimum cash position = -€1mCumulative investment over 5 years = €2.9m
Pilot:Average annual sales > €160kProfitability >7%ROI >40%Even in the development period, company net profit at breakeven
Decision taken to roll out
52
Our formats in Romania
53
Russia
54
HDS CIS
After extensive strategic analysis, decision to startgreenfield retail operations, under HDS Polska’ssupervision
Creation of a chain of POS, starting in Moscow
185 POS due to be opened by 2009: 95 Relays,90 Inmedio in shopping malls
55
Key figures – HDS CIS retail project
BP:IRR = 20.3%NPV = $7.9m (total project)Minimum cash position = -$6.1mCumulative investment over 5 years = $7.0m2009 EBIT = $1.1m at 2.1% of sales
Pilot:First shop opened in December 2004
56
Bulgaria, Slovakia, Serbia
57
Bulgarpress, IPS & Global Press today … and tomorrow
Company StartNow:
Market ShareInt’l press
Domestic press plans Retail plans
1993 > 90%
> 90%
> 90%
Chains?
1991Segment well-establishedGreenfield not possible
2001Distribution to chainsNational distribution (9% M.S.)Development is ongoing
At least one BP in 2005
58
New market opportunities
59
Ukraine & Croatia - Key indicators
2003 Ukraine Croatia
GDP per capita($)
1,293 7,300
GDP growth 12.5% 3.7%
Inflation 8.2% <2.0%
Population 47.6m 4.4m
Why? Size, political change Development, tourism
Source: IMF World Economy Outlook Sept. 04 and local statistics
60
HDS in ECE – Overall outlook
61
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 …* Bulgaria, Hungary, Poland, Czech Republic, Romania, Russia, Serbia, Slovakia