Distribution Services
INVESTOR DAY June 01, 2006 Agenda Investor Day June 01, 2006
Presentation of Hachette Distribution Services (HDS) y A world leader in travel retail and press distribution y 2000-2005: a sustained profitable growth
2006-2010: a strategy centered around the development of travel retail, diversification and geographical expansion
2007 objectives
2 HDS operates in 3 segments Investor Day June 01, 2006
n Travel retail : news & gift as well as retail of liquor, perfume, tobacco (duty free) and specialty products (luxury items, fashion, food & beverage,…) in travel locations (airports, train stations)
o Retail of Media & Entertainment Products : high street or shopping mall newsstands and retailing of books, music, video and multi-media products
p Distribution : National distribution, import and wholesale of press and related products
2005 sales breakdown by business
37% 37% Travel Retail Distribution
Retail of Media & Ent. products 26% 3 70% of sales achieved outside
France, mainly in Europe Investor Day June 01, 2006
North America: ASPAC : 2005 Sales : 19% 2005 Sales : 2%
Other Europe : Travel Retail France : 2005 Sales : 48% Retail of Media & Ent. Products 2005 Sales : 31% Distribution
4 Source : HDS Finance (managed sales) Travel Retail
3 segments Investor Day June 01, 2006
Segments in Market size and HDS presence Travel Retail market share
Strong leader News & Gift where present
Specialty & Strong leader Duty Free where present
Food & Developing Beverage
Total Travel A global player Retail
HDS will strive to achieve strong presence in the 3 segments of Travel Retail in order to provide complete offering to both landlords & customers 5 Travel Retail Investor Day June 01, 2006 News & Gift: Relay maintained its worldwide growth
More than 1 200 Relay stores in 18 countries
Successful implementation of the new store design
In 2005, first opening of Relay stores in : y Australia y Hong Kong y Romania y Russia y UK Relay - Czske Buejovice (Czech Republic) Significant development in Asia-Pacific (Hong Kong, Melbourne, Singapore, Sydney)
Two large tenders won in Spain : y Gain of commuters and long distance train stations y Gain of the new terminal at Madrid Barajas Airport
Development in Central Europe with the gain of Prague and Budapest airport tenders
6 Relay – Hong Kong Airport (Hong Kong) Relay - London Bermondsey Station (UK)
7 Relay - Madrid Barajas Airport (Spain) Relay - Perth Airport (Australia) Travel Retail Investor Day June 01, 2006 News & Gift: HDS is very strong where present
Hong Kong * Strong Singapore leadership * Leadership **
Strong * Challenger
Challenger
8 (*) In airports (**) HDS entered the market in 2005 Travel Retail Investor Day June 01, 2006 News & Gift: HDS is by far the worldwide leader, among few international players
Key players 1 500 2004 sales (M€)
1 000
500
0
* h s s t * o a t P tt s ) it * e SB k er i a * a ew i os n A ph M m e (1 r h D a l k C r S Sm o N ad r A c S h A l n r S E c D H a o M by S H V s Pa H s W d u res H /P sen e rv a N
(*) International players (1) 2005 managed sales for comparability 9 Sources : Annual reports, Internet, press release, HDS estimates Travel Retail Investor Day June 01, 2006 Duty Free: Aelia comforts its French leadership and develops abroad
Successful partnership with ADP at Roissy-Charles de Gaulle airport
Aelia pursued its developments in French airports and abroad: y Gain of Marseilles airport tender y Successful entry in the UK at Belfast and Paris CDG Airport (France) Luton airport y Development underway in Eastern Europe and Asia
10 Belfast Airport (UK) 11 Luton Airport (UK) Travel Retail Investor Day June 01, 2006 Specialty: Enlargement of our portfolio
New specialty retail formats in airports and train stations y Bijoux Terner (Budapest, Gand, Luton, Melbourne, Sydney) y Découvrir/Discover (Lyon, Madrid, Paris, Perth) y Fruits & Passion (Montreal, Toronto) y Hermès (Paris) y Kaboom! (Adelaide, Singapore, Sydney) y L’Occitane (Gare du Nord, Luton, Nice) Fruits & Passion - Toronto Pearson Airport (Canada)
Opening of Virgin books & music (Berlin, Madrid, Melbourne, Toronto…) y 35 Virgin Travel stores in 8 countries
Kaboom – Changi Airport (Singapore) 12 Virgin books and music
Virgin - Sydney Int’l Airport (Australia) Virgin – Montreal Trudeau Airport (Canada)
13 Virgin - Winnipeg Airport (Canada) Virgin - Melbourne Airport (Australia) Discover
Discover Australia - Sydney Airport (Australia) Découvrir Paris - Charles de Gaulle Airport (France)
14 Découvrir le Lyonnais - Lyon Airport (France) Descubrir Madrid - Madrid Airport (Spain) Travel Retail Investor Day June 01, 2006 Duty Free: Aelia is one of the European leaders
Strong leadership
Leadership
Strong Challenger
Challenger
15 Travel Retail Investor Day June 01, 2006 Worldwide Specialty and Duty Free is a fragmented market in consolidation
1500 Key players 2004 (M€)
1000
500
0
) S *) ) ) A ) e n *) I ) e il d n e s S s ) (* F ( (* (* F ** re an * R (* re ta lan so p ea S ice (* e D ill if F D ( F m (* /A ) F re ai rd ap r B rv s nc gr as D lia ty e K A ea ty a h a K A e ire a to Br W e u in H DA or u ph r T ich S a Nu u - A i D He er (K D Al e R ee rB A + A a w e ic w s Fr te + ry BA ub o tt len Po e x In a uf D P o el g am a as D ng L H in J T de Ki K M Al KL
Sources Annual report/Press/Internet/Ravenfox/HDS estimates (*) 2005 16 (**) 2005 managed sales for comparison purpose (***) 2003 Travel Retail Investor Day June 01, 2006 Development in Food & Beverage Gourmet Food y Australian Gourmet Traveller (Australia) y Découvrir (France) y Godiva (France) y Lindt (Canada) y Gourmand (France) y Hediard (France)
Development of convenience stores in Europe, Asia and North America y Dans Mon Panier Neuf (France) Godiva - Paris CDG Airport (France) y Hub Convenience (Australia) y Mini Market (Canada) y Petit Casino (France) y Relay services (Belgium, Czech Republic, France, Germany, Switzerland)
Development of Cafés: y Café Presse (Belgium, France, Switzerland) y Voyage Café (Poland)
17 Voyage Café – Warsaw Central Station (Poland) Relay Services - Frankfurt (Germany) Mini Market - Montreal Airport (Canada)
18 Relay Services - Prague (Czech Republic) Hub Convenience - Perth Airport (Australia) Retail of Media & Entertainment
Products Investor Day June 01, 2006 Newsstands: Development of our network in Central Europe
More than 2 000 outlets all over the world
Inmedio brand is now the leading brand in central Europe, present in 5 countries, with 284 new openings since 2003
The landscape of Central Europe countries is changing thanks to the development of Inmedio store (Hungary) commercial centers
New concepts with larger food/café offering: y Inmedio Café (Poland) y Journo (Canada)
19 Inmedio Café (Poland) Journo – Toronto (Canada)
20 Retail of Media & Entertainment
Products Investor Day June 01, 2006 Newsstands: HDS is strong in countries where it operates
(2)
Strong leadership
(1) Leadership
Strong (3) Challenger (1)
Challenger (1)
(1) In malls 21 (2) HDS entered the market in 2004 (3) in hospitals Retail of Media & Entertainment
products Investor Day June 01, 2006 Newsstands: the markets are usually dominated by local players
Key players 2 000 2004 sales (M€)
1 500
1 000
500
0
) a ) a h o * * up j c ak op na c ( or * ran ir u s u e l ( ro k i r h a by a R T Sh B G it V S s G D s es M aut w Sm H r T R e H P N W d en/ te ni ves U ar N
(*) 2005 22 (**) 2005 managed sales for comparison purpose Sources : Annual reports, Internet, press release, HDS Estimates Retail of Media & Entertainment
Products Investor Day June 01, 2006 Virgin: Improvement in profitability
The product mix of Virgin Megastore is evolving towards books, which is becoming the first product in 2006, and stationary
Successful and profitable Virgin franchises in Middle East (80M$ sales in 5 countries)
Virgin – Metz (France) The network is now made of 33 Virgin Megastore in France and 24 large bookstores from the leading regional Le Furet du Nord and Payot Libraire
Virgin Megastore became profitable and Furet du Nord and Payot did improve their profitability significantly
23 Virgin – Lyon (France) 24 Virgin - Cairo (Egypt) Retail of Media & Entertainment Products Investor Day June 01, 2006 VirginMega.fr is the 2nd French legal downloading site
VirginMega.fr (a joint company between HDS and LAB) is now the #2 legal music downloading platform in 2004 : 800.000 tracks France with a 30% market share 2005 : 4.500.000
tracks 691 800 2006 : 8.000.000 ‘000 tracks 700 562 524 Take off of music downloads from mid 600 tracks 423 500 403 393 372 2004 400 317 293 306 310 269 300 248 171 200 125 64 100 37 48 47 VirginMega launched its video 0 download offer in April 2006
june july august sept oct nov decjan - feb. march april mai june july august sept oct nov Dec - 04 05
25 Source : HDS Distribution Press distribution is about service to publishers and retailers Investor Day June 01, 2006
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 Wholesaler X of retail network Wholesaler Z
26 Distribution Investor Day June 01, 2006 A unique position in Press distribution
HDS is by far the most international player in press distribution y A strong network to share best practices and maintain operational excellence y A proven ability to enter new markets and participate in privatizations y A large and specialized network of press importers
A very strong position where present y In press distribution, size matters – Cost efficiency – Relationship with partners y HDS has a proven ability to gain and retain publisher clients
Automation of processes and improvement of productivity y Leads to an improvement of profitability
27 SGEL warehouse (Spain)
Naville (Switzerland)
28 Distribution Investor Day June 01, 2006 Diversification has become significant within HDS press wholesale companies
% non press (sales) Company What ? 2003 2005 Books, Phone cards, DVD, AMP 21.4% 29.5% Gadget, Mail order, Subscriptions
Lapker 7.2% 13.2% Phone cards
Books, Phone cards, DVD, Naville 49,8% 51,4% Gadget, Confectionery, Subscriptions
Books, Phone cards, DVD, SGEL 14.9% 17.4% Gadget, Subscriptions
TOTAL 21.1% 25.1%
29 Source : HDS Finance Distribution Investor Day June 01, 2006 An example of diversification in distribution: AMP in Belgium
ILLUSTRATION
Croissanterie
AMP network strength: y 6 000 POS delivered every morning y 120 000 km covered every week (3 times the world circumference) y 350 delivery rounds every day 30 Distribution Investor Day June 01, 2006 HDS aims at being a strong leader where it operates
*
*
Strong leadership
Leadership
Strong Challenger
Challenger
31 Excluding press import companies (*) National Distribution Distribution Investor Day June 01, 2006 Most press distribution companies are large and local
Key players in press wholesale 5 000 2004 sales (M€)
4 000
3 000
2 000
1 000
0
) n P o h a p a e at s s S a * es o *) P C c u ak en c s s s N rj pan ( i s * u lor o is r e e i ohan p ( M s r aw es r r P k i th nz N R a G T v ou ay ip a T N i e aw S V s or r S Y ap M D D ew M a / ld ut Sm H N N et A a ew / B R H on N s e s ogan W r h es e T r D nd rp A te co In n A
(*) 2005 32 (**) 2005 managed sales for comparison purpose Sources : Annual reports, Internet, Press release, HDS Estimates Agenda Investor Day June 01, 2006
Presentation of Hachette Distribution Services (HDS) y A world leader in travel retail and press distribution y 2000-2005: a sustained profitable growth
2006-2010: a strategy centered around the development of travel retail, diversification and geographical expansion
2007 objectives
33 2000-2005: A sustained profitable growth A continuing shift from distribution to retail Investor Day June 01, 2006
Turnover breakdown
Distribution CAGR Travel Retail
Retail of Media & Ent. 3.8 B€ +6.2% Products
2.8 B€
37% 1.7%
45%
37% +7.2%
36%
26% +13.4% 19%
2000 2005
34 Source : HDS Finance 2000 figures restated for comparability with 2005 2000-2005: A sustained profitable growth A combination of organic and external growth Investor Day June 01, 2006
HDS annual sales growth has been around 6.2% from 2000 to 2005 y Over 50% of this growth has been external (Virgin, Saresco, Newslink)
Organic & external growth 2000 /2005 (B€)
0,5 0,5
3,8
2,8
2000 sales organic external 2005 sales growth growth
35 Source : HDS Finance 2000 figures restated for comparability with 2005 2000-2005: A sustained profitable growth HDS is evolving towards more food & beverage and specialty products Investor Day June 01, 2006
Strong development of Product mix specialty & duty free Phone cards 10% Food&beverage pdts 7% Development of food concept Liquors, perfumes & 19% cosmetics 5% Diversification 29% Others 7% 0% 10% 5% 16% Other 10% Music&video Non core products grew over 10 14% Book Tobacco times faster than traditional core Press products
55% 42% Strong focus on diversification in order to drive growth away from declining commodities like tobacco 2000 2005
36 Source : HDS Finance 2000 figures restated for comparability with 2005 2000-2005: A sustained profitable growth HDS has nearly doubled its profitability in 5 years Investor Day June 01, 2006
Recurring EBIT (M€) 107
CAGR
+13%
Permanent focus on profitability 57 levers: sales, margins and costs Leverage external growth through reengineering and HDS know-how
2000 2005
37 Source : HDS Finance 2000 figures restated for comparability with 2005 2000-2005: A sustained profitable growth High value creation Investor Day June 01, 2006
Value creation (M€) = Contribution after tax – remuneration of average capital employed 71
CAGR
+14% 37
2000 2005
38 Source : HDS Finance 2000 figures restated for comparability with 2005 2000-2005: A sustained profitable growth A strong balance sheet and a high ROCE Investor Day June 01, 2006
Consolidated balance sheet ROCE In 2005 (M€) = Contribution after tax /average capital employed
Distribution 162% ∞ Fixed Assets 575.6 Working Capital (496.4) Net Cash 261.8 Retail Net Equity 341.0 21%
2005 2005
39 Source : HDS Finance 2000-2005: A sustained profitable growth Strong ROCE in acquisitions Investor Day June 01, 2006
ROCE = Contribution after tax /average capital employed
From acquisitions* 38%
162%
2005
From organic growth
∞
2005
40 Source : HDS Finance (*) since 1990 Agenda Investor Day June 01, 2006
Presentation of Hachette Distribution Services (HDS) y A world leader in travel retail and press distribution y 2000-2005: a sustained profitable growth
2006-2010: a strategy centered around the development of travel retail, diversification and geographical expansion
2007 objectives
41 Travel retail Investor Day June 01, 2006 A strong growth of air and rail traffic
Air traffic Rail traffic Passengers transported (millions) Passengers transported (millions)
CAGR 1400 7000 2005/2015
1200 6000 +6% 1000 5000 2000
4000 800 +3,5% 600 3000 931 2000 400 2000 1191 200 1000 1352 2100 +3,0%
0 0 8 0 2 4 6 8 0 2 4 9 1 3 5 7 9 1 3 5 7 9 0 1 9 0 0 0 0 0 1 1 1 1 1 99 00 00 0 00 00 01 01 0 9 0 0 1 2 2 2 2 2 2 2 2 1 20 20 20 20 2 20 2 20 20 20 CAGR 2005/2015 : +2% France Belgium North America Europe Asia / Pacific Spain Hungary Switzerland Growth of air traffic will be lead by emerging Rail traffic will keep on growing in countries economies with high speed trains Traffic is becoming more volatile 42 Sources : ACI - August 2005 BDD Pax ACI - 2004 Source : UIC - 2005 Travel retail Investor Day June 01, 2006 The growth of Duty Free market will be lead by luxury goods and perfumes & cosmetics
Breakdown of global Duty Free* sales by products CAGR 2005/2010
Stop of intra-European ($B) duty free 34 +5,5% September 11th SARS
28 27 +5,6% 26 25 12,8 Luxury Goods
20.5 10,5 20 10,1 9,8 9,1 +7% Confectionery 3,0 & Gourmet +5,1% Food 7,1 2,4 3,4 7,5 2,3 2,0 2,1 Tobacco Goods 2,7 2,8 1,7 2,7 2,6 1,6 2,3 2,4 9,6 +6,1% Perfumes & 7,5 7,8 6,7 7,2 Cosmetics 4,6 5,4
5,2 Wines & Spirits 4,0 3,9 4,5 4,3 4,4 4,5 +3,8%
2000 2003 2004 2005 (E) 2006 (E) 2007 (E) 2010 (E)
43 Source : Best & Most (*) Duty Free (including ferries, in-flight, downtown, border & seaport) and airside specialty stores Travel Retail is one of HDS’ main
lever of growth Investor Day June 01, 2006
Develop Relay network Develop Relay in countries with strong potential where HDS is already present worldwide Enter new strategic markets: Thailand, China, Taiwan, Ukraine …
Gain strong position within European market, especially in UK, Spain and Expand Aelia all over Central Europe Europe and Asia Start Asia
Set HDS as a key international player in specialty travel retail by developing Develop specialty existing concepts and creating new ones
Develop food & Develop one-stop shopping Relay + Food & Beverage beverage Develop Food & Beverage internationally
External growth Look for partnership/acquisitions in Europe, Asia and North America
44 Continue development of retail of Media & Entertainment products Investor Day June 01, 2006
New openings of Inmedio newsstands in Central/Eastern Europe Look for stand alone development commercial centers (Poland, Romania, Russia, Czech Republic…)
Look for opportunistic acquisitions in newsstands where HDS is External growth not present and where format is adapted
Through permanent evolution of product mix towards books and stationary Improve Virgin profitability Through development of Virgin franchising Internal or external development of regional bookstore chain locally
45 To become a key player in dematerialized
media & entertainment product: Investor Day June 01, 2006 VirginMega.fr
Strengthen Virgin’s position on the growing segment of dematerialized music Become leader in video download (launched in 04/2006) VirginMega.fr Development of new services: ticketing, photo printing, dating, travel… Develop white labels
46 To become a key player in dematerialized
media & entertainment product: Investor Day June 01, 2006 HDS Digital
Creation of a digital press kiosk for mass market spread through white labels
An innovative and original offer of digital magazines with several packages
A full range of magazines will be offered (target of 500)
47 To become a key player in dematerialized
media & entertainment product: Investor Day June 01, 2006 HDS Digital
HDS Digital will be launched in July 2006 on both HDS generalist websites:
Relay: a press specialist VirginMega.fr: the reference digital website in France
Enhanced exposure of HDS brands
48 Press distribution : Optimize operations
and diversify towards non press Investor Day June 01, 2006 Keep low costs while innovating and developing new services
Strengthen national distribution of domestic press by innovating in marketing and sales development Increase level of Strengthen wholesale profitability y Maintain operational excellence and cost monitoring (automation…) y Comfort and support independent newsstands y Play an active role in distribution to retail chains
Increase diversification within wholesale y Boost local initiatives Diversify towards non y Development of subscriptions in Switzerland and Spain press y Recent successes in phone card dematerialization (Alvadis and Naville Services, Lapker), Panini stickers and DVD y Increase experience sharing
Grow market share Outstanding service, aggressive commercial activity
Enter new countries : Look for opportunities in developing markets External growth
49 Agenda Investor Day June 01, 2006
Presentation of Hachette Distribution Services (HDS) y A world leader in travel retail and press distribution y 2000-2005: a sustained profitable growth
2006-2010: a strategy centered around the development of travel retail, diversification and geographical expansion
2007 objectives
50 Geographic growth 2003-2007 Investor Day June 01, 2006
CAGR Region 2003/07
Mature countries 1% Central Europe and Asia Pacific achieve outstanding growth rates Central Europe 9%
Asia Pacific 64%
0,1 0,2 0,1
3,8 3,4 Over 70% of HDS’s growth is generated by non mature countries 2003 sales Growth in Growth in Growth in 2007 sales mature Central Asia countries Europe
51 Source : HDS Finance Note: Turnover with Belgium distribution contracts on an homogeneous basis Organic growth 2003-2005-2007 Investor Day June 01, 2006
Turnover breakdown* Distribution
Travel Retail
Retail of Media & Ent. CAGR 05/07 Products 3,8 B€ +3.6% 3,6 B€ 3,4 B€
31% 33% 35%
41% 37% 39%
28% 28% 28%
2003 2005 2007
HDS intends to reach Lagardère’s profitability ratio objectives
52 Source : HDS Finance (*) Turnover with Belgium distribution contracts on an homogeneous basis HDS Vision
Through its global and local strategies, HDS will increase its sales and profitability by:
y Strengthening its position of world n°1 in News & Gifts Travel Retail y Becoming one of the world leader in Specialty and Duty Free y Strengthening and diversifying its strategic position in press distribution y Developing Food & Beverage activities y Developing in emerging countries
53