Investor Day Paris - June 12, 2008
Warning
Certain of the statements contained in this document are not historical facts but rather are statements of future expectations and other forward-looking statements that are based on management's beliefs. These statements reflect such views and assumptions as of the date of the statements and involve known and unknown risks and uncertainties that could cause future results, performance or future events to differ materially from those expressed or implied in such statements.
When used in this document, words such as "anticipate", "believe", "estimate", "expect", "may", "intend" and "plan" are intended to identify forward-looking statements which address our vision of expected future business and financial performance. Such forward-looking statements include, without limitation, projections for improvements in process and operations, revenues and operating margin growth, cash flow, performance, new products and services, current and future markets for products and services and other trend projections as well as new business opportunities.
These forward-looking statements are based upon a number of assumptions which are subject to uncertainty and trends that may differ materially from future results, depending on a variety of factors including without limitation: General economic and labor conditions, including in particular economic conditions in Europe and North America Legal, financial and governmental risks (including, without limitation, certain market risks) related to the businesses Certain risks related to the media industry (including, without limitation, technological risks) The cyclical nature of some of the businesses
Please refer to the most recent Reference Document (Document de Référence) filed by Lagardère SCA with the French Autorité des Marchés Financiers for additional information in relation to such factors, risks and uncertainties.
Lagardère SCA disclaims any intention or obligation to update or review the forward-looking statements referred to above. Consequently Lagardère SCA is not responsible for any consequences that could result from the use of any of the above statements.
Investor day, June 2008 • 2 Agenda
Opening remarks Didier Quillot
Current market conditions “
Where we are in 2008 “
Focus on “Active 2009” Alain Lemarchand
Focusing on growth: “Active 2009 Growth”
Maximizing growth potential of core assets Didier Quillot
Emerging countries “
Digital rollout Julien Billot
2012 vision for Lagardère Active Didier Quillot
Investor day, June 2008 • 3 Agenda
Opening remarks
Investor day, June 2008 • 4 Opening remarks
In the past 18 months In the next 3 years
We have changed our culture: We will continue to transform Lagardère Active reactivity, focus, costs, digital Focused portfolio, targeting leadership We have improved our profitability segments in print / radio / TV / digital
We are focusing our portfolio on a Cost streamlining few strategic segments / media / geographies (upscale women, Emphasis on 3 topline growth levers shelter, celebrity, automotive, – Topline management of core assets music, news and kids in France) – Emerging countries – Digital We have launched the digital transformation: digital will reach => Towards a fully-integrated plurimedia company 5% to 10% of our turnover in 2008 - Generating 10%-20% of revenue from digital - Delivering EBIT growth
Investor day, June 2008 • 5 Agenda
Current market conditions
Media consumption – Magazine – Radio – TV – Internet
Advertising spend
Investor day, June 2008 • 6 Mixed picture for magazine circulation in mature
Media Advertising consumption spend countries, solid growth in emerging countries
Magazine circulation growth 26.9% CAGR 2004-2007, % 21.5%
Mature countries Emerging countries
-4.7% - 3.1% -2.1% -1.1% -1.0% -0.5% -4,7% -3,1% -2,1% -1,1% -1,0% -0,5% * 21,5% 26,9%
*2004-2006 Sources: France: OJD / UK: ABC / Russia: TNS Gallup / Italy: ADS / Spain: OJD & Nielsen / US: ABC / China: claimed circulation / Japan: Research Institute for Publications 2008 - base print run Investor day, June 2008 • 7 Upscale Women & Celebrity (main Lagardère Active magazine segments): Media Advertising consumption spend dynamism confirmed Gross advertising revenues & average circulation CAGR 2004-07, %
8,0%8.0% 7,7.6%6% 4,7%4.7% Celebrity 12,7%12.7% 1212.7%,7% 15,3%15.3%
Upscale 1,7%1.7% 0,0.8%8% 0,1%0.10.1%% women 7,5%7.5% 7,7.3%3% 10,2%10.2%
2,9%2.9% 5,5.8%8% -2.5%-2,5% News 2.9% 4,9% 4.9% 4,7%4.7% -3.4%-3,4%
2,5%2.5% -2.0%-2,0% 1,4%1.4%1.4% Shelter 5,6%5.6% 4,4.9%9% 12,0%12.0%
0,6%0.6% --10.1%10,1% -1.01.0%-0,7%% Auto 10,7%10.7% -7-7.4%,4% 7,0%7.07.0%%
-3.1%-3,1% 0,6%0.6% -28.6%-28,6% TV -28.6% -5.5%-5,5% 2,2.1%1% -17,4%-17,’%
-11,6%-11.6% -6.9%-6,9% -2.5%-2,5% Lads 5,7% mags -13,2%-13.2% 1,1.71.7%7%% 5.75.7%%
CAGR Advertising CAGR Circulation Lagardère not present Sources – circulation: OJD, ABC Investor day, June 2008 • 8 Sources – advertising: TNS Media Intelligence, Nielsen Media Research Radio audience is still growing
Media Advertising consumption spend in emerging countries Eastern Europe daily reach trends French radio listening* between 2005 and 2007 %**
100 9393 94 Daily reach in % 2004 2007 79 90 84% 7373 83.6% 62 5858
80 50 2007 2005 70
60 0 0 4 8 2 6 8 9 9 9 0 0 0 9 9 9 0 0 1 1 1 1 2 2 Q Russia Poland*Poland* Romania*Romania*
8 (Moscow)* 0 1 Q
Note:*France: cumulative audience penetration (age 15+ for 1990 to 2002, 13+ from 2003);**Russia: age 12y+, Poland: age 15-34 Sources: Mediametrie, Zenith Optimedia, Target Group Index (MillwardBrown SMG/KRC) Investor day, June 2008 • 9 Fast growing DTT and eroding
Media Advertising consumption spend analog TV audience
Very fast growth in DTT penetration Other TV media under pressure
~9m households in 2008 Analog channel audience share: ÔÔ Cable / Satellite market share: Ô, DSL & DTT Ò 100% by switchover in 2011
Ad spend on DTT in France (gross) TV audience in France - Audience share (%) age 4+ €m 30 TF1 CAGR 06-09 1200 France 2 1000 +75% 20 France 3 800 Canal + 600 407 10 France 5 + Arte 400 186 200 M6 0 0 2005200620072010 Other channels channels (Free DTT + 2006 2007 2008 2009 (+cable cable + sat) + sat)
Sources: GFK, Référence des Equipements Multimédia / ZenithOptimedia / NPA Conseil / Médiamétrie Médiamat Investor day, June 2008 • 10 The internet consumption boom is not slowing down and end-users Media Advertising consumption spend are multimedia and multitasking
People using the Internet at least once a week, by country Increasing mobile internet usage million % of Internet users also using Internet Mobile +8%* CAGR +9%* 279 265 in France - CAGR 2005-2007 2004-2010 231 226 165 170
11%
04 07 10 04 07 10 US Western Europe
Time per week spent on media in Europe 16% (average weekly number of hours) 13% CAGR 2004-2007 +3.6% 48.4 43.5 4 3.8 3.9 4.2 4.6 4.4 4.9 Magazines 4.6 14.8 14.5 13.7 Newspapers 12.7 20052005 2007 2007 14.3 Radio 14.2 14.1 13.5 TV 8.5 10 11.2 11.6 Internet 2004 2005 2006 2007 Sources: European Interactive Advertising Association, Base: All people with children using each media, Médiamétrie, Media in Life 2008, All people age 13+: Ipsos Profiling, Sept- Nov 2007, Base Internet users age 15+, Enquête Téléphonie et Services mobiles Q3 2007, Base age 11+ ; GFK, Référence des Equipements Multimédia / ZenithOptimedia / NPA Investor day, June 2008 • 11 Conseil / Médiamétrie Médiamat …leading to high revenue growth
Media Advertising consumption spend
Internet advertising spend, €m - CAGR 2003-2008 e-commerce forecast e-commerce spend, €bn CAGR 2007-2010 US UK 2007 2, 000 17, 000 +20% +22% 2010* 1, 500 +47% 119
10, 000 1, 000
500
3, 000 0 2003 2008* 2003 2008* +17%
68 69 +21% France Spain & Italy 58 1, 000 1 ,000 +16% +15% 43 +40% +56% 2.3 +40% Sp 33 1.4 1.2 500 500 0.8 It +35% Western North Japan Russia China 0 0 Europe America 2003 2008* 2003 2008*
Note: *Estimates Investor day, June 2008 • 12 Source: Ad Barometer - Bipe, Eurostat/nVision; Euromonitor Advertising spend growth is soft in mature
Media Advertising consumption spend countries and strong in emerging countries…
Advertising spend growth 27%27% CAGR 2004-2007, %
18%18%
Mature countries Emerging countries
9.1% 9,1%
2.2% 3.3% 3.4% 3.5% 3.5% 3,3% 3,4% 3,5% 3,5% 2,2%
Note: local currency Source: Zenith Optimedia Investor day, June 2008 • 13 In mature countries, Internet is driving ad spend growth;
Media Advertising in emerging countries, all media are on an uptrend consumption spend Advertising spend by media, CAGR 2004-2007, %
Western Europe Russia +4.7% +27% 0.6% 15.8%
2.0% 13.8%
Magazines 3.4% 32.8%
4.2% 30.5% Newspapers + freesheets 48.6% 80%
4.0% TV 27.8%
Radio US China Internet +3.5% +18% 4.1% 12.4%
Other 1.0% 16.3% (outdoor + cinema) 1.9% 17.3%
1.4% 26.50% 22.9% 62.9%
10.3% 10.6%
Note: local currency Investor day, June 2008 • 14 Sources: Zenith Optimedia, Bipe The market is affected by the 2008 recession: 2008/2009 addressable advertising market outlook
US: -5% to -10% in 2008 ~ 0% to -2% in 2009
Western Europe: -2% to +1% in 2008 ≤ 0 % in 2009
Emerging countries: > +20%
Digital: – Mature countries 20% to 25%
– Emerging countries > 50%
Investor day, June 2008 • 15 Conclusion on market trends
Structural trends New trends The higher end of the market Magazine is performing well Economic slowdown is affecting Magazine circulation growing media advertising spend in most solidly in emerging countries countries Strong segments and leadership Eastern European countries titles/stations are resisting better Radio are still growing, though the in a tough environment French market is mature
Strong growth in multichannel Shift of audience from analog TV homes is expected until 2012 channels to DTT is accelerating in France
Broadband access and time Media consumption on mobile Web/Mobile spent online is increasing devices is increasing
Cross-media advertising spend Cross-media advertising offers Plurimedia is gradually increasing are being developed
Investor day, June 2008 • 16 Agenda
Where we are in 2008
Investor day, June 2008 • 17 Sales by activity and geography
Sales split per activity Sales split per country 2007 * 2007 *
Lagardère Internet Entertainment Others - 7% 3% Others - 7% 6% China - 2% Japan - 3% TV channels 4% UK - 4%
Spain - 6% Radio 14% Italy - 6% France - 47%
Russia - 10%
Magazines 73% USA - 15%
Note : *excluding regional dailies Investor day, June 2008 • 18 Magazine footprint & Revenue split magazines (2008 footprint & 2007 revenue split excluding regional dailies) radio TV An international network in 44 countries WESTERN EUROPE
24% EASTERN EUROPE 11% NORTH AMERICA 21% ASIA & OTHERS 8% Controlled subsidiaries
Joint venture
License
New license agreement reached in 2008
FRANCE 36% Brand extension dynamic 41 editions (39 editions last year) Investor day, June 2008 • 19 Negative growth profile magazine assets magazines radio under review TV 2007 magazine portfolio growth vs. profitability (∼160 titles*)
2005 – 2007 growth In 2007, primary focus + on unprofitable titles Revenues: Revenues: Revenues: – From 10% of revenues down to 5% 2% 3% 47% – From 36% of titles down to 20%, Titles: 11% Titles: 6% Titles: 39% of which 11% are on a positive growth trend Launches Women (all but 3 titles) Shelter 0 From 2008 on, focus extended Revenues: Revenues: Revenues: to negative growth profile titles 3% 2% 43% – Lads mags in France sold – Milking strategy for TV titles Titles: 9% Titles: 6% Titles: 29% – Investigating solutions for some Auto special interest magazines in the US TV & Leisure Special interest – Repositioning some titles e.g. Tuttomoto => Riders - 0 + 10% + WD => Well-Being
2007 profitability (gross margin**)
Note: 2007, percent * excluding countries in JV ** before overheads Investor day, June 2008 • 20 Managing the portfolio is also about renewal magazines radio TV
More than 7 titles* launched successfully in the last 2 years…
Title Segment Country
Psychologies Women Russia, China Domoi Shelter Russia Quo Lifestyle China Riders Lifestyle Italy Star Hit Celeb Russia Home Shelter Italy
…and more than 20 titles* launched successfully in the last 5 years
* In addition to spin-offs Investor day, June 2008 • 21 Increasing focus on the Upscale women magazines segment in mature countries… radio TV Lagardère Active Press revenue split by segment* % of sales
Women 40% 44%
65%
Shelter 8.4% 8.5%
Celebrities 13.1% 12.3%
TV 11.8% 10.8% Auto 6.1% 5.8% Leisure 8.5% 7.4% News 8.0% 7.9% Lads 3.3% 2.5% Others 0.8% 0.8% 2006 2007
*Titles of consolidated companies, constant exchange rate Investor day, June 2008 • 22 … where Lagardère Active is already a clear leader
magazines
radio Gross advertising revenue market share for upscale women’s magazines (Elle, Psychologies and Marie Claire vs top 2 competitors) in mature/emerging countries TV 2007,% 100% 9 10 10 9 9% 18 17% 9% 18 16 19 20 Elle 1 25% 25 25% 26% 26% 6* (Red) 6* 2 14 2 2 3 41% 38% 7 4 4 8 13 3* (Ana Rosa) Psychologies 7 13 18 19 Marie Claire 9 21 20 12 (Where relevant) 9 24 13 16 No.1 10 13 competitor 23 13 20 12 16 15 10 48 No.2 18 competitor 43 41 34 34 31 29 Other titles 18
France Italy China Russia Japan UK Spain US
Lagardère Active titles Titles partly owned by Lagardère Active Competitors’ titles
Note: *Red in UK, Ana Rosa in Spain, no Marie Claire ownership in UK, Spain and US Investor day, June 2008 • 23 Sources:TNS MI, TNS Gallup; Lagardère Global Advertising; country data, Nihon Ad. Stat. We are constantly strengthening our portfolio magazines (1/2) radio TV While continuing to focus our portfolio, we are building market share in key segments via selective acquisitions
France 2007 - Magazine ad revenue market share – Focus on weeklies, for which circulation increased on average by 2.6% in 2007 – Acquisitions in the upscale women and shelter segments: Version Femina April 2007 6% 4%9% 20% Arts & Décoration 18% 21% 26%25% + Maison & travaux April 2008 13% 15% Psychologies May 2008 18% 12% 16% US – Focus on 4 pillars: women, wellness, shelter, automotive – Dynamic transformation to digital in automotive in 2007, 61% 56% 57% next step women 55% 50%
Italy – Portfolio mainly focused on women’s segments FranceFranceUSA ItalyItaly UK – Improved quality and upscale repositioning (e.g. Riders & Home) LagardèreOthers Active Competitor 2 Competitor 1 Competitor 2 Sources: France & USA: TNS Media Intelligence / UK & Italy & China: Nielsen Media Research / Spain: Infoadex - estimate 2007 HFM Investor day, June 2008 • 24 Japan: HFG + wholesalers - Only the Top 10 in women’s segment – advertising and circulation revenues / Russia: TNS Gallup Others We are constantly strengthening our portfolio magazines (2/2) radio TV
Spain 2007 - Magazine ad revenue market share – Leadership position with a well diversified portfolio – Streamlined organization, with the highest profitability within Lagardère Active
4% 7% 8% 16% 8% 19% UK 21% 5% 19% – Focused on dynamic segments (women and celebrity), 17% where the UK is an important market 19% 18% 17% 16% – Increased profitability post restructuring 15% – Web/print synergies (Digital Spy) 80%
Japan 57% 56% 51% 47% – High profitability post restructuring, and stable – Fragmented advertising-based market
– Looking for solutions in digital UK Spain Russia RussiaJapan JapanChina China Competitor 2 Competitor 1 LAGARDERE ACTIVE Lagardère Active Russia & China Competitor 1 – Portfolio expansion, with many launches Competitor 2 Others Source: France & USA: TNS Media Intelligence / UK & Italy & China: Nielsen Media Research / Spain: Infoadex - estimate 2007 HFM Japan: HFG + wholesalers - Only the Top 10 in women’s segment – advertising and circulation revenues / Russia: TNS Gallup Investor day, June 2008 • 25 Radio in France (52% of 2007 total Radio revenue): magazines radio market leadership in advertising TV Advertising Audience No.1 sales house Leading position for Europe1 Improving performance for Virgin Radio (formerly Europe2)
Advertising market share, 2007 Cumulative daily reach %
Others 10 9.1% 9.7% Lagardère Publicité 32.7% NRJ 6.4% Global 29.6%
5 28% 4.7%
IP Radio (RTL)
0 Q1 05 Q4 05 Q3 06 Q2 07 Q1 08
Investor day, June 2008 • 26 Source: Mediametrie, 126,000 radio listeners, age 13+; BIPE estimate Radio in Eastern Europe (48% of 2007 total Radio revenue): magazines strong increase in both revenue & profit, radio TV with clear leadership position in all countries
LARI operates 22 radio stations with a combined daily audience of 33 million people LARI Advertising Market Share LARI revenue 2000-2007 (Sales house market share)
13% 23% €160m160 44% 56% 37% 120 34%
25% 80 19% 50% 43% 31% 25% 40
Russia Poland Romania Czech 0 Republic Competitor Other 2000 2001 2002 2003 2004 2005 2006 2007 LARI no1 competitors Revenue, French GAAP (€m) Revenue, IFRS (€m) Sources: Gallup AdFact, Expert Monitor, Alfacont, TNS Media Intelligence Investor day, June 2008 • 27 TV channels: leader in our segments magazines radio (kids and music) on all platforms (DTT, cab/sat) TV
National audience share (%) Successful launch of DTT channels for DTT channels (age 4+) 3.5% audience share
2,5 leader in 4-14 age group 2006 2007 2008 (March)
2 1.5% audience share leader in 15-24 age group 1,5 Leader in Children’s TV segments 1 with 13.6% national audience share of 4-10 age group 0,5
0
MC W9 télé T Gulli NT1 > Leader in Music TV segment NRJ12 irgin 17 rance 4 I V Direct 8 F BFM TV
Sources: Médiamétrie Médiamat January-March 2006, 2007 and 2008 / Médiamétrie MédiaCabSat / ZenithOptimedia Investor day, June 2008 • 28 Key messages on where we are
Value oriented Increased value of portfolio through – Selling / closing down some low added-value titles – Improving quality / revamping core titles – Concentrating on segments with clear leadership
Focus on emerging countries – Consistent increase of footprint both in magazines and radio – Room for a more mid market value proposition
Close monitoring of portfolio performance, and flexibility in a changing environment => Potential adjustments to portfolio assessed on a regular basis Low added value
Investor day, June 2008 • 29 Agenda
Focus on Active 2009
Investor day, June 2008 • 30 Active 2009 objectives reminder
Active 2009 objectives Implemented to date
Change culture New management & organization
Improve profitability Profitability levers activated
– 12 titles closed, – Rationalize portfolio 11 countries shifted to license or activities sold
– Cost reduction program – Cost cutting across all countries and activities
Merge sales houses Merger of sales houses in France in France achieved in September 2007
Move to Digital 35 sites launched or re-launched 7 acquisitions
Investor day, June 2008 • 31 A new mindset...
Fresh look at portfolio: no assets off-limits
Emphasis on digital culture, bringing in some entrepreneurial spirit
Bringing down barriers: from a silo to a matrix organization => mutualization of back office functions across the board (business and country wise)
Sales Radio Press Press TV Lagardère Back office Digital House France & France Intern. Channels Entertainment Departments France Internat. Finance
Technology
Legal . Purchasing
HR
Comm & PR
=> sharing of best practices Investor day, June 2008 • 32
… that allows sharing of best practices
ELLE synergies case
Two-fold magazine content sharing UK Russia Japan Argentina South Africa Hungary – Coproductions between main editions – Syndication to all editions
Share expertise and best practices Depending on the country, from 1% to 50% of magazine content syndicated from other countries Leverage network factor to increase brand power
=> International editor and publisher committees headed by ELLE main edition
Synergies for radio – leveraging expertise
Programs: research, training, tools (selector) Brand marketing
Sales: market & competition analysis, Technical & IT: broadcast network optimization, commercial strategy technology and system solutions
Investor day, June 2008 • 33 Substantial portfolio reshuffle in 2007
Revenue growth split €m
2,334 -53 -320
82 2,079 66 -30 66
2006 Exch. Rate Divestiture Closure of Organic Acquisitions 2007 revenue (1) & other of non core unprofitable growth (2) made in revenue (3) or low assets 2006 & 2007 profitability assets
(1) 2006 IFRS (proforma) (2) Including launch of new titles/activities (3) 2007 proforma, net of regional dailies divestiture Investor day, June 2008 • 34 Active 2009 portfolio reshuffle
Full year impact As forecast Achieved as of New estimate (based on 2006 in Jan. 2007 June 12th, 2008 figures, €m *) Revenue EBIT Revenue EBIT Revenue EBIT
Divesting non core assets -260 +4 -270 -1 -270 -1 Country portfolio - shift to license model -40 +1 -28 +2 -28 +2
Closing down non profitable activities -90 +7 -30 +13 -59 +14
Total -390 +12 -328 +14 -357 +15
Cellfish divestiture * -75 +6 -75 +6 -75 +6
* Cellfish accounted for as an associate Investor day, June 2008 • 35 Cost reduction initiatives
Production costs Payroll & Other costs
Paper Editorial costs reduction
Printing Sales streamlining
Distribution and circulation Overhead reduction
Digital copyflow and pre-press Other procurement
Broadcasting contracts
Status : 100% 0% Investor day, June 2008 • 36 “Active 2009” Achievements by end of 2007 / beginning of 2008
Active 2009 objectives Implemented to date Achievements
Change culture New management Better sharing of best & organization practices underway
Improve profitability Profitability levers activated Profitability improvements
– 12 titles closed, – €20m EBIT improvement on – Rationalize portfolio 11 countries shifted to a full year basis A major license or activities sold contribution to LA 2007 – Cost reduction program – Around €30m cost profit margin – Cost cutting across all countries reduction in 2007 improvement and activities
Merge sales houses Merger of sales houses Leaner organization in France in France achieved Development of cross media in September 2007 offer
Move to Digital 35 sites launched 2006: Less than 1% of revenues or re-launched 2007: 3% 7 acquisitions April 2008: 7.1% Target (5 to 10%) reached 1 year early
Investor day, June 2008 • 37 2007: a turnaround in profitability profile
EBIT €m 250
200 7.8% 8.0% 15.2% 150 14.8% Audiovisual 9.7% Magazine 100 8.5% 7.7% 6.6% 50
0 2004 2005 2006 2007
Combined profitability improved from 8.3% in 2006 to 9.3% in 2007
2004 proforma Investor day, June 2008 • 38 Active 2009 target confirmed
Lagardère Active will over deliver its €70m targeted net savings *
€m 100
75
50 D
25
0 2007 net 2008 net 2009 net 2009 Initial net savings additional additional cumulative savings estimate savings savings savings target estimate
Before possible impacts beyond Lagardère Active’s control…
* net of reorganization costs such as upgraded homogeneous information systems right across Lagardère Active… Investor day, June 2008 • 39 … Risk factors
Economic environment has changed since January 2007
Factors Rationale
Weak $ / € US is one of the main exchange rate contributing countries to Active 2009
Strong paper Energy and price inflation industrial overcapacity drastically reduced
Print, Freight and Postal Energy… costs escalation
Investor day, June 2008 • 40 P&L dynamics over the 2007-2009 period
Portfolio reshuffle* to improve profitability -€432m impact on turnover +€21m impact on EBIT
Active 2009 net full year savings (from 2009 on) €80m to €90m
Growth profile and mix of assets improved (mature => emerging, traditional => digital)
Increased investment in new developments stable at +€15m to €20m more (organic=>immediately & fully expensed) than in 06
Cost inflation ~ 3% / year (~€1.8bn / €1.9bn consolidated cost basis)
EBIT margin improvement: Initial target of >1% per year on average over the 2007 to 2009 period confirmed
* Cellfish accounted for as an associate Investor day, June 2008 • 41 Agenda
Focusing on growth “Active 2009 growth”
Investor day, June 2008 • 42 Three main structural growth levers
1 Top line 2 growth Emerging in all core countries businesses
3 Digital media
Investor day, June 2008 • 43 Three main structural growth levers
2008 revenue breakdown (estimate) Beyond Portfolio management Cost reduction initiatives Digital 7% Emerging Topline growth management will contribute to profitability countries improvement plan: 19%
Other n Systematic review of all topline levers for core 68% Lagardère traditional assets Entertainment 6% o Increased footprint and portfolio in emerging countries
p Digital transformation
Investor day, June 2008 • 44 Agenda
Focusing on growth: 1 Top line management of core assets
Core assets: top line optimization Lagardère Entertainment New opportunities (Digital Radio, Personal Mobile TV)
Investor day, June 2008 • 45 Maximizing growth potential of core assets core assets Lagardère Entertainment new opportunities Systematic review of top line levers:
Advertising 1 Optimizing ad-offer / pricing revenue 2 Improving ad-sales stimulation & organization 3 Improving account management
Circulation 4 Optimizing cover pricing revenue 5 Improving subscription 6 Optimizing distribution 7 Optimizing marketing spend allocation
8 Revamping / repositioning magazines
Other 9 Expanding brand in other / non media revenue 10 Creating add-on products and diversifying revenue
Investor day, June 2008 • 46 Increasing advertising revenue in a stable core assets or downward oriented market Lagardère Entertainment new opportunities
1 Develop creative & 2 Improve account 3 Improve ad-sales proactive ad offer/ pricing management stimulation & organization
Plurimedia, crossmedia Specific marketing strategy Rigorous sales processes, offerings and strong link for each kind of account: systems and incentives with web – prioritizing large Sales force time focused Pricing (CPM, position…) accounts on client relationship
– growth opportunities in Focus on key accounts medium accounts or non
endemic categories Creativity in special operations Elle US: 2.1% market share gained between 2003 and 2007
“Women in Hollywood” Dinner, October 2007 Investor day, June 2008 • 47 Increasing circulation revenue through core assets cover pricing … Lagardère Entertainment new opportunities
4 Optimize cover pricing E.g. France: increased cover prices - no negative effect on circulation
Average LTM paid circulation in France Key criteria to be checked: March 2007 to April 2008, number of issues sold (‘000) €2.30 in 2007 Price elasticity 700 €2.40 from Jan. 2008 of the magazine 600 Price increase in January 2008 Positioning 500 €1.20 in 2006 of the magazine €1.30 from April 2007 400 Competitors’ pricing policy 300 Price increase in April 2007 Price increase in February 2008 €2.00 in 2006 200 €2.90 from March 2007 0 €3.50 from Feb. 2008 03 04 05 06 07 08 09 10 11 12 01 02 03 04
Investor day, June 2008 • Source: OJD 48 … and subscription core assets Lagardère Entertainment new opportunities Japan US 5 Improve subscription marketing Online subscription growth Subscription growth rate number of new subscribers Partnership development
+11% Online subscription fostering 18% 22,599 18,432 9% Automatic renewal incentive 6%
Promotional costs optimization 2006 2007 2008 (E) 2005 2007
Investor day, June 2008 • 49 Increasing circulation revenue by focusing core assets on new distribution channels and better Lagardère Entertainment new marketing spend allocation opportunities 6 Optimize distribution
Specialized distribution channels to reach qualified targets Luel mailed to male VIP customers Focusing on growing channels => Revenue from advertising based on VIP quality profile
On-sale date alteration
Travel size
From Monday to Saturday: => +26% in average circulation* 7 Marketing spend optimization
Systematic cost / opportunity analyses
* Apr.-Dec. 2007 vs Jan.-Apr. 2007, excluding special issues Investor day, June 2008 • 50 Increasing revenue through revamping / core assets repositioning our magazines Lagardère Entertainment new Italy opportunities Average circulation 8 Revamp/ reposition magazine increased by 22%
From a technical …to a lifestyle magazine… companion around Improve circulation the motorcycle universe Italy Improve position on relevant readership
Better monetize advertising From a supplement … to a service magazine… oriented magazine with a luxury mood UK Average circulation increased by 3% Median reader age from 26.9 to 28.3 years
From a young / hip … to a premium positioning… fashion magazine Investor day, June 2008 • 51 Developing additional revenue core assets through brand expansion… Lagardère Entertainment new opportunities 9 Expand brand in other media and non-media
Systematic spin-off policy
Media extensions or partnerships
Licensing – Already 6% of ELLE revenue
Music multimedia event management – Increased brand awareness Elle digital player Elle sunglasses Elle bowling bag – 1.5% of music division revenue
Virgin Show RFM Party Show Car And Driver Radio Investor day, June 2008 • 52 … and add-on products core assets Lagardère Entertainment new opportunities 10 Create add-on products and diversify revenue Italy, May 2007 France, May 2008
Add-on products
Product selection is key (tops and flops)
Interactive revenue: e.g., in Poland interactive revenue (SMS, etc…) accounts for over 20% of radio revenue
Chanel mascara DVD sold with TV 7 Jours: sold with Elle: Magazine + DVD: €5.95 + 42% in sales Magazine only: €0.95 ⇒ +7% of revenue & +2% circulation
Investor day, June 2008 • 53 Our ambition: to become a core assets European Entertainment business Lagardère Entertainment new opportunities
Audiovisual Production Music & Live
Leadership position in multi-format Integrated business model with audiovisual contents (Scripted, global artist management Unscripted, Animation) in France (360° image, concerts and rights), focused on independent Addressing the western European production and established French market as well artists - European strategy to be defined
Investor day, June 2008 • 54 Lagardère Entertainment core assets Development opportunities in TV production… Lagardère Entertainment new opportunities Lagardère Active positions Development strategy
No.1 in scripted production Finalize portfolio rationalization
Lagardère 102 Consolidate leadership in scripted production Active in France Prime time 2006-2007 Carrère 79 (hours) Shorter formats for scripted production
Telfrance 72 Develop in day-time and access prime-time production
Increase international potential (train authors, No.3 in unscripted production focus on long series…) and hence diversification potential (licensing…) Endemol 17.1 Weekly Develop unscripted production (reality shows, game shows…) which enjoys high margin 2006-2007 Carrère 15.5 (hours) potential and where we have little presence
Lagardère 12.5 Look for acquisitions with complementary Active skills (low cost production for DTT…)
Investor day, June 2008 • 55 … and Live Events: a 360° strategy core assets Lagardère Entertainment new opportunities
Development strategy
From Production/Distribution only to… Production Publishing Distribution Publishing – High profitability and stability Intellectual property – Development opportunities in Rights a digital world Artist management Live events Live events – Touring – Event production – Concert halls
=> High value added (artistic, marketing…) Artist management => Increased emphasis on exclusivity
Investor day, June 2008 • 56 Our strategy to capture digital radio core assets opportunities Lagardère Entertainment new opportunities Increased Radio attractiveness VS plurimedia expectations
Oct.1st, End of 08 / Q2/Q3 End of 2008 Q1 09 2009 2010 French population equipped to receive digital radio (estimate, m) Coverage extension up to 2012 25
20
Tender Licenses Launch End of Canal+ 15 first 19 of DTR analog zones broadcast 10 Band III fully available 5 0 2009 2010 2011 2012 2013 Key digital radio benefits – Coverage (up to 85% of population) Reinforce Lagardère Active’s market share in Radio – Sound quality => – Enriched programs and enlarged Radio offering – Embedded Radio features + possible application for new licenses e.g.
Investor day, June 2008 • 57 Personal Mobile TV: core assets LA has been awarded a mobile TV license Lagardère Entertainment new for Virgin 17 opportunities
Advertising Mobile TV - France (€m) Growth opportunity
166 142 Virgin17 mobile TV showing 106 significant potential 58 24 2 9
2009 2010 2011 2012 2013 2014 2015
Investor day, June 2008 • 58 Source: CapGemini estimates / Zenith Optimedia Agenda
Focusing on growth: 2 Emerging countries
Investor day, June 2008 • 59 A buoyant economy is driving advertising growth in emerging countries
Emerging middle class Booming advertising spend 2007, Percent of total population and (US$m) CAGR 2006-10 size of middle class (million people) Russia India China Taiwan Czech Rep. Uk r aine Percent Mexico Poland 25 000 +18%
32% 20 000 +26%
19% 20% 15 000 350
35 28 6% 10 000 +15% 80 +8% Brazil Russia India China 5 000 +10% +54% +22% -2% 0 2006 2007 2008* 2009* 2010*
Emerging countries: from 7.6% of Lagardère Active revenue in 2004 to 16.1% in 2007 CAGR 04-07 above 25% per year
* Estimates source: CIA World Factbook; Zenith Optimedia; L’Expansion; Le Monde Investor day, June 2008 • 60 We are strengthening our portfolio in emerging countries
Press main launches Russia and Ukraine China
2006 Psychologies 2006 Psychologies 2007 Domoi 2007 Quo 2007 Star Hit 2008 Femina 2007 Elle Deluxe 2008 Lads title
=> 16% of revenues from recent titles* => 18 % of revenues from recent titles*
Radio acquisitions and launches 2006 R. Czech Bonton Radio 3rd network (Prague + Moravia) 2006 Poland Pogoda Radio Additional networks and regional strategy
2006 Russia RBMH 2 radio stations in Moscow + St Petersburg
2007 Slovakia Okey Radio New country
2007 Romania acquisition of 30 frequencies Network extension + 3rd network (Vibe Fm)
2007 Poland Adpoint Additional networks and regional strategy
2007 Russia Kekc FM Launch
2008 S. Africa Acceleration media On line digital agency
2008 Russia 5th frequency in Moscow
Investor day, June 2008 • 61 Note: *2007, share of titles launched in the last 5 years Keep on extending our footprint in emerging countries
LA current press footprint: Action plan:
Enter radio and magazine markets in new geographies
Step up digital operations in key emerging countries
LA current radio footprint: Pursue license extension policy in riskiest Russia or smallest markets 24% France Seize opportunities for an international 52% roll-out of some of our French TV channels EE 24%
Investor day, June 2008 • 62 Agenda
Focusing on growth
3 Rollout of Digital strategy
Publishing approach A three-fold strategy Development plan
Investor day, June 2008 • 63 Significant audience growth achieved by
Publishing Lagardère Active over the last 18 months
Audience growth Strong audience growth 2007-08: Q4 06-Q1 08 - examples kUV Only 1 website >1m UV in Sept.06 3000 sept-06 April 08 2500 2462
2000 2002 1695 13 websites / networks >1m UV in April 08 1500 1167 1315 1032 – Elle.fr, Premiere Network, Infobebes.com, 1000 Europe1.fr, Sports.fr Network, Boursier.com, 419 573 500 282 lejdd.fr, Doctissimo.fr Network 256 282 0 – Elle.com, womansday.com, Carandriver.com, * r * r r f fr rk f .f ) / e. . o 1 om .ru h Roadandtrack.com (US)* le e c y nc l tw p r. a u EllE e o e d (la N r v 7 u ri wday.ruw /0 re E d 1 8 – Digital Spy.co.uk e Europe1. n 1 /0 a 03 emi ar Pr C
Premiere Network** Caranddriver.com*
*internal data US 03/08 **premiere.fr, mcm.net, tele7.fr network, public.fr unduplicated UV - (April 07-08) Investor day, June 2008 • 64 Source: Nielsen + internal data 03-04/08 Organic rollout: strong focus on 5 key Publishing priority segments France + International
January 07 June 07 January 08 June 08
Women re-launch launch re-launch re-launch launch LES COPINES launch re-launch re-launch re-launch re-launch ELLE France PARENTS ELLE UK FEMINA S’EN MAIL France CHARLIESCHOICE NL ELLE China ELLE Japan ELLE NL ELLE US France France
re-launch launch re-launch launch ELLE Italy WDAY RU ELLE Spain WDAY China
• roll-out PSYCHOLOGIES Health/well-being websites in UK, Italy and Spain
• launch launch DECORATION Shelter POINTCLICKHOME US PORTAL France 5 priority segments • rollout Automotive Automotive re-launch websites CAR AND DRIVER US in Italy and Spain
• launch Entertainment ENTERTAINMENT launch PREMIERE France launch TELE7 France launch SUGARSCAPE UK PORTAL France
News launch JDD France launch EUROPE 1 France Kids France- specific re-launch TIJI France launch GULLI France launch CANAL J France
Music rebranding launch exclusive service Europe2+Europe2TV on Orange.fr Investor day, June 2008 • 65 …bearing fruit in terms of audience
Publishing and revenue
Organic audience build-up* in France and in 3 main regional areas (Europe, US, Asia): +36% UV Q1 08 vs 07 Revenue growth even faster than audience growth +53% revenue* Q1 08 vs 07 Audience Revenue
Q1 2008 vs Q1 2007 Growth Q1 2008 vs Q1 2007 Growth Q1 2008 vs Q1 2007 Growth excluding acquisitions* excluding acquisitions* excluding acquisitions* Q1 2007 Q1 2007 Q1 2007 + 36% + 56% Q1 2008 Q1 2008 + 53% Q1 2008 30 28 500 446 14 11.4 25 400 12 21 10 20 286 300 7.5 m PV m UV
€m 8 15 200 6 10 4 100 5 2 0 0 0 UVs PVs Revenues
*excluding acquisitions (ID Régie, Jumpstart, Nextedia, Doctissimo, FFF, Jadeti, Newsweb), + VirginMega Investor day, June 2008 • 66 Source: Nielsen + internal data 03/08 (duplicated UVs) Partnerships as a way to accelerate the uptake
Publishing of innovative products: the MusiLine case
Product innovation, leveraging Lagardère Active experience in music programming
Music programming web service – Edited program – personalized – streaming – free
Exclusive partnership with Key figures (03/08) orange.fr in Phase 1 • 211k UV • 1m programs created • 30’ average listening • 30% of total traffic Standalone service in Phase 2 Orange Music channel and integration on all Lagardère Active websites
Investor day, June 2008 • 67 Complementary acquisitions in publishing…
Publishing
Acquisition Date Segment Key figures at acquisition
Dec. 06 Sports, news, 3m UVs in March 08 automotive €8.7m revenues and €1.8m EBIT in 2007 France Feb. 08 Women Market leader in segment with 7m UV in April 08 €11.5m revenues in 2007, ~40% op. margin
April 08 Entertainment 4th largest entertainment UK news website in UK 2.1m UV on the news section, 3.1m on forums
Investor day, June 2008 • 68 … to accelerate leadership build-up
Publishing
Immediate positive contribution France Strong competitive positions Group mUV Rank built in France and UK Apr. 08 Google 23.0 1 – no.1 media group with 11m UV in 04/08 Microsoft 21.5 2 France Telecom 17.0 3
France – no.1 in women’s websites with Doctissimo Illiad 14.2 4 Pages jaunes 12.6 5 – no.3 entertainment news website Q2 08 Yahoo 12.1 6
UK E-bay 11.8 7 – no.1 UK publisher with 5.4m UV in 04/08 Lagardère 11.0 8 Active – Jumpstart Network no.5 in automotive in 03/08 with 6.4m UV* Up from no. 28 in April 07 US
* Source: Comscore Investor day, June 2008 • 69 Strategy is threefold: publishing, sales and on-line marketing
Our key beliefs
1 Audience driven by content, brands & applications/services Digital Value captured by leaders publishing Scale effect for global players
2 Close sales & publisher integration Online advertising Expertise in sophisticated advertising models sales houses Scale & cross media expertise
3 Search + database marketing (~>50% of the market) Online marketing Multiplatform convergence under way agencies
Investor day, June 2008 • 70 Significant moves in Sales and Online Agencies
Organic growth Acquisitions: key figures (France + International) + 2 Additional inventory French ad sales leader in e-commerce and high-tech Online €1.1m gross profit in 2006 advertising Offer restructuring Aug. 07 sales houses New advertising formats US leading online advertising network in automotive Adserving technology April 07 $27.6m 2007 revenues, breakeven in 2006
3 Web agency France: Online Aug. 07 Full package of services to advertisers marketing Database marketing agencies South Africa: Feb. 08 40% growth in 2007, strong client portfolio Acquired by 50/50 JV with LARI
Investor day, June 2008 • 71 Acquisitions are bringing significant synergy opportunities
Acquisition Synergies created or to be created
1 Publishers News European rollout for automotive
Potential to monetize UK traffic Entertainment digital content database
Cross site traffic management in France European rollout
2 Ad sales rep Adserving technology Performance-based advertising format know-how
Critical size on automotive websites Leverage of Jumpstart product range
3 Online agency Leverage of online marketing competencies (search, SEO, SEM, traffic management,…)
Investor day, June 2008 • 72 The plan is to grow our brands’ territories… 1 Publishing The ELLE example
4 3 Additional 2 A tri-media business 1 An interactive brand extensions An extended brand Database brand marketing / CRM Community functionalities E-community and Enlarge Tools / applications (hair services/content brand finder, diet guide, recipe extensions positioning & finder,…) ELLE A TABLE … editorial Services (coaching, and ELLE ASTRO contents astrology,…) Content on mobile Shopping service 12 sections ELLE website on (from Beauty mobile (June 08) to Love&Sex) E-commerce veryElle section e-mag rich media
Investor day, June 2008 • 73 …and to roll them out in key segments 1 Publishing and geographies
5 key segments: women health/well-being shelter automotive entertainment
4 geographies: Europe, US, Russia, Asia
Rollout of key assets, leveraging digital acquisitions e. g. + 2008 in Europe + 2008/2009 in Europe
Additional potential target acquisitions: – Asia – US (women,…) – … Investor day, June 2008 • 74 The Digital Factory will impact our overall editorial approach and business model
Key benefits
Cross-media, seamlessly LA content & LA Digital LA distribution re-usable content production Factory channels
Press Magazines
TV Production LASER TV Aggregate Enrich Radio stations Search LASER Radio Competitive advantage: Structure & Push – Cost synergies Rights buying Web – Maximization of audiences Internet Mobile – Additional revenue streams
Investor day, June 2008 • 75 Conclusion for Digital
Key priority for Lagardère Active
2009 objectives – Financials 10% of total revenues overall breakeven – Positions Strong women’s positions secured in strategic territories (Europe, US, Asia) Presence in relevant women adjacencies (health, well-being,…) Leading positions in automotive and international rollout (by 2010) Strong presence in entertainment in France + start-up in additional European countries
Approach – Enlarged positioning to maximize audience and revenue – International roll-out
– Cost synergies – Cross media
Investor day, June 2008 • 76 Agenda
2012 vision for Lagardère Active
Investor day, June 2008 • 77 Active 2009 transformation under way
In the past 18 months, we have: – Focused our portfolio on strategic segments / media / geographies – Improved our profitability – Launched our digital transformation (organic & acquisitions)
A streamlined and more profitable business: – Target is >1% per annum margin improvement between 2006 and 2009
EBIT growth between 2006 and 2009 targeted, Development costs* by media despite 2004 – 2007, €m – A much tougher than expected advertising
environment 2004 2005 2006 2007 – Increased development costs (+40%) Magazine DTT Digital By 2009 Lagardère Active will be well -41 -41 -43 positioned to benefit from a potential -57 advertising upturn
*Losses of newly launched activities Investor day, June 2008 • 78 Continued transformation beyond Active 2009
Our key market assumptions:
Cautious advertising trend estimate in mature countries
Continuous shift of advertising towards digital and cross media
We will pursue and accelerate our transformation:
Cost streamlining action plan to be deepened in all countries and activities
Continued portfolio refocusing: invest in segments with the best long-term prospects and prune underperforming assets
Optimization of growth potential – Implement “Active 09 organic growth plan” for core traditional businesses – Pursue and accelerate development in emerging countries & digital
Investor day, June 2008 • 79 Our current model vs. our ambition for 2012
From a traditional media company to a fully integrated traditional / digital plurimedia company
Digital breakeven in 2009 Example - Automobile US: Mix print/ digital media (organic + acquisitions)
Digital revenues 2006 2012 Digital Ad Digital Ad 25% in key segments 8% Circ. and geographies < 1% > 20% 19% Digital Other 36% Digital Print Ad 11% 48% Circ. Digital contribution 2006 2012 Others 14% to EBIT in key segments Print Ad 2% 73% and geographies <0 > 40% 2006 2008
Women & shelter Motor News Health / Well-being Entertainment
US X
France X
W. Europe
Russia/E. Eur TBD TBD
Asia TBD
Current capabilities status: Already Strong Existing capabilities Not yet present Investor day, June 2008 • 80 A fully integrated plurimedia company serving advertisers by aggregating fragmented audiences
The global consumer
Radio Print Familiar daily Segmented programs Time for Mobility thought Push
Web TV platforms Family Personal programs Interactivity Home Instantaneous Push
Mobile Events Personal Friends & party Mobility Fleeting Pull/push
Our key beliefs and management values: Portfolio Focus, Digital, Time to market, Cost management
Investor day, June 2008 • 81 Where we want to be in 2012
Leadership position & diversified portfolio in France, Spain, Russia Magazine Portfolio focused on strategic segments (women, celeb, shelter, automotive) in other countries
Consolidated leadership position in France Radio Increased footprint in emerging countries
Leadership position in kids and music in France… TV … to be developed internationally depending on opportunities
Leadership in TV production Lagardère Development in rights management and events Entertainment
Leadership position in key segments and geographies Internet in publishing / ad sales / agency 10 to 20% of total revenues
Investor day, June 2008 • 82 Investor Day Paris - June 12, 2008
Investor day, June 2008 • 83