Books - a Longstanding Commitment to Profitable Growth - Investor Day June 01, 2006

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Books - a Longstanding Commitment to Profitable Growth - Investor Day June 01, 2006 INVESTOR DAY June 01, 2006 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 A long history of growth and acquisitions 1826 1980 1996 1998 2000 2001 20200303 20200404 20062006 HachetteHachetteiiss foundedfounded AcquisitiAcquisitionon ofof BritishBritish AcquisitiAcquisitionon ofof TimeTime byby LouisLouis HHaachettechette PublishiPublishingng Group,Group, WarnerWarner BoBookok GroupGroup,, OctopusOctopus 55thth largestlargest USUS TradeTrade (illustrated books) HachetteHachetteacquiacquiredred byby (illustrated books) publisherpublisher (Fiction,(Fiction, JJeean-Lucan-Luc LagardèrLagardèree Illustrated,Illustrated, JuveJuvenilnilee)) Reinforcement in the Educational •• AAcquisiticquisitionon ofof partsparts ofof Reinforcement in the Educational •• AAcquisiticquisitionon ofof HodderHodder sector : acquisition of the Editis'Editis' publishipublishingng assets:assets: sector : acquisition of the HeadlineHeadline,, 44thth largestlargest BritishBritish Hatier Publishing Group Hatier Publishing Group --AAnayanaya((SSppain)ain) pupublisher,blisher, whosewhose pprresenceesence --LLarousse,arousse, DuDunod,nod, inin EducatiEducatioon,n, FictionFiction andand AcquisitiAcquisitionon ofof BritishBritish publpublishiishingng ArmandArmand Colin,Colin, DallozDalloz JuvenileJuvenile publishingpublishing fitsfits wellwell grgroupsoups OrionOrionandand CassellCassell (France(France)) withwith HacHachheettette LivrLivre’se’slliisst.t. AcquisitiAcquisitionon ofof thethe BritishBritish WattsWatts PublishiPublishingng GroupGroup (chil(childdren’s)ren’s) andand acquisitiacquisitionon ofof WiedzaWiedzaii ZyZyciecie(Poland,(Poland, page 2 IllustratedIllustrated Books)..Books).. Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 Focused on the markets where paper will prevail Book publishing Consumer Professional Trade* Education* 67% 33% Literature / «K-12» Illustrated Reference & Fiction - Non Primary / Secondary books Partworks Fiction College/university Main countries France UK USA Spain Latin America Japan Role of paper-based content * Hachette Livre 2005 data, pro-forma with 12 months integration of Time Warner Book Group page 3 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 From local leadership to global presence Benchmark 2005 (Trade & Education) including the acquisition of Time Warner Book Group in € Millions Pearson 4,209 Mc Graw Hill Education 2,151 Hachette Livre 2,104 Hachette Livre & TWBG Random House 1,828 Scholastic* 1,673 # 3 worldwide # 1 Europe De Agostini* 1,592 # 1 France # 1 UK Reed Elsevier 1,315 # 1 Australia N-Zealand Holtzbrinck* 1,145 # 2 Spain # 5 USA HarperCollins* 1,068 Houghton Mifflin 1,032 0 1,000 2,000 3,000 4,000 5,000 Note : strong impact of the €/$ exchange rate on US groups. * Holtzbrinck (2003-2004), De Agostini (2002-2004), Scholastic & HarperCollins (Data for year ending 30.06.05) Data 2005, excluding professional sales and book clubs whenever possible page 4 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 A significant transformation : from French to multi-local leader Split in sales by country (1997-2005) 100% 12% 31% 50% 62% Other Other Other Other Spain 88% UK USA UK Spain 69% UK Spain 50% 50% France Spain France 38% France France 0% 1997 2001 2004* 2005** * Hachette Livre 2004 data, pro-forma with total integration of Hodder Headline ** Hachette Livre 2005 data, pro-forma with 12 months integration of Time Warner Book Group page 5 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 Healthy organic growth and acquisitions have fuelled expansion … Hachette Livre like-for-like sales analysis (1996-2005, € Millions) 2,104 11 Discontinued Business* + 3.9% p.a. organic + 11.8% p.a. external 1,327 2005 Perimeter 2,093 766 172*** 224 542 1996 Organic Growth External Growth 2005** * Direct Sales of Encyclopaedias ("Courtage") ** Hachette Livre 2005 data, pro-forma with 12 months l integration of Time Warner Book Group *** Discontinued sales page 6 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 … and Hachette Livre has more than doubled its size in three years Æ Hachette Livre’s targets - formulated in 2003 - have been met: To be at the core of the consolidation of the French and Spanish markets (acquisition of Editis) To boost the international development of partworks To accelerate Hachette Livre’s external growth in Europe, in priority in the UK and Spain, as well as in education, within reasonable financial limits Imprints Turnover (€ Millions) + €104 M + €2,104 M + €460 M + €235 M + €346 M + €959 M Hachette Editis Hodder Time Warner Organic Hachette Livre 2003 Headline Book Group Growth* Livre 2005 ** * Organic growth of the Hachette Livre 2003 perimeter, excluding any organic growth from acquisitions (included in the acquisitions perimeter) ** Hachette Livre 2005 data, pro-forma with 12 months integration of Time Warner Book Group page 7 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 With growth also came a substantial profitability improvement Sales and operating margin (2000-2005, € Millions, and % of sales) 1,644 Sales, French GAAP standards Sales, IFRS standards 1,432 1,420 Operating margin 950 959 830 846 12.1% 11.1% 11.6% 11.5% 9.6% 7.7% 7.0% 2000 2001 2002 2003 2004 2005 Octopus Editis + Hodder Hodder Headline Acquisitions + Bruño Headline (3 months) (12 months) page 8 Books - A longstanding commitment to profitable growth - Investor Day June 01, 2006 Better performance than top industry player averages Operating Profit / Sales* (%, 2004) 12.6% 12.1% 8.8% 6.9% Market average Market average Trade Market with Hachette Hachette Livre Education Livre mix * Benchmark of the 25 leading consumer publishers worldwide (for which data were available) page 9 Books - Solid growth prospects - Investor Day June 01, 2006 The book market continues to offer solid growth prospects Æ The market in which Hachette Livre operates is growing In emerging markets, books embody the access to knowledge (management books, testimonials, self-help books) and education In mature countries, marketing and segmentation create new avenues of growth Books complement other media Segmentation and range extensions leverage our brands and bestsellers New segments have emerged: mangas, religious books, audio-books Æ Book publishing has fared well through the turmoil created by new technologies. In our core markets, Book publishing will benefit - not suffer - from new technologies Books have successively weathered the press, radio, cinema, and TV "storms" Books are today a fast moving consumer good, perfectly adapted to modern retail Digital media consumption does not affect time spent reading books Digital formats have not proven to add value. However, Book publishing will increasingly rely on the Internet Internet is becoming a new media, which we will use to support our brands It will help us provide complementary tools for teachers and students in conjunction with textbooks It is already an additional retail channel, making books more ubiquitous than ever page 10 Books - Solid growth prospects - Investor Day June 01, 2006 The global book market is growing, even in industrialized countries Market size 2004 et CAGR 2000-2004 (publishers net sales) Developed markets Emerging markets 10.0% 10.0% 10.0% 9.0% 8.6% 8.0% 8.0% 6.0% 6.0% CAGR 6.6% 4.0% 4.0% 3.3% 2.8% 4.0% 2.3% CAGR 2.8% 2.0% 2.0% 1.1% 0.0% 0.0% USA UK France Spain China Latin Eastern India America Europe Market Size 23.2 bn 5.3 bn 2.6 bn 1.9 bn 3.4 bn* ~2bn ~2bn* 1.0bn* 2004 in € Books have maintained their consumer appeal Books provide access to knowledge and keep attracting new readers thanks to the development of children fiction, e.g. Harry Potter * Eastern Europe, China and India: 2003 data page 11 Books - Solid growth prospects - Investor Day June 01, 2006 Marketing and segmentation have fuelled market growth Marabout turnover vs. Market turnover 50 CAGR = 21.4% 45 (vs. market at 4.0%) 40 38.2 35 32.6 € 30 28.5 25.4 15 25 18.8 20 € 14.5 5 15 2 10 5 € 10 0 2000 2001 2002 2003 2004 2005 € 8 Marabout turnover (in M€) € 2 € 7 page 12 Books - Solid growth prospects - Investor Day June 01, 2006 New segments have emerged CAGR by Segment US UK France 44.6% 30.6% 23.0% 16.3% 8.1% 8.6% Book Market 4.0% CAGR 2.8% 2.3% 2000-2004 Religious Audio-Books Religious Humour Partworks Mangas 2000-2005 2004-2005 2003-2005 2003-2005 2003-2004 2003-2004 page 13 Books - Solid growth prospects - Investor Day June 01, 2006 Books have their share of innovation breakthroughs Hyper-segmentation (e.g. collection, price architecture) 44 000 (2000’s) Segmentation (e.g. tourism, children, self 25 000 help) (1990’s) Paperback 15 000 INTERNET (1950’s) Illustrated TELE- • New media / books 13 000 VISION (1920’s) channel rather than new Hardcover RADIO competitor • Movies and radio programs # of new books 11 000 MOVIES allow to develop new releases / year (1900’s) segments and leverage PHOTO recognition of celebrities / AND characters • A new life for best-sellers IMAGE (and back-list sales) • New formats (paperback) new channels (clubs, mass retail) ; PRESS mass market books mirror the • Development of development of mass media illustrated books: • Books are often children, women pre-published as interest, science series in page 14 newspapers Books - Solid growth prospects - Investor Day June 01, 2006 Internet reach and book sales have grown in parallel
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