Hachette Livre (version anglaise) (pdf - 390 Ko)

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Feb 2, 2004 ... Distinctive features of Hachette Livre's business portfolio. ➔ Hachette Livre : our ..... Well-known brands : Bled, Bescherelle, Littré, Gaffiot.
Hachette Livre

INVESTOR DAY PARIS FEBRUARY 2, 2004

Table of contents Ô Hachette Livre profile n n n

Competitive position on the world book market Outline description of our relevant markets Distinctive features of Hachette Livre’s business portfolio

Ô Hachette Livre : our international span of activities n n n n

The French speaking world as our homebase A major inroad in the worlwide international markets : partworks A prominent and growing presence on the English speaking market The attainment of a leading position on Spanish speaking markets

Ô Key features of competitive and financial performance and outlook n n n

Historical financial performance Competitive position : summary Perspectives of profit improvement

Ô Hachette Livre : development perspectives n 2

n

Up-to-date portfolio diagnosis Maintaining the momentum on the strategic road

Hachette Livre profile Competitive position on the world book market Hodder Headline

189

Cornelsen

190

The sixth world Consumer book publisher

Westermann

207

Klett-Gruppe

217

Langenscheidt *

234 260

Blackwell Publishing

262

Taylor & Francis

300

Wolters Kluwer Mondadori

331

Santillana

347

Proforma 2002 sales in € million of the first 30 players in Consumer publishing (Trade / Education including College)

423

Time Warner Book Group

498

Bonnier Books

565

Editis

577

John Wiley

621

RCS *

647

O.U.P.

725

Simon & Schuster * Reader's Digest **

900

Planeta *

902 1045

Holtzbrinck De Agostini

1185

Houghton Mifflin

1196 1228

Harper Collins

1300

Thomson Learning

1310

Hachette Livre Reed (Harcourt) Education

1579 2074

Scholastic

2494

McGraw Hill

4153

Bertelsmann

4397

Pearson 0 3

500

1000

1500

2000

2500

3000

Sources : accounts of the 30 main worldwide players, proforma as of end of 2003 ; Hachette Livre : proforma after integration of Editis assets Turnover 2002 or 2003 (depending on fiscal year end) except : * 2001 data ** 2000 data

3500

4000

4500

Hachette Livre profile Outline description of our relevant markets

Book publishing : a highly segmented market Book publishing

Markets relevant for Hachette Livre

Consumer

Trade 63%

Literature / Fiction - Non Fiction

4

Illustrated books

Professional

Education 24%

Reference & Partworks

Sources : Germany (Börsenblatt 10/07/03), France (SNE 2002), Spain (FGEE 2002), USA (Association of American Publishers), UK (Book Facts 2001).

« K-12 » Primary / Secondary

Prof./ Scient. / Techn. 13%

College / University

Hachette Livre profile Outline description of our relevant markets

Developed markets have recently proven to be sources of growth (USA, UK, France etc.)

In developed markets growth is sourced from : Ô cycles in governmental reforms (education) n

rebound expected in 2004 in Spain, in 2005 in France, in 2005-06 in the US / UK

Ô changes in the object « book » depending on its use n

Partworks : +40% in France in 2002

Ô changes in topics covered, depending on sociological trends n

Mind Body Spirit : +10,2% in 2002 in the UK

n

Children’s paperbacks : +8% in 2002 in France

Ô lifestyle changes : 35 hours etc (how-to books) Ô technological developments related to editorial contents : digital contents and services (education) 5 Sources : Booksales Yearbook 2003, panel IPSOS, www.publishers.org, internal data

Hachette Livre profile Outline description of our relevant markets

Emerging markets : significant reservoirs for growth Ô China, Russia, Central Europe, Latin America...

Population Population :: 144 144 m m inhab. inhab.

Population Population :: 1289 1289 m m inhab. inhab.

Market Market size size :: €700 €700 m m Production : 72.000 titles Production : 72.000 titles

Market Market size size :: €6,4 €6,4 bn bn

(+59% (+59% 1997-2002) 1997-2002)

Total Total print print run run :: 591 591 m m copies copies % of title production 31%

40%

Scient. Books

21%

2%

Literature

Children ’s

16%

6%

(+8,5% (+8,5%2001-02) 2001-02)

Production Production :: 154.000 154.000 titles titles Total print run : 6,31 bn copies Total print run : 6,31 bn copies

% of print run

Education

23%

Latin Latin America America

Title production : breakdown

Languages & Linguistics 6%

Literature Art books Children's 10% 8% Books 6% Other 2%

Social & human Sciences 22%

12%

6 Sources : LH 10.10.03, www.ined.fr, LH 21.06.02, The Bookseller 12.10.01

STM 23% School Textbooks 23%

Total

China China

Brazil

Russia Russia

Argentina

n

The book as the basic educational tool The book as the first entertainment and cultural medium

Mexico

n

Population (in m inhab.)

105

37

176

318

Schoolbooks

40%

21%

45%

37%

College / Acad.

20%

10%

19%

17%

Trade

28%

50%

20%

30%

ELT

8%

7%

9%

8%

Other

4%

12%

7%

8%

TOTAL

500

520

940

1960

in value, in US$ m

Hachette Livre profile Outline description of our relevant markets

Zoom on the French book market Ô Behind the apparent stability (CAGR 1998-2002 : +2,6%) n n

Market value : € 2,4 bn, 374 million units in 2002 far ahead of the music market : € 1,3 bn, 171 million units

Ô the different market segments are highly volatile n n

Strong growth disparities between the segments. Within each segment, fluctuating annual growth rate

 Existing growth potential Education (including Dictionaries)

CAGR 1998-02 9,9% 10%

Dictionaries

7,5% 5,4% 5,0%

5%

4,9%

3,8%

2,3% 2,6%

Encyclopaedias (door to door)

0%

-1,1%

Partworks

-5%

Practical / Travel guides (excl. maps and atlases)

-10%

Other (incl. cartoons) Total market

-15% -20%

-20,7%

7 Sources : SNE (publishers net sales), SNEP (publishers sales)

Children’s books Literature Art books

Hachette Livre profile Outline description of our relevant markets

The British book market : regular and strong growth Ô Annual growth 1998-2002 of +3.1% in domestic consumer market to £2 bn n

Difficult time for the educational publishers in 2003-04

Ô Export sales represent approx. 35% of global book sales, due to the general practice of co-edition (and despite an unfavourable exchange rate) and to the size of English speaking markets. n n

Sale of international rights in order to amortise creation and development costs. This model has guaranteed the success of the most prestigious Englishlanguage reference co-edition publishers : Dorling Kindersley, Octopus, Phaidon, Thames & Hudson. Breakdown of Publishers turnover (2002)

Domestic consumer market in £m (retail + direct sales)

2250

1970

2000

1980

Export 35%

1870 1750

1760

1998

1999

1750

1500

1250 8

2000

2001

2002

Source: Book Sales Yearbook 2003 ; The Bookseller, 28 March 2003 « Book Exports stay Buoyant »

Domestic 65%

Hachette Livre profile Outline description of our relevant markets

The Spanish book market : moderate growth underpinned by Education and Export Domestic book market (in value) Public price 3,000

In € million

2,500

2,362

2,431

2,529

2,607

2,675

2,000 1,500 1,000 500 0 1998

1999

2000

Other publishing segments Education market

9 Source: FGEE, FEDECALI.

2001

2002

Ô The growth engine in the overall Spanish book market is the education segment, posting an annual growth (1998-02) of +7,4%. Ô The 10% annual growth rate (1995-02) for export sales reflects the spread of the Spanish language.

Hachette Livre profile Distinctive features of Hachette Livre’s business portfolio

The winning business model of Hachette Livre Ô Hachette Livre is one of the few multi-lingual / multi-specialist publishers in the world « Consumer » (Trade and Education) market, successfully smoothing the economic cycles of its different editorial segments, through a wide portfolio approach. Ô Its editorial diversity, as well as its ability to manage it efficiently, represents : the best guarantee for stability, for the Group and its shareholders n the best asset to grow more than market average by targeting dynamic segments (children’s books, paperbacks, partworks, illustrated books) n This requires the company’s ability to simultaneously manage multiple time cycles; n This competitive advantage is an integral part of the company’s structure as a decentralised federation of publishers. n

Ô The know-how required to manage a complex system balancing 4 segments (education, literature, illustrated, partworks) and high-performing distribution facilities have proven to be key to the Group’s success in France and the UK ; this business model can be replicated tomorrow in Spain and, beyond, on other language zones. 10

Hachette Livre profile Distinctive features of Hachette Livre’s business portfolio

Strategic position :

diversified presence

U.K.

Ireland

Hachette Partworks Orion

Quebec

Netherlands

Germany

Belgium

Octopus

Poland

France

Larousse

Mexico

Spain

Mexique

Venezuela Columbia

Dunod Dalloz A. Colin

Portugal

Hatier

Switzerland

Austria

Hachette Hachette Collections

Salvat

LATIN AMERIcA

Italy

Anaya Bruno

Brazil

Japan Chili

Morocco Algeria

Argentina

Partworks Trade Education Reference Spec. / Prof.

Malaisia

Senegal Ivory Coast

Togo / Benin

Cameroun Gabon

Australia Madagascar

11

South Africa

New Zealand

Hachette Livre profile Distinctive features of Hachette Livre’s business portfolio

Strong position resulting from the strategy implemented since 1992 Ô Continued growth of the publishing segments in France, then abroad, have offset the decline in door-to-door sales. 900

Door-to-door

Publishing (incl. Partworks)

Total 822

714

Turnover en € m

830

768

800 700

950

(Before integration of Editis assets)

669

662

659

699

638

846

200

Publishing 189

180

140

600

Total 142

500

120 100

400 80 300

60

200

Door-to-door 14

100 0

40 20 0

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Recovery & strategic repositioning Growth and internationalisation strategy 12

160

Contribution of international sales to turnover :

21%

21%

25%

32%

Source: internal data

35%

35%

42%

Index on basis 100 in 1992

Turnover in € m

Hachette Livre : our international span of activities The French speaking world as our homebase

Literature : Fiction / Non-fiction

Literature

Ô A fully integrated business model addressing the whole value chain Autonomy of publishers promoting internal competition and fostering editorial creativity n Qualitative author sourcing, leading to the control of rights portfolio

Others

33% Flammarion

n

l

n

also supplying paperback publishing and multiple media licensing opportunities

Maximum retention of value through self distribution and paperback

Ô Longstanding prestigious, award-winning and best-selling publishing houses n

Powerful brands with strong mutual emulation l

n

Fayard, Grasset, Stock, Calmann-Lévy, Livre de Poche

15% Hachette Livre

19%

Source: panel Sofres

Paperbacks

l

Orion-J.C. Lattès (Rankin, Binchy), Fayard (Rolling Stones, worldwide rights with Orion).

13 Source: panel IPSOS in value excl. Cartoons

Others

Flammarion

16% Gallimard

23% Editis

management of digital rights, production in digital format

International cross-fertilisation UK - France

Editis

2001

13%

l

Albin Michel

France Loisirs

Novels, essays, biographies, history, human sciences, documents…

Impact of digitalisation

Gallimard

12%

21%

Ô Recent trends

n

10%

Covering a large range of French and international literature titles l

n

4% 7%

27% Hachette Livre

2002 Source: panel IPSOS

Hachette Livre : our international span of activities The French speaking world as our homebase

Education : the company’s historical core business Ô Hachette Livre is the #1 educational publisher in France n

Two distinct entities at Hachette : Hachette Education (1826) and Groupe Alexandre Hatier (1880) l l

n

Imprints Hachette, Hatier, Didier, Foucher (vocational education) Well-known brands : Bled, Bescherelle, Littré, Gaffiot...

Key positions on the supplemental market (Passeport, Annabac...)

Education 16%

37%

Others

Editis

Ô A cyclical market subject to governmental policies 2002-04 : entry into a challenging period for French educational publishers related to the slower-paced curriculum reforms and their reduced impact n Rebound expected as from 2005 n

Ô Education lies in the heart of future developments Education is a core Governmental policy issue and parental concern and, as such, it is a high potential market long term n Multiple public initiatives currently promote the integration of new technologies in the classroom n

14

Ô Despite the difficult educational environment, Hachette Livre has been able to gain market share and improve its profitability.

47%

Hachette Livre

2002 Source: internal data

Hachette Livre : our international span of activities The French speaking world as our homebase

Illustrated books Ô Cover the whole range of illustrated books from « useful » to « entertaining » practical guides and how-to books, travel guides, art books, cartoons n Hachette Pratique, Marabout, Hachette Tourisme, Le Routard, Le Chêne, Hazan n Brands : Le Guide Bleu, Le Guide Voir, Le Guide Bleu Evasion,... n

Ô Children’s books :

Well-known series based on Hachette’s rich historical back-list and key characters (Astérix, Franklin, Babar…), complemented by children’s reference works and non fiction n Livre de Poche Jeunesse, Bibliothèques Rose & Verte n Disney-Hachette Edition : joint-venture with Disney n

Ô Based on its strengths, in 2002 Hachette Livre displays growth rates far above market average n

Well-known brands, high profitability, access to the UK publishers’ back-list Practical and Travel guides

Market average

+5%

+4,5% Practical guides

Hachette Livre

Children’s Books

Travel guides

Marabout : +38% H. Pratique : +22%

Total : +30%

Incl. Paperbacks : +8%

+20% 15 Source: Livres Hebdo 21.03.03, panel IPSOS, internal data

+3%

H. Jeunesse : +21%

H. Tourisme : +10%

#1

Art Books

#1

incl. Paperbacks H. Jeunesse Roman : +42%

#1

Le Chêne: +20% Hazan : +9%

Total : +18%

#2

Hachette Livre : our international span of activities The French speaking world as our homebase

Through the integration of Editis assets, Hachette Livre will get access to new major segments in 2004 Ô Dictionaries / Reference : Larousse n n n n

The New Dictionary of the French Language was first published in 1856 Today Larousse is #1 in France on the monolingual as well as bilingual dictionaries market 80% of French homes own a copy of Le Petit Larousse The Larousse brand enjoys an international reputation More than 50% of sales made in Spanish language l A household brand across Latin America l Current development projects in Poland, Italy, Brazil... l

Ô Higher Education / Specialist publishing : Dalloz, Dunod, Armand Colin n n n n 16

Well positioned on the French market Leading brands on each market segment that they cover High profitability Controlled implementation of digitalisation and approach of professional markets

Hachette Livre : our international span of activities The French speaking world as our homebase

Salesforce Direct sales (mail order incl. clubs) 19%

Door to door Internet Other 3% 2%

10%

2nd level bookshops 9%

Supermarkets 16%

Specialised chains 23%

1st level bookshops 18%

Ô In an environment where supermarkets and chains play an increasing role, French independent booksellers still remain the 2nd largest sales channel in bookselling. Ô Commercial B2B website « hachettediffusion.fr » is now fully operational n

High capillarity l

n

Increased autonomy of independent booksellers l

n n 17 Source: retailer panels

access to POS not visited by the salesforce

online ordering

5,200 clients subscribing (35% of clients) The ordering rate, connection number and turnover have doubled in 2003

Hachette Livre : our international span of activities The French speaking world as our homebase

Distribution Ô Completion of an organisational scheme by flow : SERVICE PROVIDER

OUTSOURCING COMPANY

MAUREPAS CENTRAL WAREHOUSE

Subscription flows Reorders supermarkets

2 REGIONAL WAREHOUSES

• Central warehousing • Reorders

10 CASH & CARRY CENTERS

RETURN CENTER

Ô Hachette Livre owns distribution platforms in the 3 key French speaking countries Belgium, Switzerland and Canada. Ô In 2003 Hachette Livre’s distribution processed over 200 million units. 18

Ô Regular and complementary third party publishers contribute for approx. one third of turnover.

Hachette Livre : our international span of activities The French speaking world as our homebase

Partworks : one of the key growth drivers in the last years Ô Business model based on customer retention and international cloning : Marketing-driven selection of collectible topics, heavy upfront launching investment to generate long term customer loyalty n Careful cost management to maximise margin on follow-up issues n Ability to replicate proven success on successive foreign markets n

Ô Rapid growth of the partworks business #2 on the French market with 20% market share n Subsidiaries : Hachette Collections, Hachette Partworks & Hachette Fascicoli, Hachette Collections Japan, Hachette Kolecja n Continued internationalisation (Spain, Latin America, UK, Italy, Japan) through organic growth or alliances n Key success factors : n

l l

ability to create new products supporting internationalisation / customisation marketing know-how

Ô Huge growth reservoirs still available to build on Hachette Livre is #3 worldwide n High business potentials in Italy (#1 market), the UK, Japan n 19

Partworks (France) 5% 2% 11% 11% 12% 13%

Others Marshall Cavendish Eaglemoss Altaya Del Prado

21% Fabbri-Orbi (RCS)

26%

2002

Hachette Livre Atlas (De Agostini)

Source: internal data

Hachette Livre : our international span of activities A major inroad in the worldwide international markets : partworks

Ireland

U.K.

Internationalisation in partworks (1996-2003) Netherlands

Quebec Belgium

Germany Poland

Switzerland

Mexico

Austria

Mexique

France LATIN AMERICA

Portugal

Italy Spain

Brazil

Japan

Malaisia ?

Australia

20

Spanish-speaking French-speaking & others English-speaking Exploratory attempt

South Africa

New Zealand

Hachette Livre : our international span of activities A prominent and growing presence on the English speaking market

Hachette Livre is the #5 Trade publisher in the UK

behind Bertelsmann (Random House), Pearson (Penguin / DK), News Corp. (HarperCollins) and WHSmith (Hodder Headline)

Ô Hachette Livre achieved this position n

partly through Orion’s organic growth l

n

uninterrupted since 1998

partly through Octopus acquisition in 2001 leader in adult illustrated books and practical guides l customisation of approach depending on local markets features : co-edition, direct sale, packaging, etc. l > 50% of turnover outside the UK, mainly in co-edition l

Ô With 3 autonomous publishing houses and a performing distribution center, Hachette Livre can now apply its business model to its UK infrastructure. 21

% of retail market share 6.0%

6.1% 1.0 % 0.1 % 5.0 %

4.0%

3.3% 2.0%

0.0%

Octopus Watts Orion

0.1 % 3.2 %

1998

2002

Source: Book Sales Yearbook 2003, p. 39, « General Retail Market 2002 : top 20 publishers »

Hachette Livre : our international span of activities The attainment of a leading position on Spanish speaking markets

Spain : with Anaya, Hachette Livre becomes the #1 educational publisher

19% 20%

20%

19%

o uñ Br

22%

0%

3% o uñ r B

Before

Santa Maria

5%

Anaya

10%

Santillana

15%

Santa Maria

Based on its existing brands : Salvat, Bruño, Edelsa

23%

22%

Anaya

n

25%

Santillana

Ô Anaya’s integration into Hachette Livre is an ideal fit to accelerate the Group’s transformation into a major Trade and Education publisher in the Spanish speaking markets.

Spanish education market (2002) Public price, €625 m

After

Sources : FGEE, Fedecali, company web sites, press articles

22

Key features of competitive and financial performance and outlook Historical financial performance

PROFITABILITY

Op. profit

GROWTH

Op. margin

Turnover (in M €)

12,0% 120

9,6%

10,0%

91

8,0%

100

7,7% 7,0%

In € m

80

5,8%

6,0%

6,3%

60

6,0%

65

40

41

46

950

52

699

768

822

830

846

2000

2001

58 4,0%

20

2,0%

0

0,0% 1997

23 Source : internal data

1998

1999

2000

2001

2002

1997

1998

1999

2002

Key features of competitive and financial performance and outlook Historical financial performance

CASH FLOW

ECONOMIC VALUE ADDED

Free cash flow * (in M €)

in M€

67

50,0

40,8 40,0

53

30,0

42

39

37

23,6

38 20,0

14,2

11,5

7,1

10,0

2,3 0,0 1997

1998

1999

2000

2001

2002

1 997

Turnover (in M €)

1 998

1 999

2 000

2 001

Turnover (in M €) 950

699

24

768

822

830

* excluding dividends paid to Lagardère Groupe Source : internal data

2 002

950

846 699

768

822

830

846

Key features of competitive and financial performance and outlook Competitive position : summary

EDUCATION

UK

SPANISH SPEAKING MARKETS

FRENCH SPEAKING MARKETS

25

1 2 3

1 2 3

1 2 3

Reed Wolters Kluwer Pearson

Santillana Hachette Livre Santa Maria

Hachette Livre Editis Belin

TRADE

1 2 3 4 5 1 2 3

1 2 3

PARTWORKS (International)

Bertelsmann Pearson Harpers Collins WH Smith Hachette Livre

Planeta Random House Mondadori Santillana

Hachette Livre Editis Gallimard

1 2 3

DeAgostini RCS Libri (Fabbri) Hachette Livre

Key features of competitive and financial performance and outlook Competitive position : summary

SWOT analysis STRENGTHS Diversified presence on the Consumer market (multi-lingual / multi-specialist) and agile segment management n Fully integrated, replicable business model n Formidable brand collection with high international appeal, under the unique Hachette flagship n Qualitative portfolio of famous and high-profile authors, with authoritative minds n Fact-driven marketing approach n State-of-the-art distribution facilities with in-depth bookselling market reach and strong appeal to third party publishers n Demonstrated long term commitment of Lagardère Group to Book Publishing n

WEAKNESSES Headroom for extra growth on the French speaking markets appears limited. n

Perception of Hachette Livre’s position and role in its environment is often skewed by a « schizophrenic » approach (too small though too large) n

Absence of English language educational activity (ELT) to spearhead Hachette Livre’s international growth in developing countries n

Pace and completion of the Hachette Livre development is very dependant on (sometimes unpredictable) acquisition opportunities. n

OPPORTUNITIES n

Short term : integration of Editis assets

Completion of the Hachette Livre fully integrated business model in major presence countries n

n

International cross-fertilisation in Literature and Illustrated books

n

n

n

Organic growth on the partworks market

n

Additional growth potential in emerging markets

Technological developments in Education (digital contents and services) n

26

THREATS Unstability of the French home market since the VUP sale may have turned a sanctuary into an international battlefield ? (still to be proven) Worldwide concentration in Book publishing may raise the stakes for scale-driven investments and / or future acquisitions Transfering from a challenger to a leader position may involve some cultural adjustments, to ensure that the impetus is maintained. n

Key features of competitive and financial performance and outlook Perspectives of profit improvement

Although excellent, profitability can still outperform its track record

Ô The Group anticipates benefits from : n n n n

the synergetic effect of Editis assets integration the expected rebound of educational markets in France and Spain within 2 to 5 years the additional leverage on both organic growth and margins due to the completion of the Group’s deployment in France, Spain and the UK the external growth, still at the core of the company’s growth strategy and that will be primarily seeked on its existing markets.

Ô This should enable Hachette Livre to keep growing its profitability within the next 3-4 years.

27

Hachette Livre : development perspectives Up-to-date portfolio diagnosis

Among the largest world publishers, Hachette Livre is one of the best positioned to take its development further Ô Hachette Livre demonstrated its ability to optimise the management of its brand portfolio, including in periods of slow market growth. Ô Hachette Livre fundamentals kept improving in 2002-03 and now place the Group in the best position to face the changes in its environment, even when fast or unexpected : n n

new structure of the French market, less stable since the VUP sale emerging opportunities for international growth within 3 to 5 years.

Ô Beyond current success, Hachette Livre intends to foster its offensive development strategy on key non French speaking markets. Ô In the course of this process, the single move of Editis assets integration enables Hachette Livre to climb to the #6 worldwide position on the Consumer market. 28

Hachette Livre : development perspectives Maintaining the momentum on the strategic road

Ô Beyond this first step, the strategy proposed by Hachette Livre for 20042008 is articulated around the following directions : n n n n n n

29

To expand in education on the English speaking market To extend the illustrated book publishers network around Octopus and in Spain, without excluding other language markets... To accelerate the partworks international development To invest actively in digital education To continue the international growth in worldwide Trade publishing To organise our involvement and presence in selected emerging markets with high growth potential