PRESENTATION TO INVESTORS 1H08

PRESENTATION TO
INVESTORS 1H08
Agenda
Overview and Consolidated Performance
Livraria Saraiva
Editora Saraiva
2
Corporate Governance
Level 2 of Bovespa’s Corporate Governance
First company in Brazil to guarantee tag along
rights in its Bylaws - March 2000
Š 90% tag along for preferred shareholders
Bylaws establish that the company will not retain
excess cash – mandatory distribution of financial
availability* that exceeds 25% of its total assets for
four consecutive quarters
99.97%
GVA®: Shareholder Value Management
Market Maker
Preferred
Shares
18,974K
66%
*Financial
Common
Shares
9,622K
34%
availability: cash and banks + financial investments - short and long term loans
3
Our Businesses
The Company focuses on book publishing and retailing, in both physical and on-line channels.
Saraiva offers a complete catalogue of Elementary and High school Textbooks,
Readers, Law books, Business Administration, Economics, Business Literature
and Accounting books
Market leader in the Law segment – approximately 40% market share
4th largest publisher of elementary and high school Textbooks – around 15% market
share
National distribution: 12 branches
Ético Teaching System
Largest bookstore chain in Brazil in terms of revenues
38 stores: 21 Super Stores and 17 regular stores, (July/2008)
Pioneer in the Super Store concept in Brazil
Category Killer: books, CDs, DVDs, stationery, periodicals, information technology etc.
Siciliano: 50 Stores + 11 Franchisees
One of the Brazilian e-commerce pioneers - 1998
One of the largest Brazilian on-line book retailers
Approximately 1.6 million active clients as of June 2008
Operations are integrated with the physical stores and carry broader product mix
4
Growing Operations
CAGR 14.6% p.a (1998-2007)
CAGR 15.1% p.a (2003-2007)
Consolidated Gross Revenue (R$ MM)
CAGR 24.1% p.a (2005-2007)
+42.2%
+32.7%
779
587
292
235
500
119
351
130
352
Primary/Secondary
Offering
Editora*
Siciliano
336
487
2006
45
Livraria Saraiva
221
2007
Pigmento Acquisition
(“Teaching System”)
1H07
1H08
Siciliano S.A. Acquisition
* Publishing Revenue: excludes sales to Saraiva Bookstore
5
Mix Gross Revenues – EBITDA (Consolidated)
Gross Revenues
R$ 779.4 MM (1)
Retail
Publishing
63%
37%
R$ 487.4
R$ 309.3
2007
(1)
R$ 499.7 MM
Retail (2)
76%
R$ 380.7
Publishing
24%
R$ 119.0
(1)
Excludes Inter Company Sales
(2)
Includes Siciliano S.A. since March 6, 2008
1H08
EBITDA
R$ 113.3 MM
Publishing
Retail
64%
36%
R$ 73.2
R$ 40.5
R$ 60.8 MM
Publishing
Retail (2)
61%
39%
R$ 37.0
R$ 23.8
6
Highlights Consolidated (1)
(1) Excludes Inter Company Sales and includes Siciliano S.A.
(2) Includes Siciliano S.A. since March 6, 2008.
7
Consolidated Performance
Net Cash Position¹ (R$ MM)
79.8
76.7
10.5
(40.0)
(38.4)
1H04
(1)
1H05
1H06
1H07
1H08
Net Cash Position = Cash & Equivalent – Loans and financing
Capital Raise April-2006 = R$ 63.6 MM
8
Agenda
Overview and Consolidated Performance
Livraria Saraiva
Editora Saraiva
9
The Book Retail Market
Very fragmented market.
More than 2,600 bookstores, of which 70% are located in the South and Southeast regions.
Revenue in markets which Saraiva operates – R$ 35.1 Billion - 2006
Net Revenues 2007 – In R$ MM
Book Market
595
153
25.3
4.0
442
442
0.9
153
2.8
2.1
Saraiva
Siciliano
Saraiva +
Siciliano
138
132
La Selva
Cultura
(1)
(2)
(1)
2006
Sources: CBL (Câmara Brasileira do livro), Saraiva, Serasa
Revista Papel e Arte and Nielsen
10
Bookstore: Organic Growth
Livraria Saraiva and Livraria Siciliano
Sales Area (Thousand m²) and Number of Stores
Guidance 2009-2010: 11 New Stores
+ 6 thousand m2 sales area
+14.4%
40.3 m
2
40.4 m
2
41.8 m
52
50
48
36
36
38
40
Dec 30
- 07
mar/08
2
47.8 m2
48
24.3 m2
51
Jul- 08* Dec-08** Dec-10**
Number of Own Stores Saraiva
Number of Own Stores Siciliano
(*)
Jul/08 – Opening of 1 store in São Paulo (SP).
(**)
Expansion project estimate
11
Saraiva.com – Operating Synergies with Bricks and Mortar
Scale of operations
Brand recognition
Expertise in logistics
and distribution
Geographic coverage
Service rendering
12
Bookstore Strategy
Our growth strategy is based on the evolution of the Mega Store and Regular
Store concepts, on the diversification and adaptation of the product mix and on
strategic acquisitions.
Growth and consolidation:
ƒ
Expansion of the physical store chain
ƒ
Strategic acquisitions
ƒ
Store refurbishing
New categories of products
Efficiency in working capital management
Brand enhancing
Relationship with costumers: Saraiva Plus loyalty Card / more than 2 million
members as of June 2008
13
Evolution of the Main Indicators - Livraria Saraiva
Book Category Growth: up 37% in 1H08
27.9%
26.6%
15.6%
1H07
56.5%
Books
Electronics / IT
Others
22.5%
1H08
50.9%
14
Livraria Saraiva – Highlights
EBTIDA X EBTIDA Margin (%)
9.2%
6.3%
6.0%
3.7%
40.5
2.3%
7.8
5.1
2003
2004
16.0
19.0
2005
2006
2007
15
Livraria Saraiva Consolidated * – Highlights
(*)
(1)
Includes Siciliano S.A. since March 6, 2008
Accounts Receivable + Inventories - Accounts Payable
16
Saraiva.com - Livraria Saraiva
(1) Active customers: clients who have bought at least once a year in the last two years.
Contribution to Gross Revenue
133.0
40%
72.2
63.4
10%
34.8
7.2
12.3
12.9
MegaStores
RegularStores
2Q07
2Q08
Gross Revenue
1H07
SG&A
1H08
23.3
1H08
“.Com”
50%
17
Shopping Jardim Sul Pilot Project – Siciliano Before
18
Shopping Jardim Sul Pilot Project – Refurbishment
19
Shopping Jardim Sul Pilot Project – Saraiva
20
Shopping Jardim Sul Pilot Project
First store changed into Saraiva
Revenue Growth After Remodeling
Reopening – 05/29/08
129%
Saraiva
Siciliano
Jun to Aug/07
Jun to Aug/08
Average Sale Ticket: from R$ 47.30 to R$ 65.47 (+38.4%)
Weekly average number of costumers: from 836 to 1, 424 (+70.3%)
New store attributes includes a complete product mix and services:
better shopping experience
21
Evolution of the Main Indicators - Livraria Siciliano
Same-Store Sales
Siciliano’s Stores After Acquisition – (month-over-month)
18.0%
15.0%
12.0%
7.7%
9.0%
4.1%
6.0%
3.0%
5.5%
0.4%
0.0%
-3.0%
-6.0%
-9.0%
-8.4%
-12.0%
Mar-08
Apr-08
May-08
Jun-08
Jul-08
22
Agenda
Overview and Consolidated Performance
Livraria Saraiva
Editora Saraiva
ShoppingNorte
Pátio Shopping
Paulista - -SP
RJ
Shopping PátioFlorianópolis
Higienópolis - SC
SP
ShoppingSalvador
Salvador- -BA
BA
Novo
Shopping
– Ribeirão
Preto/S
Novo
Shopping
– Ribeirão
Preto/SP
23
Publishing Market Overview
Outstanding position in the Law and Elementary & High School publishing markets.
Publishing Market in Brazil - 2006
Gross Revenues – R$ 2.1 Billion
Law Books 2007
Net Revenues – In R$ MM
76
50
26
Saraiva
RT
Atlas
14
(**)
Forense
Elementary and High School Textbooks 2007
Net Revenues – In R$ MM
Elementary & High School
Literature
344
295
Religious Books
274
219
Professional and Technical Books (*)
73
* Includes law books
(1) 2006
(**) Only law books
Source: CBL / Company reports and Serasa
Ática
Scipione
FTD/
Quinteto
Moderna
(1)
Saraiva
Atual
Formato
72
(1)
IBEP
Editora do
Nacional
Brasil
24
Distribution Chain
Saraiva Publishing House is nationally present - 12 branches and 17 authorized dealers.
The branches carry inventories to meet local demand
and maximize sales efforts through our sales
personnel
The adoption of elementary and high school textbooks
in Brazil is decided by teachers
Several publishing lines allow Saraiva to dilute fixed
cost and create competitive advantages.
25
Governmental Purchase's Cycle
Elementary School
Source: FNDE/MEC/INEP (School census 2006)
(*)
% of Historical Replacement
(1)
History and Geography
New Adoptions
26
Governmental Purchase's Cycle
Elementary School
Source: FNDE/MEC/INEP (School census 2006)
(*)
% of Historical Replacement
(1)
History and Geography
(2)
Programs not yet officially announced by the federal government
New Adoptions
27
Governmental Purchase's Cycle
High School
Source: FNDE/MEC/INEP (School census 2006)
(*)
% of Historical Replacement
New Adoptions
Possibles Purchases
of Philosophy and
Sociology Contents
28
Saraiva’s Contracts
The National Elementary and High School Programs (PNLD & PNLEM) are based on a three-year cycle.
+40.5%
140.9
100.3
(1)
Includes PNLD, PNLEM, “Books in School Program” – SEE/MG, PNBE and PNBEM
(National School Library Program)
.
85.5
84.6
83.3
73.4
(*)
65.7
65.0
(*)
42.9
41.9
(*)
23.4
11.8
1997
(*)
1998
PNLEM program did not exist and PNLD program replacements only
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008E
Contracts in R$ MM - PNLD/PNLEM
29
Strategy – Publishing
We will keep on expanding our business through investments in our catalog and strategic acquisitions.
Entrance barriers: proprietary content, strong distribution, relationship with authors and teachers.
Growth and consolidation:
ƒ Acquisition of other publishing or catalogues
ƒ New products
ƒ Use of new medias: launch of Destination Series products
Enhance the relationship with teachers
Enter new markets: Teaching systems
ƒ Market of R$ 500 million / year (*)
Operating Efficiency
(*)
Saraiva’s estimate
30
Publishing - Highlights
EBTIDA X EBTIDA Margin (%)
25.9%
22.1%
20.3%
23.7%
16.9%
73.2
34.7
2003
60.4
54.8
2005
2006
45.2
2004
2007
31
Publishing - Highlights
(1)
Accounts Receivable + Inventories - Accounts Payable
32
Contacts
João Luís Ramos Hopp
CFO and Investor Relations Director
phone: (55 11) 3613 3263
e-mail: jlhopp@saraiva.com.br
Maurício Fanganiello
Planning Director
phone: (55 11) 3613 3302
e-mail: mpfanganiello@saraiva.com.br
IR Website: www.saraivair.com
Ligia Montagnani
Investor Relations Consultant
FIRB – Financial Investor Relations Brasil
phone: (55 11) 3897 6405
e-mail: ligia.montagnani@firb.com
33