1 - Saraiva

1
Presentation to Investors
Agenda
Overview and Consolidated Performance
Editora Saraiva
Livraria Saraiva
2
First Class Corporate Governance
9 Adhesion to Level 2 of Bovespa Corporate
Governance
3
Jorge Eduardo
Saraiva
9 First company in Brazil to guarantee tag along
rights in its Bylaws - March 2000
Š 90% tag along for preferred shares
99.91%
9 Bylaws establishe that the company will not retain
excess cash – mandatory distribution of financial
availability* that exceeds 25% its total assets in
case it occurs in four consecutive quarters
9 GVA®: Shareholder Value Management
*Financial
availability: Cash and banks + financial investments – short and long term loans and financings
Our Business
4
The Company focuses on books publishing and retailing, in both physical and on-line channels.
9 Saraiva offers a complete catalogue of Elementary and High school Textbooks, Readers,
Law books, Business Administration, Economics, Business Literature and
Accounting books
9 Market leader in the Law segment – approximately 40% market share
9 4th largest publisher of elementary and high school Textbooks – around 17% market share
9 National distribution: Chain of 12 branches
9 Publicly traded and parent Company of Livraria Saraiva
9 Largest bookstore chain in Brazil in terms of revenues
9 30 stores: 15 MegaStores and 15 regular stores
9 Pioneer in the concept of MegaStore in Brazil
9 Category Killer: books, CDs, DVDs, stationery, periodicals, information technology etc.
9 The “Saraiva Plus” loyalty Card launched in Jun/05 has already more than 1 million
members as of September 2006
9 One of the pioneers in e-commerce in Brazil - 1998
9 One of the largest on-line book retailers in Brazil
9 Approximately 1 million active clients as of September 2006
9 Operation integrated with the physical stores
9 Extended product mix
History of Constant Success and Growth
5
We are an innovative company that has taken advantage of acquisition opportunities.
Consolidated Gross Revenue (R$ million)
CAGR 13.9% p.a. (1996-2005)
Acquisition of Atual
Publishing House
1st MegaStore
Publishing *
Bookstore
Launching of
Saraiva.com website
353
229
254
157
178
78
83
79
95
121
140
1996
1997
1998
1999
108
Business
Administration,
Economics and
Accounting Books
171
408
195
392
172
(1)
1
444
206
489
227
114
224
(1)
1
182
213
220
238
262
281
2000
2001
2002
2003
2004
2005
Acquisition of Renascer
Publishing House catalogue
Launching of SaraivaJur.com
website
* Publishing Revenue: excludes sales to Saraiva Bookstore
(1)
Lower governmental purchases – Years of book replacement
506
Acquisition of
Formato
Publishing
House
Long Distance
Learning,
Customized
Editions
Saraiva Breakdown – FY2005
6
Publishing House: strong cash generation and low CAPEX needs
Bookstore: accelerated growth potential (physical stores and Saraiva.com)
Net Revenues (1)
R$ 477.2 Million
EBITDA (1)
R$ 76.3 Million
Bookstore
21%
Bookstore
53%
Publishing House
47%
Publishing House
79%
(1)
Consolidated 2005
2005 Financial Highlights – Consolidated
7
9 Record net profit for the second year in a row.
Š Net profit of R$ 40.0 million, growth of 120.0% compared to 2004.
Š Net revenue of R$ 477.2 million, increase of 9.0% compared to 2004.
Š EBITDA of R$ 76.3 million, significant increase of 52% compared to 2004.
2005
R$ million
VA %
2004
R$ million
VA %
HA%
Gross Revenues
505.6
105.9%
489.1
111.8%
3.4%
Net Revenues
477.2
100.0%
437.7
100.0%
9.0%
Gross Profit
260.4
54.6%
229.6
52.5%
13.4%
EBITDA
76.3
16.0%
50.4
11.5%
51.5%
Net Profit
40.0
8.4%
18.2
4.2%
119.8%
Consolidated Performance
8
Highlights
R$ million
3Q 05
3Q 06
Chg.
9M 05
9M 06
Chg.
Consolidated Gross Revenue
82.2
101.8
23.9%
339.3
397.3
17.1%
Gross Revenue BooksStores
61.9
79.8
28.9%
193.8
251.0
29.5%
Gross Revenue Publishing House
20.3
145.5
146.3
0.6%
Net Sales
76.3
93.7
22.9%
321.4
372.5
15.9%
Gross Margin %
51.4%
45.4%
(6,0)pp
55.3%
53.3%
(2,0)pp
Ajusted EBITDA
(0.4)
(0.7)
61.9%
44.2
47.6
-0.6%
-0.8%
(0,2)pp
13.7%
12.8%
Net Income
(3.2)
(2.3)
-27.5%
19.8
23.2
Investment
2.8
1.2
-58.3%
4.8
2.9
EBITDA Margin %
SGA / Net Sales %
(1)
(2)
(3)
00
(1)
56.5%
22.0
(1)
(2)
47.8%
8.8%
(1)
(8,7)pp
(1)
(2)
(3)
44.9%
43.1%
24.8
22.8
7.7%
(0,9)pp
17.0%
-39.6%
(1,8)pp
Exclude Inter Company Sales.
Includes R$ 0.5MM non-recurring expenses of lawyers and auditors fees related to our primary/secondary share issue.
Adjusted EBITDA: does not include Saraiva Plus provision (R$ 1.6MM).
R$ 2.4MM - Commission charges related to the public offering.
PNLD / PNLEM
-
-
-
-8.2%
Consolidated Performance
Sale Mix– 9M06
1.9%
3.5%
13.3%
Editora
6.2%
2.3%
36.8%
15.7%
Livraria
36.1%
13.3%
2.0% 5.7%
63.2%
9
Consolidated Performance
Net Cash Position
10
(1)
(R$ Million)
74.9
(70.6)
9M02
(1)
(62.1)
9M03
Net Cash Position = Cash & Banks – Loans and financing
Capital Raise April/2006 = R$ 63.6 MM
(45.6)
9M04
3.9
9M05
9M06
Capital Markets
INDICATORS
Number of Trades (¹)
Participation in Trading Sessions - % (¹)
Quantity Traded - thousand shares (¹)
Volume Traded - R$ 000 (¹)
Share Price - R$ (¹) (²)
Total Shares Outstanding - 000 (²) (³)
Market Value - R$ million (²)
11
9M06
20,187
100.0
13,460
270,322
18.70
28,230
527.9
9M05
Chg.
706 2759.3%
70.7 29,3pp
2,744 390.5%
34,087 693.0%
11.70 59.8%
22,937 23.1%
268.4 96.7%
Source: Bovespa
(¹) Referring to preferred shares (SLED4)
(²) At end of year
(³) The EGM of January 6 2006 announced a stock dividend of 2,326,920 preferred shares. In April/06
the Company issued 3,000,000 preferred shares.
•ITAG – Special Tag Along Stock Index
• IGC – Special Corporate Governance Stock Index
•IBrX – Brazil Index September/2006 – (100 stocks selected among BOVESPA’s most traded shares)
Agenda
Overview and Consolidated Performance
Editora Saraiva
Livraria Saraiva
12
Publishing Market Overview
13
Outstanding position in the markets where we operate and possibility to operate in other publishing
lines.
Law Books 2005
Net Revenues – R$ million
Publishing Market in Brazil - 2005
Gross Revenue – R$ 1.79 Billion
70
62
60
50
44
40
Professional and
Technical Books*
15.0%
27
30
17
20
10
0
Saraiva
Religious Books
9.0%
(1)
Atlas
Forense
Text Books 2005
Textbooks
54.2%
General
Publications
21.8%
RT
Net Revenues – R$ million
400
350
325
300
246
250
196
200
161
150
100
61
61
50
0
* Includes law books
(1) 2004
Source: Company reports and Serasa
Ática
Scipione
FTD /
Quinteto
Moderna
Saraiva /
Atual /
Formato
IBEP /
(1)
Nacional
Editora do
Brasil
Education in Brazil
14
Growth potential in High Schools and College Levels.
Investments to increase the quantity of students attending school.
9 In the Elementary and High school textbook market, the largest purchaser is the Federal Government
through the National Book Acquisition Program - PNLD (14.8% of the Group revenues in 2005).
32.0
Students Enrolled (million) 33.5
Saraiva is well
positioned to fulfill
the future demand
in both segments
9.0
4.9
5.6
1.7
1994
Elementary School
CAGR
Source:
MEC, INEP e SEEC
0.4%
2005
High School
5.7%
College
11.4%
Publishing House
15
Saraiva Publishing House has national presence - 12 branches and 17 authorized dealers.
• Several publishing lines allows Saraiva to dilute fixed cost and create competitive advantages.
Location of branches and dealers
Santarém
Santarém
9 The branches have inventories to
meet local demand and maximize
sales efforts through our sales
personnel
Macapá
Macapá
Teresina
Fortaleza
Manaus
9 The adoption of elementary and
high school textbooks in Brazil is
decided by teachers
Belém
São Luiz
Imperatriz
Imperatriz
Recife
Rio Branco
Aracaju
Natal
Natal
João
Pessoa
Maceió
Salvador
Porto Velho
Cuiabá
á
Palmas
Bras ília
Brasília
Belo Horizonte
Uberlândia
Uberlândia
Goiânia
Vitória
Vitória
Campo Grande
Rio de
Janeiro
Ribeirão Preto
São Paulo:
Distribution
Centro
de Distribui
on Center
ç
ção
Curitiba
Florianópolis
Branch
Porto Alegre
Dealers
Government Programs Cycles
16
The National Elementary Textbook Program (PNLD) is based on a three-year cycle. On the third year of this
cycle a smaller number of books is purchased, only to replace books that have been ruined in the two
previous years.
9 In replacement years, Saraiva sales within PNLD are naturally lower.
Book replacement year
85.5
83.3
82.6
73.4
65.0
65.0
42.9
14.9
1995
23.4
19.8
11.8
9.1
1994
41.9
1996
1997
1998
1999
2000
2001
2002
2003
The value contracts are R$ million - PNLD/PNLEM
2004
2005
2006
Cycle of Governmental Purchases
17
Elementary School
Grades
Number of
Students
(MM)
1st Grade
2st - 4th Grade
5st - 8th Grade
Subjects
Literacy, Portuguese,
Mathematics,
4.7
Science, History &
Geography
Portuguese,
10.7
Mathematics,
Science, History,
Geography and
13.7
Regional Books
Market
Potential
Number of
books
(MM)
% of Market Potential acquired
each year *
PNLD2007 PNLD2008 PNLD2009
28.1
100%
100%
100%
66.2
100%
12%
12%
68.6
12%
100%
12%
High School
1st - 3rd Grade
Source: Abrelivros/FNDE/MEC
* % history of replacement
8.0
Portuguese,
Mathematics,
Physics, Chemistry,
Biology, History and
Geography
56.0
Cycle to be defined
Strategy – Publishing House
18
We will keep on expanding our business through the consolidation of our market position and strategic
acquisitions of publishing houses and catalogues.
9 Entrance barriers: proprietary content, strong distribution, relationship with authors and teachers.
9Market position growth and consolidation
ΠAcquisition of other publishing houses or catalogues
Š New products and strong distribution chain
Š Use of new medias: CD ROM, Internet and Long Distance Learning
9Enhancement of the relationship with teachers
9Increase in operating efficiency
Saraiva S.A. Livreiros Editores - “Editora”
Highlights
R$ million
9M 05
9M 06
Chg.
Gross Revenues
153.5
156.8
2.2%
Private Market
128.7
134.1
4.2%
Government (*)
24.8
22.8
-8.2%
Net Sales
153.3
156.6
2.2%
Gross Margin %
71.1%
73.4%
2,3pp
34.5
34.3
22.5%
21.9%
EBITDA
EBITDA Margin %
Net Income
19.8
Investment
2.2
SGA / Net Sales %
(*)
Government Sales
PNLD
PNLEM
PNLEM MG "Programa Livro na Escola"
(1)
(1)
-0.8%
(0,6)pp
23.2(2)
17.0%
1.1
-51.9%
50.7%
50.3%
(0,4)pp
24.8
22.8
-8.2%
16.5
11.2
-32.2%
8.2
4.2
-48.8%
-
7.3
(3)
-
Includes R$ 0.5MM non-recurring expenses of lawyers and auditors fees related to our primary/secondary share issue.
R$ 2.4MM - Commission charges related to the public offering.
(3)
PNLEM MG "Programa Livro na Escola" - Purchase of biology and physics textbooks public schools students in the state of Minas Gerais.
(2)
19
Editora Saraiva
180
160
Gross Revenue (R$ Million) and
EBITDA (R$ Million) and
Gross Margin (%)
EBITDA Margin (%)
74.4% 75.5% 71.7% 71.1% 73.4%
140
120
100
20
122
134
154
153
157
80
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
9M02 9M03 9M04 9M05 9M06
Gross Sales
R$ million
Market
Government
9M02
110.6
11.8
30.4
25.8%
25.3
25.3
19.8% 17.8%
34.5
34.3
22.5% 21.9%
9M02 9M03 9M04 9M05 9M06
9M03
129.0
5.3
9M04
125.6
28.4
9M05
128.7
24.8
9M06
134.1
22.8
55.0%
53.0%
51.0%
49.0%
47.0%
45.0%
43.0%
41.0%
39.0%
37.0%
35.0%
33.0%
31.0%
29.0%
27.0%
25.0%
23.0%
21.0%
19.0%
17.0%
Agenda
Overview and Consolidated Performance
Editora Saraiva
Livraria Saraiva
21
The Book Retail Market
22
The States of São Paulo and Rio de Janeiro represent around 65% of the book retail market in Brazil(1)
9 Very fragmented market.
9 More than 1,500 bookstores, of which 70% are located in the South and Southeast regions.
9 Inequality in bookstore distribution across the national territory.
Book retail market revenues – R$ 2.57 Billion
Net Revenues 2005 - R$ Million
300
253
250
Other
39%
200
158
150
Bookstores
61%
111
100
58
50
0
Saraiva
(1)
Source CBL
In 2004
Sources: CBL (Brazilian Book Chamber), Saraiva, Serasa.
(2)
Siciliano (2)
Cultura
La Selva(2)
Bookstore: Bricks and Mortar
23
The largest bookstore in Brazil in terms of revenues: 30 Stores – 15 RegularStores and 15 MegaStores
9 Sales area of 20.0 thousand m² in strategic locations.
9 Store models: MegaStores, RegularStores and “new RegularStores”.
9 Offers an unique purchasing experience in a pleasant and well dimensioned areas.
Expansion potential
PE
MegaStore
1
RJ (6 stores)
Regular Stores
MegaStores
2
4
SP (19 stores)
Regular Stores
MegaStores
12
7
Bookstores Location
(1)
DF
Regular Store
1
GO
MegaStore
1
PR
MegaStore
1
RS
MegaStore
1
Includes Saraiva.com
Saraiva.com – Operating Synergies with Bricks and Mortar
9 Scale of operations
9 Brand recognition
9 Expertise in logistics
and distribution
9 Geographic coverage
9 Service rendering
9 Consumer’s profile
24
Bookstore Strategy: Bricks and Mortar
Our growth strategy is based on the evolution of the concept of MegaStore and on the new
concept of RegularStore, on the diversification and adaptation of the product mix and on
strategic acquisitions.
9Market position growth and consolidation
Š Expansion of the physical store chain in the new model
Š Strategic acquisitions
Š Store refurbishing
9New categories of products
9Efficiency in working capital management
9Brand enhancing
9Relationship with custumers: Saraiva Plus loyalty Card
25
Strategy: Saraiva.com
26
Focus on the consolidation of our categories and on the diversification of our product mix along with
marketing investments.
9 Investment in services
9 Larger investment in marketing and broader presence on internet
portals
9 New categories
Š Imported books
Š Information Technology
Š Electronics
Š Games
9 Logistics and fulfilment
Livraria Saraiva – Evolution of Revenues
R$ million
3Q 05
Gross Sales
61.9
Comparable Sales (Physical Stores + Saraiva.com)
61.5
Saraiva.com
3Q 06
Chg.
79.8
9M 05
27
9M 06
Chg.
28.9%
193.8
75.2
22.3%
192.5
237.9
23.6%
14.5
22.1
52.0%
45.2
71.4
58.1%
Physical Stores
47.4
57.7
21.8%
148.7
179.6
20.8%
Same Store Sales (Physical Stores)
47.0
53.1
13.1%
147.3
166.5
13.0%
1%
7%
4%
10%
3%
4%
5%
9M05
62%
29.5%
21%
21%
5%
251.0
9M06
Books
Stationery
Multimedia products
Music / DVD
Electronics / IT
Others
57%
Livraria e Papelaria Saraiva S.A. - “Livraria”
28
Highlights
R$ million
9M 05
9M 06
Chg.
Gross Sales
193.8
251.0
29.5%
Net Sales
176.0
226.3
28.6%
Gross Margin %
39.0%
37.0%
(2,0)pp
13.3
38.2%
Ajusted EBITDA (*)
EBITDA Margin %
9.6
5.5%
5.9%
Net Income
3.0
3.8
26.1%
Investment
2.5
1.8
-28.8%
SGA / Net Sales %
Working Capital
Average Working Capital/Net Sales %
(*) Ajusted EBITDA: does not include Saraiva Plus provision (R$ 1.6MM)
0,4pp
36.1%
34.1%
(2,0)pp
28.1
41.2
46.5%
10.4%
12.2%
1,8pp
Livraria Saraiva
R$ million
29
9M 05
Turnover
9M 06
Turnover
Chg.
Inventories
33.9
82
40.8
77
20.4%
Costumers
19.6
26
38.4
41
95.5%
Suppliers
25.4
62
37.9
64
49.4%
Working Capital
28.1
46
41.2
54
46.5%
Working Capital (1) / Gross Sales (2) (%)
17.2%
14.7%
13.7%
10.4%
12.2%
9M02 9M03 9M04 9M05 9M06
(1)
Inventory + Costumers – Suppliers (average last 12 months)
(2)
Gross Revenues last 12 months
Saraiva.com
30
Highlights
R$ million
3Q 05
3Q 06
Chg.
9M 05
9M 06
Chg.
Gross Revenues
14.5
22.1
52.0%
45.2
71.4
58.1%
Net Sales
13.4
19.7
46.6%
41.9
64.4
53.6%
1.9
(1)
3.1
69.9%
6.5
(1)
8.9
38.5%
732
989
35.2%
(2)
732
(2)
989
35.2%
23.5%
27.7%
76.1
115.6
Ajusted EBITDA
Active Customers (000)
% of Gross Sales - Livraria
Average Ticket (R$)
71.4
4,2pp
52.0%
23.3%
28.5%
5,2pp
80.7
111.8
38.5%
% Contribution to Gross Revenue
15%
37.5
27.5
17.9
8.9
9.2
10.2
45.2
10.3
28%
14.5
Megas
9M02
9M03
Gross Revenue
9M04
9M05
9M06
57%
SG&A (R$ million)
(1)
Ajusted EBITDA: Includes provision for redemption of bonus from the Saraiva Plus program (R$ 461K), which does not represent cash outflow
(2)
Active Customers : clients who have bought at least once a year in the last two years.
Regular Stores
.com
Contacts
João Luís Ramos Hopp
CFO and Investor Relations Director
phone: (55 11) 3613 3263
e-mail: [email protected]
Mauricio Fanganiello
Planning and Controlling Manager
phone: (55 11) 3613 3302
e-mail: [email protected]
IR Website: www.saraivari.com
Ligia Montagnani
Investor Relations Consultant
FIRB – Financial Investor Relations Brasil
phone: (55 11) 3897 6405
e-mail: [email protected]
31