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WMJ CONSULTING P T Y L T D BOOK PRODUCTION IN AUSTRALIA PIAA/APA JOINT INDUSTRY STUDY BOOK PUBLISHING ANALYSIS.

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Presentation on theme: "WMJ CONSULTING P T Y L T D BOOK PRODUCTION IN AUSTRALIA PIAA/APA JOINT INDUSTRY STUDY BOOK PUBLISHING ANALYSIS."— Presentation transcript:

1 WMJ CONSULTING P T Y L T D BOOK PRODUCTION IN AUSTRALIA PIAA/APA JOINT INDUSTRY STUDY BOOK PUBLISHING ANALYSIS

2 WMJ CONSULTING P T Y L T D Purpose Examine: Opportunities for Growth Opportunities to Improve Performance Industry Best Practices

3 WMJ CONSULTING P T Y L T D Methodology Questionnaire – Primarily FY2000 Interviews Case Studies

4 WMJ CONSULTING P T Y L T D Approach Across Four Major Industry Segments: Trade/Consumer Schools Tertiary/Academic Professional/Reference

5 WMJ CONSULTING P T Y L T D Results Trade/Consumer (14) Sales $536.1m PBIT $35.3m Schools (10) Sales $162.6m PBIT $27.2m Academic/Prof (10) Sales $257.5m PBIT $43.6m TotalSales $956.2m PBIT $106.1m

6 WMJ CONSULTING P T Y L T D Profit Margins By Sector TRADE SCHOOLTERTIARY/ ACADEMIC PROF’S’L

7 WMJ CONSULTING P T Y L T D Trade/Consumer Segment Sales Growth No Similar Profit Growth Margin Problems High Operating Costs Working Capital Difficulties

8 WMJ CONSULTING P T Y L T D Trade P&L Summary FY 2000 Sales $536.1m Trading Gross Profit$280.8m (52.4%) Gross Margin$233.6m (43.6%) Op Costs$198.3m (37.0%) PBIT$35.3m (6.6%)

9 WMJ CONSULTING P T Y L T D Trade/Consumer P&L Y2000

10 WMJ CONSULTING P T Y L T D Trade P&L Summary Australian Titles 45.8% Total Sales Trading Gross Profit 52.4% Sales Trading GP Eroded 8.8% to 43.6% Exchange Loss - $444K (0.08% sales) Inventory W/O - $26.3m (4.9% sales) Imported Books GP – 39.5% sales

11 WMJ CONSULTING P T Y L T D Trade P&L Summary (cont) Royalties/fees 13.3% Sales Operating Costs 37% Sales Marketing/Sales Costs 12.7% Sales Distribution Costs 11.2% Sales PBIT 6.6% Sales or 3.5% Adjusted

12 WMJ CONSULTING P T Y L T D Export Sales Export Sales $60.3m – 24.5% Sales of Australian Books 75% from one company Adjusted 7.2% Sales of Australian Books

13 WMJ CONSULTING P T Y L T D Returns 0% - 10% Sales3 15% - 20% Sales7 20% - 25% Sales1 > 30% Sales1

14 WMJ CONSULTING P T Y L T D Trade Working Capital PBIT$35.2m Advances$16.2m WIP$17.2m Inventory$120.6m Debtors$114.0m Total Working Capital$267.9m Ratio13.1%

15 WMJ CONSULTING P T Y L T D Key W/Capital Components Inventory $120.6m 22.5% sales 27 weeks in stock Debtors Range 60 – 96 DSO

16 WMJ CONSULTING P T Y L T D Schools Segment Significant Sales Growth 1997 – 2000 Also Strong Profit Growth Higher Margins than Trade Better Working Capital Performance

17 WMJ CONSULTING P T Y L T D Schools P&L Summary FY 2000 Sales $162.6m Trading Gross Profit$95.1m (58.5%) Gross Margin$84.7m (52.1%) Operating Costs$57.5m (35.4%) PBIT$27.2m (16.7%)

18 WMJ CONSULTING P T Y L T D School P&L Y2000 School P&L Y2000

19 WMJ CONSULTING P T Y L T D Schools P&L Summary Australian Titles Dominate – 93% Total Sales Primary School Books – 49% Sales Secondary School Books – 41% Trading GP – 58.5% sales Gross Margin – 52.1% (Trade 43.6%) Exchange Losses - $231K Inventory W/O - $3m

20 WMJ CONSULTING P T Y L T D Schools P&L Summary (cont) Trading Terms Royalties/Fees – 10.5% sales Operating Costs – 35.4% sales Marketing/Sales Costs – 12.9% sales Distribution Costs – 7.8% sales PBIT – 16.7% sales

21 WMJ CONSULTING P T Y L T D Export Sales School Export Sales - $47m or 33.4% sales of Australian Books Two Companies Boosted Result >20% Op Margin Cos. Had strong Exports USA Largest Export Market Strong Exports From Literacy Area

22 WMJ CONSULTING P T Y L T D Electronic Sales Electronic 1% Total Sales - But:- Used as Ancillary Textbook Material Some Stand-Alone Products Marketing Support Some Access to Texts Some Material Sold on Subscription

23 WMJ CONSULTING P T Y L T D Schools Working Capital Summary PBIT$21.9m Author Advances $1.1m WIP $7.5m Inventory$23.0m Debtors$32.9m Total Working Capital$64.5m Ratio 33.9%

24 WMJ CONSULTING P T Y L T D Key W/Capital Components Inventory $26.8m 17.1% Sales 28 Weeks in Stock Debtors >75 DSO

25 WMJ CONSULTING P T Y L T D Tertiary/Academic Segment Data From Publishers of Professional Information Segregated Sales Growth in Academic In Academic Segment Only 32.5% Sales From Australian Books Lower Margins Working Capital Difficulties

26 WMJ CONSULTING P T Y L T D Tertiary/Acad. P&L Summary Sales $115.3m Trading Gross Profit $56.8m (49.3% sales) Gross Margin $48.6m (42.1% sales) Operating Costs $40.4m (35.1% sales) PBIT $8.1m (7.0% sales)

27 WMJ CONSULTING P T Y L T D Tertiary/Academic P&L Y2000

28 WMJ CONSULTING P T Y L T D Tertiary/Acad. P&L Summary Imported Books 61.3% Total Sales Margins Distorted By Interco. Trading Trading Gross Profit – 49.3% sales Gross Margin – 42.1% sales Exchange Losses - $1.1m Inventory W/O - $2.0m

29 WMJ CONSULTING P T Y L T D Tertiary/Acad. P&L Summary Royalties/Fees 20.8% sales - ?? Operating Costs – 35.1% sales Marketing/Sales Costs 17.0% sales Distribution Costs – 10.4% sales PBIT – 7.0% sales

30 WMJ CONSULTING P T Y L T D Prof. Information P&L Summary Sales $142.2m Gross Margin$83.5m (58.7% sales) Operating Costs$48.1m (33.8% sales) PBIT$35.5m (24.9% sales)

31 WMJ CONSULTING P T Y L T D Electronic Sales – Prof. Information 20% Total Sales 50% in Three Years Stand-Alone Products Electronic Versions Print Products Some Print Product Phased Out Investment in Data Conversion

32 WMJ CONSULTING P T Y L T D Tertiary/Acad. Working Capital PBIT$17.8m Author Advances$0.4m WIP$2.0m Inventory$15.8m Debtors$22.7m Total Working Capital$40.9m Ratio16.0%

33 WMJ CONSULTING P T Y L T D Case Studies Allen and Unwin Hodder Headline Penguin John Wiley & Sons Australia Ltd Nelson Thomson Learning Reed Education

34 WMJ CONSULTING P T Y L T D Case Studies - Conclusions Clearly Defined Company Goals Planning Tools Focused Publishing Strategies Effective Communication Accountability

35 WMJ CONSULTING P T Y L T D Case Studies - Conclusions Use of Incentive Management Information Balance Sheet Management Service Levels Experienced Management

36 WMJ CONSULTING P T Y L T D Trade - Recommendations Grow Australian Published Lists Develop Export Culture Review Margin Performance Tighten Returns Policies Further Review Marketing and Sales Strategies

37 WMJ CONSULTING P T Y L T D Trade Recommendations (cont.) Review Distribution Strategies Tighten Debtor Management Focus on Management of Inventory Increase Training/Development Spend Strategies for Smaller Companies

38 WMJ CONSULTING P T Y L T D Trade Benchmarks Sales Australian Books46% Total Sales Export Sales7.2% Sales Aust. Books Gross Margin45% Sales G.P. – Imported Books40% Sales Returns<20% Sales Operating Costs35% Sales

39 WMJ CONSULTING P T Y L T D Trade Benchmarks (cont.) Marketing/Sales Costs12% Sales Distribution Costs7% - 11% Sales Working Capital Ratio>20% DSO<70 Days Inventory3X Turn Sell Time – First Print12 Weeks

40 WMJ CONSULTING P T Y L T D Trade Financial Model Trading Gross Profit – 53% Sales Other Cost of Sales – 8% Gross Margin – 45% Operating Costs – 35% Sales PBIT – 10% Sales

41 WMJ CONSULTING P T Y L T D Recommendations - Education Increase Australian Lists in Tertiary Drive for additional export sales Low Margin Operators Review Margins Review Trading Terms for Imports Tighten Debtor Management Improve Management of Inventory Increase Training/Devel. Spend

42 WMJ CONSULTING P T Y L T D Education Benchmarks Sales Aust. Academic Books20% Total Sales School Export Sales>30% Aust Bks GP Imported Books>45% Sales Marketing/Sales Costs17% Sales Distribution CostsSchool – 7% Sales Academic – 11%

43 WMJ CONSULTING P T Y L T D Education Benchmarks (cont.) Working Capital Ratio>30% School >20% Academic DSO<70 Days InventorySchool – 2X Turn Academic – 3X Turn Sell First Print52 Weeks

44 WMJ CONSULTING P T Y L T D Schools Financial Model Trading Gross Profit – 58% Sales Other Cost of Sales – 6% Sales Gross Margin – 52% Sales Operating Costs – 35% Sales PBIT – 17% Sales

45 WMJ CONSULTING P T Y L T D Tertiary/Acad. Financial Model Trading Gross Profit – 49% Sales Other Cost of Sales – 7% Sales Gross Margin – 42% Sales Operating Costs – 35% Sales PBIT – 7% Sales


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