wmj consulting p t y l t d book production in australia piaa/apa joint industry study book...

W MJCONSULTINGP T Y L T D

BOOK PRODUCTION IN BOOK PRODUCTION IN

AUSTRALIAAUSTRALIA

PIAA/APA JOINT INDUSTRY STUDYPIAA/APA JOINT INDUSTRY STUDY

BOOK PUBLISHING ANALYSISBOOK PUBLISHING ANALYSIS


PurposePurpose

Examine: Opportunities for Growth

Opportunities to Improve PerformanceIndustry Best Practices


MethodologyMethodology

Questionnaire – Primarily FY2000

Interviews

Case Studies


ApproachApproach

Across Four Major Industry Segments:

Trade/ConsumerSchoolsTertiary/AcademicProfessional/Reference


ResultsResultsTrade/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

Total Sales $956.2m

PBIT $106.1m


7%17%

7%

25%

37%35%

35%

34%

44%52%

42%

59%

100%100%

100%

100%

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Pe

rce

nta

ge

SalesGr ProfitCostsPBIT

Profit Margins By SectorProfit Margins By Sector

TRADE SCHOOL TERTIARY/ACADEMIC

PROF’S’L


Trade/Consumer SegmentTrade/Consumer Segment

Sales Growth 1997-2000No Similar Profit GrowthMargin ProblemsHigh Operating CostsWorking Capital Difficulties


Trade P&L Summary FY 2000Trade P&L Summary FY 2000Sales $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%)


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Sales

Gr Profit

Costs

PBIT

Trade/Consumer P&L Y2000Trade/Consumer P&L Y2000


Trade P&L SummaryTrade P&L Summary

Australian Titles 45.8% Total SalesTrading Gross Profit 52.4% SalesTrading 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


Trade P&L Summary (cont)Trade P&L Summary (cont)

Royalties/fees 13.3% SalesOperating Costs 37% SalesMarketing/Sales Costs 12.7% SalesDistribution Costs 11.2% SalesPBIT 6.6% Sales or 3.5% Adjusted


Export SalesExport Sales

Export Sales $60.3m – 24.5% Sales of Australian Books

75% from one companyAdjusted 7.2% Sales of Australian

Books


ReturnsReturns

0% - 10% Sales 3

15% - 20% Sales 7

20% - 25% Sales 1

> 30% Sales 1


Trade Working Capital Trade Working Capital PBIT $35.2m

Advances $16.2m

WIP $17.2m

Inventory $120.6m

Debtors $114.0m

Total Working Capital $267.9m

Ratio 13.1%


Key W/Capital ComponentsKey W/Capital Components

Inventory

$120.6m 22.5% sales 27 weeks in stock

Debtors

Range 60 – 96 DSO


Schools SegmentSchools Segment

Significant Sales Growth 1997 – 2000Also Strong Profit GrowthHigher Margins than TradeBetter Working Capital Performance


Schools P&L Summary FY 2000Schools 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%)


School P&L Y2000School P&L Y2000

-5000

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Schools P&L SummarySchools P&L Summary

Australian Titles Dominate – 93% TotalSales Primary School Books – 49%Sales Secondary School Books – 41%Trading GP – 58.5% salesGross Margin – 52.1% (Trade 43.6%)

Exchange Losses - $231KInventory W/O - $3m


Schools P&L Summary (cont)Schools P&L Summary (cont)

Trading TermsRoyalties/Fees – 10.5% salesOperating Costs – 35.4% salesMarketing/Sales Costs – 12.9% salesDistribution Costs – 7.8% salesPBIT – 16.7% sales


Export SalesExport Sales

School Export Sales - $47m or 33.4% sales of Australian Books

Two Companies Boosted Result>20% Op Margin Cos. Had strong

ExportsUSA Largest Export MarketStrong Exports From Literacy Area


Electronic SalesElectronic Sales

Electronic 1% Total Sales - But:-Used as Ancillary Textbook MaterialSome Stand-Alone ProductsMarketing SupportSome Access to TextsSome Material Sold on Subscription


Schools Working Capital SummarySchools Working Capital Summary

PBIT $21.9m

Author Advances $1.1m

WIP $7.5m

Inventory $23.0m

Debtors $32.9m


Ratio 33.9%


Key W/Capital ComponentsKey W/Capital Components

Inventory $26.8m 17.1% Sales 28 Weeks in Stock

Debtors >75 DSO


Tertiary/Academic SegmentTertiary/Academic SegmentData From Publishers of Professional

Information SegregatedSales Growth in Academic 1997-2000In Academic Segment Only 32.5%

Sales From Australian BooksLower MarginsWorking Capital Difficulties


Tertiary/Acad. P&L SummaryTertiary/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)


Tertiary/Academic P&L Y2000Tertiary/Academic P&L Y2000

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SalesGr ProfitCostsPBIT


Tertiary/Acad. P&L SummaryTertiary/Acad. P&L SummaryImported Books 61.3% Total SalesMargins Distorted By Interco. TradingTrading Gross Profit – 49.3% salesGross Margin – 42.1% salesExchange Losses - $1.1mInventory W/O - $2.0m


Tertiary/Acad. P&L SummaryTertiary/Acad. P&L Summary

Royalties/Fees 20.8% sales - ??Operating Costs – 35.1% salesMarketing/Sales Costs 17.0% salesDistribution Costs – 10.4% salesPBIT – 7.0% sales


Prof. Information P&L SummaryProf. 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)


Electronic Sales – Prof. InformationElectronic Sales – Prof. Information

20% Total Sales50% in Three YearsStand-Alone ProductsElectronic Versions Print ProductsSome Print Product Phased OutInvestment in Data Conversion


Tertiary/Acad. Working CapitalTertiary/Acad. Working Capital

PBIT $17.8m

Author Advances $0.4m

WIP $2.0m

Inventory $15.8m

Debtors $22.7m


Ratio 16.0%


Case StudiesCase Studies

Allen and UnwinHodder HeadlinePenguinJohn Wiley & Sons Australia LtdNelson Thomson LearningReed Education


Case Studies - ConclusionsCase Studies - Conclusions

Clearly Defined Company GoalsPlanning ToolsFocused Publishing StrategiesEffective CommunicationAccountability


Case Studies - ConclusionsCase Studies - Conclusions

Use of IncentiveManagement InformationBalance Sheet ManagementService LevelsExperienced Management


Trade - RecommendationsTrade - Recommendations

Grow Australian Published ListsDevelop Export CultureReview Margin Performance Tighten Returns Policies FurtherReview Marketing and Sales Strategies


Trade Recommendations (cont.)Trade Recommendations (cont.)

Review Distribution StrategiesTighten Debtor ManagementFocus on Management of InventoryIncrease Training/Development SpendStrategies for Smaller Companies


Trade BenchmarksTrade Benchmarks

Sales Australian Books 46% Total Sales

Export Sales 7.2% Sales Aust. Books

Gross Margin 45% Sales

G.P. – Imported Books 40% Sales

Returns <20% Sales

Operating Costs 35% Sales


Trade Benchmarks (cont.)Trade Benchmarks (cont.)Marketing/Sales Costs 12% Sales

Distribution Costs 7% - 11% Sales

Working Capital Ratio >20%

DSO <70 Days

Inventory 3X Turn

Sell Time – First Print 12 Weeks


Trade Financial ModelTrade Financial Model

Trading Gross Profit – 53% SalesOther Cost of Sales – 8%Gross Margin – 45%Operating Costs – 35% SalesPBIT – 10% Sales


Recommendations - EducationRecommendations - EducationIncrease Australian Lists in TertiaryDrive for additional export salesLow Margin Operators Review MarginsReview Trading Terms for ImportsTighten Debtor ManagementImprove Management of InventoryIncrease Training/Devel. Spend


Education BenchmarksEducation BenchmarksSales Aust. Academic Books 20% Total Sales

School Export Sales >30% Aust Bks

GP Imported Books >45% Sales

Marketing/Sales Costs 17% Sales

Distribution Costs School – 7% Sales

Academic – 11%


Education Benchmarks (cont.)Education Benchmarks (cont.)

Working Capital Ratio >30% School

>20% Academic

DSO <70 Days

Inventory School – 2X Turn

Academic – 3X Turn

Sell First Print 52 Weeks


Schools Financial ModelSchools Financial Model

Trading Gross Profit – 58% SalesOther Cost of Sales – 6% SalesGross Margin – 52% SalesOperating Costs – 35% SalesPBIT – 17% Sales


Tertiary/Acad. Financial ModelTertiary/Acad. Financial Model

Trading Gross Profit – 49% SalesOther Cost of Sales – 7% SalesGross Margin – 42% SalesOperating Costs – 35% SalesPBIT – 7% Sales

wmj consulting p t y l t d book production in australia piaa/apa joint industry study book...

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