Hachette Distribution Services - Lagard¨re -

Hachette Distribution Services

INVESTOR DAY

PARIS

FEBRUARY 2, 2004

2

Agenda

■ Presentation of Hachette Distribution Services (HDS)

■ Strategic positioning by segment

■ Strategic orientations for 2004 - 2007

3

Overview of HDS (I)

➔ HDS is a 4,5 B€ company active in press distribution and retail■ Retail is now half of HDS’ sales, and growing faster than distribution ■ HDS is truly international (2/3 sales outside France)■ More than 13 000 people in 19 countries

➔ Since 1999, HDS growth of sales is over 14% p.a.■ 1/3 of this growth has been external (Virgin, DFA)■ HDS created 45 M€ value in 2002

4

Overview of HDS (II)

➔ HDS has 2 main activities : Retail and Press Distribution

➔ HDS is tightly linked to printed media industry■ Press-driven activities provide 80% of HDS’s EBIT■ Diversification is under way

➔ HDS is the retail arm of Lagardère Group■ Retail network is extended over 14 countries (with 3 600 stores)■ Retail sales are concentrated in France, in travel locations and in press

stores

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3 segments in Retail

➔ Travel retail: press and specialty stores in travel locations

➔ Newsstands : press stores in high street and shopping mall

➔ Media entertainment products: high street and shopping mall retailing of books, music and video

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National distributor:

Wholesaler X

Publisher CPublisher B

sales promotion, relationship with publishers, monitoring of wholesalers

reliable and cost-effective distribution of press, monitoring of retail network

Publisher A

Wholesaler Z

Press wholesalers:

2 segments in Press Distribution

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HDS has shown strong growth

(1) : 1/3 of this growth of sales has been external

1999 2000 2001 2002 Annual Growth

Sales (1) (B €) 2,96 3,30 3,85 4,46 14,6%

Operating income (M€)

48 61 81 88 22,4%

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Distribution:+ 11% p.a.

Retail:

+23% p.a.

30% 30%

3% 9%12%11%

55% 50%

0%10%20%30%40%50%60%70%80%90%

100%

2000 2002

Travel retail Media entertainment Newsstands Distribution

3.3 B€ 4,5 B€

Retail is growing faster than Distribution

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France : 32%

Iberia: 11%North America:

26 %

Belgium: 14%

Switzerland: 9%

Hungary: 5%

Australia / Singapore / China: 0,3%

Other Europe: 3%

68% of HDS sales are made outside France

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HDS is a people business

➔ Over 13 000 employees in 19 countries■ 9 000 employees in retail ■ 4 000 employees in distribution

➔ HDS businesses are labor-intensive■ Labor cost in retail is 43 % of gross margin, and 53 % in distribution

➔ A multi-cultural organization■ 70% of people are outside France■ International workgroups to promote experience sharing

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Other (1)34%

Press 54%

Book7%

Music & Video5%

Other (1)26%

Press 66%

Book8%

2000 sales mix 2002 sales mix

(1) « Other » includes confectionary, phone cards, perfume & tobacco, …

Product mix evolution shows adaptation of HDS to market needs

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65% 64% 64%

35% 36%36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

74% 71%

43%

26%

57%

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

HDS Retail Sales HDS Travel Retail Sales

By product

By location

By geography

By product

By location

By geography

France Press-

DrivenTravel

locations

Other

Non-

Press

StoresNon

travel

FranceNews

& Gift Airports

Other

Rail

Subway

Other

HDS Retail activities are concentrated in France and in travellocations (2002)

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HDS operates several brands under license

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HDS has developed a large portfolio of own banners

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Agenda


■ Strategic positioning by segment● Travel retail● Retail of media entertainment products● Newsstands● Distribution (national & wholesale)


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➔ Strong traffic growth anticipated in the long term

➔ Very strong positions■ France n°1■ World n° 1 in News & Gifts

➔ Large banners portfolio➔ Knowledge of travelling customer➔ Relationships with landlords

■ over 95% renewal rate

➔ More than 70% of travel retail activity is in France and in News & Gifts

➔ No positions in Food & Beverage

➔ Large conceded food operators start retail operations

➔ Potential ban on tobacco sales➔ Traffic is less and less predictable

in the short term

➔ Travel platforms are evolving, with more private operators and more retail space

➔ Consolidation of European playersis likely to happen

Travel Retail is a core activity of HDS

Strengths Weaknesses

Threats Opportunities

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0

500

1000

1500

2000

2500

3000

3500

Compass/SSP

Autogrill HDS

DFS

Nuance

Elior

AldeasaBAA - W

DFHein

emannDFAmeric

asFood & Beverage Travel Retail Specialty Travel RetailN&G Travel Retail

2002 Sales(M€)

Source : annual reports, HDS estimates – Only travel retail sales are shown here

HDS is one of world top 5 travel retailers

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Frankfurt Airport

Paris CDG Airport TimesNewslink - Singapore Airport

Toronto Airport

Relay: in 80 airports all over the world

19

0

RelayRelay umbrellaRelay+ other banner

+

Books

Food Products

LuggageMusic

Gifts-Souvenirs

Toys +

+

+

+

+

Relay has initiated territory extension

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Relay is already an umbrella brand

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Lyon (Train station)

Virgin NewarkParis (CDG Airport)

Virgin in Travel Retail

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Other Travel Retail specialty concepts (I)

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Other Travel Retail specialty concepts (II)

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Agenda




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➔ Network has reached critical mass■ 32 stores in France for Virgin■ 11 in France for Le Furet du Nord■ 11 in Switzerland for Payot

➔ Great brands■ Payot and Le Furet du Nord are regional

leaders■ Virgin has huge brand equity

➔ VirginMega.fr: only French legal digital offer including every majors and independent labels

➔ Uncertainties in the market■ Music performing poorly■ Question mark on multimedia

➔ Very competitive markets■ Pressure on margins

➔ Music and video piracy not under control

➔ Product mix evolution away from music has been initiated

➔ Some product show very strong growth (DVD)

HDS is a challenger in French retail of media entertainment products



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Music28%

Video17%Books

36%

Others9%Multi-

Media10%

Media Entertainment Product Mix

430 M€ sales

Music is less than one third of media entertainment product mix (2002)

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Agenda




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➔ Presence of HDS either with travel retail or with distribution in many attractive countries

➔ Efficient, modern store concept

➔ Low market share in some countries➔ No strong international brand

➔ Business is getting competitive in some regions

■ Rautakirja, Valora, Narvesen➔ Some core products are declining

or at risk ■ Tobacco, phone cards

➔ Attractive opportunities with good margin arise in some Central European countries

■ New shopping malls

HDS has reached a strong position in high street newsstands


ThreatsOpportunities

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Budapest

Warsaw

Madrid

Local newsstands banners

30

0

50

100

150

200

250

Belgium Spain Switzerland NorthAmerica

Poland Hungary CzechRepublic

Romania

➔ 43 % of HDS press stores are outside travel locations➔ 800 kiosks in central Europe are not shown below

Order of countries : opening date of first store

#press storeshigh street

International development of high street press stores

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Agenda




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➔ Very strong position in countries where active

■ Belgium, Switzerland, Hungary■ USA, Spain

➔ International best-practices sharing to keep high operational standards

➔ No other international player

➔ Labor-intensive industry with little automation perspective

➔ Flat press market and strong market share induce pressure for diversification

➔ Not active in France

➔ Retail press market shows slight decline in some countries

➔ Concentration of retail chains (supermarket) could lead to by-pass of wholesale

➔ Create more value-added service for publishers and retailers

➔ Some privatizations might create growth opportunities

➔ HDS already has a network of 10 international press importing structures

■ Attractive niche

Where present, HDS has a leading position in Press Distribution and Wholesale



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HDS

Nippan

Distribution

Sales

Geographic

presence

Comments

Japan4,0 B€

Source: HDS estimates

2,5 B€

Very large, integrated player.Active in magazine and books

Tohan Very large, integrated player.Active in magazine and booksJapan4,3 B€

ValoraSwitzerland,Luxembourg Strong integration with retail activities.1,3 B€

Menzies United Kingdom1,4 B€

NMPP France, plus some African countries2,9 B€

WHSmith United Kingdom1,5 B€

NewsGroup US, Canada1,0 B€

AnCo US1,1 B€

B. , Switz., Hungary, Sp., Germ., US, Can.

Other main activity is aviation services

Other main activity is retail

Part of a highly diversified service group

Part of a highly diversified service group

Most Press Distribution companies are only local

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Agenda


■ Strategic positioning by segment


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HDS Mission Statement

Hachette Distribution Services (HDS) is a company dedicated to marketing media products and convenience services to its customers all over the world

Our mission is to facilitate access to the diversity of ideas and cultures

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HDS Values

➔ Innovation: to anticipate consumer trends, we are constantly striving to innovate with the continual introduction of new concepts and services

➔ Initiative: in their daily work, our team members must foster a keen sense of initiative and responsibility in order to provide top-quality service to their customers

➔ Professionalism: we work to establish a reputation for expertise amongst our clients and partners

➔ Team spirit: our goals will be achieved through teamwork. Our progress as a team will advance the cause of the Group as a whole

➔ Ethics: we are committed to work in respect with strong ethical standards

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A vision for HDS

➔ HDS vision is to :

■ Consolidate our strategic position in press distribution

■ Be recognized as an innovative high street retailer of media products and convenience services

■ Strengthen our leading travel retailer position

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Consolidate our strategic position in Press Distribution

➔ National distribution: grow market share and focus on core business■ Attract new titles through added value services

➔ Wholesale: maintain operational excellence and continue diversification■ Maintain competitiveness through continuous change programs■ Diversify by bringing new products and services to retail networks

➔ Be opportunistic in the development

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Be recognized as an innovative high street retailer of media products and convenience services

➔ Selectively develop press retail in high street■ Focus on most profitable locations and local synergies■ Innovate with distinctive concepts

➔ Consolidate current media entertainment retail network■ Innovate in store lay-out and product mix ■ Leverage on Virgin brand equity

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Strengthen our leading Travel Retailer position

➔ Relay: develop network worldwide while strengthening image■ Develop network where present and open new countries■ Continue concept evolution■ Strengthen image and awareness

➔ Specialty Travel Retail: develop actively■ Enhance portfolio of brands and store concepts■ Bid for new concessions■ Participate in the consolidation of European market

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Innovation Initiative Professionalism Team spirit Ethics

Conclusion: HDS Vision

➔ Consolidate our strategic position in press distribution

➔ Be recognized as an innovative high street retailer of media products and convenience services

➔ Strengthen our leading travel retailer position

Hachette Distribution Services - Lagard¨re -

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