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CFA Institute Research Challenge

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Local Challenge CFA France
Team C

Recommendation : SELL

LAGARDERE SCA

Last Price : 25.36 (Date: 8/1/2016)


Target Price : 21.00

INDUSTRY : MEDIA
Ticker : MMB-FR

This report is published for educational purposes only by students competing in the CFA Institute Research Challenge.

DCF
23.9

SOTP
18

50%

50%

Lagardre: Muddled Past, Gloomy Future


We initiate coverage of Lagardre SCA (MMB) with a SELL recommendation with a target
price of 21 suggesting 17% downside potential.
Our SELL recommendation is based on three key points: (1) an unattractive
risk/reward profile, (2) diversified but mostly low organic growth activities operating
in a highly competitive environment and (3) a weak corporate strategy with serious
issues on business sustainability.

TARGET PRICE
21.00
SELL
-17% potential downside

Market Profile
52-week Price Range ()

21.02-30.23

Average 3M Daily Volume

294,144

Shares Outstanding (M)

131.1

Market Capitalization
(M)

3,325

Insider Ownership

11.2%

Free Float

74.2%

Beta

1.63

Sources: Factset, Damodaran & team


estimates
Key Metrics
2014 2015E 2016E

Our 3 keys points are supported by an historically non fundamentaly high valuation
multiple (8.6x EV/EBITDA 16e, a 18% premium to the historical average) mainly due to a
lower conglomerate discount which we believe is unjustified for the moment. We derived
our target price of 21 from a combination of a DCF model and sum-of-the-parts
valuations model(including a 25% conglomerate discount) with an equal weighting of
both methods.
Our Sell recommendation relies on
A lack of a business mix advantage with an unaggressive strategy in a highly consolidating
media industry in addition to:

Strong pressure on cash generation: We believe the risk/reward profile of the


group is unattractive due to (1) highly cyclical sales, (2) highly volatile and low net
earning margins and (3) low Capex which highlights future growth issues. Moreover,
we forecast free cash flow 2015-19e CAGR of just 1% due to pressure on margin and
from working capital.

Follower attitude with a short-sighted view corporate strategy: (1) management


lacks expertise in acquisition valuation, which has led to huge impairment losses in
the past, (2) proceeds from divestments have mostly been distributed in the form of
exceptional dividends and not reinvested, contrary to peers practice and (3) complete
home-made corporate management that limits influx of external expertise.
Furthermore, we see low shareholders representation and governance risks with a
group structure of double voting rights for share registered in the name of same
shareholders for more than 4 years.

Sales (M)

7,170

7,378

7,856

EBITDA
Margin

7.6%

7.7%

7.7 %

EPS ()

0.32

1.56

1.74

Payout(%)

410

83

75

N.Debt/
EBITDA

1.9x

2.5x

2.4x

ROCE

7.1%

7.5%

7.1%

Main risk: We believe any major acquisition announcement could have a temporary
positive impact on the share price as well as news flow on assets divestment (Magazine
and Distribution). However we believe this risk is limited due to weak organic growth in
these activities and their currently low valuation.

EV/EBITDA

8.8x

9.0x

8.6x

200

P/E

79.8x

16.2x

14.5x

180

Lagardre

160

Stoxx 600 Media

Team Sentiment Summary


News Flow

High (+)

140

Uncertainties

High (-)

120

Competitive
Advantage

Low (-)

100

Growth Potential

Medium

80

Profitability

Low (-)

60

Payout

High (+)

40

Valuation

High (-)

Governance

Low (-)

25.4

17 % Downside
potential
21.0

Source: Factset
1

CFA Institute Research Challenge


Business Description

Figure 1: Activities snapshot with % of


sales
28%
PUBLISHING

L
A
G
A
R
D
E
R
E

53%

Still in transformation from an Aerospace and Publishing company to a more diversified group,
Lagardre SCA was established in 1992 from the merger between Matra Hachette and Lagardre
group. Lagardre is listed on Euronext Paris since June, 1987 (ticker: MMB-FR).

TRAVEL RETAIL

13%

Focus on the Media industry.


Lagardre Publishing (28% of group sales), with its unavoidable Hachette division, is clearly a
core-business division for Lagardre (largest EBITDA contribution with 41%). A segment in
which Lagardre is a worldwide leader among mature and cyclical business.
Lagardre Active (13% of group sales) includes the press business, the audiovisual (radio/TV)
and digital activities as well as the advertising sales and is built on iconic brands such as Elle,
Paris Match, Europe 1 and Gulli among declining activities with digital transformation.

ACTIVE

5%

SPORTS &
ENTERTAINMENT

Source: Company data


Figure 2: 2014 Revenues & EBITDA by
division (%)
Revenues contribution

60%
Travel Retail

50%
40%

Publishing
30%
20%

Sports and
Entertainment

10%

Active

0%
0%

January 11th 2016

10%

20%

30%

40%

50%

With strong interests in Travel Retail and Sports.


The Travel Retail (TR) segment (53% of group sales) is the largest division by sales and is a truly
global player as it employs over 12,800 people and maintains a network of 4,161 stores in 30
countries, 170 airports and 700 stations through 3 activities: Travel Essentials (46% of divisional
sales), Duty Free & Luxury (41%) and Food Services (13%). Since its strategic focus is TR,
Lagardre initiated a process in 2013 to find investors to buy its distribution business which is
currently part of the TR division.
Lagardre Sports and Entertainment (5% of group sales), the smallest division of the Group, is a
globally integrated full service sports marketing agency as well as events and venue manager. A
significant change of the business mix is on track to further focus on emerging markets.
(Appendix 8)

EBITDA contribution

Source: Company data

1945:
Creation
of
Matra,
researching and developing planes,
transport systems and satellites

Figure 3: Lagardre in 6 dates

1992:
Merger
of
Hachette and Matra,
held by Lagardre group

2013: Lagardre sells


its EADS and Canal+
stakes

Lagardres history in 6 dates

1826: Louis Hachette lays


the basis of the Hachette
group main activities

A diversified geographical exposure.


Restructuring in Western Europe and Invest more in emerging markets.
To offset a weak economy in Europe, the Lagardres operating activities have been reshaped. On the
other hand the group continues to foster its presence in Asia and Eastern Europe with sales outlets
openings in the TR segment to capture highly increasing spent per passenger (PAX) and air traffic.
(Figure 4)

Source: Company data


Figure 5: Evolution of print revenues as
% of total sales
67%

61%
49%

2003

2007

Source: Company data

2003: Arnaud Lagardre takes the


lead of Lagardre SCA (French
partnership limited by shares)

An external growth strategy.


For many years, Lagardre has acquired several companies such as SportFive (2006), Doctissimo
(2008), Les Editions Albert-Ren (2008) and more recently Paradies (2015) to adapt to a new
environment. Moreover, as part of its business operations, Lagardre manages certain Travel Retail
contracts in the form of 50-50 joint ventures with its partners like SNCF or Aroport de Paris.
Non-strategic businesses to divest.
Departing with the old media businesses like the declining press distribution business and
advertising mainly established in Western Europe to focus on core activities like TR. (Appendix 9)

Figure 4: Geographical footprint

72%

1987: the company is


listed on Euronext Paris

2010

2013

A reduced dependency on Print businesses


Facing weak growth in the publishing and printed press market, Lagardre has reduced its work
force in paper-related businesses and will continue its cost-cutting plan in the publishing segment,
yet operating in a quite different market environment. (Figure 5)
Sustained investment in digital technologies
Lagardre Publishing, the companys cash cow, generating roughly half of total EBIT has seen its
model being called into question by structural changes that took place throughout the value chain of
the cultural industry. Initially exposed at 2/3 of sales under the Publishing paper market, the group
suffered from the rapid digital shift in the industry. After huge and costly efforts, the company
reversed the paper market exposure to 1/3 of total sales and continues to develop and adapt digitally
its broadcasting and magazines businesses to be well-positioned if market opportunities appear.
2

CFA Institute Research Challenge


Figure 6: Share ownership structure
Float

5%
8%

Qatar Invest.
Authority

13%

74%

Arnaud
Lagardre

January 11th 2016

Corporate management
Lagardre is a partnership limited by shares. Lagardres general management is in charge of the
Managing Partners. One Managing Partner and three Co-Managing Partners: Arnaud Lagardre,
Pierre Leroy, Dominique DHinnin, Thierry Funck-Brentano, engage their responsibility of drawing
up the strategy, ensuring the implementation of decisions and controlling the Group. The entire
general management has more than 25 years of experience with Lagardre.
As a conglomerate, Lagardres operating activites are conducted by legally independent companies
grouped together in the 4 business divisions, under the Managing Partners control, each divisions
has its own organization, each of the 4 divisional CEOs have more than 10 years of experience at
Lagardre or in the related industries. (Appendix 17)
Shareholder structure
Via Lagardre Capital & Management (LC&M), Arnaud Lagardre controls 8.2% of the capital and
12.7% of the voting rights of Lagardre SCA. The Qatar Investment Authority holds 12.83% of the
share capital. (Appendix 18)
The shareholders are highly dispersed, 74% of the shares are floating, but mainly held by
institutional investors (Figure 6).

Insiders
Source: Company data

Industry Overview and Competitive Positioning


Over the last few years, the media industry has been disrupted by the Internet and is struggling
to find a new path. To succeed in this new environment, companies need to drive both innovation
and efficiency to embrace the changing face of the media industry.

Figure 7: Global media industry


category segmentation: % share

Traditional model still dominates but a shift to an online model is the main challenge to tackle
The media and entertainment sector is in disruptive moment where existing business models
continue to thrive at the same time that new models are emerging. The landscape for media
consumer is substantially different to what it was few years ago. (Figure 9)
The rapidly growing amount of content available via the Internet and the proliferation of devices
such as tablets and smartphones accelerates the translation. The growth reflects the publics rising
demand for content anywhere, anytime and on any device.

Movies &
Entertainment
9%
Advertising
11%
Broadcasting &
Cable TV
48%
Publishing
32%

Consumers are no longer satisfied to enjoy print, video, or other forms of entertainment passively.
With spending turning away from the traditional paid media domains of TV and print towards
electronic devices, advertisers dedicate more resources to digital, database marketing, event
marketing and place-based media.

Source: Mdiamtrie

This changing dynamic poses challenges but also offers opportunities for entertainment content
companies: the Internet channel offers the possibility for these companies to connect with and
Figure 8: Media sources of revenue: % share market directly to consumers. As the smartphone becomes the central device, consumers are forced
to make more complex choices between traditional and new media formats, all of which are available
through the handset.
Telecommunication
services

Different sources of revenue for media companies


Major revenue sources in Media are telecommunications services (c45%), traditional publishing
including books, newspapers, magazines, and software (c20%) and radio and TV content distribution
including broadcasting, cable, and other pay TV subscription services (10%). Additional products
and services include movie production and distribution; music publishing, licensing and recording;
Internet publishing and Web portals; and data processing. (Figure 8)

Additional products and


services
Traditional publishing

Radio & TV content


0%

10% 20% 30% 40% 50%

Source: Mdiamtrie
Figure 9: Media consumption: hours
spent per day, world average
3.5
3

The sixth continent


Travel Retail has undergone a major shift over the past few years that has turned airports and train
stations into shopping destinations. The opportunity to buy goods when travelling is not a new thing
but the concept has changed over time: the range of products on offer and the different types of
shopping opportunities available at airports have become much more diverse. With sales reaching
88 bn in 2014, the worldwide industry of travel commerce is a market that is dynamic and strategic
as it is an important source of revenue for many brands and the primary source of income for many
airports (4% growth CAGR 2015-19e).

Key Industry Trends

2.5
2

2012

1.5

2015

1
0.5
0
TV

Online

Radio

Print

A new media experience


A transformation of advertising budget is underway as we spent more time on mobiles, tablets
and laptops. (Figure 9) This shift requires media companies to increase their focus on
innovation. It also creates opportunities to connect with customers through all devices in real
time and create campaigns across social media.
The division Lagardre Active is grappling with these issue as c40% of revenues of this division
stem from advertising.

Source: Mdiamtrie
3

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Figure 10: User penetration in the


ebooks segment

A wave of consolidation
Consolidation is hitting all segments of media, which promise to have a broad impact on the
future of the industry and competition. There is clearly an appetite for consolidation of audience
share and hence than advertising market in each media segment (TV, radio mainly).

Political and cultural concerns for ebooks


The ebook faces an environment in France that is characterized by various factors from politics
and culture. France remains the main market (31% of sales) for Lagardre Publishing. With a
rate of 8.9%, the user penetration in the ebooks segment is low in France, compared to top
countries such as the United States (36.1%) and the United Kingdom (16.5%). In France, the
ebook price-fixing law and the reduced from the book VAT rate decided in 2012 have negative
effects on this sector. Global distribution platforms like Amazon or Apple have brought the
globalization of publishing to a new dimension preventing Lagardre from gaining market share
outside of France. (Figure 10)

A system of tender offer for retail operations


There are different ways to grow in the TR: acquire new businesses or through concessions
which can be won in a tender process launched by airport authorities. Concession agreement is
for the design, construction, operation and maintenance of passenger terminal. A contract will be
awarded to the highest and most qualified bidder who meets the bid requirements. Airports
select the best partner as in-terminal concessions provide an important passenger service. A
well-implemented concession program can also provide financial benefits to the airports
operating budget.

TR not as strong as in the past


Decline in Eastern European travel volumes is responsible for a downturn in the European travel
retail business. The collapse of the Russian Ruble and the Chinese Governments crackdown on
corruption and extravagant spending have led to a marked reduction in spending of the most
important nationalities of travelling shopper. Meanwhile, the weakening currencies of other
developing market economies such as Brazil, as well as lacklustre growth in Europe and the
Americas, have also put the sector under strain.

Top Countries
United States

36.1%

United Kingdom

16.5%

Canada

16.3%

Spain

12.8%

Germany

11.1%

France

8.9%

January 11th 2016

Source: Syndicat National de lEdition

Competitive landscape
Demand is driven by discretionary consumer spending and leisure time. The profitability depends on
effective marketing and creative capital. Large companies have advantage because they can reach
mass audiences through multiple channels.
Small companies can compete effectively by targeting narrow audience segments with niche
products.
The TR industry is competitive but fragmented. More than 40% of the market share is held by 6 main
companies, but each of them develop their activities through different sectors.
Actors in Sports & Entertainment tend to offer sport and entertainment altogether (sport
competition with concerts) to address wider public, offer longer events at an increasing price. This
trend answers the desire of fans to be part of the live experience and of a global entertainment.

Main competitors by business units

Book publishing
Travel Retail
Radio
TV
Magazine
Audiovisual production
Digital
Sport rights

Source: Team research

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Porters 5 forces

Figure 11: Porters 5 forces


Threat of
Substitutes (3.5)

Threat of New
Entrants (1.5)

Rivalry (4)

Bargaining
Power of
Customers (4)

January 11th 2016

Bargaining
Power of
Suppliers (2.5)

Source: Team estimates

Rivalry: Players are large, often vertically integrated. These large companies tend to exacerbate
rivalry, as they are formidable rivals and able to exploit economies of scale. In TR, companies
compete fiercely as the ability to win and renew concessions contract is important.
Bargaining power of customers: The very diverse range of services and products on offer to
buyers results in a decrease in buyer power. In TR, Lagardre has some airport retailing
monopolies which reduces customer power.
Bargaining power of suppliers: For media, one factor is that suppliers may be indispensable to
players due to a lack of alternative inputs.
Threat of substitutes: The largest threat is online piracy. Moreover, substitutes are many due to
the broad scope of the industry.
Threat of new entrants: Quite low because of the high fixed costs associated with media. A
further barrier to entry would be the degree of regulation. In sport, the threat is quite high
because of the high ability of small agencies to enter the market and graze market share of large
groups.

Lagardres competitive advantage relies on:


Strong market presence in the TR
Lagardre TR is a global leader in TR with operations in 30 countries on four continents. It has the
largest international network of convenience stores and stores dedicated to cultural leisure products.
Lagardre TR operates a total of 4,161 stores, including 3,687 in Europe, Middle East and Africa, 270
in Asia-Pacific and 204 in North America. With the Relay and Hubiz stores and local store names such
as Newslink, Lagardre currently runs the worlds largest international network of stores located in
travel areas. Furthermore, Lagardre TR operates 337 food service outlets in nine countries. This
market presence helps Lagardre drive business growth which in turn assists in delivering financial
performance. Despite this network, we are still worry that the company strategy largely executed
through acquisition may not generate attractive returns. (Appendix 19)

Figure 12: Monte Carlo Analysis


200
180
160
140
120
100
80

Well-established publishing business


The group has well-established publishing business. According to industry estimates, Lagardre
Publishing is the worlds third-largest book publisher for the general public and educational markets.
Hachette, the groups flagship brand, publishes books in English, Spanish and French languages and
holds leading positions in several of its markets. In addition, the companys strong publishing
business provides access to a large customer base and established distribution channels which can
be leveraged to further enhance the growth prospects. But the decline of the market as well as selfpublishing, falling prices, development of Internet retailers are examples that illustrates the risks
weighing on the future of this division.

60
40
20
0

Source: Team estimates

Investment Summary
We initiate coverage of Lagardre SCA (MMB) with a SELL recommendation and a target price of
21 suggesting 17% downside potential.

Dividend Yield (%)

Figure 13: Dividend and FCF yield in


the industry
7.5

Our SELL recommendation is based on three key points: (1) an unattractive risk/reward profile,(2)
a diversified but mostly low organic growth activities operating in a highly competitive
environment and (3) a weak corporate strategy with serious issues on business sustainability

7.0

Our SELL recommendation relies on

6.5

A lack of advantages relative to peers


Despite asset cleaning, we think the group lack of advantages relative to leaders on each industries
where Lagardre operates. With c80% sale exposure on Europe, the group is too much dependent on
low organic growth activities, with industries experiencing challenging shift in consumer habits
(Digital, Advertising on Magazine, Publishing) and among high consolidation movement which
prouve the real difficulties actors meet to create long term value for shareholders.

6.0
5.5
5.0
4.5
4.0

-50

50

100

FCF Yield (%)


11Peers
Source: Factset

Lagardre
-39

Not attractive risk/reward profile


We believe at current valuation the risk/reward profile of the group is not attractive because
business exposure is highly cyclical on sales and low Capex raise question about future growth
dynamics. We believe at current valuation multiple the fundamental risk profile of the group requires
higher return which are clearly out of access by our view with such valuation level. (Figure 13)
Complete home-made corporate governance raise issue
The home made management lacks expertise on setting adequate price for acquisitions, and implies
huge impairment losses that reduce net income. We do not see signs ahead that could attest the
management decision wisdom. Moreover, Lagardre evolves in very competitive environment where
acquisition activity is huge (strong consolidation), the weak corporate governance profile is clearly
for us a weakness to compete.
5

CFA Institute Research Challenge

January 11th 2016

Figure 14: Lagardre SOTP (EV/EBITDA and P/E multiple)

Publishing
Media
Travel Retail
Target Price

Weight
51%
18%
31%

EV/EBITDA Implied EV (M) Price per Share


7.35x
1759
9.76
6.84x
988
6.27
9.03x
2030
7.79
23.8

P/E
12.8x
14.3x
16.4x

23.8

7.8

Implied EPS () Price per Share


0.89
11.4
0.31
4.5
0.54
8.9
24.7

24.7

6.3
9.8

SOTP (EV/EBITDA Multiple ) segment bridge

SOTP (P/E Multiple ) segment bridge

Valuation
Figure 15: DCF assumptions
Risk-free Rate

0.91%

Beta (unlevered)

1.13

Market Risk Premium

6.4%

Cost of Equity

11.2%

Tax rate

26%

Cost of debt

3%

Cost of debt after-tax

2.2%

Weight of Equity

63%

Weight of Debt

37%

WACC

7.9%

Terminal Growth Rate

2.0%

Sources: Factset, Damodaran & Team estimates

Figure 16: Share of enterprise value


19%

I.

DCF Valuation

A stable perpetual Growth Rate


Lagardres nominal perpetual growth rate is based on: (1) The global economic growth:
stabilization of World GDP growth rate at 3% from 2017 (Source: World Bank) and low inflation
forecast, (2) the new strategy set to establish Lagardre in higher-growing, emerging countries and
(3) lower growth in EU and North America. We obtained a long-term growth rate of 2%.
Sales and EBITDA forecasts
We forecast sales separately for each division based on global growth and company strategy. For the
TR division we estimate a sales growth of 4.4% 2015-2019 CAGR, and an EBITDA growth of 8.2% in
the same period. We estimate the publishing division to experience a sales and EBITDA 1.1% CAGR
2015-2019 growth. The EBITDA should grow by 0.89%. CAGR in the same period. The active division
should see its sales decrease by 1.4% 2015-2019 CAGR in line with industry consensus. Finally, we
estimate the sport division to see its sales and EBITDA grow by 1.1% CAGR 2015-2019.
Defining the WACC
To calculate the cost of capital, we used the CAPM. Fama & French model did not show significance
for the size and the book-to-market ratios. We calculated Lagardres beta as the average of beta in
Retail, Media and Publishing & Newspaper.
We used France 10-Year OAT as the risk-free rate.
Note: For further information, please refer to Appendix 24.

PV of Terminal
Value
PV of OFCF

81%
Source: Team estimates

Lagardre currently trades at 8.6x EV/EBITDA 2016e, which is a 14.5% premium to its 10-year
average EV/EBITDA 12-months forward multiples of 7.5x. We believe such a premium is unjustified.
We valued Lagardre using an equal blend between a sum-of-the-parts (SOTP) valuation and a DCF
model, and derived a target price of 21, which is 17% below the current share price.

DCF Target Price


The DCF model captures (1) slowly improving Lagardres FCF (2015-2019e CAGR of 1%), (2) its
important gearing increasing its risk and cost of equity, (3) the slow growth in each of the activities.
Our model points to a target value of 23.9. We ran several sensitivity analysis to analyze the impact
of the inputs on the target price. (Appendix 25) We did not used a Dividend Discount Model, despite
recurring dividend, because our fundamental analysis demonstrates the non sustainability of such
dividend yield relative to peers.

II. Sum-of-the-parts Valuation


We applied a discount of 25% to our blend of relative, which is based on historical discount to peers.
The blend of relative is made of peers multiples (EV/EBITDA, P/FCF and P/Earnings) and multiple
factor regression, which gives us a derived target price of 18.(Appendix 26, Appendix 28)
6

CFA Institute Research Challenge

January 11th 2016

1. Sum-of-the-parts using peers multiples

Figure 17: EPS consensus vs team


estimates

Choice of Peers
Direct comparable conglomerates are not available. Therefore we selected 3 peer groups based on
Lagardres divisions: (Appendix 21)
EPS Growth 2015E 2016E 2017E 15-17
Book Publishing, the Lagardre historical activity facing low growth and consolidation
(Pearson, Wiley, News Corporation, Mondadori, Scholastic and Bertelsmann).
Consensus
1.77
1.92
2.00 6.3%
Media, with mostly French companies focusing on TV broadcasting, radio or event management
Team
1.56
1.74
1.68 3.8%
(Next Radio TV, TF1, RTL Group, GL Events, Highlight Communication, NRJ Group).
Estimates
Travel Retail, in which companies deal with food & beverage, travel essentials, duty free and
Premium/
-12% -9.4% -16%
luxury (Autogrill, Dufry, WH Smith, Elior).
EPS VS Consensus

CAGR

Discount

Why We Choose These Three Multiples


We treat EV/EBITDA, P/FCF and P/E equally in our valuation as they represent the company value at
different stage of the financial statements.

Source: Team estimates


Figure 18: Valuation
Target
Weight
price ()

Valuation method
DCF Valuation
SOTP
Multiple factor regression
Average target price

23.9

50%

18

25%

21.2

25%

21

100%

Source: Team estimates

EV/EBITDA
Our Sum-Of-The-Parts analysis shows that TR is the only Lagardre activity trading at a discount
compare to peers when taking EBITDA as drivers while the two others trade at a premium. We
derived a target price before discount of 23.8 from EV/EBITDA valuation. (Appendix 29)
P/Earnings
The P/E method brings almost the same conclusion except for Media which trades at a discount to
peers. We forecast EPS to be multiplied by 4 between 2014 and 2015 mainly thanks to (1) the new
bond issue which lowered the group leverage and (2) a decrease in restructuring costs. We derived a
target price before discount of 24.70 from P/Earnings valuation. (Appendix 30)
P/FCF
We derived a target price before discount of 19 from the P/FCF valuation. (Appendix 31)
2.Multiple Factor Regression
A broad sample of 240 firms (153 in Retail, 40 in Media and 47 in Publishing & Newspaper) was used
to regress forward P/E against 8 variables: leverage, EPS long-term growth rate (g), payout, beta,
market capitalization (logarithm), return on equity, liquidity, default spread for cost of debt.
We obtained a target price before discount of 28.3. (Appendix 32)

Financial Analysis
Figure 19: Sales and EBITDA margin
8,000

8.0%

7,800

7.8%

7,600
7,400

7.6%

7,200

7.4%

7,000
6,800

7.2%
2013

2014

2015e 2016e 2017e

Sales (LHS)

EBITDA Margin (Rhs)

Sources: Company data & Team estimates

Figure 20: EBITDA margin by units


15.5%

Despite the strategic plan announced in 2008 with the aim to boost organic growth, the group
succeeded to deliver -2.1% of organic growth, with a divestment and FX impact of -10bps. We
may see a brighter trend in 2015e with the increasing exposure to TR for example, as the
group recently announced its intention to divest all of its historically lagging Distribution
activity (c20% of group sales). We see 2015e and 2016e as exceptional, thanks to good
momentum in Sport Events and Publishing, further supported by higher exposure to TR.
However, low margin activities with such high volatility, issues with the sustainability of
dividends, lower Capex and higher debt give the group an unattractive risk/reward profile.
Publishing (28% of group sales): a mature and cyclical story
Representing c28% of media sales and c41% of media EBITDA, the publishing business is a cash
machine as c90% of the groups annual DPS is covered by its FCF. (Appendix 13a)
We see positive momentum in 2016e as an education reform is expected in France, boosting sales in
this highly mature industry by 250bps (3% growth in 2016e, with underlying 0.5%). The impact is a
one shot item and will be short in time in our view (over 12 months) is a one shot item. Besides this
one-off item, we expect flat underlying growth in this highly mature industry as reflected by
historical average annual growth in 2008-14 of 0%). Please refer to the Appendix 12 . for the Industry
Snapshot.
Margin squeezed like a lemon
Despite a good business mix contribution (Publishing is ranked #2 after Sport by EBITDA
profitability) (Figure 19) we expect margin pressure on both supply and demand side for three
reasons: (1) a dispute with Amazon reflects the important challenge the industry faces with
bargaining power of retailers, (2) we define the European market as complicated on a regular basis
(e.g. price-fixing law in France) and (3) increasing author royalties that now account for more than
12.5% of the profit distribution among supply chain actors. (Appendix 13b)

13.5%
11.5%
9.5%
7.5%
5.5%
3.5%

2013

2014

2015E

2016E

2017E

Sources: Company data & Team estimates

We do not see any improvement in EBITDA margin due to this challenging situation and a serious
lack of exposure to e-books which could enhance margins (Publishing generates on average 40% of
its sales in France and only 30% of them are in general literature, the only segment really concerned
by digital revolution so far). Our research indicates potential EBITDA margin in digital of c25%. On
average, peers generate c20% of sales in digital vs. 10% at Lagardre with c13% EBITDA margin
(11% at Lagardre). (Appendix 12)
7

CFA Institute Research Challenge

TR (53% of group sales): Game over for the double digit growth game?
Despite long term exposure to the TR business, organic growth at Lagardre did not skyrocket, ranking
well behind its peers. (Figure 21) We believe this low growth trend is due to the diversification of
activities between the 3 sub segments as pure players such as DFS company (LVMH) pulled out of the
game. The group has embarked on a new strategic trajectory, as Distribution is being divested in
exchange of a more dynamic growth industry (TR). With the Paradies acquisition in 2015, we expect
the group (1) to add 0.6bn TR sales by 2019e with prudent 6% sales CAGR (vs 12% in the business
plan pre-acquisition) as North America has mature air traffic with historically high loading factors
(85%) and (2) to continue to generate c4.5% organic growth pa. The inclusion of Paradies with the
announced 12% EBITDA margin would add c1.8% of EBITDA margin percentage points including
15M synergies.

Figure 21: Travel Retail growth, Majors


25%
20%
15%
10%
5%
0%

2012

2013

2014

Source: Companies data


Figure 22: ROCE analysis
9%

120

8%

100

7%

80

6%

60

5%
4%

40

ROCE (lhs)
Indexed NOPAT (rhs)
Indexed Capital Employed (rhs)

Sources: Company data & Team estimates


Figure 23: Net earning margin/volatility

AVG Net earning margin

12%
10%

Wiley

8%

RTL
Pearson

6%
4%
2%
0%

Lagardre

Dufry
Autogril
l

0% 2% 4% 6% 8% 10% 12%
Std Dev of net earnings

Sources: Company data & Team estimates

6%

4%

2%

0%

Industry

Active

Sport & Entertainment (5% of group sales): Too many promises, pure players lack growth and
profitability
During the investor day held in May 2014, management described the activity as strong and with
growth potential ahead, supported by a PWC analysis which was referred to. Despite the bullish
expectations of industry specialists, we do not share the same view as historical organic growth has
been lagging in this segment (c5% average in 2008-14), and there are no events that would change the
trend. We expect however EBIT margin improvement, as announced by group, thanks to a efficient cost
cutting efforts (-0.8% EBIT margin in 2014 to 4.6% 2016e). The depreciation strategy of the group
appears to be quite aggressive, as depreciation/sales ratio decreased strongly while sales has been
relatively less volatile. Our research on IMG (sport pure player and direct competitor) revealed a low
growth industry with pressure on profitability. We do not think this segment to grow more than 5% as
announced by the industry experts. Our forecast stands at 1.7% CAGR 2015-19e.
The fall of ROCE at group level, volatility of ROE
Due to the exceptional dividends and non-recurring items, the tax rate of the firm is quite volatile.
Return on capital employed over the 2008-14 period experienced a sharp drop (from 8.7% to 7.5%).
NOPAT margin was divided by two due to the unprofitable Sport activity and the severe margin
pressure in TR (Figure 22). Currently, the ROCE-WACC spread is slightly negative which proves the
mature stage of the Lagardre businesses.
JVS and non-recurring items have a significant impact on the period 2008-14 (positive impact of
c60bps and negative impact c110 bps respectively). We forecast further ROE dilution, as the strategy is
clearly to decrease exposure to minorities but where the management track record remain very lo. Due
to lack of information, we cannot correctly value minorities. (Appendix 38)
High volatility and low earning margin
The Risk/Reward profile of the company does not seem attractive. On average between 2008-14,
Lagardres net earning margin stood at 3.2%with volatility of 7.8%, the group has the lower net
earning unit per point of risk among our selection of peers. (Figure 23) This high volatility is due to
non-recurring items (Restructuring costs, G&L, amortization of intangible related acquisition,
impairments) since 2003 and appear in our view, quite recurring as the group is constantly in
reorganization.
Huge impairments and losses
We analyzed the cumulative bottom line of the P&L and reach the conclusion that the cumulative
exceptional dividend per share of (c22) covered all the impairment and losses which the group has
made (cumulative c21 per share), as a result of expensive acquisitions and weak market conditions.
We see the management M&A activities as dangerous and most of time value dilutive, which can
transform the core coverage payout ratio far above 1, which we believe is not a key ingredient to build
leadership position in highly competitive industries.
Dividend payout is not backed by fundamentals
Historically since 2008, the group maintain its 1.30 dividend per share, while the FCF covered only
0.80. Because the asset cleaning arrived at end, we can be sure of non-exceptional dividends ahead.
Furthermore, we adjusted the reported earnings to core earnings to come to the conclusion that the
group distributes dividend which has been covered by the underlying core earnings, but not from its
cash flow as the conversion ratio falls below 1. However, due to the high amount of non-recurring
items and of the other investment line in the cash flow statement, we think the dividend is at risk if the
historical shareholders value destruction continues.

Figure 24: Capex/sales ratio

Publishing

January 12th 2015

TR

Below industry average CAPEX could have impact on future sales growth :
We used our SOTP peer list to compare Lagardre Capex with major actor by segment. We conclude
that Lagardre has, on average between 2008 and 2014, below industry ratio Capex/Sales (Figure 24).
We believe the investment effort is a key in a high competitive industry in order to generate sufficient
growth and shift to a leader position. (Appendix 42)

Lagardre

Sources: Factset & Companies data


8

CFA Institute Research Challenge


Figure 25: Net Debt/EBITDA

January 11th 2016

Above Industry Net Debt/EBITDA:


Lagardre has on average between 2008-14, 2.2x net debt/EBITDA vs peer average of 1.90x (all
segments are include, based on SOTP list). We expect the ratio for Lagardre to reach 2.6x, as the
group increases its debt with the Paradies acquisition (EV of 475m). Based on our forecast, and
with the 6% cash/sales requirement (our historical analysis highlights a cash/sales ratio of between
6-7%), we do not expect the group to reduce its net debt/EBITDA below 2x. Furthermore, evolving in
highly competitive industries with recent consolidation trends, we think the group should make
significant acquisitions to maintain market share. With a high payout ratio, higher Capex
requirement from TR (management indicated a figure above 100m pa) and no longer significant
assets divestures, we are confident with the further debt issuance assumptions.

2.6X
2.5X
2.4X
2.3X
2.2X
2.1X
2.0X
1.9X
1.8X

Figure 26: Cumulative cash analysis 2008-14

1.7X

Lagardre

Industry Avg

Source: Company data

Source: Company data

Figure 27: Consolidated sales breakdown

Market Risk | Regional paper prices


Lagardre Publishing (28% of group sales) and Lagardre Active (13% of group sales) are affected by
paper price mainly in European, North American and Asian Market. Although there is not a direct link
to a single index, according to companys statistic, these divisions operating profit are subject to
have a negative impact up to 15m in case of a long-term 10% long-term rise in paper prices.

Other
23%

GBP
6%
CHF
5%

Investment Risks

Market Risk | Credit risks


This risk mainly relates to trade receivables. In 2014, the Group was unable to recover certain
receivables in the areas of sports rights marketing and the organization of sporting events.
Receivables amount to 1280m and represent a DSO of 61 days and weigh 17.1% of group sales.

EUR
58%
USD
8%

Market Risk | Exchange rate risks


Lagardres exposure to foreign exchange rate risks on transactions effects, especially with the
strategy to increase its market share in emerging markets. 42% of consolidated sales are generated
outside of the Euro zone. (Figure 27) The sensitivity is, however, not very significant: a 1% rise of the
EUR/USD would decrease the operating profit in 0.4m in 2014. The current trend in the forex
market is favorable to Lagardre (euro depreciation) (Figure 28)

Source: Company data


Figure 28: Currency fluctuation
1.6
1.35

Economic Risk | GDP Growth


The sales per passengers in airports and train stations depends on economic climate which has an
impact on the purchasing power of travelers. As 53% of Group sales are from the Travel Retail
division, a decline in GDP growth rate may lead to a decrease in Travel Retail.

1.1
0.85
0.6

CHF/EUR

Source: Factset

GBP/EUR

USD/EUR

Economic Risk | Effects of digital and mobile technologies


A large portion of the Groups revenues derives from businesses that are sensitive to digital and
mobile technologies(digital transition). Innovation in digital and mobile technologies may affect
customers shopping habits, which can have a huge impact on the amount of customers in the Groups
store locations and sales of traditional analogue products such as magazines and printed books.
Transformation from TV to Internet may directly or indirectly create more uncertainty in revenues
directly or indirectly associated with advertising and broadcasting. Ambiguity in various markets has
a negative impact on the profitability for Lagardre.
Strategic Risk | Acquisition risk
Lagardre faces a poor track record regarding acquisitions and integration. The Group acquired
many companies with high valuation multiples, poor performances and high impairment loss.
9

CFA Institute Research Challenge

January 11th 2016

Operational Risk | Terrorism


As recent events have shown, media, events and tourism that are open to public are increasing
targeted by terrorists. The growth of the Group which is exposed to these events have increased this
exposure to the impact of terrorist attacks.

Figure 29: GDP Growth


8.0%
7.0%
6.0%

Operational Risk | Geopolitical events


Lagardre has activities in countries sensitive to the risk of credit or liquidity crisis, in 2014, the
Group generated 4% of sales in countries rated Ba1 or lower by Moodys.

5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Bresil

China
2012

US

2013

France

2014

Operational Risk | Major contract


Lagardre Sports & Entertainment (5% of group sales) and Lagardre TR (53% of group sales)
submitted a bid in a call for tenders. These 2 divisions have large contracts for sports events or
franchise in airports that are renewed every 3-10 years. There is, however, no guarantee that these
contracts will be renewed and there is a risk of losing contracts or revising pricing up, which would
negatively impact business volumes and margins.
Governance Risk
Lagardre meets the requirement of the AFEP/MEDEF code. However, the General Partner is also
the Chairman of the board, as well as largest shareholders and occupies many important positions in
the group. We think this situation not only reduces other shareholders ability to oppose against the
corporate strategy, but also presents potential conflicts of interest between corporate and personal
benefit. (Appendix )

Source: World Bank

Regulatory Risk | Special regulations


The group is subject to local specific regulations in the countries in which it operates, spread all 4
division, including intellectual property rights, legal copyright registration requirements, rules
governing the pricing of books, and VAT rules in publishing activities. Limitations principally
applicable to the sale of print media, foodstuffs, tobacco, alcohol and duty-free products and
transport operations in TR. Broadcasting service and audiovisual production in Active and Sports &
Entertainment.
Note: Please refer to Appendix 47 For Risk Matrix.

Corporate Governance and Social Responsibility

Figure 30: Remuneration


Compensation
(in millions)

2012

2013

2014

Fixed base salary and


benefits in kind

6.4

5.9

5.9

Variable salary

3.5

4.04

3.3

Extraordinary
compensation

0.026

4.4

Attendance fees

0.021

0.019

Total

9.947

9.959

13.6

Source: Company data

Figure 31: Share ownership


Stakeholders

% of shares

Managing Partner

8.18%

Co-Managing Partners

0.16%

Supervisory Board

0.06%

Source: Company data

Governance
In accordance with AFEP/MEDEF code, Lagardre meets the independence requirement of
supervisory board, all members are independent (Appendix 48), the establishment of 2 committees
and existence of code of conduct ensure the supervision of management and day-to-day activities.
The compensation and benefits are publicly released (Figure 30 & 31).
However, rights and obligations of shareholders are limited. Double voting rights for share
registered in the name of the same shareholder for at least four years reduce the volatility and
interests for minority shareholders. Shareholders are represented by the Supervisory board to give
consent to the appointment of the Managing Partners by the General Partners, thus they dont have
direct vote right to change a board director unless there are any disagreements between
Supervisory board and General Partners.
Social
Lagardre wants to play a role in improving the living condition and well-being of communities in
the countries in which it operates, in particular through educational, cultural and sportive activities
and initiatives.
Jean-Luc Lagardre Foundation and Elle Foundation have not only taken action in
supporting people with talent in the fields of writing, broadcast, music and digital technology,
encouraging the sharing of expertise, but have supported associations to grant access to education
for all as well as women and children projection, more than 240 young talented peoples beneficed
from the Jean-Luc Lagardre Foundation grants to pursue their major projects since 1991.
Furthermore, corporate efforts are taken to advance workforce diversity and social transformation,
as well as other measures to focus on the growth of employees and offer guidance for young people.
Environment
Lagardre shows best practice to improve its environmental performance by trying to use certified
and recycled paper, managing waste electrical and electronic equipment, creating an innovative
website that allows educators to view all new publications and specimen copied on line to reduce
the carbon footprint of distribution relating to this field of publishing.

10

CFA Institute Research Challenge

January 11th 2016

Appendix Table of Contents


Appendix 1. Income Statement
Appendix 2. Margin Contribution by Division
Appendix 3. Balance Sheet
Appendix 4. Strategic Balance Sheet
Appendix 5. Vertical Balance Sheet
Appendix 6. Cash Flow Statement
Appendix 7. Free Cash Flow Restatement
Business Description
Appendix 8. Description of activities
Appendix 9. Acquisitions & Disposals
Appendix 10. GDP Zones and Forecasts
Appendix 11. Major Currency Snapshot
Appendix 12. Publishing Snapshot
Appendix 13. Publishing Industry Profitability Erosion
Appendix 14. Major Zone PAX and Forecast with GDP
Appendix 15. Europe PAX and Forecast with GDP
Appendix 16. Europe PAX and Forecast with Oil Price
Appendix 17. Management Structure
Appendix 18. Share Ownership Structure
Industry Overview
Appendix 19. Worlds busiest airports (by passenger trafic)
Appendix 20. SWOT Analysis
Valuation
Appendix 21. Peers Summary
Appendix 22. GDP growth forecasts
Appendix 23. Target capital structure
Appendix 24. WACC components
Appendix 25. Scenario Analysis
Appendix 26. Multiples summary
Appendix 27. Team Estimates vs Consensus
Appendix 28. Valuation Summary
Appendix 29. SOTP Valuation (EV/EBITDA Multiple)
Appendix 30. SOTP(P/E Multiple)
Appendix 31. FCF per share Valuation
Appendix 32. P/Earnings Regression
Appendix 33. P/Earnings Regression Bridge by Segment
Appendix 34. Forecast of EPS Growth of Peers
Appendix 35. Scenario Analysis
Financial Analysis
Appendix 36. Discount to peers
Appendix 37. Extended Dupont Analysis
Appendix 38. Jvs and Recurring Impact on Net Margin
Appendix 39. Degree of Operating Leverage
Appendix 40. Non Recurring Items, 2008-14 Cumulative Analysis per Share
Appendix 41. Profitability and Credit Analysis Snapshot
Appendix 42. Synthetic Credit Rating
Appendix 43. Capex Analysis
Appendix 44. Capex/Sales History with Peers
Appendix 45. Debt breakdown and Interest Rate Forecast
Appendix 46. Financial Interest Forecast based on Historical Data
Investment risk
Appendix 47. Risk Matrix
Corporate governance & social responsibility
Appendix 48. Supervisory Board
11

CFA Institute Research Challenge

January 11th 2016

Appendix 1. Income Statement


2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
Net Sales Media
Publishing
Active
Travel&Retail
Sport
Other Sales Group

8215 7892 7966


2159 2273 2165
2111 1725 1826
3501 3388 3579
444
507
396
406
397
373

7657
2038
1441
3724
454
391

Reported Sales
Growth

8621 8289 8339 8048 7722 7564 7493 7701 8179 8199 8340 8487
-5.0% -3.9% 0.6% -3.5% -4.1% -2.0% -0.9% 2.8% 6.2% 0.2% 1.7% 1.8%

Opex

-7823 -7619 -7671 -7421 -7163 -7048 -6977 -7159 -7599 -7620 -7749 -7884

EBITDA Media
EBITDA from control structure
EBITDA Group
EBITDA Burden effect from
structure
EBITDA MARGIN

803
-5
798

667
4
670

662
6
668

-0.6%
9.3%

0.4%
8.1%

0.9% -0.8% -1.9% -6.7% -5.1% -4.9% -4.6% -4.6% -4.5% -4.4%
8.0% 7.8% 7.2% 6.8% 6.9% 7.0% 7.1% 7.1% 7.1% 7.1%

D&A

-221

-276

-240

-308

-256

-214

-223

-204

-188

-197

-200

-206

EBIT Media
EBIT Group

587
577

397
394

434
428

331
319

323
304

347
302

330
293

375
338

430
393

419
382

429
392

434
397

Non Recurring Income


(expenses)
Jv's and Associates

2
246

-55
29

-150
65

-919
111

-181
105

1218
7

-93
9

-12
9

-35
9

-35
9

-35
9

-35
9

Financial income
Financial expenses
Net Financial Expenses
Tax Shield

39
-215
-176
6

14
-96
-82
35

21
-103
-82
21

21
-116
-95
-17

11
-93
-82
23

9
-100
-91
7

12
-85
-73
46

15
-64
-49
13

15
-64
-49
13

15
-64
-49
13

15
-64
-49
13

15
-64
-49
13

PreTax earnings
Income tax expense

649
-22

286
-123

627
34
0
129
4.61
0.28

163
27
0
127
1.07
1.21

Tax Rate
Net Earnings
Minorities
Share out
EPS
Payout Ratio

632
-5
627

7370 7216 7170 7378 7856 7876 8017 8164


2077 2066 2004 2133 2197 2208 2219 2231
1014 996
958
944
940
924
908
893
3809 3745 3814 3827 4272 4320 4427 4546
470
409
394
474
447
424
463
495
352
348
323
323
323
323
323
323

570
-11
559

553
-37
516

544
-28
516

570
-28
542

609
-28
581

607
-28
579

619
-28
591

631
-28
603

CAGR
08-14 15-19
-2.2%
-1.2%
-12.3%
1.4%
-2.0%

2.6%
1.1%
-1.4%
4.4%
1.1%

-7.0%

2.7%

261 -584 146 1436 137 286 318 308 317 322
-67
-105
-40
-117
-87
-74
-82
-79
-82
-83
-3.4% -43.0% 25.7% 18.0% 27.5% -8.1% 63.7% 25.7% 25.7% 25.7% 25.7% 25.7%
194
31
0
128
1.27
1.02

-689
18
0
127
-5.56
-0.23

106 1319 50
17
12
8
0
0
0
128
128
131
0.69 10.22 0.32
1.87 0.13 4.10

213
8

236
8

229
8

236
8

240
8

131
1.56
0.83

131
1.74
0.75

131
1.68
0.77

131
1.74
0.75

131
1.77
0.74

-36.0% 3.1%

Appendix 2. Margin Contribution by Division

EBITDA Margin (%)


Publishing
Active
Travel&Retail
Sport
Weight(%)
Publishing
Active
Travel&Retail
Sport

2008

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

9.8
12.3
11.2
5.0
25.9

8.5
14.1
2.9
4.2
29.0

8.3
12.5
6.1
4.5
28.8

8.3
11.8
8.0
4.4
23.3

7.7
11.7
7.8
4.4
16.6

7.7
11.8
7.8
4.4
15.9

7.6
10.9
9.0
4.8
13.7

7.7
10.8
7.5
5.0
16.7

7.7
10.8
7.5
6.0
16.6

7.7
10.7
7.5
6.0
16.4

7.7
10.7
7.5
6.1
16.6

7.7
10.6
7.5
6.1
16.7

33.7
30.0
21.9
14.3

49.0
7.5
21.4
22.0

41.4
17.1
24.3
17.2

38.8
18.4
26.1
16.8

43.2
13.9
29.3
13.7
12

44.7
14.1
29.5
11.8

40.6
15.8
33.6
9.9

41.0
12.4
32.7
13.9

39.3
11.6
36.9
12.1

39.5
11.4
37.6
11.5

38.7
11.0
37.9
12.4

38.0
10.6
38.3
13.1

CFA Institute Research Challenge

January 11th 2016

Appendix 3. Balance Sheet

2008

2009

2010

Cash and Equivalents


Short term bank loans and overdrafts
Net Cash
Short-Terms Investments
Account Receivables
Inventory
Other Current Assets
Derivative financial instruments
Loans
Current Assets

835
(259)
576
117
1,647
551
933
404
40
4,527

764
(245)
519
78
1,468
538
857
12
34
3,750

616
654
648
1,748
528
797
713
723
738
786
(105)
(60)
(49)
(71)
(68)
(68)
(68)
(68)
(68)
(68)
511
594
599
1,677
460
729
645
655
670
718
106
83
55
36
38
38
38
38
38
38
1,189
1,276
1,255
1,239
1,280 1,266 1,343 1,343 1,343 1,343
523
542
581
559
578
555
556
556
557
557
914
900
978
1,005
959
895
951
953
969
986
14
11
5
4
7
7
7
7
7
7
55
52
29
10
10
10
10
10
10
10
3,417 3,518 3,550 4,601 3,400 3,567 3,618 3,631 3,662 3,728

Net Property Plant, and Equipment


Goodwill
Intangible Assets
Deferred Tax Assets
Investments in non consolidated companies
Loans and receivables
Investments in Associates
Non-Current Assets
Assets held for sale
Total Assets

636
2,980
1,340
203
121
81
2,443
7,804
12,331

2011

2012

2013

1,845
1,191
522
82
522
229
336
4,727

1,754
492
533
96
480
245
370
3,970

1,618
541
578
92
438
306
342
3,915

1,613
163
606
3
480
326
317
3,508

1,651
238
642
1
460
249
293
3,534

1,645
806
693
1
433
240
342
4,160

Long-Term Debt
Deferred Tax Liabilities
Provisions for pensions
Non-current provisions for contingencies and
losses
Other non-current liabilities:
Non Current Liabilities
Liabilities associated with assets held for sales
Total liabilities

2,380
243
94

2,174
223
102

1,953
126
101

1,843
143
101

2,165
290
119

189
252
3,158
7,885

179
395
3,073
7,043

170
219
2,569
399
6,883

162
147
2,396
5,904

Share Capital
Reserves
Retained Earnings(Deficit)
Shareholder's Equity

800
2,962
593
4,355

800
3,021
137
3,958

800
2,923
163
3,886

Minority Interest
Total Equity

91
4,446

124
4,082
11,125
11,125

12,331
12,331

2015E 2016E 2017E 2018E 2019E

635
625
712
739
762
840 1,107 1,146 1,178 1,208 1,208
2,810
2,583 1,837
1,799
1,619
1,740
1,740 1,740 1,740 1,740 1,740
1,386
846
746
1,016
885
1,045
1,283 1,283 1,283 1,283 1,283
169
167
184
236
190
199
199
199
199
199
199
90
49
64
47
59
56
56
56
56
56
56
116
63
83
85
64
69
69
69
69
69
69
2,169
2,054 1,771
1,451
152
159
159
159
159
159
159
7,375
6,387 5,397 5,373 3,731 4,108 4,612 4,652 4,684 4,713 4,713
1,097
13
437
11,125 10,901 8,928 9,360 8,332 7,508 8,180 8,270 8,315 8,375 8,441

Accounts Payable
Short-Term Debt
Other Payable
Derivative financial instruments
Accrued taxes and employee benefit expense
Sundry payables
Current provisions for contingencies and losses
Current Liabilities

Total Equity and Liabilities


Total Assets

2014

1,702
1,713
490 1,033
525
562
1
1
443
443
249
249
273
273
3,683 4,275

1,717
1,033
599
1
443
249
273
4,315

1,718
558
600
1
443
249
273
3,842

1,719
558
611
1
443
249
273
3,854

1,720
558
622
1
443
249
273
3,866

617
245
117

1,030
289
155

1,084
289
155

1,084
289
155

1,559
289
155

1,559
289
155

1,559
289
155

168
93
2,835
6,369

158
108
1,245
5,405

158
112
1,744
5,427

158
112
1,798
6,073

158
112
1,798

158
112
2,273

158
112
2,273

158
112
2,273

6,113

6,115

6,127

6,139

800
2,856
(707)
2,949

800
2,020
89
2,909

800
742
1,307
2,849

800
1,141
41
1,982

800
2,008

800
2,058

800
2,100

800
2,149

800
2,202

132
4,018

75
3,024

82
2,991

78
2,927

99
2,081

99
2,107

99
2,157

99
2,199

99
2,248

99
2,301

10,901
10,901

8,928
8,928

9,360
9,360

8,332
8,332

7,508
7,508

8,180
8,180

8,270
8,270

8,315
8,315

8,375
8,375

8,441
8,441

13

CFA Institute Research Challenge

January 11th 2016

Appendix 4. Strategic Balance Sheet

2008

2009

2010

2011

2012

2013

2014 2015E 2016E 2017E 2018E 2019E

Current Operating Assets


Current Operating Liabilities
Net Working Capital
Variation
NWC/sales

3,131
2,863
2,626 2,718 2,814 2,803 2,817 2,716 2,850 2,853 2,869 2,887
3,118
3,012
2,940 3,025 3,002 3,011 2,919 2,968 3,008 3,010 3,022 3,034
13
-149
-314
-307
-188
-208
-102 -252 -158 -158 -152 -147
134
(162)
(164)
7
118
(20)
106 (150)
94
(0)
5
5
0.15% -1.80% -3.76% -3.81% -2.44% -2.75% -1.36% -3.27% -1.93% -1.92% -1.83% -1.74%

Fixed Assets
Goodwill
Intangible
Investment in Joint Venture and Associates
Total Non Current Operating Assets

636
2,980
1,340
2,564
4,956

635
2,810
1,386
2,259
4,831

625
712
739
762
840 1,107 1,146 1,178 1,208 1,208
2,583 1,837 1,799 1,619 1,740 1,740 1,740 1,740 1,740 1,740
846
746 1,016
885 1,045 1,283 1,283 1,283 1,283 1,283
2,103 1,835 1,498
211
215
215
215
215
215
215
4,054 3,295 3,554 3,266 3,625 4,129 4,169 4,201 4,230 4,230

Total Capital Employed


Total Capital Employed Without GoodWill

4,969
1,989

4,682
1,872

3,740
1,157

Cash and Equivalent


Gross Debt
Net debt/(cash)
Other Financial Assets
Other financial Liabilities
Net Financial Assets (Liabilities)

835
3,571
2,736
3.43
642
82
560

764
2,666
1,902
2.84
239
96
143

616
654
648 1,748
2,494 2,006 2,403 1,423
1,878 1,352 1,755 (325)
2.81
2.16
3.14 (0.63)
238
229
173
114
92
3
1
1
146
226
172
113

Other Operating Assets


Other Operating Liabilities
Net Operating Assets (Liabilities)

203
495
(292)

169
618
(449)

Provisions
Shareholders funds
Minorities
Equity capital

619
4,355
91
4,446

651
3,958
124
4,082

613
580
580
617
586
586
586
586
586
586
3,886 2,949 2,909 2,849 1,982 2,008 2,058 2,100 2,149 2,202
132
75
82
78
99
99
99
99
99
99
4,018 3,024 2,991 2,927 2,081 2,107 2,157 2,199 2,248 2,301

Total Assets
Total Liabilities

12,331
12,331

11,125
11,125

10,901
10,901

1,264
744
520

2,988
1,151

197
290
(93)

8,928
8,928
-

3,366
1,567

3,058
1,439

3,523
1,783

3,877 4,011 4,043 4,078 4,083


2,137 2,271 2,303 2,338 2,343

528
797
713
723
738
786
1,520 2,117 2,117 2,117 2,117 2,117
992 1,320 1,404 1,394 1,379 1,331
1.92
2.44
2.42
2.41
2.33
2.21
124
124
124
124
124
124
1
1
1
1
1
1
123
123
123
123
123
123

673
190
199
199
199
199
199
199
383
353
401
401
401
401
401
401
290 (163) (202) (202) (202) (202) (202) (202)

9,360
9,360
-

8,332
8,332
-

7,508
7,508
-

8,180
8,180
-

8,270
8,270
-

8,315
8,315
-

8,375
8,375
-

8,441
8,441
-

Current Operating Assets

(=) Account receivables + Inventory + Other Current Assets (excluding loans and derivatives instruments)

Current Operating Liabilities


Total Capital Employed
Other Financial Assets
Other Operating Assets
Other Operating Liabilities

(=) Accounts Payable + Accrued Taxes and employee benefit expense + Sundry payable + Other Payable
(=) Net working capital + Total non Current operating assets
(=) Short and Long term Loans + Derivatives + Short Term Investments
(=) Deferred tax assets + Assets held for sales
(=) Deferred tax liabilities + Other non Current liabilities + Liabilities held for sales

14

CFA Institute Research Challenge

January 11th 2016

Appendix 5. Vertical Balance Sheet

2008

2009

2010

2011

2012

2013

2014

2015E 2016E 2017E 2018E 2019E

7%
1%
13%
4%
8%
3%
0%
37%

7%
1%
13%
5%
8%
0%
0%
34%

6%
1%
11%
5%
8%
0%
1%
31%

7%
1%
14%
6%
10%
0%
1%
39%

7%
1%
13%
6%
10%
0%
0%
38%

21%
0%
15%
7%
12%
0%
0%
55%

7%
1%
17%
8%
13%
0%
0%
45%

9%
0%
16%
7%
11%
0%
0%
44%

8%
0%
16%
7%
12%
0%
0%
44%

8%
0%
16%
7%
12%
0%
0%
43%

8%
0%
16%
7%
12%
0%
0%
43%

9%
0%
16%
7%
12%
0%
0%
44%

5%
24%
11%
2%
1%
1%
20%
63%
0%
100%

6%
25%
12%
2%
1%
1%
19%
66%
0%
100%

6%
24%
8%
2%
0%
1%
19%
59%
10%
100%

8%
21%
8%
2%
1%
1%
20%
60%
0%
100%

8%
19%
11%
3%
1%
1%
16%
57%
5%
100%

9%
19%
11%
2%
1%
1%
2%
45%
0%
100%

11%
23%
14%
3%
1%
1%
2%
55%
0%
100%

14%
21%
16%
2%
1%
1%
2%
56%
0%
100%

14%
21%
16%
2%
1%
1%
2%
56%
0%
100%

14%
21%
15%
2%
1%
1%
2%
57%
0%
100%

15%
21%
15%
2%
1%
1%
2%
57%
0%
100%

15%
21%
15%
2%
1%
1%
2%
56%
0%
100%

Accounts Payable
Short-Term Debt
Other Payable
Derivative financial instruments
Accrued taxes and employee benefit expense
Sundry payables
Current provisions for contingencies and losses
Current Liabilities

15%
10%
4%
1%
4%
2%
3%
38%

16%
4%
5%
1%
4%
2%
3%
36%

15%
5%
5%
1%
4%
3%
3%
36%

18%
2%
7%
0%
5%
4%
4%
39%

18%
3%
7%
0%
5%
3%
3%
38%

20%
10%
8%
0%
5%
3%
4%
50%

23%
7%
7%
0%
6%
3%
4%
49%

21%
13%
7%
0%
5%
3%
3%
52%

21%
13%
7%
0%
5%
3%
3%
52%

21%
7%
7%
0%
5%
3%
3%
46%

21%
7%
7%
0%
5%
3%
3%
46%

20%
7%
7%
0%
5%
3%
3%
46%

Long-Term Debt
Deferred Tax Liabilities
Provisions for pensions
Non-current provisions for contingencies and
losses
Other Non Current Liabilities
Non Current Liabilities
Liabilities associated with assets held for sales
Total liabilities

19%
2%
1%

20%
2%
1%

18%
1%
1%

21%
2%
1%

23%
3%
1%

7%
3%
1%

14%
4%
2%

13%
4%
2%

13%
4%
2%

19%
3%
2%

19%
3%
2%

19%
3%
2%

2%
2%
26%
0%
64%

2%
4%
28%
0%
63%

2%
2%
24%
4%
63%

2%
2%
27%
0%
66%

2%
1%
30%
0%
68%

2%
1%
15%
0%
65%

2%
1%
23%
0%
72%

2%
1%
22%
0%
74%

2%
1%
22%
0%
74%

2%
1%
27%
0%
74%

2%
1%
27%
0%
73%

2%
1%
27%
0%
73%

Share Capital
Reserves
Retained Earnings(Deficit)
Shareholder's Equity

6%
24%
5%
35%

7%
27%
1%
36%

7%
27%
1%
36%

9%
32%
-8%
33%

9%
22%
1%
31%

10%
9%
16%
34%

11%
15%
1%
26%

10%
0%
0%
24%

10%
0%
0%
25%

10%
0%
0%
25%

10%
0%
0%
25%

9%
0%
0%
26%

Minority Interest
Total Equity

1%
36%

1%
37%

1%
37%

1%
34%

1%
32%

1%
35%

1%
28%

1%
26%

1%
26%

1%
26%

1%
27%

1%
27%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

100%
100%

Cash and Equivalents


Short-Terms Investments
Account Receivables
Inventory
Other Current Assets
Derivative financial instruments
Loans
Current Assets
Net Property Plant, and Equipment
Goodwill
Intangible Assets
Deferred Tax Assets
Investments in non consolidated companies
Loans and receivables
Investments in Associates
Non-Current Assets
Assets held for sale
Total Assets

Total Equity and Liabilities


Total Assets

15

CFA Institute Research Challenge

January 11th 2016

Appendix 6. Cash Flow Statement


2008
PreTax Earning

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

825

368

343

(489)

228

1,527

210

335

367

356

366

371

(-) Depreciation and amortisation


(+) Other Items
(+) Change in Current Assets
(-) Change in Current Liabilities
(=) Change in Working Capital

(201)
(209)
172
38
141

(257)
(28)
(268)
(106)
(127)

(238)
58
(236)
(72)
(81)

(305)
548
92
85
170

(246)
92
95
(23)
21

(214)
(1,337)
(11)
9
(116)

(223)
(39)
14
(92)
49

(204)
12
(101)
49
(150)

(188)
35
134
40
94

(197)
35
3
3
(0)

(200)
35
17
11
5

(206)
35
17
12
5

(+) Dividends from equity accounted companies


(+) (Income) loss equity accounted companies

30
(136)

31
26

17
(65)

35
198

48
(61)

17
(7)

(9)

(9)

(9)

(9)

(9)

Gross Cash Flow from Operating Activities


Net Financial Income
Net Income Tax
Net CFO

570
(194)
(178)
198

781
(111)
(119)
551

672
(67)
(74)
531

427
(87)
(83)
257

531
(76)
(64)
391

570
(86)
(149)
335

355
(69)
(75)
211

692
(49)
(74)
569

487
(49)
(82)
356

579
(49)
(79)
451

586
(49)
(82)
456

598
(49)
(83)
466

Capex for Intangible and PP&E


Capex for other assets and Investments
Proceeds from investing activities
(Increase) decrease in short term investments
Net CFI

(225)
(484)
778
8
77

(240)
(63)
700
37
434

(228)
(82)
104
(29)
(235)

(253)
(99)
840
21
509

(264)
(384)
85
28
(535)

(296)
(41)
3,418
29
3,110

(249)
(282)
50
(481)

(233)
(475)

(228)
-

(708)

(228)

(228)
(228)

(229)
(229)

(206)
(206)

Other Financing Items


Dividends paid to owners of parent
Dividends paid to minority
Net Change in Debt
Net CFF

(102)
(174)
(28)
131
(173)

(1)
(171)
(31)
(852)
(1,055)

8
(167)
(33)
(41)
(233)

(24)
(167)
(28)
(551)
(770)

(60)
(166)
(26)
414
162

(18)
(1,323)
(16)
(1,004)
(2,361)

(47)
(945)
(16)
58
(950)

(3)
(170)
(16)
597
408

(26)
(170)
(16)
(212)

(26)
(170)
(16)
(212)

(26)
(170)
(16)
(212)

(26)
(170)
(16)
(212)

269

(84)

11

14

48

460.0
728.7
9%

728.7
644.8
8%

644.8
655.3
8%

655.3
669.8
8%

669.8
717.7
8%

10
40

Other Effects
Change in cash and cash equivalents

2
104

12
(58)

(71)
(8)

87
83

(13)
5

(6)
1,078

4
(1,216)

Cash and Equivalents, Beginning of the year


Cash and Equivalents, End of Year
NET CASH/SALES

472
576
7%

576
518
6%

518
510
6%

510
593
7%

593
598
8%

598
1,676
22%

1,676
460
6%

Appendix 7. Free Cash flow Restatement

2008
Revenue
Growth
Opex

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

8,621
-5.0%
-7823

8,289
-3.9%
-7619

8,339
0.6%
-7671

8,048
-3.5%
-7421

7,722
-4.1%
-7163

7,564
-2.0%
-7048

7,493
-0.9%
-6977

7,701
2.8%
-7159

8,179
6.2%
-7599

8,199
0.2%
-7620

8,340
1.7%
-7749

8,487
1.8%
-7884

(=) EBITDA
(-) D&A
(=) EBIT
% Margin
(-) Tax on Operating Income
% Tax Rate
(=) NOPAT

798
(221)
577
6.7%
(147)
25.5%
430

670
(276)
394
4.8%
(100)
25.5%
294

668
(240)
428
5.1%
(109)
25.5%
319

627
(308)
319
4.0%
(81)
25.5%
238

559
(256)
304
3.9%
(77)
25.5%
226

516
(214)
302
4.0%
(77)
25.5%
225

516
(223)
293
3.9%
(75)
25.5%
218

542
(204)
338
4.4%
(86)
25.5%
252

581
(188)
393
4.8%
(100)
25.5%
293

579
(197)
382
4.7%
(97)
25.5%
285

591
(200)
392
4.7%
(100)
25.5%
292

603
(206)
397
4.7%
(101)
25.5%
296

(+) Depreciation & Amortisation

(221)

(276)

(240)

(308)

(256)

(214)

(223)

(204)

(188)

(197)

(200)

(206)

(-) Capex for PPE and Intangible


(-) Change in NWC

(225)
141

(240)
(127)

(228)
(81)

(253)
170

(264)
21

(296)
(116)

(249)
49

(233)
(150)

(228)
94

(228)
(0)

(229)
5

(206)
5

412
-10%

123
-70%

(=) Free Cash Flow


Growth in FCF

285

457
60%

197
60%

16

259
32%

143
-45%

372
160%

159
-57%

253
59%

257
2%

291
13%

CFA Institute Research Challenge

January 11th 2016

Go back

Appendix 8. Description of activities

LAGARDERE

28% of sales
Books and e-Books
publishing

13% of sales

53% of sales
Travel Essentials,
Free & Luxury
Foodservice

Press
activities
and
magazine
publishing,
audiovisual (TV, radio,
audiovisual production),
digital and advertising
sales brokerage

Duty
and

Source: Team estimates

17

5% of sales
Athlete
representation,
venue consulting, events
production
and
management, marketing
rights

CFA Institute Research Challenge

January 11th 2016

Go back

Appendix 9. Acquisitions & Disposals

Lagardre Publishing
Acquisitions
2
4
1
0
1
0
0
4
4
16
22%

2015
2014
2013
2012
2011
2010
2009
2008
2007
TOTAL

Lagardre Travel Retail

Disposals
1
1
1
0
1
1
3
2
6
16
36%

Acquisitions
1
1
3
6
1
0
1
1
0
14
19%

Disposals
2
3
0
0
0
0
0
0
1
6
14%

Lagardre Active
Acquisitions
2
2
4
3
0
1
2
4
7
25

Disposals
2
2
2
1
5
3
3
0
1
19

Lagardre Sports and


Entertainment
Acquisitions
Disposals
3
1
2
0
1
0
1
0
1
0
2
0
1
0
4
0
2
2
17
3
24%
7%

35%
43%
NB: This table highlights the number of acquisitions and disposals by division for each year. The most
dynamic division is Lagardre Active with 35% of group acquisitions and 43% of group disposals
98.2 M

70 M
865 M

Feb 08

Jun 12

55 M

Dec 08

Nov 06

May 15

Apr 14

Acquisitions

Lagardre Acquisition & Divesture Timeline


Divestures
Apr 13

Feb 08

Mar 11

2,283 M

Oct 13

1,020 M
651 M

Source: Company data

18

485 M

Aug 15

CFA Institute Research Challenge

January 11th 2016

Go back

Appendix 10. GDP Zones and Forecasts


11.0%
9.0%
7.0%
5.0%
3.0%
1.0%
2013

-1.0%

2014
EURO AREA GDP

2015E
USA GDP

2016E
ASIA GDP

2017E

Emirates GDP

Source: World Bank

Appendix 11. Major Currency Snapshot


90

4.5

EUR/RUB

80

4.0

70

3.5

EUR/BRL

60
3.0

50
40
01/14

07/14

01/15

2.5
01/14

07/15

EUR/USD

1.4

9.0

07/14

01/15

07/15

EUR/CNY

8.5
8.0

1.3

7.5

1.2

7.0
1.1
1.0
01/14

6.5
07/14

01/15

6.0
01/14

07/15

Source: Factset

19

07/14

01/15

07/15

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Appendix 12. Publishing Snapshot


Publisher
Holding

Hachette

PRH

LAGARDERE

BERTELSMANN

Harper Collins
NEWS
CORPORATION

Simon&Schuster
CBS CORPORATION

LFY Revenue (M)


LFY Organic Growth
Organic Average % 5 Yr
Reported Growth Average % 5 Yr

2029
-1.8%
-2.6%
-1.3%

3324
0.70%
6.06%
13.63%

1257
-3.07%
0.59%
8.91%

586
NA
NA
-0.31%

LFY EBITDA
LFY EBITDA Margin
5 Year Average EBITDA Margin

221
10.9%
11.9%

452
13.6%
13.5%

167
13.3%
10.5%

81
13.8%
12.0%

LFY Geographic Exposure


USA
UK
Europe
Other

21.3%
18.2%
37%
24%

55.6%
11.8%
16.1%
17%

44.0%
26.6%
2.0%
27%

89%
2%
2%
7%

Digital exposure

c10%

c20%

c25%

c25%

Source: Company data

Appendix 13a. Publishing FCF dividend coverage

Source : Company

Appendix 13b. Publishing Industry Profitability Erosion

Source : The book publishing industry, 3rd edition

20

8%

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Appendix 14: Major Zone PAX and Forecast with GDP

EUROPE PAX
EURO AREA GDP

2008
1.2%
6.7%

2009
-5.8%
-10.0%

2010
3.0%
-1.1%

2011
6.8%
7.8%

2012
1.0%
-5.9%

2013
2.2%
4.2%

2014
4.7%
3.1%

2015E
1.7%
1.5%

2016E
1.9%
1.8%

2017E
1.8%
1.6%

CAGR 20082013
1.9%
-1.3%

NORTH AMERICA
USA GDP

-2.9%
1.7%

-4.0%
-2.0%

2.6%
3.8%

2.1%
3.7%

3.4%
4.2%

-1.6%
3.7%

5.3%
3.9%

12%
2.7%

1.4%
2.8%

0.9%
2.4%

1.2%
2.6%

ASIA
ASIA GDP

0.1%
26.1%

45.1%
9.6%

21.5%
20.9%

6.8%
22.7%

16.0%
11.5%

5.1%
10.5%

5.9%
7.9%

7.5%
6.7%

7.5%
6.7%

7.4%
6.6%

18.1%
8.5%

Middle East
Emirates GDP

9.0%
22.3%

9.2%
-19.6%

15.4%
12.8%

8.0%
21.5%

13.2%
7.2%

15.2%
8.1%

9.4%
-0.2%

11.0%
2.2%

10.9%
3.7%

10.9%
3.8%

12.2%
6.2%

WorldWide
World GDP

-1.2%
9.6%

2.6%
-5.2%

5.4%
9.7%

4.8%
10.8%

4.1%
2.1%

3.1%
2.8%

3.0%
2.6%

3.0%
2.8%

3.0%
3.3%

3.0%
3.2%

2.3%
3.9%

Sources : World Bank for GDP data and forecast, Airport Council International for airport data

Appendix 15: Europe PAX and Forecast with GDP

10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
-12%

2008

2009

2010

2011

2012

EUROPE PAX

2013

2014

2015E

2016E

2017E

2015

2016

2017

EURO AREA GDP

Sources: World Bank for GDP data and forecast, Airport Council International for airport data

Appendix 16: Europe PAX and Forecast with Oil Price


40%
30%
20%
10%
0%
-10%

2008

2009

2010

2011

2012

2013

2014

-20%
-30%
-40%
-50%
EUROPE PAX

OIL PRICE

Sources: OPEC for GDP data and forecast, Airport Council International for airport data

21

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Appendix 17. Management Structure


A. Partners
Lagardre SCA is a French partnership limited by shares, who has two categories of Partners.

Lagardre SCA
(MMB)

Limited
Partners**

General
Partners*

Arjil
CommanditeArco

Arnaud
Lagardre

B. Executive Committee
Executive
Committee

Ramzi Khiroun
Spokesman for the Managing
Partners

Managing
Partners

Arnaud
Lagardre

Arnaud Lagardre
Chairman
General and Managing
Partner

Arjil
CommanditeArco

Pierre Leroy
Secretary General
Co-Managing Partner

Dominique DHinnin
CFO
Co-Managing Partner

Thierry Funck-Brentano
Chief HRCSDO
Co-Managing Partner

*As a French partnership limited by shares, two General Partners are liable to an unlimited extent for
companys liability.
*Limited Partners are represented by a Supervisory Board, and managed by Managing Partners
*In Lagardre SCA, General Partners are also Managing Partners
Source: Company data

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Appendix 17. Management structure


The members of the Executive Committee
Director

Position

Held Since

Affiliates/Other positions

Arnaud Lagardre

Managing Partners of Lagardre SCA

Managing Partners since March 2003


Tenure: 29 Years

Pierre Leroy

Co-Managing Partner of Lagarde re


SCA
Secretary General of the Lagarde re
group

Director and CEO of MMB in 1987


Chairman and CEO of Lagardre
Socits in 1988 Secretary General of
Lagardre group in 1993
Tenure: 29 Years

Source: Company data

23

Chairman and Chief Executive Officer, Arjil Commandite e-Arco


SA
Chairman, Lagarde re SAS
Chairman, Lagarde re Capital & Management SAS
Chairman and Chief Executive Officer and
Chairman of the Board of Directors of Lagarde re Media SAS
Director, Hachette Livre SA
Chairman of the Supervisory Board, Lagarde re Services SAS
Chairman of the Supervisory Board, Lagarde re Active SAS
Chairman of the Executive Committee,
Lagarde re Unlimited SAS
Director, Lagarde re Ressources SAS
Chairman, Lagarde re Unlimited Inc.
Permanent representative, Lagarde re Unlimited Inc.
Managing Member, Lagarde re Unlimited LLC
Chairman, Sports Investment Company LLC
Member of the Board of Directors, World Sport Group
Investments Ltd
Member of the Board of Directors, World Sport Group
Holdings Ltd
Chairman, Fondation Jean-Luc Lagarde re
Chairman, Lagarde re Paris Racing Ressources sports
association (not-for-profit organisation)
Chairman, Lagarde re Paris Racing sports association (not-forprofit organisation)
Director, Deputy Chairman and Chief Operating Officer, Arjil
Commandite e Arco SA
Chairman, Lagarde re Ressources SAS
Director, Deputy Chairman and Chief Operating Officer,
Lagarde re Media SAS
Director, Hachette Livre SA
Member of the Supervisory Board, Lagarde re Services SAS
Member of the Supervisory Board, Lagarde re Active SAS
Director, Lagarde re Active Broadcast
(a Monaco-based joint-stock corporation)
Chairman of the Supervisory Board,
Socie te dExploitation des Folies Berge re SAS
Liquidator, Financie re de Pichat & Compagnie SCA
Chairman, Lagarde re Participations SAS
Chairman, Lagarde re Expression SAS
Chairman, Dariade SAS
Chairman, Sofrimo SAS Chairman, Holpa SAS
Permanent representative of Lagarde re Participations to the
Board of Directors, Galice SA
Representative, Lagarde re Participations, Chairman, He lios
SAS
Director, Ecrinvest 4 SA
Director, Fondation Jean-Luc Lagarde re
Chairman and Chief Executive Officer, Lagarde re Paris Racing
Ressources SASP
Manager, Team Lagarde re SNC
Member of the Board of Directors, Lagarde re UK Ltd Director,
Lagarde re Capital & Management SAS

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Appendix 17. Management structure


The members of the Executive Committee
Director

Position

Held Since

Affiliates/Other positions

Dominique dHinnin

Co-Managing Partner of Lagarde re


SCA
CFO, Lagarde re group

CFO since 1998


Tenure: 18 Years

Thierry Funck-Brentano

Co-Managing Partner of Lagarde re


SCA
Chief Human Relations,
Communications and Sustainable
Development Officer, Lagarde re group

Entire career with the Lagardre group


Tenure: 23 Years

Chief Operating Officer, Arjil Commandite e-Arco


SA Director and Chief Operating Officer, Lagarde re Media SAS
Chairman and Chief Executive Officer, Ecrinvest 4 SA
Member of the Supervisory Board, Lagarde re Active SAS
Permanent representative of Lagarde re Media SAS to the
Board of Directors of Lagarde re Active Broadcast (a Monacobased joint-stock corporation)
Member of the Supervisory Board, Lagarde re Services SAS
Director, Hachette Livre SA
Director, Lagarde re Ressources SAS
Member of the Supervisory Board, Matra Manufacturing &
Services SAS
Director, Marie Claire Album SA
Director, Holding E. Prouvost SA
Member of the Board of Directors, Lagarde re North America,
Inc.
Director and Chief Operating Officer, Arjil Commandite e-Arco
SA
Director and Chief Operating Officer, Lagarde re Media SAS
Permanent representative of Lagarde re Media SAS to the
Board of Directors, Hachette Livre SA
Member of the Supervisory Board, Lagarde re Active SAS
Member of the Supervisory Board, Lagarde re Services SAS
Chairman and member of the Management Committee,
Lagarde re Unlimited SAS
Member of the Board of Directors, World Sport Group
Holdings Ltd
Member of the Board of Directors, World Sport Group
Investments Ltd
Representative, Lagarde re Unlimited, Chairman, Lagarde re
Unlimited Stadium Solutions SAS
Director, Lagarde re Active Broadcast (a Monaco-based jointstock corporation)
Director, Lagarde re Ressources SAS
Member of the Supervisory Board, Socie te dExploitation des
Folies Berge re SAS
Director, Lagarde re Capital & Management SAS
Chairman of the Supervisory Board, Matra Manufacturing &
Services SAS
Director, Ecrinvest 4 SA
Director, Fondation Jean-Luc Lagarde re
Director, Secretary General and Treasurer, Lagarde re Paris
Racing Ressources sports association (not-for-profit
organisation)
Secretary General and member of the steering committee,
Lagarde re Paris Racing sports association

Source: Company data

Corporate Officers
director

position

Held Since

Joined Lagardre
Since

Other positions held before replacement

Arnaud Nourry

Chairman, CEO
Hachette Livre

23 May 2003

1992

Director, Groupe Alexandre Hatier

Dag Rasmussen

Chairman,CEO
Lagardre Travel Retail

2011

1988

COO, president, Lagardre Travel Retail

Denis Olivennes

Chairman,CEO
Lagardre Active

7 november 2011

2010

president, Canal+ France


CEO, FNAC

Arnaud Lagardre

CEO
Lagardre Sports and
Entertainment

Grar Adsuar

Deputy CFO
Lagardre SCA

1987

25 January 2011

1989

Source: Company data

24

CFO, Telecommunication satellites business of Astrium

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Appendix 18. Share ownership structure

A. Share Capital

French
Institutional
Investors

Non-French
investors

12.34%

67.75%

Private
investors

Lagardre
Capital&Management

8.28%

6.79%

Employees & Group


Savings plan
investment Funds
2.67%

Treasury
Shares

2.27%

Lagardre SCA
(MMB)
B. Voting Rights

French
Institutional
Investors

Non-French
investors

13.03%

63.2%

Private
investors

Lagardre
Capital&Management

12.73%

8.18%

Employees & Group


Savings plan
investment Funds
2.86%

Lagardre SCA
(MMB)

C. Principal shareholders
Shareholders

Share Capital

The rights to Vote

Arnaud Lagardre

8.18%

12.73%

Qatar Investment Authority

12.827%

9.98%

Source: Company data

25

Treasury
Shares

0%

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Appendix 19. Worlds busiest airports (by passenger trafic)

Lagardre Travel Retail presence

Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Location
Atlanta - Hartsfield-Jackson
Beijing
London Heathrow
Tokyo - Haneda
Los Angeles
Dubai
Chicago - O'Hare
Paris - CDG
Dallas - Fort Worth
Hong Kong
Frankfurt
Jakarta Soekarno-Hatta
Istanbul - Atatrk
Amsterdam - Schiphol
Canton Baiyun
Changi
New York - JFK
Denver
Shanghai - Pudong
Kuala Lumpur

Country
USA
China
United Kingdom
Japan
USA
United Arab Emirates
USA
France
USA
China
Germany
Indonesia
Turkey
Netherlands
China
Singapore
USA
USA
China
Malaysia

Number of passengers
96,178,899
86,130,390
73,408,442
72,826,862
70,665,472
70,475,636
70,015,746
63,808,796
63,523,489
63,148,379
59,566,132
57,005,406
56,767,108
54,978,023
54,780,346
54,091,802
53,635,346
53,472,514
51,651,800
48,932,471

NB: A portfolio of stores in 220 airports across four continents. Among the
20th busiest airports in the world, Lagardre TR is present in 11 airports.
Sources: Company data & Airport Council International

26

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Appendix 20. SWOT Analysis

Weaknesses

Strengths

- Still too dependent on mature and low growth activities


(Publishing 40% EBIT group part)

- Diversified activities: four businesses related to media


- Ability to reorganize itself towards growing activities

- Few synergies between sport and entertainment (10% of


EBITDAR media) and other media segments

- Responsive to economic changes (acquisitions)


- Important cash return for shareholders from recent
divestures (EADS and Canal+)

- Poor corporate governance (Partnership limited by shares)


- Disability to well price acquisitions: Le Guide, Sportfive

- Ability to adapt itself to globalization, digitalization trends


- Emblematic radio and magazines

SWOT
Threats

Opportunities
- Growth opportunities in airport retail division thanks to
growing air traffic and passenger spends

- Intense competition in all the business activities affecting


the groups market share

- Growth with potential acquisitions (Travel retail & Active)

- High competition with market leaders on the online retail


(Google and Amazon)

- Digital revolution: double screen eBook and smartphones


will bear margin in Publishing industry

- Global economic slowdown: Lagardre is subject to growth


slowdown of advertising in Europe
- Industry consolidation reduces Lagardres sales power

Source: Team estimates

27

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Appendix 21. Peers summary

Book Publishing

Media

Travel Retail

Company Name

Market Cap Bn
(12/28/2015)

Total Revenue
M

Total EBITDA
Sales per
Margin
Business Unit M

BU
%Revenue

Net
Debt/EBITDA

Pearson

8,597

6,503

17.7%

6,503

100%

2.54x

News Corp

7,335

7,406

11.3%

1,667

23%

-2.12x

John Wiley

2,369

1,553

20.3%

1,553

100%

1.47x

Scholastic

1,203

1,308

6.7%

1,308

100%

-3.46x

Mondadori

263

1,238

6.9%

346

28%

3.97x

Lagardre

3,573

7,110

11.0%

2,004

28%

2.82x

Median

2,369

1,553

11.3%

1,553

1.47x

RTL Group

11,609

6,003

21.0%

6,003

100%

0.88x

News Corp

7,335

7,406

11.3%

5,731

77%

-2.12x

TF1

2,079

2,029

9.6%

2,029

100%

-1.66x

NRJ Group

784

380

15.8%

380

100%

-2.61x

GL Events

372

942

11.2%

942

100%

3.08x

Highlight
Communications

265

298

22.4%

298

100%

-0.04x

Mondadori

263

1,238

6.9%

889

72%

3.97x

Lagardre

3,573

7,110

10.4%

1,352

19%

Median

784

1,238

11.3

942

Dufry

5,887

4,973

12.0%

4,973

100%

2.82x
-0.04x
4.52x

Elior

3,260

5,581

8.1%

5,581

100%

3.33x

WH Smith

2,737

1,579

14.3%

706

45%

-0.10x

Autogrill

2,231

4,766

8.6%

2,732

57%

2.56x

Lagardre

3,573

7,110

4.8%

3,814

54%

2.82x

Median

2,998

4,869

10.3%

3,852

Source: Factset

28

2.95x

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Appendix 22. GDP growth forecasts

World Economy %
World (WBG members)
US
Euro Area
Central & Eastern Europe
East Asia & Pacific
China

2010
4.3
2.5
2.0
0.2
9.8
10.6

2011
3.2
1.6
1.7
1.6
8.4
9.5

2012
2.5
2.2
-0.7
0.6
7.4
7.8

2013
2.4
1.5
-0.2
2.8
7.1
7.7

2014
2.6
2.4
0.9
2.1
6.8
7.3

2015E 2016E 2017E


2.4
2.9
3.1
2.5
2.7
2.4
1.5
1.7
1.7
2.9
3.3
3.7
6.4
6.3
6.2
6.9
6.7
6.5

Source: World Bank

Appendix 23. Target capital structure

37%
Net Debt/(Net Debt+Equity)

63%

Equity/(Net Debt+Equity)

Source: Team estimates

Appendix 24. WACC components

Weighted Average Cost of Capital

Risk-free rate

0.91%

France 10 Years OAT

Based on A. Damodaran's data: average beta of publishing


& newspaper, retail and broadcasting sectors
Based on A. Damodaran's data: total equity risk premium
6.41%
of France
Cost of equity 11.4%

Beta

1.63

Market premium
Tax rate

25.7%

Based on Lagardre data

Cost of debt

3.00%

Based on Lagardre data

Cost of debt after-tax 2.23%


WACC 7.9%
Source: Team estimates

NB: Damodarans data are dated December 2015


= +
=


+ 1
+
+
29

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Appendix 25. Scenario Analysis

Revenue

2015E

2016E

2017E

2018E

2019E

7,701

8,179

8,199

8,340

8,487

Growth

2.8%

Opex

-7159

6.2%
-7599

0.2%
-7620

1.7%
-7749

1.8%
-7884

(=) EBITDA

542

581

579

591

603

(-) D&A

(204)

(188)

(197)

(200)

(206)

(=) EBIT

338

393

382

392

397

% Margin

4.4%

(-) Tax on Operating Income

(86)

% Tax Rate

25.5%

4.8%
(100)
25.5%

4.7%
(97)

4.7%
(100)

25.5%

4.7%
(101)

25.5%

25.5%

(=) NOPAT

252

293

285

292

296

(+) Depreciation & Amortisation

(204)

(188)

(197)

(200)

(206)

(-) Capex for PPE and Intangible

(233)

(228)

(228)

(229)

(206)

(-) Change in NWC

(150)

94

(=) Free Cash Flow


Growth in FCF
WACC

159

253

257

291

160%

-57%

59%

2%

13%

7.93%
2.0%

Terminal Value

5,000

P V of terminal value

3,685

P V of OFCF

FCF
18%

783

Entreprise value 2015

4,468

Net debt 2015

1,404

Minority 2015e + Pension for Obligations 2015e

254

E 2015 = EV - Net debt - Minorities and Pension

2,810

E 2016 = E 2015 *(1+Ke)

3,129

Shares outstanding

131

Target Price

23.9

WACC

372

Perpetuity growth rate

WACC

(0)

Terminal
Value, 82%

7.5%
7.7%
7.9%
8.1%
8.3%

1.6%
24.3
23.0
21.8
20.6
19.6

Perpetuity Growth
1.8%
2.0%
25.4
26.7
24.1
25.2
22.8
23.9
21.6
22.6
20.5
21.4

2.2%
28.0
26.5
25.0
23.7
22.4

2.4%
29.5
27.8
26.3
24.8
23.5

7.5%
7.7%
7.9%
8.1%
8.3%

1.6%
-4.4%
-9.5%
-14.3%
-18.8%
-23.0%

Perpetuity Growth
1.8%
2.0%
0.2%
5.1%
-5.2%
-0.7%
-10.3%
-6.0%
-15.0%
-11.1%
-19.5%
-15.8%

2.2%
10.4%
4.2%
-1.5%
-6.8%
-11.8%

2.4%
16.1%
9.5%
3.4%
-2.3%
-7.6%

Source: Team estimates

30

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Appendix 26. Multiples summary

Business valuation(M)

EV/EBITDA

Publishing

1759

Media

988

Travel Retail

2030

EV Group 2016

4778

Net Debt

1404

Minorities

254

Conglomerate discount

-25%

Target Price ()

17.85

NB: EV/EBITDA is computed as EV at the beginning of the fiscal year divided by the forecast EBITDA of the
same fiscal year.

P/Earnings Valuation

FY16E

Estimated EPS

1.73

Average P/E segment

14.2x

Conglomerate discount

-25%

Target Price ()

18.52

NB: We applied a conglomerate discount of 25% to Lagardre target price because we believe the company
not to be a specialist in each of them and we dont see synergies between them.

Multiples valuation

Target price ()

P/Earnings

18.52

EV/EBITDA

17.85

Average Target Price ()

18.10

Sources: Team estimates & Factset

31

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Appendix 27. Team Estimates VS Consensus

SALES

MMB Consensus
Team Estimates
Position

2015E
7,146
7,378
3.3%

Team Estimates VS Consensus


2016E
7,350
7,856
6.9%

2017E
7,522
7,887
4.9%

EBITDA

MMB Consensus
Team Estimates
Premium/Discount

2015E
573
569
-0.8%

2016E
640
618
-3.5%

2017E
663
612
-7.8%

EPS

MMB Consensus
Team Estimates
Premium/Discount

2015E
1.8
1.5
-15.7%

2016E
1.9
1.7
-10.2%

2017E
2.0
1.6
-19.7%

Appendix 28. Valuation Summary

Multiple

TP

Weight

EV/EBITDA

23.8

25%

P/E

24.7

25%

REGRESSION P/E

28.3

25%

P/FCF

19.0

25%

Conglomerate
Discount
Multiple Valuation

18.00

50%

DCF Valuation

23.90

50%

Target Price

21.00

25%

Source: Team estimates

32

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Appendix 29. SOTP Valuation (EV/EBITDA Multiple)

EV/EBITDA
2016E
2017E

EBITDA CONSENSUS
2015E
2016E
2017E

CAGR 1517

Publishing

Pearson
Wiley
News Corporation
Mondadori
Scholastic
Industry Multiple
Publishing EBITDAe*
Target EV

7.4x
8.8x
4.8x
6.4x
7.3x
7.3x
248
1759

7.2x
7.3x
4.1x
5.4x
6.4x
6.4x
244
1550

869
349
948
78
110

818
390
1004
91
132

843
470
1063
102
145

-1.5%
16.0%
5.9%
14.4%
14.8%

233

248

244

2.5%

6.9x
8.6x
6.4x
5.8x
4.2x
7.9x
6.8x
144
988

5.4x
8.1x
5.4x
5.6x
3.9x
6.4x
5.5x
139
765

191
1346
78
111
70
57

212
1399
91
118
73
73

261
1470
102
116
77
85

16.9%
4.5%
14.4%
2.2%
4.9%
22.1%

150

144

139

-3.77%

6.6x
9.5x
10.8x
8.1x
8.8x
225
2030

5.9x
8.0x
10.4x
7.4x
7.7x
229
1811

377
725
170
508

405
990
177
543

436
1116
183
575

7.54%
24.07%
3.75%
6.39%

186

225

229

10.78%

Active, Sport and Entertainment

TF1
RTL Group
Mondadori
GL Events
HightLight Com
NRJ Group
Industry Multiple
Media EBITDAe*
Target EV
Travel and Retail

Autogrill
Dufry
WHSmith
Elior
Travel Retail Multiple
Travel Retail EBITDAe*
Target EV
Source: Team estimates

EV Group
Net Debt 2016e
Pension and Minorities 2016e
Equity Value
Share Out
Target Price

4778
1404
254
3120
131
23.80

We find a before discount target price of 23.80


using the EV/EBITDA multiple by division. We
used the Factset Consensus for each peer to
obtain the industry multiple. We used our team
estimates EBITDA to derive the target price.

Sources : Factset, Consensus & Team estimates

33

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Appendix 30. SOTP (P/E Multiple)

P/E

EPS Estimate

2016E

2015E

2016E

2017E

CAGR 1517

PSON-GB

Pearson

10.7x

0.70

0.64

0.66

-3.3%

JW.A-US

Wiley

12.8x

2.79

3.27

3.80

16.8%

NWSA-US

News Corporation

19.7x

0.57

0.64

0.71

11.6%

MN-IT

Mondadori

9.5x

0.05

0.10

0.12

60.2%

SCHL-US

Scholastic

20.2x

1.33

1.87

1.63

10.7%

Publishing Multiple

12.8x

Weight

50%

TFI-FR

TF1

19.6x

0.46

0.50

0.65

19.0%

RTL-BE

RTL Group

14.8x

4.81

4.98

5.26

4.5%

MN-IT

Mondadori

9.5x

0.05

0.10

0.12

60.2%

GLO-FR

GL Events

10.8x

1.34

1.52

1.48

5.1%

HLG-ETR

HightLight Com

13.8x

0.34

0.40

0.44

14.1%

NRG-FR

NRJ Group

22.8x

0.29

0.41

0.51

33.3%

Media Multiple

14.3x

Weight

19%

AGL-IT

Autogrill

26.3x

0.23

0.31

0.38

28.0%

DUFN-CH

Dufry

12.7x

5.19

8.76

11.20

46.9%

SMWH-GB

WHSmith

16.9x

0.94

1.01

1.09

7.9%

ELIOR-FR

Elior

15.9x

0.99

1.12

1.22

11.4%

Travel Retail Multiple


Weight
Average PE Segments
Lagardre EPS (e) Team Estimates
Source: Team estimates

Target Price

16.4x
32%
14.2x
1.74
24.7

Sources : Factset Consensus & Team estimates

34

We find a before discount target


price of 24.7 using the P/E multiple
by division. We applied the EBIT
2016E weight by division to find the
repartition P/E between activities.
We used the Factset Consensus for
each peer to obtain the industry
multiple. We used our team
estimates EPS to derive the target
price.

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Appendix 31. FCF per share Valuation

P/FCF
2016E
2017E
Pearson
News Corporation
Scholastic
TF1
RTL Group
GL Events
HightLight Com
NRJ Group
Dufry
WHSmith
Elior
Median Multiple
Lagardre FCF Team estimates
Share Out
FCF/share
TP

15.4x
11.2x
19.6x
13.9x
12.3x
15.9x
32.9x
25.4x
9.0x
15.7x
17.7x
15.7x
159
131
1.21
19.0

13.0x
9.9x
18.7x
12.4x
11.7x
8.6x
15.4x
19.6x
8.2x
14.7x
13.8x
13.0x
253
131
1.93

FCF per Share CONSENSUS


2015E
2016E
2017E
0.5
1.1
1.7
0.5
4.2
0.1
0.0
0.4
-21.9
1.0
0.9

0.4
1.1
1.9
0.7
6.0
1.0
0.2
0.4
12.3
1.1
1.0

0.5
1.3
2.0
0.8
6.3
1.9
0.4
0.5
13.6
1.2
1.3

CAGR 1517
6.6%
8.1%
7.5%
21.3%
23.1%
NS
NS
10.9%
NS
7.3%
19.1%

Sources : Factset, Consensus and Team estimates

Appendix 32. P/Earnings regression

Group
Publishing
Travel Retail
Media

Weight* EPS 2016e Regression Multiple Target Value


100%
1.73
16.3x
28.3
51%
0.88
15.2x
13.4
31%
0.54
17.9x
9.6
18%
0.31
16.9x
5.3

NB: A broad sample of 240 firms (153 in Retail, 40 in Media and 47 in Publishing & Newspaper) was used to
regress forward P/E against 8 variables: leverage, EPS long-term growth rate (g), payout, beta, market
capitalization (logarithm), return on equity, liquidity, default spread for cost of debt. We then applied the *EBIT
2016e weight of each Lagardres activity to get a global group P/E which we multiplied by the forecasted 2016
EPS.

Source: Team estimates

35

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Appendix 33. P/Earnings Regression Bridge by Segment

28.3

5.3
9.6

13.4

Appendix 34. Forecast of EPS Growth of Peers

Companies

2016E

2017E

Lagardre

16%

-5%

Pearson

-10%

1%

Wiley

17%

16%

News Corporation

16%

12%

Mondadori

104%

17%

Scholastic

37%

-11%

Companies

2016E

2017E

Lagardre

16%

-5%

TF1

6%

30%

RTL Group

2%

7%

Mondadori

104%

17%

GL Events

15%

-5%

HightLight Com

19%

10%

NRJ Group

43%

27%

Companies

2016E

2017E

Lagardre

16%

-5%

Autogrill

34%

18%

Dufry

73%

24%

WHSmith

8%

7%

Elior

12%

7%

Source: Factset
36

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Appendix 35. Scenario Analysis


Bear Case

BASE CASE

Bull Case

26.20

Average TP

19.10

21.00

Up/Downside

-25%

-17%

3.5%

Recommendation

SELL

SELL

NEUTRAL

DCF TP
EV/EBITDA TP

20.45
17.80

23.90
18.00

30.7
21.70

CAGR 15-19

-1.00%

1.10%

3.20%

Sales

Underlying organic growth at -1.5%. 50m additional


sales for the french education reform in 2016.

Publishing

EBITDA CAGR 15-19


EBITDA Margin

Underlying organic growth at 0.5%. 75m additional Underlying organic growth at 1.5%. 150m additional
sales for the french education reform in 2016
sales for the french education reform in 2016

-1.92%

0.89%

3.70%

10Bps pa decrease in EBITDA Margin with defavorable


Constant digital part, pressure on margin from author 5 Bps increase in EBITDA Margin with digital business
digital mix. Strong pressure on margin from author
royalties (-5bps on margin pa)
mix. No pressure from author royalties
royalties (-10bps on margin pa )

Travel & Retail and Distribution


CAGR 15-19
Sales

2.00%

4.40%

Underlying TravelR organic growth at CAGR 3.4% and Underlying organic growth at 2% with deteriorating
10% for Distribution. Contraction for 2016 and 2017
emerging market economies (Russia, Bresil and China ) .
with low oil prices and high volatility on emerging FX.
Paradies segment sales growth at c4%.
Paradies segment sales growth at c6%

5.5%
Underlying organic growth at 5%. Paradies Sales
growth at c10%

EBITDA CAGR 15-19

3.80%

8.20%

12.40%

EBITDA Margin

Increase in the EBITDA Margin with 6% from Paradies,


no synergies.

Increase in the EBITDA Margin with 8% from Paradies,


linear syngeries of 16M in 2019, and constant
underlying segment margin at 5.1%.

Increase in the EBITDA Margin with 12% from


Paradies, linear syngeries of 16M in 2019, and
constant underlying TR margin

Active
CAGR 15-19
Sales

-1.40%
NA

Underlying organic growth at -4.5% on magazine


segment and 1% growth in the audiovisual.

EBITDA CAGR 15-19


EBITDA Margin

NA

-1.40%
NA

Constant EBITDA Margin at 7.5%

NA

Sport
CAGR 15-19

1.10%
NA

High cyclicality in sales growth. Strong years in 2016


and 2017 but low activity thereafter.

EBITDA CAGR 15-19

1.10%

EBITDA Margin

NA

Regression model for the estimates of EBITDA Margin


based on historical operating leverage.

Sales

NA

NA

Structure
Impairment Loss

45M from LeGuide, NewsWeb and BilletReduc

None

None

Restructuring

70M Restructuring Costs Pa

35M Restructuring costs (constant) pa.

None

Gains/Losses

None

25M Gains from Deutsche Bank Sales in 2016

None

37

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Appendix 36. Discount to peers

Premium/discount to peers : at current stock price the


discount is on the bottom of its cycle

Industry vs MMB P/E NTM, : Historically, the group


always traded at c20% discount to peers
30%

25
BENCHMARK P/E NTM

20

20%

MMB P/E NTM

Premium or Discount

10%
0%

15

-10%
Median 20%

-20%

10

-30%
-40%
12/10 10/11 08/12 06/13 04/14 02/15 12/15

5
12/10 09/11 06/12 03/13 12/13 09/14 06/15
Sources: Factset & team estimates

Sources: Factset & team estimates

We compared the Lagardere P/E NTM to the benchmark P/E NTM which we obtained by classifying each peers
into their sub industries, and weighting each sub industries median P/E NTM with the annual division weight for
Lagardere. We could therefore compute a premium or discount based on how expensive Lagardere should trade
with its exposures on industries and how much it currently trade in the market.
We underline two important point 1/Lagardere experienced above median discount, between October 2012 and
August 2014. The team researchs found a downward revision of NTM EPS consensus with a slight increase in price
and 2/Currently the stock is trading near its 5 years median up of its cycle, we believe the stock to trade at c25%
discount to peers at end 2016.

EPS NTM Consensus

We believe conglomerate discount is justified


30
Autogrill

2.00
25

Next Radio TV

1.80

Scholastic

1.60
1.40
1.20

P/E 2016E

20

Elior

15
Lagardre

1.00

0.80

0
0.0%

GL Events

HighLight

Fair value valuation


R = 0.7018

5.0%

10.0%

15.0%

20.0%

CAGR EPS 15-17


Sources: Factset & team estimates

NRJ

TF1

WHSmith
RTL

10

NewsCorp

Sources: Factset & team estimates


38

25.0%

30.0%

35.0%

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Appendix 37. Extended Dupont Analysis


Tax Burden Ex Associates
(x) Interest burden
(x) Non Recurring Impact
(x) EBIT Margin
(=) Net profit margin ex
associates
Total asset turnover (exassociates)
Effect of associates on assets
turnover
(x) Total asset Turnover
(=) ROA
(x) Leverage
(=) ROE

2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.70
0.76
0.71
1.16
0.33
0.94
0.64
0.85
0.86
0.86
0.86
0.87
1.00
0.86
0.65
-1.88
0.40
5.03
0.68
0.96
0.91
0.91
0.91
0.91
6.7%
4.8%
5.1%
4.0%
3.9%
4.0%
3.9%
4.4%
4.8%
4.7%
4.7%
4.7%
3.5%

2.3%

1.7%

-6.4%

0.4%

14.0%

1.3%

2.7%

2.8%

2.7%

2.7%

2.7%

1.13

1.07

1.06

0.88

1.02

1.07

0.97

1.03

0.98

0.99

0.98

0.97

0.30
0.27
0.25
0.23
0.19
0.03
0.03
0.03
0.03
0.03
0.03
0.03
1.43
1.34
1.31
1.11
1.21
1.10
1.00
1.06
1.01
1.01
1.00
0.99
3.07% 2.15% 1.66% -7.28% 0.38% 13.07% 1.29% 2.59% 2.85% 2.74% 2.81% 2.83%
2.24
6.9%

2.24
4.8%

2.26
2.41
3.7% -17.5%

2.70
2.85
1.0% 37.3%

3.68
3.97
3.91
3.86
3.80
3.73
4.8% 10.3% 11.2% 10.6% 10.7% 10.6%

(VS) ROE include associates


12.52% 5.56% 5.42% 13.75% 4.64% 37.51% 5.21% 10.70% 11.60% 10.99% 11.07% 10.98%
Magnitude Effect from associates 82.2% 15.2% 44.6% -21.5% 348.9% 0.7% 9.5% 4.4% 3.9% 4.1% 3.9% 3.9%

Highlight: We used an extended DuPont Analysis to underline the magnitude effect Associates and JVS have on
ROE. On average between 2008 and 2014 the magnitude impact on ROE stand at 68.5%. Due to this important
level, we think a more detailed analysis provide useful information on the underlying core business profitability
of Lagardere.
Appendix 38. Jvs and Non Recurring Impact on Net Margin

Revenue
EBITDA
EBIT
NOPAT
Normalized net earnings

2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
8,621 8,289 8,339 8,048 7,722 7,564 7,493 7,701 8,179 8,199 8,340 8,487
9.3%
8.1%
8.0%
7.8%
7.2%
6.8%
6.9%
7.0%
7.1%
7.1%
7.1%
7.1%
6.7%
4.8%
5.1%
4.0%
3.9%
4.0%
3.9%
4.4%
4.8%
4.7%
4.7%
4.7%
429
293
318
237
226
224
218
251
292
284
291
295
298
232
257
166
165
157
163
215
256
248
255
259

Share of Results Associates


JV's
Profit Ex Associates

34
246
578

27
29
288

31
65
353

18
111
295

17
105
287

12
7
176

8
9
180

8
9
232

8
9
273

8
9
265

8
9
272

8
9
276

After Tax non Recurring Item


Normalized net earnings

1
579

-41
247

-111
242

-683
-387

-134
152

905
1081

-69
111

-9
223

-26
247

-26
239

-26
246

-26
250

Net Earnings Margin Core


Net Earnings Margin With JV's
Magnitude from JV's To Core
Net Earnings Margin
Magnitude from Non Recurring

3.46% 2.80% 3.08% 2.07% 2.13% 2.07% 2.18% 2.79% 3.13% 3.02% 3.06% 3.05%
6.70% 3.47% 4.23% 3.67% 3.71% 2.32% 2.41% 3.01% 3.33% 3.23% 3.26% 3.25%
94.0% 24.2% 37.3% 77.5% 74.1% 12.1% 10.4% 7.9% 6.6% 6.9% 6.7% 6.6%
6.7%

3.0%

2.9%

-4.8% 2.0% 14.3% 1.5%


0.3% -14.2% -31.6% 231.1% -46.9% 514.9% -38.3%

2.9%

3.0%

2.9%

2.9%

2.9%

-3.8%

-9.5%

-9.8%

-9.6%

-9.4%

Highlight and Methodology: We used the normalized tax rate of 25.5% (2008-2014 median tax rate) to compute
NOPAT and to adjust each line below on the income statement from respective tax impact. We found net earnings
margin core and net earnings margin with JVs. This analysis demonstrate (1) the important contribution from
JVS ( which the group announced to progressively disinvest ) and (2) the value destruction the management
decisions occurred from core to net earnings margin.
*Net earnings Core : NOPAT After tax financial expenses
*Net earnings with JvS : Net earnings core + Jvs and Associates income
*Net earning margin : Net earning Core + Jvs and Associates + After Tax non Recurring Items
39

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Appendix 39. Degree of Operating Leverage

Lagardere Travel Retail

30%

8%

20%

6%
4%

10%

OPEX Growth

OPEX Growth

Lagardere Sport Entertainment

0%
-30%

-20%

-10%

0%

10%

20%

-10%
-20%

2%
-10.0%

-5.0%

0%
0.0%
-2%

5.0%

-4%
y = 0.9689x + 6E-05
R = 0.9908

-6%

y = 1.0796x + 0.0284
R = 0.9022

-8%
Sales Growth

-30%
Sales Growth

Lagardere Publishing

Lagardere Active
10%

8%

5%

6%
-40.0%

OPEX Growth

OPEX Growth

4%
2%

-10.0%

-5.0%

0%
0.0%
-2%
-4%

10.0%

5.0%

10.0%

-30.0%

-20.0%

-10.0%

0%
0.0%
-5%
-10%
-15%

y = 0.8871x - 0.0085
R = 0.9239

-20%
-25%

y = 0.7881x + 0.0015
R = 0.9572

-30%

-6%

Sales Growth

Sales Growth

-35%

Appendix 40. Non Recurring Items, 2008-14 Cumulative Analysis per Share

18.31

40

10.0%

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Appendix 41. Profitability and Credit Analysis Snapshot

EBITDA Margin
EBIT Margin
ROCE
Debt/EBITDA
Net Debt/EBITDA

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

8.1%
6.7%
5.9%
4.00
2.84

8.0%
4.8%
6.8%
3.77
2.81

7.8%
5.1%
6.3%
3.17
2.16

7.2%
4.0%
7.5%
4.22
3.14

6.8%
3.9%
6.7%
2.57
-0.63

6.9%
4.0%
7.1%
2.79
1.92

7.0%
3.9%
7.1%
3.72
2.45

7.1%
4.4%
7.5%
3.48
2.45

7.1%
4.8%
7.1%
3.49
2.45

7.1%
4.7%
7.2%
3.42
2.39

7.1%
4.7%
7.2%
3.36
2.26

Exhibit : 2014 released figures for major indicators vs peers and historical Lagardere performance
Lagardre historical high*

14%

Lagardre 2014 data

12%

Lagardre historical low*

10%

Peers average**

8%

14x
12x
10x
8x

6%

6x

4%

4x

2%

2x

0%

0x
EBITDA Margin

EBIT Margin

ROCE

Net Debt/EBITDA

Debt/EBITDA

Highlights : We analyzed the historical performance of the group relative to its 2014 released number to conclude that most of them are
historically low. Relative to peers, we underline the same conclusion that the group underperform industries on EBITDA and EBIT margin and
ROCE.
*Based on 2008-2014 period analysis
**Based on SOTP company list, 2008-2014 period analysis

Appendix 42. Synthetic Credit Rating


Grade
AAA
EBIT Interest coverage
23.8
EBITDA interest coverage
25.5
Total debt/Ebitda
0.4
FFO/total debt
203.3
FOCF/total debt
127.6
ROIC
27.6
Total debt/Capital
12.4
Source : S&P Corporate Rating Criteria 2006

AA
19.5
24.6
0.9
79.9
44.5
27
28.3

EBIT
EBITDA/In
Total
Interest
CFO/DEBT
terest net Debt/EBITDA
Coverage

Pearson
BBB
A
BB
BB
JohnWiley
A
AAA
BBB
BBB
NewsCorporation
#N/A Not rated
AAA
Not rated
Arnoldo Mondadori
CCC
CCC
CCC
CCC
Scholastic
A
AAA
AAA
AAA
Next Radio TV
AAA
AAA
A
AA
TF1
AAA
AAA
AAA
AAA
RTL Group
AAA
AAA
AA
AA
NRJ Group
AAA
AAA
AAA
AAA
Autogrill
CCC
BB
B
BB
Dufry
B
BB
CCC
CCC
WhSmith
AAA
AAA
AAA
AAA
Lagardre
Not rated
CCC
Not rated
B

A
8
10.2
1.6
48
25
17.5
37.5

BBB
4.7
6.5
2.2
35.9
17.3
13.4
42.5

BB
2.5
3.5
3.5
22.4
8.3
11.3
53.7

B
1.2
1.9
5.3
11.5
2.8
8.7
75.9

ROCE

Total
debt/capital

Overall
Grade

Rating
Equivalent

Not rated
B
Not rated
Not rated
Not rated
B
CCC
A
Not rated
Not rated
Not rated
AAA
Not rated

AA
BBB
AAA
B
AAA
AA
AAA
AA
AAA
B
B
AAA
BB

21
26
14
6
33
33
36
37
35
11
9
42
6

BB
BBB
B
CCC
A
A
AA
AA
A
CCC
CCC
AAA
CCC

Source : Factset andTeam estimates, based on 2014 data only

41

CCC
0.4
0.9
7.9
5
-2.1
3.2
113.5

Equivalence de Note
AAA
AA
A
BBB
BB
B
CCC
Not rated

7
6
5
4
3
2
1
0

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Appendix 43. Capex Analysis

Lagardere Publishing

Lagardere Travel Retail

4%
16%
Wiley
News Corp
0%

2%
Lagardre
Publishing

-2%

4%

6%

8%

Dufry

12%

Pearson

0%

CAGR Sales Growth

CAGR Sales Growth

2%

10%

Scholastic

-4%
-6%

8%

Elior
Lagardre
TR

4%
0%
2%
-4%

Mondadori
-8%

5%

Capex/Sales

Lagardere Active

Lagardere Sport Entertainment


4%

10%

RTL Group

8%

GL Events

CAGR Sales Growth

CAGR Sales Growth

4%
Autogrill

-8%

Capex/Sales

6%
4%

HighLight
Communication

2%
0%
-2%

3%
WH Smith

0%

5%

-4%

10%
15%
20%
Lagardre Sport
&Enternainment

25%

30%

NRJ Group

0%
0%
-4%

2%

TF1

4%

6%

8%

Mondadori

-8%
-12%

Lagardre
Active

-16%

Capex/Sales

Capex/Sales

Highlight : We used our SOTP peer list to build a Capex/Sales relative analysis. We conclude that Lagardre, on
on most of segment, devote less % of sales than its peers which we believe can affect future growth sales
potential. Furthermore, our efficient indicator (Sales Cagr/(Capex/Sales) ) indicates often a lower impact on
sales from the capex efforts.
Capex/Sales

Wiley
Pearson
News Corp.
Scholastic
BU Publishing
Mondadori

7.6%
2.9%
4.3%
7.6%
2.0%
0.7%

Sales 08-14
CAGR

Publishing
2.1%
0.2%
-0.2%
-2.0%
-1.2%
-7.0%

Efficient
Indicator

Rank

0.27
0.07
-0.05
-0.27
-0.63
-10.52

#1
#2
#3
#4
#5
#6

0.27
0.05
-1.26
-8.38
-10.52

#1
#2
#3
#4
#5

Capex
/Sales

Dufry
Elior
BU TR
WHSmith
Autogrill

Active
NRJ Group
RTL Group
TF1
BU Active
Mondadori

6.9%
3.4%
2.8%
1.5%
0.7%

1.9%
0.2%
-3.5%
-12.3%
-7.0%

Sales 0814 CAGR

Travel&Retail
4.0%
12.1%
3.5%
5.3%
2.5%
1.4%
2.9%
-2.1%
3.4%
-4.5%

Efficient
Indicator

Rank

2.99
1.51
0.59
-0.73
-1.34

#1
#2
#3
#4
#5

Sport&Entertainment

42

GL Events
HightLight
BU Sport

8.0%
25.4%
20.4%

7.6%
0.6%
-2.0%

0.95
0.02
-0.10

#1
#2
#3

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Appendix 44. Capex/Sales History with Peers

Pearson
Wiley
News Corporation
Mondadori
Scholastic
Peers Average Capex/Sales
Lagardere Publishing Capex/Sales
Difference with peers average
TF1
RTL Group
Mondadori
NRJ Group
Peers Average Capex/Sales
Lagardere Active Capex/Sales
Difference with peers average

Sales 08-14
CAGR

2008

2009

2010

2011

2012

2013

2014

AVG

2.5
11.0
3.7
1.0
5.6
3.7
2.1
-44%

2.3
12.0
3.7
0.0
5.4
3.7
1.2
-67%

2.3
6.1
6.0
1.0
6.9
6.0
0.9
-85%

3.0
6.7
4.3
1.1
5.2
4.3
1.4
-67%

3.0
6.2
3.7
0.5
7.2
3.7
2.1
-45%

3.6
5.5
4.4
0.8
19.0
4.4
2.0
-55%

3.7
6.0
4.4
0.3
3.6
3.7
4.0
8%

2.9
7.6
4.3
0.7
7.6
4.2
2.0
-51%

0.2%
2.1%
-0.2%
-7.0%
-2.0%

3.4

4.2

1.9

3.9

2.1

2.5

1.8

2.8

-3.5%

3.1
1.0
6.0
3.3
2.1
-35%

4.1
0.0
8.0
4.1
2.2
-46%

4.1
1.0
8.7
3.0
1.0
-67%

3.5
1.1
6.9
3.7
1.0
-72%

3.2
0.5
5.8
2.7
1.0
-63%

2.8
0.8
6.3
2.6
1.6
-39%

3.2
0.3

0.2%
-7.0%
1.9%

1.8
1.4
-23%

3.4
0.7
6.9
3.0
1.5
-49%

3.4
3.6
3.5
3.8
3.5
2.1
-39%

0.0
3.6
3.2
3.7
3.4
2.6
-23%

4.1
6.2
2.8
3.6
3.9
3.3
-14%

4.0
4.8
3.3
3.1
3.7
2.9
-20%

3.4
4.0
2.9
3.5
3.5
2.5
-29%

-4.5%
12.1%
-2.1%
5.3%

4.8
21.0
12.9
24.9
93%

11.5
30.8
21.1
23.0
9%

9.4
36.0
22.7
26.7
17%

8.8
17.8
13.3
10.2
-23%

8.0
25.4
16.7
20.4
24%

7.6%
0.6%

Autogrill
Dufry
WHSmith
Elior
Peers Average Capex/Sales
Lagardere Travel Retail Capex/Sales
Difference with peers average

5.7
3.5
2.1

2.7
2.9
2.2

3.5
2.3
-34%

2.7
1.9
-28%

3.7
3.8
3.2
3.4
3.5
1.9
-46%

GL Events
HightLight Com
Peers Average Capex/Sales
Lagardere Sport Capex/Sales
Difference with peers average

9.2
23.2
16.2
11.3
-30%

6.4
23.9
15.2
19.9
31%

6.1
25.3
15.7
27.0
72%

Sources : Factset andTeam estimates

43

-1.2%

-12.3%

1.4%

-2.0%

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Appendix 45. Debt Breakdown and Interest Rate Forecast


Breakdown of debt

Amount (M)

Maturity

Coupon Type Interest Rate

YTM

Interest (M)

% of Debt

Bond Unsecured 31/10/2017

492

Oct-17

Fixed

4.1%

1.5%

20.3

27.5%

Bond Unsecured 9/19/2019

497

Sep-19

Fixed

2.0%

2.0%

9.9

27.7%

Bank loans

103

8%

8.2

5.7%

Other Debt

171

8%

13.7

9.5%

Commercial Paper

527

0.3%

1.6

29.4%

Financial Lease
Total Debt

Jun-16

0.1%

1,792

Interest Rate

53.7

3.00%

Appendix 46. Financial Interest Forecast based on Historical Data


2008
Interest Income on Loans
Marketable Securities Income
Gains on derivative
Other financial Income
Total Financial income
Financial Assets in the Balance Sheet
Net Interest Received

2009

2010

2011

2012

2013

2014 S1 2014 S1 2015

25

12

14

13

39

14

21

21

11

12

478

128

181

152

8%

11%

12%

14%

91

51

56

55

67

12%

18%

21%

11%

6%

Avg

12%

Sources : Company Data, in Million

Highlights : Our analysis focus on the net interest received from the 2008-2014 period and the debt breakdown in 2014. We applied in
our forecast 12% as financial interest received ( based on financial assets in balance sheet ) and 3% interest expenses on gross debt
and other financial liabilities.

44

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Appendix 47. Risk Matrix

High

Effects of Digital
and Mobile
Governance Risk
Technologies

Major Contract

Median

I
m
p
a
c
t

Paper Prices

Special
Regulations

GDP

Terrorism

Exchange Rate
Risk

Acquisition Risk

Credit Risks

Geopolitical
Events
Low

Probability
Low
Market Risk

Median
Economic Risk

Strategic Risk

Operational Risk

Source: Teams Estimate

45

High
Governance Risk

Regulatory Risk

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Appendix 48. Supervisory Board

Supervisory Board

Laure Rivire-Doumenc
Secretary

Xavier de Sarrau
Chairman

Audit Committee

Appointements,
Remuneration and
Governance
Committee

Other members

Xavier de Sarrau
Chairman of
Committee

Franois David
Chairman of
Committee

Martine Chne

Nathalie Andrieux

Georges Chodron de
Courcel

Yves Guillemot

Franois David

Pierre Lescure

Jean-Claude
Magendie

Aline SyliaWalbaum

Soumia Belaidi
Malinbaum

Javier Monzo n

Patrick Valroff

Hlne Molinari

Franois Roussely

Susan M.Tolson

Source: Company data

46

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Appendix 48. Supervisory Board

director

position

Held Since

Affiliates/Other positions

Xavier de Sarrau

Chairman of the Board


Chairman of the Audit Committee

10 Mars 2010

Member of the Supervisory Board, JC Decaux


Chairman of the Audit Committee and Ethics Committee, JC decaux
Director, Oredon Associates(UK)

Nathalie Andrieux

Member of the Board


Member of the Audit Committee

3 May 2012

Member of the French Digital Council


Chair, Mediapost Holding
Director, Docapost
Member of the Supervisory Board and Member of The Strategic
Committee, la Banque Postale

Martine Che ne

Member of the Board

29 April 2008

Worked in Lagardre more than 25 years(1984 2009)

Georges Chodron de Courcel

Member of the BoardMember of the


Appointments, Remuneration and
Governance Committee

19 May 1998

Director, Bouygues SA
Director, Nexans SA
Director, FFP SA
Director, Scor Holding Switzerland AG(Switzerland)

Franc ois David

Member of the BoardMember of the


Audit Committee Chairman of the
Appointments, Remuneration and
Governance Committee

29 April 2008

Honorary Chairman, Coface group


Member of the Board, Order of the Legion of Honour
Member of the Supervisory Board, Galate Films

Yves Guillemot

Member of the Board

6 May 2014

President and CEO, Ubisoft Entertainment SA


Deputy CEO and Director, Gameloft SE, Guillemot Coporation SA
Director,Rmy Cointreau
Director, Advanced Mobile Applications Ltd(UK)

Pierre Lescure

Member of the BoardMember of the


Appointments, Remuneration and
Governance Committee

6 May 2014

Chairman, AnnaRose productions SAS


Director, havas Advertising
Member of the Executive Commission, Prisa TV and Digital+(Spain)

Jean-Claude Magendie

Member of the Board

27 April 2010

President, European College for Conflict resolution


First President of the Paris Court of Appeal
Chairman, Association mdiation entreprises

Soumia Belaidi Malinbaum

Member of the BoardMember of the


Appointments, Remuneration and
Governance Committee

3 May 2013

Deputy CEO of keyrus


Member of the Educational Board, HEC Paris
Member of the Board of Director, Universit paris Dauphine
Director and chair of the Audit Committee, FMM
Member of the Board of Directors, Institut du monde arabe (IMA)

He le ne Molinari

Member of the BoardMember of the


Appointments, Remuneration and
Governance Committee

3 May 2012

Legal manager of AHM conseil


Vice president, Be-Bound
COO and member of the Executive Council of MEDEF

Javier Monzo n

Member of the Board

29 April 2008

Chairman, Telefnica(Spain)
Member of the Board of Directors, ACS actividades de Construccin
y Servicio SA(Spain)

Francois Roussely

Member of the Board

11 May 2004

Honorary senior advisor, French National Audit Office(Cour des


Comptes)
Deputy Chairman, Crdit Suisse Europe
Deputy Chairman, Fondation du Collge de France
Honorary chairman, EDF

Aline Sylla-Walbaum

Member of the BoardMember of the


Audit Committee

3 May 2013

Vice-Chair of the Board of Directors, Orchestre de Paris


Member of the Board Directors, Muse dOrsay
Member of the Board Directors, Louvre-Lens museum
International Managing Director, Christie

Susan M. Tolson

Member of the Board

10 May 2011

Director, WorldLine E-Payment Services Member of the Audit,


Governance and Remunration Committees
Honorary Chair, American Friends of The muse dOrsay
Director, the American Cinmathque

director, Novacs
Member of the Executive Committee, Crdit Agricole SA
Chairman and Chief Executive officer, Sofinco
Chairman, Crdit lift SAS

Patrick Valroff

Member of the BoardMember of the


Audit Committee

27 April 2010

Source: Company data

47

Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company.
The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the
content or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company.
Market making:
The author(s) does not act as a market maker in the subject companys securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be
reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information
is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment
advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by
any individual affiliated with Lagardre, CFA Institute or the CFA Institute Research Challenge with regard to this companys stock.

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48