cfa institute research challenge · 2016. 11. 2. · (including gulli, mcm, canal j), audiovisual...

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LAGARDÈRE

Date:01.08.2015 Media,Telecom&TechnologyTicker:Factset–MMB France

- We initiatecoverageof LagardèrewithaBUY ratingandanend-of-the-year targetpriceof€28.98thatoffersa14%upsidefromthecurrentstockprice.LagardèreisaFrenchmedia conglomerate, leader inmanyof itsmarkets, ownerof serveral iconicbrands.Followingitssuccessfulrestructuringstrategy,Lagardère’sgrowthstrategyisamixofexternalgrowthandadding-valueacquisitionssuchasParadiesin2015,aswellasorganicgrowthwithreinforcementofprofitability.

- Lagardèrewillgrowitsrevenuesandincreaseitsmarginsfollowingthedivestmentoflowprofitableassets inboththeTravelRetailandActivedivisions includingtheshifttowards highly profitable eBooks. The multiplication of sport events as well as therenewalofeducationalbooksareexpectedtoboostrevenues.2015-20salesCAGRisexpectedtobe3.17%andweanticipatetheEBITmargintogrowfrom5.8%to8.1%.

- Capitalstructureisexpectedtobeimprovedwiththedisposalofunprofitableassets.

Thecompanyintendstosell itslessprofitableassetsatbookvalueorabovetoavoidlosses on these assets. Recent acquisitions such as the one of Paradies in 2015required the group to issuenewdebt,which significantly increased theNetDebt toEBITDA ratio. However, positive prospects regarding top-line growth and marginexpansion are expected to improve operating cash flows, which will facilitate therepaymentofdebt.

- Attractive stock considering our valuation based on a weighted average of three

methods(DCF,DDMandMultiplesanalyses) leadingtoatargetpriceof€28.98asofJanuary2016.ThevaluationmainlyreliesontheintrinsicvaluedeterminedbytheDCFanalysistocapturetherestructuringofthecorebusinessandtoaccountforthewidediversification of business activities, using a Sum-of-the-Parts approach.

Key financial data (€) - 01.08.2016

Book Value per share 15.91

Earnings per share 1.26

Dividend per share 1.30

Dividend Yield 5.12%

Net Debt/Equity 30.39%

Net Debt/EBITDA 1.13

ROE 7.92%

ROA 2.11%

EV/sales 0,6x

EV/EBITDA 7,3x

EV/EBIT 10,3x

P/E 20,13x

Market data (€) - 01.08.2016

Market capitalization 3327

Share price 25.37

Main Shareholders

- Non-French Investors 68%

- French Institutional 12%

- Lagardère Cap. & Mgt 8%

52w. Price range 21.9-30.2

Avg. 3M Dly. Volume 0.25m

Rating: BUY

Target Price: €28.98 Price as of 01.08.2015: €25.37 Upside: 14%

2

InvestmentSummary

Restructuring Strategy Driving Strong Growth Prospects Fundamentals and Valuation are Indicative of a Strong BUY Recommendation Our 2015 end-of-the-year target price is €28.98, suggesting a 14% upside compared to Lagardère’s current market valuation of €25.37 (closing price) per share as of January 8th, 2016. We derived our target price based on several valuation methods (DCF, DDM and Multiples analyses). Additionally, a holding discount of 8% is taken into account due to the sophisticated structure of the conglomerate, the fact that investors are forced to invest in all 4 divisions equally, and a resulting lower transparency. Furthermore, the BUY recommendation is reinforced by the conservative assumptions we chose for our DCF analysis. Promising Restructuring Strategy with Improved Profitability Lagardère’s restructuring strategy is well defined and has already demonstrated a positive bottom line impact. The company is expanding into the high-growth travel retail sector and reinforces its well-established and leading market position in the publishing sector. In addition, Lagardère has a strong position in the domestic market as well as iconic brands and is therefore a good investment. The shift to travel retail allows for further expansion into the APAC and North American regions while benefitting from global economic trends such as globalization, increasing world GDP and economic recovery from the crisis. Additionally, Lagardère is exiting the declining distribution market while it is planning on disposing unprofitable assets such as certain magazines and radio/ music channels. As a result, the company is able to increase sales and profit margins while reducing costs. Business Benefitting from Strong Competitive Positioning and Economies of Scale The diversification of business activities in a global context reduces the dependence on an industry or on the economic health of a specific region. Moreover, the company has established a strong competitive positioning in the travel retail sector using an external growth strategy. Through the recent acquisition of Paradies, Lagardère established a leading position for travel essentials worldwide and became #2 in terms of sales in the North American market. Considering Lagardère’s publishing activities, the company benefits from a solid branding, which allows to create and retain strong business relations with famous authors, a key element in this business. The firm’s large size allows for economies of scale and fosters the negotiation power with contractors such as printing shops and distribution companies. Lastly, Lagardère Publishing and Active benefit from synergies since these divisions share several business partners. Main Risks In terms of operational risk, the main concerns, among others, are linked with potential conflicts with partners, increased intellectual property risk (due to further digitalization), higher oil prices and raising airport shop concession fees. Other risks include geopolitical and natural events that could affect the international traffic market, to which Lagardère Travel Retail (53% of total sales in 2014) is exposed, as well as stricter local rules in 40 countries where the firm operates, strong fluctuations in exchange rates and weak GDP growth rates.

20014A 2015A 2016E 2017E 2018E 2019E 2020E

€ million

Revenue

7175 6845 7233 7416 7612 7802 8003

EBITDA

544 560 640 706 762 825 894

Net Income

-136 165 200 229 254 280 310

€ per share

Net Income

n.r. 1.26 1.53 1.75 1.93 2.13 2.36

Dividends

1.3 1.3 1.3 1.3 1.3 1.3 1.3

Returns (%)

Total Equity n.r. 7.9% 9.4% 10.4% 11.0% 11.6% 12.0%

3

BusinessDescription Lagardère is a French diversified media group headquartered in Paris, established in 1826 and listed on Euronext Paris since 1992. The firm operates in the print and electronic media industry through publication, travel retail services, audiovisual content production and distribution as well as sports events organization and merchandising. The firm has around 22,100 employees, reports revenues of €7,170m and adjusted profit of €185m in 2014 (respectively -0.6% and +7.6% year-on-year) and is part of the SBF Index 120 after leaving the CAC 40 in 2010. The group operates in nearly 40 countries, mainly in Europe, North America and Asia Pacific. It is dependent on developed markets (80% of 2014 net sales, among which 70% are from Western Europe). A World Class Diversified Media Group, Operating in 4 Business Segments • Lagardère Travel Retail (2014 sales €3,814bn up 2% compared with 2013) operates through 2 business lines (Travel Retail and Distribution). It consists of distribution activities for convenience stores and retail operations in travel areas and concessions in 3 fields: Travel Essentials, Duty Free & Luxury and recently Food Services in 30 countries. It operates through its own brands (Fnac, Ubiz) or through franchises and licenses (Hermes, Fnac, Victoria’s Secret). It is #3 Travel Retailer worldwide and plans to sell off the entire distribution business to transition to 100% travel retail. • Lagardère Publishing (2014 sales €2,004bn down 3% compared with 2013) consists of publishing companies (books and eBooks) with a high degree of editorial independence. The division publishes in 3 languages and supplies 12,000 bookshops. It is #3 world largest trade book publisher for the general public and educational markets and #1 publisher in France. • Lagardère Active (2014 sales €958bn down 4% compared with 2013) encompasses magazine publishing (30 press titles in France – including Elle and Paris Match – and 80 under license worldwide), radio (23 radio stations including Europe 1, Virgin Radio, RFM), television channel (including Gulli, MCM, Canal J), audiovisual production, as well as distribution and advertising sale brokerage. It is #1 mainstream magazine publisher and audiovisual producer in France. • Lagardère Sport and Entertainment (2014 sales €394m down 4% compared with 2013) consists of marketing rights management (70 football teams in Europe), event production (Africa cup of Nation and AFC Asian cup), media rights management (broadcasting right in Europe and Africa of Olympic games of 2014 and 2016), athlete management and brand management. It is the leader in the representation of golfers worldwide and in sports marketing in Asia. Firm’s Strategy and Recent Trends Lagardère’s strategy focuses on 3 pillars: i) reduce exposure to declining activities, ii) adapt existing activities and enhance leadership positions, iii) invest in higher growth activities. • i) The group sold many assets such as 10 press titles in 2014. As a result, paper activities accounted for less than 50% of total sales for the first time in 2013. • ii) The group restructured its business segments. Lagardère Publishing completed its portfolio with acquisitions (such as Constante & Robinson (fiction) and Rising Star (school textbooks) in the UK), leading to a successful transition towards eBooks (from 2% of 2010 sales to 10% of 2014 sales). Lagardère Travel Retail is disposing its distribution assets (now only 22% of the division sales). Lastly, Lagardère Active developed its musical activities in Africa (Senegal) and opened its digital portfolio to e-medical businesses with MonDocteur.fr and Doctripharma. • iii) The group has acquired Paradies in 2015 (creating the 2nd largest player in the North America travel retail industry), 82% of a TV producer in Spain (Boomerang TV) and Lagardère Sport and Entertainment has acquired UFA (soccer marketing in Europe). Shareholder’s Structure and Management Lagardère is a French Partnership limited by shares (131.13m shares) with 2 General Partners (Arnaud Lagardère and Société Arjil Commanditée - Arco) and Limited Partners. Non-French institutional investors hold 67.75% of the capital, among which Qatar Investment Authority owns 12.83%. Insider ownership accounts for 11.2%, of which Arnaud Lagardère, CEO since the death of his father Jean-Luc in 2003, owns 8.18%. Lagardère pro-active policy of paying returns to shareholders has included stable ordinary dividends of 1.3€ per share every year since 2007.

35%

34%

12%

10% 7% 2%

France Western Europe

Eastern Europe North America

Asia Pacific Other

2014Geographicalbreakdownofsales

53%

28%

13% 5%

Travel Retail

Publishing

Active

Sports and Entertainment

28%

52%

19%

1%

Travel Retail

Publishing

Active

Sports and Entertainment

2014BreakdownofsalesandEBITbydivisions

68% 12%

8% 7% 3% 2%

Non-French InvestorsFrench Institutionnal investorsLagardère Capital & ManagementPrivate InvestorsEmployeeTreasury Shares

2014Shareholdingstructure:%ofsharecapital

4

IndustryAnalysis Travel Retail Sector Boosted by Fuelled Tourism Activity and Defragmentation • Positive tourism growth trend is based on the recovering world economy, which fosters spending in the travel retail sector. According to the United Nation World Tourism Organization, tourist arrivals grew globally by 4% per year on average, with APAC, America, and Europe experiencing strong growth. Between Jan. and Aug. 2015, world travel increased by 4.3%. In addition to this, the average amount spent per person increased in the first 3 quarters of 2015. Due to these 2 factors, Lagardère’s sales are expected to grow in the short-term. • The increase in tourism triggers the need of airport expansions. Such projects are mostly financed through additional income from increased airport shop rents. As a result, travel retail companies tend to merge in order to benefit from economies of scale and thus to offset the additional costs from increasing rents. Moreover, a larger firm size allows for higher negotiation power over rental contracts, which are limited to several years and require renewal. •Duty Free global sales are forecasted to increase with a CAGR of 8.6% from 2015 (to $73.6bn by 2019). 50% of that growth is attributed to travelers from emerging countries (mostly China), allured by luxury and brand products at a discount price. Sales growth in the Travel Essentials and Food Services sector are expected to be in line with traffic growth of approx. 5% per year. •However, recent terrorist attacks and increased security concerns may slow travel demand from Asia to Europe, with a significant impact on revenues (similar to Sept. 11 and 2005 London bombings). In the long run though, air traffic is expected to grow by 5% CAGR over 2014-19. Limited Disruptive Effect of Digitalization on the Stagnating Publishing Industry • The publishing sector is segmented between books, magazines and newspapers. While books play a crucial role in the EU (40% of market share), newspapers dominate the North American market (44%), as much as magazines in France (45%). Overall, sales are expected to stagnate or slightly decline by -0.1% to -0.3% CAGR over 2014-19. • The effect of eBooks on the publishing market is weaker than initially expected (less than 5% of the publishing market in 2014, except for the US and the UK). EU regulations regarding digital books sales are preventing a significant price reduction, thus preserving the sale of print media. Overall, Lagardère reacted early to the digitalization, with eBooks accounting for 10% of 2014 publishing sales (against less than 1% in 2009). However, a decline in sales has been observed in 2014, posing the question whether the eBook market is already satisfied. • Digitalization lowers the barriers to entry since authors can publish themselves and therefore avoid high fees by publishing companies. Moreover, fashion blogs are cannibalizing the sales of fashion magazines. Media Industry Experiencing Accelerate Growth in BRIC Countries • The global media industry has been expanding at modest speed in recent years and the industry is expected to grow at an accelerate pace in the coming years. However, this market is largely driven by exceptional growth in the BRIC countries which have been able to offset the low growth pattern seen in Europe and other developed markets. • In the global media industry, the broadcasting & cable TV segment is forecasted to accelerate with an anticipated CAGR for 2014-2019 of 3.6%. However, the French media industry does not follow the same trend, it has been recently declining and is expected to remain stable in the mid-term – indeed, being an early adopter of the digital signal, France has moved before many European countries. In 2014, the French media industry had revenues of $37.7bn and an anticipated CAGR of 0.1% for 2014-2019. • According to the Satellite Industry Association’s (SIA) 2014 report, the global satellite industry grew by 4% in 2014 to reach US$203bn, and global pay TV subscribers grew to 230m, primarily driven by emerging markets. As Lagardère provides TV broadcasting and satellite services, these trends reflect growth potential for the firm. • Broadcasting & Radio is undergoing a rapid transformation: radio users are expected to grow by 14% up to 183m over 2015-18, which will boost revenues from subscriptions and advertising. Internet radio hits all demographics, skewing towards tomorrow’s audience of Millennials and younger, who tend to listen to radio Internet using mobile devices (95% of internet radio listening happens on mobile devices).

0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0%

10,0%

2011

2015

Passengertrafficevolutionfrom2011to2015

-1,00%

1,00%

3,00%

5,00%

7,00%

9,00%

0

500

1000

1500

2000

2500

3000

3500

2010 2011 2012 2013 2014 Millions of passenger

Growth

Airpassengersevolutionsince2010

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

EBookshareas%oftotalLagardèrepublishingsales

-1,00%

1,00%

3,00%

5,00%

7,00%

9,00%

600 620 640 660 680 700 720 740

2010 2011 2012 2013 2014

€ billion Growth

GlobalMediaIndustryvalueevolutionsince2010

5

Broadcasting Business Entered by Large Sports Organizations • The global sports market (€110bn in 2015) is growing at 5% per year, outperforming GDP growth, mostly driven by media and sponsorship revenue growth. This sector is expected to be boosted by new markets, with events such as the 2016 summer Olympic Games in Brazil, the 2018 FIFA World Cup in Russia and the 2022 Winter Olympic Games in China. Even though some large organizations – such as the FIFA – tend to broadcast occidental sports events on their own, there are numerous opportunities for Lagardère to broadcast events in emerging countries, such as the African and Asian Cup. • Sports rights in particular are facing intensified globalization with new markets playing an increasingly important role. Indeed, from 2002 to 2012, Asia Pacific media revenue growth increased from 13% to 18%, and top 5 European football leagues media estimates to generate 26% of its revenues from international markets in 2017 compared to 14% in 2005.

CompetitivePositionning Lagardère Travel Retail is #3 travel retailer in terms of sales (2014), #2 in North America (following Paradies acquisition) and #1 for travel essentials worldwide. It is a global player with a focus on Europe (62% of 2014 sales) and operates businesses and stores in 150 airports and 28 countries. In terms of sales (2014) in the Duty Free & Luxury, Travel Essentials, and Food Services, Lagardère Travel Retail ranks 4th after Dufry, DFS, and Autogrill. Lagardère Travel Retail is refocusing on travel retail and therefore divesting the Distribution segment, to further enhance its leadership position in the travel retail industry. Lagardère Travel Retail’s main competitors are Dufry and Autogrill. The former is a global leader which operates 283 stores (mainly duty free), in 63 countries as of Sep. 2015. The latter, focuses mainly on Food Service for travelers. Lagardère Publishing is a global leader benefitting from a strong branding. It is #3 trade book publisher worldwide, #1 in France, #2 publisher in the UK and #4 publisher in the US. The group aims at enhancing their leadership position in this segment by reinforcing their relations with authors, using their strong publishing brands, and transitioning to eBooks. The main competitors are Axel Springer, Penguin Random House, and Pearson. Axel Springer is one of Europe’s largest media companies, focusing mainly on the German market (57% of 2015 sales). It aims to pursue its digitalization faster and more vigorously: revenues from digitals increased from 14% (2008) to 53% (2014). Penguin Random House – owned by Bertelsmann (53%) and Pearson (47%) – is a global publishing group with reported 2014 sales of €3.3bn (vs. €2bn for Lagardère Publishing). Lastly, Pearson is a US company focusing on academic publishing and operating mainly in North America (61% of 2014 sales). Lagardère Active has a very strong leadership position in the French market: #1 magazine publisher (with Elle, Paris Match, JDD and Public), #1 TV production group (through Lagardère Entertainment), #1 Internet & mobile media group (with LeGuide, Doctissimo, BilletReduc and Boursier), and #1 youth and family TV channels (with Gulli). In 2014, the French TV market represented 91% of the division’s revenues, against 5% for the international market and 4% for the digital market. Its main competitors include Bertelsmann, Newscorp, Axel Springer, Vivendi and Gannet Co. Bertelsmann – its main concurrent – operates publishing activities in 30 countries and aims at increasing revenues from digital investments (2014 acquisitions include StyleHaul and SpotXchange). In France, it is the #2 largest magazine publisher (through Prisma Média). Increased focus on the digital market is a common positioning among all players of this segment. Lagardère Sports & Entertainment is undergoing a strategic transformation. Currently operating in 20 countries and headed by a fresh Executive Committee since 2014, the division is focused on turning around in Europe and the lowering of its risk profile. The players in this industry are exposed to upsides such as exposure to major sports, fast growing media and sponsorship agreements and emerging markets, as well as downsides like seasonality. With respect to geographic operations, the industry has a contrast, main competitor Mediaset SpA operates only in Italy and Spain whereas IMG (subsidiary of William Morris Endeavor) has a mammoth reach of more than 25 countries.

0 10000 20000 30000 40000 50000 60000

Nor

th A

m.

EMEA

Asi

a Pa

cific

Latin

Am

.

2011

2015

Evolutionofmediasportmarketbyregion(€m)

Top5Airtravelretailbysale(€m)

6050

3300 3038 2004

0

2000

4000

6000

8000

Top4consumerbookpublisherworldwide(€m)

0 1000 2000 3000 4000 5000 6000 7000

Food services Travel essentiel Duty free

24%

13%

12%11%

9%

32%

Elle Vogue Cosmopolitain Marie Claire Harper's Bazaar Other

2014AdMarketSharevolume

6

FinancialAnalysis Group Restructuring Expected to Boost Sales and Earnings • We expect slightly increased sales and earning growths in the medium term, based on the continuous restructuring of the Group. Indeed, we anticipate a positive impact of the refocus of Lagardère Travel Retail (50% of the Group sales), shifting away from distribution – divestment of activities in Switzerland, Spain, Hungary and Belgium – and strengthening its Travel Retail activities through organic and external growth (acquisition of Airest, Gerzon and Paradies). Travel retail is a bullish market (+5% growth in 2014) benefitting from growth in air traffic. On the Publishing side (30% of the group sales), we expect the firm to benefit from the end of tense commercial relations with Amazon, the recovering US economy (20% of Publishing sales) as well as the anticipated change in the academic curriculums of France and Spain in 2016 (which will boost school books sales). In addition, we anticipate a positive impact on sales from the current weak € vs. the US$. However, the overall publishing market is expected to stagnate or even slightly decline with an estimated CAGR of -0.1 to -0.3% between 2014 and 2019. • The recent disposals of 3 significant stakes (7.4% stake in EADS for €2.3bn, 20% stake in Canal+ France for €1bn and 25% stake in Amaury Group for €91m) are in line with the restructuring strategy and will drive the firm’s results up. They explain abnormal ratios for 2013 such as a 17.44% Net Income margin, a €10.22 EPS and ROE of 45.06%. Sound and Stable Levels of Margins Expected to Increase • EBITDA and EBIT margins have been fairly stable over the past 3 years (respectively 7.5% and 4.5%) but slightly below peers (respectively 10.5% and 8.5% - Cf. Appendix 17). We expect these margins to remain stable and slightly increase in the medium term. The main driver for this anticipated increase is the growing importance of the Travel Retail division, which benefits from higher operating margins (for e.g. duty free, food services and convenience stores). • Regarding the Active division, a refocus on iconic brands is a key element of Lagardère’s strategy. Disposal of low profitable assets (such as Télé 7 Jour, Ici Paris and Musical Radio) would have a significant positive impact on profit margins, but remains uncertain for now. Negative Cash Conversion Cycle and Consistent Dividend Payout According to our estimates, restructuring activities will provide a much needed boost in recurring EBIT. We expect the future operating cash flow to improve thanks to growing margins. This is supplemented by the fact that we anticipate a strenghtened free cash flow and a stable cash flows to sales ratio over the projected period. Negative cash conversion cycle (-26 days) highlights its ability to maintain superior credit terms: paying suppliers in 136 days, receiving cash at point of sales, inventory days at 46 days and receivable days at 64 days. By having superior power over suppliers, as seen by the negative Cash Conversion Cycle, Lagardère can use suppliers’ money to finance its operations. • Despite relatively low liquidity ratios (current ratio, quick ratio and cash ratio of respectively 0.9x, 0.8x, 0.1x compared to peers’ average of 1.1x, 0.8x and 0.4x – Appendix 17), the firm uses its operating cash flow to pay a dividend of €1.3 per share (stable and consistent over the past years, reflecting credible financial management). Please note that further major acquisitions could threaten the sustainability of the dividend. Decreasing Recurring Capital Expenditure Expected to Offer Capacity for Acquisitions • Capital expenditure as a percentage of sales of the publishing division is expected to decline to 2% in 2015-2016 and to 1% in the long term, compared to 2.4% over 2011-14, as Lagardère’s strategy is simply to maintain its leadership position in this sector. In contrast, the firm focuses on growing its travel retail business (such as the acquisition of 17 stores at JFK Airport in 2015 as well as Paradies), which leads to an increase in the division’s financial capital expenditure. Lastly, CapEx as a percentage of revenues of Lagardère Active and Sports & Entertainment are expected to remain at their historically constant levels of 1.25% and 21.14% respectively.

0,0% 2,0% 4,0% 6,0% 8,0%

10,0% 12,0% 14,0% 16,0% 18,0%

2012

20

13

2014

20

15

2016

20

17

2018

20

19

EBITDA Margin EBIT Margin Net Profit Margin

ROEevolutionfrom2015to2019

7,9% 9,4%

10,4% 11,0%

11,6% 12,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

2015

20

16

2017

20

18

2019

20

20

Evolutionofmarginsfrom2012to2019

Salesevolution2014-2019

6000

6400

6800

7200

7600

8000

2015 2016 2017 2018 2019

7

Reasonably Levered Capital Structure and Sound Financial Health of the Group • We consider the firm’s financial health as reasonable. The Debt to Equity ratio approximates 75% (fluctuations over the past years are due to the restructuring of the firm and its disposals), while the peers average amounts to 90% (Cf. Appendix 17). The interest coverage ratio, although slightly below peers (4.7x compared to peers’ average of 5.2x), remains satisfactory. Lagardère has €2,211m available cash (divided between €566m in cash and marketable securities and €1,645m undrawn on a syndicated credit line), which demonstrates the firm’s future ability to service its debt obligations and operations with reasonable ease and flexibility. In addition, Lagardère’s bonds have different maturities (€500 commercial papers that matured in June 2015 as well as two €500m 5-year bond issues maturing in 2017 and 2019) and its 2% interest rate regarding its most recent bond-issue positions the firm close to AAA-. • Given Lagardère’s current capital structure and relatively weak liquidity ratios, we expect future external growth to be financed with further borrowings. However, we don’t expect that the firm will expose itself to excessive leverage, given CEO Arnaud Lagardère’s unlimited liability over the firm’s financial obligations. We do not anticipate financial charges to increase over the forecasted horizon, due to the current monetary policy in Europe keeping interest rates low. In addition, almost the entire debt is denominated in euros, which does not raise concerns regarding potential fluctuations in the amount of principal to be repaid.

CompanyValuation Lagardère has been valued using 3 methods: Discounted Cash Flow analysis (60% of overall valuation), Discounted Dividend analysis (20%) and Multiple analysis (20%). The DCF and the multiple analysis are based on a Sum-of-the-Parts approach that values the 4 main divisions of the company separately. Indeed, Lagardère operates in 4 divisions that are different in terms of risk, growth perspective, growth drivers and cash flow generation. In addition, as investors have no choice but to invest in all 4 divisions, an 8% holding discount has been applied to Lagardère’s overall valuation. Our weighted-average final target price is 28.98€ per share. DCF Analysis Our DCF values Lagardère at 31.75€ per share after holding discount. We estimate this price with the separate valuation of Travel Retail, Publishing, Active and Sports & Entertainment as explained above. The timeline of the DCF valuation is five years, from 2016 to 2020 (Cf. Appendix 7). Projected cash flows are mostly based on expected market trends and sales performance (Cf. Appendix 8). We also decided not to take into account M&A that has not been announced yet since these events are too uncertain to quantify. Therefore, we used recurring EBIT that does not include acquisitions. Lastly, synergies between divisions are assumed to remain at the same level. Figures are broken down between the 4 divisions according to the assumptions below (Cf. Appendix 9): Sales and Operational Margins: Each division is divided into its key cash generating products. Once key products were identified, we used market growth perspectives of these products to estimate future growth of revenue for each division while assuming the realistic implementation of the company strategy. When M&A was announced, we adjusted the revenue to include or exclude the sales from the new or old company. Regarding the operational margin, we project a slight increase for Publishing, Active, Sport and Entertainment following the refocus strategy of the group. As for Travel Retail, we believe that the margins are going to be fairly stable following the recent new acquisitions. D&A, Capex and Change in WC: In the publishing division CapEx is expected to decrease and stay constant at 1% of sales since no major investments are expected. As a result, D&A remains rather constant over time at 1.16% of revenues, which represents the historical average of D&A. Lastly, an anticipated change in curriculum of France and Spain in 2016 will lead to increased inventories of academic books and thus increases change in WC to 3.5%. However, in the Travel Retail division, the group aims to invest in higher growth activities, resulting in an increase of 10% of CapEx in 2015 and will decrease to historical level in 2016. Thereafter, it will remain constant at nearly 3%. Regarding the other divisions, the level will

Publish. Travel Retail Active Sports and Enter.

Educat. Distrib. Radio Media

Illustrat. books

Travel Retail TV

Marketing right

General literature Press Other

Partwork Pure digital

Event premium

Division DCF

Lagardère Publishing 2496

Lagardère Travel Retail 1639

Lagardère Active 1038

Lagardère Sports and Entertainment 391

Implied DCF 5564.17

8% holding discount 445.13

Total DCF 5119.04

0,000

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2012

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2014

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2016

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2018

Current Ratio

Quick Ratio

Cash Operating Ratio

Evolutionofcashratiofrom2012to2019

8

WACC and Terminal Growth Rate (Cf. Appendix 10): As each division is different in terms of risk, 4 different betas have been considered (Cf. Appendix 15), according to the peers’ average of each division. The WACC is therefore ranging from 5.71% for the least risky business (Travel Retail) to 8.12% for the riskiest one (Sports and Entertainment). On average, we obtained a 7% WACC. Regarding the risk of equity, we assumed a risk free rate of 2.94% corresponding to the 10Y average of the 10Y French government bonds to capture comprehensively its evolution. As for the cost of debt before tax, it is at 2.4% following the latest bond issue in 2014. Regarding the capital structure, we took the 5Y average net debt divided by the current market cap (ratio of 0.32) to have a capital structure in line with historical trends. The Terminal Growth Rate is determined per division and based on official Perpetual Growth Rate forecasts of Lagardère. M&A and restructuring consequences are taken into account in these figures. Terminal Value and Valuation Strategy: The terminal value represents 80% of the total value of the DCF. Although this figure might seem high, it is in line with the valuation strategy that is based on reasonable assumptions in terms of margins and projected sales 2016-2020. Moreover, due to the difficulty of forecasting the effect of the M&A and restructuring in the close future (since M&A is a clear priority but acquisitions are not concretized yet) we decided to put this additional future value in the Terminal value. Comparable Multiple Analysis The multiple analysis values Lagardère at 32.7€ per share after holding discount. The target price is calculated based on Lagardère’s peers. Since Lagardère operates in 4 different business segments, the target price is the result of a Sum-of-the-Parts. Choice of Competitors: To obtain an accurate valuation range, 4 groups were defined; corresponding to Lagardère’s 4 divisions. Each group is made up of 3 to 5 peers. Choice of Multiples: Initially, we performed 3 multiple valuations (based on a 5-year average): EV/Sales, EV/EBITDA and EV/EBIT (Cf. Appendices 12, 13 and 14). However, the EV/Sales multiple has been excluded since it does not deliver a proper valuation. This multiple does not take the profitability of a company into account, which is an issue since Lagardère’s margins are below its peers. As a result, EV/Sales would have valued the firm at €60 per share, which would have distorted the overall valuation result. The EV/EBIT multiple has also been put aside as it is too sensitive to differences in depreciation and amortization policies. As a result, the EV/EBITDA multiple was applied that is free from influences of the capital structure, which has been altered due to recent acquisitions. In this regard, the P/E multiple would have been too influenced by the debt structure and has been excluded as well. Dividend Discount Model The DDM values Lagardère at 16.94€ per share after holding discount. Lagardère’s dividend policy does not take into account the performance of the company since it has constantly delivered the same dividend of €1.3 per share since 2007. As a consequence, the resulting valuation is very low. However, it remains important as it represents an all time low. The cost of equity is based on the weighted average group beta. As for the perpetual growth rate of 2%, it was applied to consider future inflation and eventual small increases.

Limitations of Our Valuation Our valuation assumes that each division has the same level of Debt/Equity as the whole group. This assumption is made since the level of debt for each division is not available due to the holding structure of the group. When computing the target Debt/Equity ratio, we decided to take the 5-year average of Net Debt to ensure that the current high leverage due to restructuring activities is not distorting the result.

Division WACC Beta PGR Publishing 7.04% 0.91 2.0% Services 5.73% 0.64 1.7% Active 7.21% 0.95 1.2% Unlimited 8.15% 1.14 2.5% All Lagardère 7.01% 0.87 2%

Share Value after holding discount (€m)

NPV of FCF 791

PV of Terminal Value 4 116

DCF Valuation 4 907 Enterprise Value 4 907

Less: Minority Interest 109

Less: Debt 1 520 Add: Cash 886 Equity Value 4 163

Fully Diluted Shares 131.1

Value

31.75

Publ

ishi

ng

Company EV/EBITDA LTM

Scholastic Corp. 13.50x

Axel Springer 15.10x

Pearson 9.90x

Average 12.83x

Serv

ices

Autogrill 12.20x

Dufry 13.10x

WH Smith 12.00x

Average 12.43x

Act

ive

Wige Media 17.70x

Axel Springer 15.10x

Newscorp 7.00x

Vivendi 14.40x

Average 13.55x

Unl

imite

d

ITV 14.61x WPP PLC 10.27x

Sky plc 13.94x Mediaset SpA 14.91x

Average 13.43x

9

InvestmentRisks Impact and probability of the following risks are presented in Appendix 16. Operating risk Raise in Oil Prices - The significantly low oil price is expected to favorably impact the already growing air traffic. However, a situational turnaround leading back to barrels sold at $100 or more – that we consider unlikely in the mid-term but possible – would adversely affect customers' spending and thus slow Lagardère's revenues growth. Raise in Airport Shop Concession Fees - Competition for attractive store locations in airports could further increase the concession fees. Consequently, there would be an increase in operating costs, thus reducing the division’s profitability. Conflict with Partners - Commercial conflicts such as the Amazon dispute can have a significant negative impact on Lagardère's sales. The recent multi-year agreement reached with Amazon is a guarantee that Lagardère will remain sole decision-maker of its book prices and will be able to preserve its margins. However, any other trade conflict would adversely damage the firm's sales. Intellectual Property Risk - eBooks account for 26% of Lagardère's general literature book sales in the US and UK (2 main markets) and 10% of Lagardère’s division sales. This further increases the firm's exposure to unauthorized digital reproduction and sharing of protected content. Publishing’s High Dependence on Educational Reforms and Mega-Bestsellers - 45% of the French education publication market share belongs to Lagardère publishing. There was a lack of curriculum reforms and renewals in 2014 and the next major education overhaul has been pushed back to 2016. This in addition to a flood of bestsellers in 2013 explains the poor performance of publishing in 2014 in comparison to 2013. Further, the sales of this division face a risk of cuts in funds allocated by different governments for the purchase of textbooks. Increase in Cost of Paper - Lagardère uses a high volume of paper (211,000 tons in 2014) for its Publishing and Active division activities. A long-term 10% rise in paper price could negatively impact the operating profits by €15million per year, before adjustments. Since 2013 however, 2/3rd of Lagardère’s activities are paperless and the current strategic transformation (print to digital) will ensure the continuity of this paper-reduction trend, reducing the above-mentioned risk for the firm. Risk of Major Contracts - Agreements relating to sports events and concessions entered into by the travel retail division are worth several hundred million euros and they face several uncertainties. Adverse changes in market conditions/economic environment can negatively impact income generation ability and ultimately lead to non profitability upon their termination. Additionally, there is no guaranteed renewal of these agreements. The renewals depend on the company’s own competitiveness as well as that of both its long standing and new competitors at the time of the contract’s expiry. Regulatory Risk Stricter Local Rules - Concerning its retail distribution activities, Lagardère is exposed to local and international regulations. Various stricter rules may adversely impact the firm's revenues, similarly to the ones caused by tighter Chinese regulations on corporate gifting and luxury spending, stricter environmental protection measures as well as recent Hungarian laws regarding the sale and consumption of tobacco (monopolization of tobacco products entailed a 60% decrease in sales of retail activity in Hungary) Market Risk Exchange Rate Risk - The weak euro has a positive impact on the firm's exports (at least 25% of Lagardère’s revenue is denominated in foreign currencies) and on domestic sales. The current accommodating European monetary policy, combined with tightening measures in the US, is likely to boost Lagardère’s revenue, especially airport sales. However, a change in the current trend (a strengthening euro against the functional currencies), which we do not forecast in the short term, would have a negative impact on the firm's activity. Even though Lagardère has invested in hedging activities through foreign exchange forward contracts, it is not guaranteed that such measures will cover the fluctuations in exchange rates and thus the potential resulting losses.

10

Brexit and Grexit - A Greek exit from the Euro Zone and/or the UK leaving the European Union would result in a European turmoil, with a probable negative impact on investors' confidence in the European economic recovery as well as an increased volatility around the € currency. This would entail diminished visibility for Lagardère and would require further hedging. Geopolitical and Natural Risk Terrorist Attacks Dampening Air Traffic - The recent rise of ISIS and the increasing number of attacks may negatively affect the flow of international air traffic in some airports, from which Lagardère pulls a significant part of its revenue (Lagardère Travel Retail stands for 50% of the group’s revenues). The intensified violence and the resulting fear among potential travelers could erode Lagardère's revenues. Pandemic breakouts - The annual traffic suffers a decrease of 8% of annual traffic in 2014 according to IATA (International Air Transport Association) due to the outbreak of Ebola. Therefore, pandemics of this kind may highly affect the air traffic and would have a negative impact on Travel Retail’s revenue. Economic Risk Weak GDP Growth Rates - Tourism (and thus Travel Retail sales) highly depends on the economic climate, as well as books (to a much lesser extent). Despite the strengthening of the US economy (+2.5% GDP growth expected in 2016), the weak European economic recovery (+1.5% GDP growth), which accounts for 80% of Lagardère’s sales, and the anticipated slowing growth in Emerging Markets (+4% GDP growth) may dampen the firm’s revenues. However, the macroeconomic environment will affect every player in the industry and we are confident in Lagardère's ability to maintain its position in the market due to its worldwide presence and pricing power. Additionally, 3.9% of the sales come from countries rated Ba1 or lower by Moody’s (economies sensitive to risks of liquidity or credit crisis). A crisis combined with a recession would affect the sales and profitability. Sudden Slowdown in the French Advertising Market - Lagardère’s Active division is sensitive to the downturn of the advertising industry and it is noticed that even a 1% decline in advertising sales across Lagardère Active would lead to a decline in operating profits of €2m to €3m in the division over a period of one year before any adjustments. M&A Risks - The Group acquired many companies in the recent years (Paradies for Travel Retail, Constable & Robinson and Quercus for Publishing, Gulli for Active). The ability to successfully integrate recent and any future acquisitions is crucial to realize the group’s strategy.

Close Date Recent M&A activiy

Oct '15 Lagardère SCA acquires Paradies Holdings LLC

Feb '14

Lagardère SCA acquires Casino de Paris SAS from Allegria Invest SA

Feb '14 Lagardère SCA acquires Constable & Robinson Ltd.

Oct '14 Lagardère SCA acquires Gulli Interactive SASU

Jan '14 Lagardère SCA acquires Charles F. Gerzon Holding BV

Oct '13 Lagardère SCA acquires Crown Sports Management LLC

Jul '12 Lagardère SCA acquires Duty Free Stores Wellington Ltd.

Sep '12 Lagardère SCA acquires ADR Retail

Jun '12 Lagardère SCA takes a majority stake in LeGuide.com SA

Feb '12 Lagardère SCA acquires Airport Fashion SA

Jan '12 Lagardère SCA acquires Gaylord Sports Management

Jan '12 Lagardère SCA acquires Unimex Group

11,11,21,31,41,5

January-13

April-13

July-13

October-13

January-14

April-14

July-14

October-14

January-15

April-15

July-15

October-15

Last3yearsEUR/USDrateevolution

11

Appendix 1: SWOT Analysis of Lagardère

Strengths - Diverse business activities reducing dependency on a particular media (different markets, divisions, and labels) - Defined business and growth strategy Travel Retail - Global leader in travel retail business particularly in duty free & luxury - Largest international network of newsagents and convenience stores in travel locations Publishing - Third largest trade book publisher globally - Strong branding of publishing labels, which also creates strong relations with famous authors - Market leader in academic publishing in France and strong market positioning in UK, US, and Western Europe - Well-established business increases scale and thus the reach to customers and distributor

Weaknesses - Concentration of suppliers leading to a high dependency on those, as well as an increased bargaining power for suppliers, which increases costs - Sales are strongly linked to economic health especially regarding the travel retail and advertising revenues - Strongly impacted by seasonalities, especially in the Sports sector Publishing - Sales are highly depending on the success of authors

Opportunities Travel Retail - Globalization and mobility growth fosters travel activity worldwide and thus increases the amount of potential customers - Economic recovery in western countries leading to increased travel and consumption - Sector of travel essentials underserved in North America, which is offering the opportunity to enter the market with a lower level of competition Publishing - Digitalization of publishing market representing a new segment of growth with lower inventory and production costs, in which Lagardère has already started to invest Media, Sports & Entertainment - High growth prospects in digital advertising spending - Underserved broadcasting market in Emerging Countries - Increasing sports market spending

Threats Travel Retail - Diminishing economic growth in China - Local regulations restricting the duty free sale of tobacco products Publishing - Strong local and international competitors (e.g. Gallimard-Flammarion and Pearson) - Uncertainty about regulations of digital book pricing (European court decision still outstanding) and academic book publishing licenses - Compliance with local regulations such as intellectual property rights, legal copyright registration requirements, rules governing the pricing of books, and VAT rules Media, Sports & Entertainment - Overall strong competition in each sector of the media industry increasing price pressure and posing a threat to loose market share - Large sport associations are entering the broadcast industry

12

Appendix 2: Porter’s 5 Forces – Travel Retail & Publishing - Simplified

BuyerPower

SupplierPower

ThreatofNewEntrantsThreatofSubs8tutes

DegreeofRivalry

Porter's5Forces-TravelRetail

BuyerPower

SupplierPower

ThreatofNewEntrantsThreatofSubs8tutes

DegreeofRivalry

Porter's5Forces-Publishing(Books,Magazines,NewsPapers)

13

Appendix 3: Porter’s 5 forces – Publishing & Travel Retail – Detailed

1) Publishing

Buyer Power • B2B: diverse set of buyers, large retailers (amazon, Carrefour, in Europe Tesco) have strong negotiation power, flexibility in choosing supplier

• But differentiated products by suppliers weakens buyer power • Low customer loyalty except for newspapers, magazines, popular books • High price sensitivity on physical books due to digital offer • Vertical integration unlikely MODERATE

Supplier Power • Paper merchants have supplier power to a certain extent since paper is key resource and exists in a huge variety / quality

• Journalists / writers require high wages due to high education standards and since most important component for books/ papers etc. -> high switching costs (recruitment)

• Longstanding business contracts with printing companies • Backward integration of publishers – printers -> weakens SP • Self-publishing through technology e.g. Fifty Shades of Grey • Agents who negotiate for successful authors, difficult to predict success of a

product MODERATE

Threat of New Entrants • Dominance of multinational publishers (MMB, Axel Springer) + combined operations with niche /academic publishers

• New entrants only in niche market • Driven by consumer demand -> new entrants can succeed except in news

paper/ magazine business (high brand loyalty) • Low entrance costs: digital / print on demand • Large companies offer take back for unsold news papers/ magazines -> costly • Privacy laws for celebrities and politicians • Reduced VAT of 5.5% in France (standard book level) in e-business, which is

debated in European Court of Justice (might not hold on) since classified as electronic services, but also other European countries lower tax

• Legal restrictions in Russia and Turkey / Scandinavia most deregulated • Strict transparency rules (who, source, etc.) • Large retailers with high negotiation power • Declining business MODERATE

Threat of Substitutes • Digital versions, e-books (kindle, amazon) • Publishing business often combined with sale of food / personal products /

media etc. than ensure revenue, otherwise very difficult • Initial high costs for switching to digital but reduced costs in long-term • Threat varies depending on specific segment MODERATE

Degree of Rivalry • Dominant player is Lagardère, but also other large publishers • Products highly differentiated -> target, topic, political orientation • Only niche is more easily accessible to smaller players • High costs: storage, later editions even not bought at discount MODERATE

14

2) Travel Retail

Buyer Power • Driver of the Travel Retail Market

• Seasonal and strongly linked to economic stability HIGH

Supplier Power • Defragmentation of retailers due to a high M&A activity LOW

Threat of New Entrants • Requirement of high investment resources • Big size required in order to benefit from economies of scale • Increasing airport rents LOW

Threat of Substitutes • If the offer at an airport is not appealing or large enough, Asian customers buy at duty free shops at the border or even in cities instead (e.g. Japan)

LOW

Degree of Rivalry • Large players such as Dufry and World Travel Retail HIGH

Appendix 4: Projected Balance Sheet – Group

31-déc 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E 2020E

Current Assets

3 518,00 3 550,00 4 601,00 3 400,00 3 651,25 3 826,88 3 882,83 4 012,28 4 109,48 4 210,28

Cash & Equivalents

737,00 703,00 1 784,00 566,00 886,00 936,15 959,92 985,22 1 009,81 1 035,87

Inventories

542,00 581,00 559,00 578,00 963,45 986,94 970,78 1 023,46 1 046,07 1 067,82 Receivables

1 980,00 1 961,00 1 866,00 1 935,00 1 801,80 1 903,79 1 952,14 2 003,60 2 053,60 2 106,59

Other Current Assets

259,00 305,00 392,00 321,00 298,22 315,10 323,10 331,61 339,89 348,66

Fixed Assets

5 410,00 5 810,00 3 731,00 4 108,00 4 195,20 4 286,13 4 372,06 4 463,79 4 563,04 4 563,04 Total Assets 8 928,00 9 360,00 8 332,00 7 508,00 7 846,45 8 113,01 8 254,90 8 476,06 8 672,52 8 773,31

Total Equity

3 024,00 2 991,00 2 927,00 2 081,00 2 086,19 2 127,47 2 198,86 2 296,04 2 420,91 2 577,11 Retained Earnings

-707 89 1307 41 35,83 65,67 124,44 207,66 317,11 456,28

Minorities

75,00 82,00 78,00 99,00 109,35 120,79 133,43 147,38 162,80 179,83

Total Liabilities

5 904,00 6 369,00 5 405,00 5 427,00 5 760,26 5 985,54 6 056,03 6 180,02 6 251,61 6 196,21

Current Liabilities

3 345,00 3 296,00 3 354,00 3 193,00 4 368,15 4 523,19 4 515,60 4 715,12 4 824,10 4 933,03

Payables

1 713,00 1 651,00 1 645,00 1 702,00 2 860,61 2 930,32 2 882,29 3 038,75 3 105,89 3 170,48 Other Current Liabilities

1 632,00 1 645,00 1 709,00 1 491,00 1 507,54 1 592,87 1 633,32 1 676,37 1 718,21 1 762,55

Total Liabilities & Equity 8 928,00 9 360,00 8 332,00 7 508,00 7 846,45 8 113,01 8 254,90 8 476,06 8 672,52 8 773,31

15

Appendix 5: Projected Working Capital Requirement Calculation – Divisions

1) Travel Retail

31-déc Average 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E 2020E

Sales

3724 3809 3745 3819 3417 3726 3854 3990 4131 4281 % of group sales

49% 52% 52% 53% 50% 52% 52% 52% 53% 53%

CoGS

3559 3642 3582 3636 3253 3523 3629 3758 3892 4033 % of total CoGS

48% 51% 51% 52% 52% 53% 54% 55% 56% 57%

growth

2% -2% 2% -11% 8% 3% 4% 4% 4%

inventories

260 296 284 301 257 279 287 297 308 319 DIH = Inv/CoGS * 365 28,89 26,71 29,68 28,95 30,21 28,89 28,89 28,89 28,89 28,89 28,89

receivables

963 1013 968 1030 899 981 1014 1050 1087 1127 DSO = AR/Sales * 365 96,07 94,38 97,09 94,39 98,44 96,07 96,07 96,07 96,07 96,07 96,07

other current assets

126 158 203 171 149 162 168 174 180 187 % of sales 0,04 0,03 0,04 0,05 0,04 0,04 0,04 0,04 0,04 0,04 0,04

payables

823 842 836 886 764 827 852 883 914 947 DPO = AP/CoGS * 365 85,72 84,41 84,34 85,18 88,96 85,72 85,72 85,72 85,72 85,72 85,72

other current liabilities

794 850 887 794 753 821 849 879 910 943 % of sales 0,22 0,21 0,22 0,24 0,21 0,22 0,22 0,22 0,22 0,22 0,22

NWC -267,44 -224,55 -266,94 -178,08 -210,73 -226,06 -231,62 -239,88 -248,45 -257,54 Change in NWC

42,89 -42,39 88,86 -32,65 -15,33 -5,56 -8,27 -8,57 -9,09

2) Publishing


Sales

2038 2077 2066 2004 2037 2106 2168 2177 2195 2215 % of group sales

27% 28% 29% 28% 30% 29% 29% 29% 28% 28%

CoGS

1793 1831 1819 1783 1795 1838 1874 1854 1840 1825 % of total CoGS

24% 26% 26% 26% 29% 28% 28% 27% 26% 26%

growth

2% -1% -2% 1% 2% 2% -1% -1% -1%

inventories

131 149 144 148 142 145 148 147 146 144 DIH = Inv/CoGS * 365 28,89 26,71 29,68 28,95 30,21 28,89 28,89 28,89 28,89 28,89 28,89

receivables

527 552 534 540 536 554 571 573 578 583 DSO = AR/Sales * 365 96,07 94,38 97,09 94,39 98,44 96,07 96,07 96,07 96,07 96,07 96,07


69 86 112 90 89 92 94 95 96 96 % of sales 0,04 0,03 0,04 0,05 0,04 0,04 0,04 0,04 0,04 0,04 0,04

payables

415 423 424 435 422 432 440 435 432 429 DPO = AP/CoGS * 365 85,72 84,41 84,34 85,18 88,96 85,72 85,72 85,72 85,72 85,72 85,72


434 463 489 416 449 464 477 479 483 488 % of sales 0,22 0,21 0,22 0,24 0,21 0,22 0,22 0,22 0,22 0,22 0,22 NWC -122 -99 -123 -73 -103 -104 -104 -100 -97 -92 Change in NWC

23 -24 50 -30 -1 0 4 4 4

16

3) Active


Sales

1441 1014 996 958 957 959 962 967 973 980 % of group sales

19% 14% 14% 13% 14% 13% 13% 13% 12% 12%

CoGS

1325 935 918 872 866 861 856 853 850 847 % of total CoGS

18% 13% 13% 12% 14% 13% 13% 12% 12% 12%

growth

-29% -2% -5% -1% -1% -1% 0% 0% 0%

inventories

97 76 73 72 68 68 68 68 67 67 DIH = Inv/CoGS * 365 28,89 26,71 29,68 28,95 30,21 28,89 28,89 28,89 28,89 28,89 28,89

receivables

373 270 258 258 252 252 253 255 256 258 DSO = AR/Sales * 365 96,07 94,38 97,09 94,39 98,44 96,07 96,07 96,07 96,07 96,07 96,07


49 42 54 43 42 42 42 42 42 43 % of sales 0,04 0,03 0,04 0,05 0,04 0,04 0,04 0,04 0,04 0,04 0,04

payables

306 216 214 213 203 202 201 200 200 199 DPO = AP/CoGS * 365 85,72 84,41 84,34 85,18 88,96 85,72 85,72 85,72 85,72 85,72 85,72


307 226 236 199 211 211 212 213 214 216 % of sales 0,22 0,21 0,22 0,24 0,21 0,22 0,22 0,22 0,22 0,22 0,22 NWC -95 -55 -66 -38 -52 -51 -50 -49 -48 -47 Change in NWC

41 -11 27 -14 1 1 1 1 1

4) Sports and Entertainments


Sales

454 472 409 394 434 442 433 478 502 527 % of group sales

6% 6% 6% 5% 6% 6% 6% 6% 6% 7%

CoGS

348 394 344 340 372 371 351 384 394 403 % of total CoGS

84% 93% 81% 78% 88% 86% 80% 88% 91% 94%

growth inventories

455 541 453 452 495 495 467 512 525 537 DIH = Inv/CoGS * 365 486,11 477,09 501,23 480,66 485,46 486,11 486,11 486,11 486,11 486,11 486,11

receivables

117 126 106 106 114 116 114 126 132 139 DSO = AR/Sales * 365 96,07 94,38 97,09 94,39 98,44 96,07 96,07 96,07 96,07 96,07 96,07


15 20 22 18 19 19 19 21 22 23 % of sales 0,04 0,03 0,04 0,05 0,04 0,04 0,04 0,04 0,04 0,04 0,04

payables

1438 1537 1333 1332 1472 1469 1389 1520 1560 1596 DPO = AP/CoGS * 365 1444,03 1507,84 1424,32 1414,45 1429,50 1444,03 1444,03 1444,03 1444,03 1444,03 1444,03


97 105 97 82 96 97 95 105 111 116 % of sales 0,22 0,21 0,22 0,24 0,21 0,22 0,22 0,22 0,22 0,22 0,22 NWC

-947 -957 -849 -837 -939 -936 -884 -967 -991 -1013

Change in NWC

-10 108 12 -101 2 53 -83 -24 -22

17

Appendix 6: Income Statement - Group 31-déc 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E 2020E

Revenue 7657 7372 7216 7175 6845 7233 7416 7612 7802 8003

CoGS

7407 7145 7049 6983 6285 6592 6710 6849 6977 7109

EBITDA 250 227 167 192 560 640 706 762 825 894

Depreciation

217 212 181 165 165 181 194 210 227 247

EBIT 33 15 -14 27 395 460 512 553 598 648

interest

112 93 95 76 129 137 142 144 146 148

EBT -79 -78 -109 -49 267 323 370 409 451 499

taxes

105 40 117 87 101 123 140 155 172 190

Net Income -184 -118 -226 -136 165 200 229 254 280 310

Dividend 170 170 170 170 170 170 170 170 170 170

Retained Earnings

-354 -288 -396 -306 -5 30 59 83 109 139

Appendix 7: Discounted Cash Flow Analysis - Group

2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E 2020E CAGR

Revenue

7657 7372 7216 7175 6845 7233 7416 7612 7802 8003 3,17%

Growth

-3,72% -2,12% -0,57% -4,60% 5,66% 2,54% 2,64% 2,50% 2,58%

EBITDA

632 570 553 544 560 640 706 762 825 894

% margin

8,25% 7,73% 7,66% 7,58% 8,19% 8,86% 9,52% 10,02% 10,57% 11,18%

D&A

217 212 181 165 165 181 194 210 227 247 % of revenue

2,83% 2,88% 2,51% 2,30% 2,41% 2,50% 2,62% 2,76% 2,91% 3,08%

Rec. EBIT

415 358 372 379 395 474 512 553 598 648 % margin

5,42% 4,86% 5,16% 5,28% 5,77% 6,55% 6,90% 7,26% 7,66% 8,09%

Capex

237 260 291 246 615 268 285 296 319 346 % of revenue

3,10% 3,53% 4,03% 3,43% 8,99% 3,71% 3,85% 3,88% 4,09% 4,32%

Change in WC

91 96 30 178 -178 -13 48 -87 -28 -25 % of revenue

1,19% 1,31% 0,42% 2,48% -2,60% -0,18% 0,64% -1,14% -0,36% -0,32%

Free Cash Flow 144 65 86 -24 -28 219 178 344 307 328 6349

Discounted Free cash flow 201 153 274 232 231 4474

DCF 5564

DCF After 8% holding Disc. 5119

18

Appendix 8: Assumptions for projections

1) Travel and Retail

Product 2015e 2016e 2017e 2018e 2019e 2020e Distribution -4,00% -3,50% -1,50% -1,50% -1,50% -1,50% Airport Europe 3,30% 4,50% 4,50% 4,50% 4,50% 4,50%

Travel R

etail

Airport Asia Pa 7,80% 7,60% 7,40% 7,30% 7,30% 7,30% Airport NorthAm 1,50% 1,50% 1,70% 1,70% 1,70% 1,70% Station Europe 5,50% 4,40% 4,50% 4,50% 4,40% 4,40% Station Asia Pa 6,10% 7,70% 8,00% 8,30% 8,50% 8,50% Station NorthAm 9,20% 7,80% 7,90% 7,70% 7,30% 7,30% Other Europe 4,10% 4,10% 4,20% 4,30% 4,00% 4,00% Other Asia Pa 8,70% 9,00% 8,80% 8,80% 7,80% 7,80% Other North Am 5,30% 4,80% 4,90% 5,00% 4,60% 4,60%

Aggregate 2011A 2012A 2013A 2014A 2015e 2016e 2017e 2018e 2019e 2020e

D&A 1,61% 1,65% 1,79% 2,04% 2,04% 2,04% 2,04% 2,04% 2,04% 2,04%

Rec EBIT 2,82% 2,73% 2,56% 2,75% 2,77% 3,79% 3,78% 3,77% 3,75% 3,75%

Capex 2,15% 2,60% 3,34% 2,93% 2,75% 3,00% 3,00% 2,75% 2,75% 2,75%

Change in WC -0,99% 1,13% -1,13% 2,33% -0,89% -0,89% -0,89% -0,89% -0,89% -0,89%

2) Publishing

Product 2015e 2016e 2017e 2018e 2019e 2020e Education -3,00% 15,00% 12,00% -3,00% -1,00% -1,00% Illustrated

book -0,10% -0,10% -0,10% -0,10% -0,10% -0,10% General lite. 3,00% 2,00% 2,00% 2,00% 2,00% 2,00% Partworks 5,00% 5,00% 5,00% 5,00% 5,00% 5,00% Other 2,00% -2,00% -3,00% -3,00% -3,00% -3,00%


D&A 1,18% 1,11% 1,16% 1,20% 1,16% 1,16% 1,16% 1,16% 1,16% 1,16%

Rec EBIT 10,84% 10,74% 10,79% 9,83% 10,55% 11,70% 10,80% 10,55% 10,55% 10,55%

Capex 1,42% 2,07% 1,98% 4,04% 2,00% 2,00% 1,00% 1,00% 1,00% 1,00%

Change in WC 2,06% 1,09% -1,15% 2,48% 1,00% 3,50% 1,50% 1,00% 1,00% 1,00%

19

3) Active

Product 2015e 2016e 2017e 2018e 2019e 2020e Radio -0,20% 0,00% 0,10% 0,30% 0,50% 0,50% TV 1,10% 1,40% 1,60% 1,80% 1,90% 1,90% Press -1,10% -0,90% -0,80% -0,60% -0,60% -0,60% Pure Digital -0,20% 0,00% 0,10% 0,30% 0,50% 0,50%


D&A 1,46% 1,48% 1,41% 1,36% 1,36% 1,36% 1,36% 1,36% 1,36% 1,36%

Rec EBIT 6,59% 6,31% 6,43% 7,62% 7,87% 8,12% 8,37% 8,62% 8,87% 8,87%

Capex 1,04% 0,99% 1,61% 1,36% 1,25% 1,25% 1,25% 1,25% 1,25% 1,25%

Change in WC 4,79% 4,01% -1,11% 2,86% 2,64% 2,64% 2,64% 2,64% 2,64% 2,64%

4) Sports and Entertainments

Product 2015e 2016e 2017e 2018e 2019e 2020e Media right 4,40% 4,70% 4,90% 4,90% 5,20% 5,20% Marketing right 5,00% 5,00% 5,00% 5,00% 5,00% 5,00% Other 5,00% 5,00% 5,00% 5,00% 5,00% 5,00% Event premium 10,00% 5,00% 2,00% -5,00% 0,00% 0,00%


D&A 24,67% 23,52% 18,58% 12,69% 15,64% 15,64% 15,64% 15,64% 15,64% 15,64%

Rec EBIT -1,32% -6,99% -2,69% 1,02% 1,27% 1,52% 1,77% 2,02% 2,27% 2,27%

Capex 24,89% 22,88% 26,65% 10,15% 21,14% 21,14% 21,14% 21,14% 21,14% 21,14%

Change in WC 3,74% -2,10% 26,34% 2,94% 9,06% 9,06% 9,06% 9,06% 9,06% 9,06%

20

Appendix 9: Discounted Cash Flow Analysis – Divisions

1) Travel Retail

31 December 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E 2020E Term. Val.

Revenue

3724 3809 3745 3819 3417 3726 3854 3990 4131 4281 Growth

2,28% -1,68% 1,98% -10,53% 9,04% 3,44% 3,53% 3,54% 3,63%

EBITDA

165 167 163 183 164 203 224 232 239 248

% margin

4,43% 4,38% 4,35% 4,79% 4,81% 5,45% 5,82% 5,81% 5,80% 5,78%

Rec. EBITDA before adjustment 165 167 163 183 164 146 224 232 239 248

% margin 4% 4% 4% 5% 5% 4% 6% 6% 6% 6%

Adjustment (Paradies)

57,3678

% margin (Paradies)

12%

D&A

60 63 67 78 70 76 79 81 84 87 % of revenue

1,61% 1,65% 1,79% 2,04% 2,04% 2,04% 2,04% 2,04% 2,04% 2,04%

Rec. EBIT

105 104 96 105 95 141 146 150 155 160 % margin

2,82% 2,73% 2,56% 2,75% 2,77% 3,79% 3,78% 3,77% 3,75% 3,74%

Rec. EBIT before adjustment

105 104 96 105 91 127 131 136 141 146

% margin 2,82% 2,73% 2,56% 2,75% 2,72% 3,41% 3,41% 3,41% 3,41% 3,41%

Adjustment (Paradies)

4

Adjustment (Synergy cost

saving)

14 14 14 14 14

Capex

80 99 125 112 471 112 116 110 114 118 % of revenue

2,15% 2,60% 3,34% 2,93% 13,79% 3,00% 3,00% 2,75% 2,75% 2,75%

Capex before adjustment 80 99 125 112 94 112 116 110 114 118

% of revenue 2,15% 2,60% 3,34% 2,93% 2,75% 3,00% 3,00% 2,75% 2,75% 2,75%

Adjustment(Dis

posal) -108

Adjustment (Paradies) 485

Change in WC

-37 42,89 -42,39 88,86 -32,65 -15,33 -5,56 -8,27 -8,57 -9,09 % of revenue

-0,99% 1,13% -1,13% 2,33% -0,89% -0,89% -0,89% -0,89% -0,89% -0,89%

WACC of division 5,71% Tax Rate 38% Growth rate to infinity 1,7% Free Cash Flow 82 -14 44 -58 -310 67 59 73 75 78 1915 Discounted Free cash flow 63 51 59 57 55 1354 TOTAL DCF 1639

21

2) Publishing


Revenue

2038 2077 2066 2004 2037 2106 2168 2177 2195 2215 Growth

1,91% -0,53% -3,00% 1,64% 3,36% 2,97% 0,41% 0,84% 0,90%

EBITDA

245 246 247 221 242 268 294 323 355 390 % margin

12,02% 11,84% 11,96% 11,03% 11,88% 12,72% 13,58% 14,84% 16,16% 17,60%

D&A

24 23 24 24 24 25 25 25 25 26 % of revenue

1,18% 1,11% 1,16% 1,20% 1,16% 1,16% 1,16% 1,16% 1,16% 1,16%

Rec. EBIT

221 223 223 197 218 243 270 298 329 364 % margin

10,84% 10,74% 10,79% 9,83% 10,55% 11,70% 10,80% 10,55% 10,55% 10,55%

Capex

29 43 41 81 83 84 85 86 87 88 % of revenue

1,42% 2,07% 1,98% 4,04% 2,00% 2,00% 1,00% 1,00% 1,00% 1,00%

Change in WC

42 22,66 -23,82 49,73 -29,87 -0,73 -0,19 3,86 3,67 4,09 % of revenue

2,06% 1,09% -1,15% 2,48% 1,00% 3,50% 1,50% 1,00% 1,00% 1,00%

WACC of division 7,01% Tax Rate 38% Growth rate to infinity 2,0% Free Cash Flow 90 96 145 15 107 92 107 120 139 160 2831 Discounted Free cash flow 86 93 97 105 113 2001 TOTAL DCF 2496

3) Active


Revenue

1441 1014 996 958 957 959 962 967 973 980 Growth

-29,63% -1,78% -3,82% -0,06% 0,18% 0,31% 0,52% 0,65% 0,66%

EBITDA

116 79 78 86 92 98 106 114 123 133 % margin

8,05% 7,79% 7,83% 8,98% 9,60% 10,27% 11,00% 11,78% 12,64% 13,56%

D&A

21 15 14 13 13 13 14 14 14 14 % of revenue

1,46% 1,48% 1,41% 1,36% 1,36% 1,36% 1,36% 1,36% 1,36% 1,36%

Rec. EBIT

95 64 64 73 79 85 92 100 109 119 % margin

6,59% 6,31% 6,43% 7,62% 7,87% 8,12% 8,37% 8,62% 8,87% 8,87%

Capex

15 10 16 13 13 13 13 14 14 14 % of revenue

1,04% 0,99% 1,61% 1,36% 1,25% 1,25% 1,25% 1,25% 1,25% 1,25%

Change in WC

69 40,64 -11,05 27,44 -13,69 0,91 0,93 0,92 0,98 1,09 % of revenue

4,79% 4,01% -1,11% 2,86% 2,64% 2,64% 2,64% 2,64% 2,64% 2,64%

WACC of division 7,19% Tax Rate 38% Growth rate to infinity 1,2% Free Cash Flow -4 4 49 18 63 52 56 61 67 73 1131 Discounted Free cash flow 45 46 46 51 51 799 TOTAL DCF 1038

22

4) Sports and Entertainment


Revenue

454 472 409 394 434 442 433 478 502 527 Growth

3,96% -13,35% -3,67% 10,13% 1,94% -2,22% 10,51% 5,04% 5,04%

EBITDA

106 78 65 54 62 71 81 94 108 124 % margin

23,35% 16,53% 15,89% 13,71% 14,26% 16,04% 18,84% 19,60% 21,46% 23,52%

D&A

112 111 76 50 58 67 77 89 103 120 % of revenue

24,67% 23,52% 18,58% 12,69% 15,64% 15,64% 15,64% 15,64% 15,64% 15,64%

Rec. EBIT

-6 -33 -11 4 4 4 4 4 4 4 % margin

-1,32% -6,99% -2,69% 1,02% 1,27% 1,52% 1,77% 2,02% 2,27% 2,27%

Capex

113 108 109 40 48 59 71 86 104 126 % of revenue

24,89% 22,88% 26,65% 10,15% 21,14% 21,14% 21,14% 21,14% 21,14% 21,14%

Change in WC

17 -9,92 107,72 11,58 -101,48 2,47 52,59 -83,38 -24,17 -21,50 % of revenue

3,74% -2,10% 26,34% 2,94% 9,06% 9,06% 9,06% 9,06% 9,06% 9,06%

WACC of division 8,12% Tax Rate 38% Growth rate to infinity 2,5% Free Cash Flow -24 -20 -152 1 113 8 -44 89 26 17 472 Discounted Free cash flow 8 -37 71 19 12 320 TOTAL DCF 391

23

Appendix 10: WACC Calculations

PublishingWACCFIGURES

Cost of Equity

Risk-free rate 2,94% Equity risk 6,35% Levered Beta 0,92 Cost of equity 8,8%

Cost of debt

Cost of debt before tax 2,370% Tax rate 38,0% Cost of debt after tax 1,469%

Capital structure

Equity 75,7% Debt 24,3%

Implied WACC 7,01%

TravelRetailWACCFIGURES

Cost of Equity

Risk-free rate 2,94% Equity risk 6,35% Levered Beta 0,65

Cost of equity 7,1%

Cost of debt


Capital structure


Implied WACC 5,71%

ActiveWACCFIGURES

Cost of Equity

Risk-free rate 2,94% Equity risk 6,35% Levered Beta 0,96

Cost of equity 9,0%

Cost of debt


Capital structure


Implied WACC 7,19%

SportsandEnter.WACCFIGURES

Cost of Equity Risk-free rate 2,94% Equity risk 6,35% Levered Beta 1,15

Cost of equity 10,3%

Cost of debt

Cost of debt before tax 2,370% Tax rate 38,0%

Cost of debt after tax 1,469%

Capital structure


Implied WACC 8,12%

24

Appendix 11: Sensitivity Analysis After Discount – Growth Rate to Infinity vs. WACC

Average Growth Rate to Infinity

5119 1,5% 1,8% 2,0% 2,3% 2,5%6,0% 5800 6091 6418 6789 72136,5% 5211 5441 5697 5982 63047,0% 4729 4915 5119 5345 55967,5% 4327 4480 4647 4829 50308,0% 3988 4115 4253 4403 4566

Appendix 12: Trading Multiple Implied Valuation – Simplified

Implied Enterprise Value

Aggregate 2015 projection 2014 Current 5Y Average

Publ

i.

Sales 2037 3252 2988 2920

EBITDA 242 2396 3106 2372

EBIT 218 4608 5862 n.a.

Serv

.

Sales 3417 3964 4442 3531

EBITDA 164 2027 2045 1579

EBIT 95 1410 2978 n.a.

Act

i.

Sales 957 1261 1197 1053

EBITDA 92 1063 1246 878

EBIT 79 1680 1102 n.a.

Unl

i.

Sales 434 1006 1131 940

EBITDA 62 854 831 645

EBIT 4 77 82 n.a.

Total Sales 8724 8977 7768

EBITDA 5833 6650 5036

EBIT 7153 9222 n.a.

Ave

rage

WA

CC

25

Appendix 13: Sales & EBITDA Multiple – Detailed

m€

As of 01.04.2016 2014a

EV/Sales EV/EBITDA

Company Country Market cap EV Sales EBITDA EBIT

2014 Current 5Y ave. 2014 Current 5Y ave.

Publ

ishi

ng

Scholastic Corp. US 1229 982 1346 101 72

0,63x 0,70x 0,60x 7,00x 13,50x 5,40x

Axel Springer Germany 5530 6735 3038 561 317

1,82x 2,10x 1,60x 11,35x 15,10x 12,30x

Pearson UK 8236 11374 6050 1249 484

2,34x 1,60x 2,10x 11,35x 9,90x 11,70x

Average

1,60x 1,47x 1,43x 9,90x 12,83x 9,80x

Serv

ices

Autogrill Italy 2236 2973 4461 213 26

0,52x 0,70x 0,50x 10,87x 12,20x 8,00x

Dufry Switzerland 5929 8760 3447 403 201

1,79x 1,60x 1,70x 15,33x 13,10x 13,00x

WH Smith UK 2478 2727 1410 182 141

1,17x 1,60x 0,90x 10,78x 12,00x 7,80x

Average 1,16x 1,30x 1,03x 12,33x 12,43x 9,60x

Act

ive

Wige Media Germany 19765 22740 60249 1270 -1739

0,24x 0,40x 0,40x 11,29x 17,70x 10,70x

Axel Springer Germany 5530 6735 3038 561 317

1,82x 2,10x 1,60x 11,35x 15,10x 12,30x

Newscorp US 7416 5882 6322 621 195

0,87x 0,70x 0,80x 7,15x 7,00x 8,20x

Vivendi France 27082 19540 10089 1434 783

2,34x 1,80x 1,60x

16,47x 14,40x 7,00x

Average 1,32x 1,25x 1,10x

11,57x 13,55x 9,55x

Unl

imite

d

ITV UK 15053 15867 3335 977 832

3,61x 4,29x 2,70x 13,98x 14,61x 10,40x

WPP PLC UK 27476 32529 14844 12959 2114

1,88x 2,01x 1,60x 10,98x 10,27x 10,40x

Sky plc UK 25644 33102 9308 5039 1486

2,15x 2,44x 2,20x 10,11x 13,94x 10,50x

Mediaset SpA Italy 4355 5822 3414 1521 256

1,63x 1,69x 20,13x 14,91x

Average 2,32x 2,61x 2,17x

13,80x 13,43x 10,43x

26

Appendix 14: EBIT & P/E Multiple – Detailed

m€

As of 01.04.2016 2014a EV/EBIT P/E

Company Country Market cap EV Sales EBITDA EBIT 2014 Current 5Y ave.

2014 Current 5Y ave.

Publ

ishi

ng

Scholastic Corp. US 1229 982 1346 101 72 16,74x 37,50x n.a

n.r 23,70x 21,40x

Axel Springer Germany 5530 6735 3038 561 317 17,47x 19,16x n.a

32,95x 24,30x 20,40x

Pearson UK 8236 11374 6050 1249 484 29,27x 24,09x n.a

39,53x 30,10x 25,70x

Average 21,16x 26,92x n.a

36,24x 26,03x 22,50x

Serv

ices

Autogrill Italy 2236 2973 4461 213 26 n.r 42,84x n.a

63,13x 51,40x 30,90x

Dufry Switzerland 5929 8760 3447 403 201 30,77x 35,59x n.a

90,31x n.a 48,80x

WH Smith UK 2478 2727 1410 182 141 13,90x 15,94x n.a

17,22x 19,40x 13,50x

Average 14,89x 31,46x 0,00x

56,89x 23,60x 31,07x

Act

ive

Wige Media Germany 19765 22740 60249 1270 -1739 n.r n.a n.a

n.r 28,30x 66,30x

Axel Springer Germany 5530 6735 3038 561 317 17,47x 19,16x n.a

32,95x 24,40x 20,40x

Newscorp US 7416 5882 6322 621 195 16,36x n.a n.a

43,76x 22,70x 29,30x

Vivendi France 27082 19540 10089 1434 783 30,17x 27,98x n.a

18,64x 37,60x 18,00x

Average

21,33x 13,99x n.a 31,78x 28,25x 33,50x

Unl

imite

d

ITV UK 15053 15867 3335 977 832 13,06x 15,74x n.a

22,60x 21,11x 18,40x

WPP PLC UK 27476 32529 14844 12959 2114 13,92x 15,64x n.a

17,90x 16,15x 16,10x

Sky plc UK 25644 33102 9308 5039 1486 20,25x 20,93x

11,20x 14,22x 14,70x

Mediaset SpA Italy 4355 5822 3414 1521 256 28,83x 29,05x n.a

n.r 127,73x

Average

19,02x 20,34x n.a 12,93x 44,80x 16,40x

27

Appendix 15: Beta by Division Calculation - Detailed

m€

Beta

Deleveraging

Relevering

Company Country

5Y Av. - FS

ND/MC Tax Unlevered beta - FS Unlevered beta

Levered beta

Publ

ishi

ng

Scholastic Corp. US

1,08

0,087 40,00% 1,03 0,41

Axel Springer Germany

0,67

0,124 29,65% 0,62 0,61

Pearson UK

0,81

0,277 20,00% 0,66 0,15

Average

0,85

0,77 0,39

0,92

Serv

ices

Autogrill Italy

0,66

0,318 31,40% 0,54 0,42

Dufry Switzerland

0,62

0,427 17,92% 0,46 0,67

WH Smith UK

0,62

-0,008 20,00% 0,62 0,54

Average 0,63 0,54 0,54

0,65

Act

ive

Wige Media Germany

0,24

-0,020 29,65% 0,24 0,66

Axel Springer Germany

0,67

0,124 29,65% 0,62 0,61

Newscorp US

1,1

-0,261 17,92% 1,40 2,47

Vivendi France

0,83

-0,179 38% 0,93 0,71

Average 0,71 0,80 1,11 0,96

Unl

imite

d

ITV UK

1,24

-0,005 20,00% 1,24 0,85

WPP PLC UK

1,13

0,114 20,00% 1,04 0,71

Sky plc UK

0,64

0,173 20,00% 0,56 0,32

Mediaset SpA Italy

1,14

0,205 31,40% 1,00 1,25

Average 1,0375 0,96 0,79 1,15

28

Appendix 16: Risk Analysis Matrix

Appendix 17: Lagardère vs. its peers – various metrics

29

Sources used for the report

1) Highlight - Capital IQ - FactSet

2) Business Description - Infography OJIM about Lagardère 2014 - Lagardère Corporate Presentation 2014 - Lagardère Credit Investment Presentation 2014 - Lagardère Investor Presentation September 2015 - Lagardère Reference Document 2014 - Lagardère website - Press 3) Industry analysis and competitive positioning - Lagardère Investor Presentation March 2015 - Lagardère Travel Retail Acquisition of Paradies Presentation - Lagardère Unlimited Investor Day Presentation, May 2014 - MarketLine report: Digital Media France, Europe and World 2015 - MarketLine report: Media France, Europe and World 2015 - MarketLine report: Newspaper France, Europe and World 2015 - MarketLine report: Publishing France, Europe and World 2015 - MarketLine report: Global Passenger Rail 2015 - MarketLine report: Global Passenger 2015 - MarketLine report: Global Airline 2015 - PWC: Outlook for the global sport markets to 2015” - RNR Market Research, Global Duty Free Retailing for 2014 – 2019 - UNWTO World Tourism Barometer 2015 - Xapp Media: Internet, Radio Trends Report 2015 - Xerfi: L’édition de Livre en France 2015 - Xerfi: World Media company 2014 - Xerfi: Airports and Airport Operators World 2015 - Xerfi: Airline World 2015 - Xerfi: World Sport Franchise Business 2015

4) Financial Analysis, Valuation and Investment summary - Bloomberg - Capital IQ - Factset - Investing.com: French Government bond since 1986 - Most sources used in the 3) were used as well here, for the calculation of growth perspective

5) Investment Risk - Lagardère Investor Presentation September 2015 - Lagardère Reference Document 2014 - Press

Disclosures: Ownership and material conflicts of interest: Theauthor(s),oramemberoftheirhousehold,ofthisreportdoesnotholdafinancialinterestinthesecuritiesofthiscompany.Theauthor(s),oramemberoftheirhousehold,ofthisreportdoestnotknowoftheexistenceofanyconflictsofinterestthatmightbiasthecontentorpublicationofthisreport.Receipt of compensation: � Compensationoftheauthor(s)ofthisreportisnotbasedoninvestmentbankingrevenue.Position as a officer or director: �Theauthor(s),oramemberoftheirhousehold,doesnotserveasanofficer,directororadvisoryboardmemberofthesubjectcompany.Market making: �Theauthor(s)doesnotactasamarketmakerinthesubjectcompany’ssecurities.Disclaimer: �Theinformationsetforthhereinhasbeenobtainedorderivedfromsourcesgenerallyavailabletothepublicandbelievedbytheauthor(s)tobereliable,buttheauthor(s)doesnotmakeanyrepresentationorwarranty,expressorimplied,astoitsaccuracyorcompleteness.Theinformationisnotintendedtobeusedasthebasisofanyinvestmentdecisionsbyanypersonorentity.Thisinformationdoesnotconstituteinvestmentadvice,norisitanofferorasolicitationofanoffertobuyorsellanysecurity.Thisreportshouldnotbeconsideredtobearecommendationbyanyindividualaffiliatedwith[SocietyName],CFAInstituteortheCFAInstituteResearchChallengewithregardtothiscompany’sstock.

cfa institute research challenge · 2016. 11. 2. · (including gulli, mcm, canal j), audiovisual...

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