BOOK PRODUCTION IN
AUSTRALIA
PIAA/APA JOINT INDUSTRY STUDY
BOOK PUBLISHING ANALYSIS
WJ M
CONSULTING
PTY
LTD
Purpose
Examine:
 Opportunities for Growth
Opportunities to Improve Performance
 Industry Best Practices

WJ M
CONSULTING
PTY
LTD
Methodology

Questionnaire – Primarily FY2000

Interviews

Case Studies
WJ M
CONSULTING
PTY
LTD
Approach
Across Four Major Industry Segments:
Trade/Consumer
 Schools
 Tertiary/Academic
 Professional/Reference

WJ M
CONSULTING
PTY
LTD
Results
WJ M
CONSULTING
PTY
LTD
Trade/Consumer
(14)
Sales
PBIT
$536.1m
$35.3m
Schools
(10)
Sales
PBIT
$162.6m
$27.2m
Academic/Prof
(10)
Sales
PBIT
$257.5m
$43.6m
Total
Sales
PBIT
$956.2m
$106.1m
Profit Margins By Sector
100%
Percentage
90%
80%
70%
100%
100%
100%
100%
60%
50%
40%
Sales
Gr Profit 30%
Costs
20%
PBIT
44%
37%
10%
WJ M
CONSULTING
PTY
LTD
0%
59%
52%
42%
34%
35%
35%
25%
17%
7%
7%
TRADE
SCHOOL
TERTIARY/
ACADEMIC
PROF’S’L
Trade/Consumer Segment
Sales Growth 1997-2000
 No Similar Profit Growth
 Margin Problems
 High Operating Costs
 Working Capital Difficulties

WJ M
CONSULTING
PTY
LTD
Trade P&L Summary FY 2000
Sales
Trading Gross Profit
$280.8m (52.4%)
Gross Margin
$233.6m (43.6%)
Op Costs
$198.3m (37.0%)
PBIT
WJ M
CONSULTING
PTY
LTD
$536.1m
$35.3m (6.6%)
120000
Trade/Consumer P&L Y2000
100000
$AUS '000's
80000
Sales
Gr Profit
Costs
PBIT
60000
40000
20000
W J M0
CONSULTING
PTY
LTD
(1)
(2)
(3)
(4)
(5)
(6)
Companies
(7)
(8)
(9)
(10)
Trade P&L Summary
Australian Titles 45.8% Total Sales
 Trading Gross Profit 52.4% Sales
 Trading GP Eroded 8.8% to 43.6%
 Exchange Loss - $444K (0.08% sales)
 Inventory W/O - $26.3m (4.9% sales)
 Imported Books GP – 39.5% sales

WJ M
CONSULTING
PTY
LTD
Trade P&L Summary (cont)
Royalties/fees 13.3% Sales
 Operating Costs 37% Sales
 Marketing/Sales Costs 12.7% Sales
 Distribution Costs 11.2% Sales
 PBIT 6.6% Sales or 3.5% Adjusted

WJ M
CONSULTING
PTY
LTD
Export Sales
Export Sales $60.3m – 24.5% Sales of
Australian Books
 75% from one company
 Adjusted 7.2% Sales of Australian
Books

WJ M
CONSULTING
PTY
LTD
Returns
WJ M
CONSULTING
PTY
LTD
0% - 10% Sales
3
15% - 20% Sales
7
20% - 25% Sales
1
> 30% Sales
1
Trade Working Capital
WJ M
CONSULTING
PTY
LTD
PBIT
$35.2m
Advances
$16.2m
WIP
$17.2m
Inventory
$120.6m
Debtors
$114.0m
Total Working Capital
$267.9m
Ratio
13.1%
Key W/Capital Components
Inventory
Debtors

Range 60 – 96 DSO
$120.6m
 22.5% sales
 27 weeks in stock
WJ M
CONSULTING
PTY
LTD
Schools Segment
Significant Sales Growth 1997 – 2000
 Also Strong Profit Growth
 Higher Margins than Trade
 Better Working Capital Performance

WJ M
CONSULTING
PTY
LTD
Schools P&L Summary FY 2000
Sales
WJ M
CONSULTING
PTY
LTD
$162.6m
Trading Gross Profit
$95.1m (58.5%)
Gross Margin
$84.7m (52.1%)
Operating Costs
$57.5m (35.4%)
PBIT
$27.2m (16.7%)
School P&L Y2000
35000
30000
$AUS '000's
25000
20000
Sales
Gr Profit
Costs
PBIT
15000
10000
5000
WJ M
0
CONSULTING -5000
PTY
LTD
(1)
(2)
(3)
(4)
(5)
(6)
Companies
(7)
(8)
(9)
(10)
Schools P&L Summary
Australian Titles Dominate – 93% Total
 Sales Primary School Books – 49%
 Sales Secondary School Books – 41%
 Trading GP – 58.5% sales
 Gross Margin – 52.1% (Trade 43.6%)
 Exchange Losses - $231K
 Inventory W/O - $3m

WJ M
CONSULTING
PTY
LTD
Schools P&L Summary (cont)
Trading Terms
 Royalties/Fees – 10.5% sales
 Operating Costs – 35.4% sales
 Marketing/Sales Costs – 12.9% sales
 Distribution Costs – 7.8% sales
 PBIT – 16.7% sales

WJ M
CONSULTING
PTY
LTD
Export Sales
School Export Sales - $47m or 33.4%
sales of Australian Books
 Two Companies Boosted Result
 >20% Op Margin Cos. Had strong
Exports
 USA Largest Export Market
 Strong Exports From Literacy Area

WJ M
CONSULTING
PTY
LTD
Electronic Sales
Electronic 1% Total Sales - But: Used as Ancillary Textbook Material
 Some Stand-Alone Products
 Marketing Support
 Some Access to Texts
 Some Material Sold on Subscription
WJ M
CONSULTING
PTY
LTD
Schools Working Capital Summary
PBIT
Author Advances
$1.1m
WIP
$7.5m
Inventory
$23.0m
Debtors
$32.9m
Total Working Capital
$64.5m
W J M Ratio
CONSULTING
PTY
LTD
$21.9m
33.9%
Key W/Capital Components
Inventory
 $26.8m
 17.1% Sales
 28 Weeks in Stock
WJ M
CONSULTING
PTY
LTD
Debtors
 >75 DSO
Tertiary/Academic Segment
Data From Publishers of Professional
Information Segregated
 Sales Growth in Academic 1997-2000
 In Academic Segment Only 32.5%
Sales From Australian Books
 Lower Margins
 Working Capital Difficulties

WJ M
CONSULTING
PTY
LTD
Tertiary/Acad. P&L Summary
Sales
Trading Gross
Profit
Gross Margin
$56.8m (49.3% sales)
Operating Costs
$40.4m (35.1% sales)
PBIT
WJ M
CONSULTING
PTY
LTD
$115.3m
$48.6m (42.1% sales)
$8.1m (7.0% sales)
Tertiary/Academic
P&L
Y2000
45000
40000
Sales
Gr Profit
Costs
PBIT
$AUS '000's
35000
30000
25000
20000
15000
10000
5000
WJ M
CONSULTING
PTY
LTD
0
(1)
(2)
(3)
(4)
(5)
Companies
(6)
(7)
(8)
Tertiary/Acad. P&L Summary
Imported Books 61.3% Total Sales
 Margins Distorted By Interco. Trading
 Trading Gross Profit – 49.3% sales
 Gross Margin – 42.1% sales
 Exchange Losses - $1.1m
 Inventory W/O - $2.0m

WJ M
CONSULTING
PTY
LTD
Tertiary/Acad. P&L Summary
Royalties/Fees 20.8% sales - ??
 Operating Costs – 35.1% sales
 Marketing/Sales Costs 17.0% sales
 Distribution Costs – 10.4% sales
 PBIT – 7.0% sales

WJ M
CONSULTING
PTY
LTD
Prof. Information P&L Summary
Sales
WJ M
CONSULTING
PTY
LTD
$142.2m
Gross Margin
$83.5m (58.7% sales)
Operating Costs
$48.1m (33.8% sales)
PBIT
$35.5m (24.9% sales)
Electronic Sales – Prof. Information
20% Total Sales
 50% in Three Years
 Stand-Alone Products
 Electronic Versions Print Products
 Some Print Product Phased Out
 Investment in Data Conversion

WJ M
CONSULTING
PTY
LTD
Tertiary/Acad. Working Capital
WJ M
CONSULTING
PTY
LTD
PBIT
$17.8m
Author Advances
$0.4m
WIP
$2.0m
Inventory
$15.8m
Debtors
$22.7m
Total Working Capital
$40.9m
Ratio
16.0%
Case Studies
Allen and Unwin
 Hodder Headline
 Penguin
 John Wiley & Sons Australia Ltd
 Nelson Thomson Learning
 Reed Education

WJ M
CONSULTING
PTY
LTD
Case Studies - Conclusions
Clearly Defined Company Goals
 Planning Tools
 Focused Publishing Strategies
 Effective Communication
 Accountability

WJ M
CONSULTING
PTY
LTD
Case Studies - Conclusions
Use of Incentive
 Management Information
 Balance Sheet Management
 Service Levels
 Experienced Management

WJ M
CONSULTING
PTY
LTD
Trade - Recommendations
Grow Australian Published Lists
 Develop Export Culture
 Review Margin Performance
 Tighten Returns Policies Further
 Review Marketing and Sales Strategies

WJ M
CONSULTING
PTY
LTD
Trade Recommendations (cont.)
Review Distribution Strategies
 Tighten Debtor Management
 Focus on Management of Inventory
 Increase Training/Development Spend
 Strategies for Smaller Companies

WJ M
CONSULTING
PTY
LTD
Trade Benchmarks
Sales Australian Books
46% Total Sales
Export Sales
7.2% Sales Aust. Books
Gross Margin
45% Sales
G.P. – Imported Books
40% Sales
Returns
<20% Sales
Operating Costs
35% Sales
WJ M
CONSULTING
PTY
LTD
Trade Benchmarks (cont.)
Marketing/Sales Costs 12% Sales
WJ M
CONSULTING
PTY
LTD
Distribution Costs
7% - 11% Sales
Working Capital Ratio
>20%
DSO
<70 Days
Inventory
3X Turn
Sell Time – First Print
12 Weeks
Trade Financial Model
Trading Gross Profit – 53% Sales
 Other Cost of Sales – 8%
 Gross Margin – 45%
 Operating Costs – 35% Sales
 PBIT – 10% Sales

WJ M
CONSULTING
PTY
LTD
Recommendations - Education
Increase Australian Lists in Tertiary
 Drive for additional export sales
 Low Margin Operators Review Margins
 Review Trading Terms for Imports
 Tighten Debtor Management
 Improve Management of Inventory
 Increase Training/Devel. Spend

WJ M
CONSULTING
PTY
LTD
Education Benchmarks
Sales Aust. Academic Books
20% Total Sales
School Export Sales
>30% Aust Bks
GP Imported Books
>45% Sales
Marketing/Sales Costs
17% Sales
Distribution Costs
School – 7%
Sales
WJ M
CONSULTING
PTY
LTD
Academic – 11%
Education Benchmarks (cont.)
Working Capital Ratio
>30% School
>20% Academic
DSO
<70 Days
Inventory
School – 2X Turn
Academic – 3X Turn
Sell First Print
52 Weeks
WJ M
CONSULTING
PTY
LTD
Schools Financial Model
Trading Gross Profit – 58% Sales
 Other Cost of Sales – 6% Sales
 Gross Margin – 52% Sales
 Operating Costs – 35% Sales
 PBIT – 17% Sales

WJ M
CONSULTING
PTY
LTD
Tertiary/Acad. Financial Model
Trading Gross Profit – 49% Sales
 Other Cost of Sales – 7% Sales
 Gross Margin – 42% Sales
 Operating Costs – 35% Sales
 PBIT – 7% Sales

WJ M
CONSULTING
PTY
LTD