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Saraiva.com.br Editora
SaraivaSaraivaJurVersão em Português |
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Gross Revenues Gross revenues grew by 20%, rising from R$ 180.0 million in 2002 to R$ 216.1 million in 2003.  For a perfect understanding of the sales performance, it should be explained that government purchases of textbooks, under the PNLD, are based on 3-year cycles, as shown below:
As shown in the above table, the total volume of books acquired by the Government is naturally higher in the two years in which new acquisitions are made (the PNLD for 2004 was a program of large government purchases, comprising the acquisition of new 1st to 4th grade books, in addition to replacement books for the 5th to 8th grades). In addition, the significant participation of Editora Saraiva led to a record sales value in the PNLD/04, as shown by the data below:
(2) PNLD 2004 – R$ 28.1 million of sales are being booked in 2004. Despite the record value of sales made under the Program, due to Government delays in signing contracts a significant part of the sales (R$ 28.1 million) will be billed in the fiscal year of 2004. This fact, together with the good prospects for the PNLD/2005, under which sales are expected to take place by the end of 2004, give rise to positive prospects for sales in the current year. In sales to the private market, all the main publishing lines showed increases, especially the law book segment, which grew by 30% - it was still being boosted by works relating to the new Brazilian Civil Code. Within the more recent publishing areas, books on Economics and Business Management were the highlight, registering 25% growth in sales. Gross Profit Gross profit rose from R$ 120.3 million in 2002 to R$ 135.4 million in 2003. In percentage terms, as expected, there was a reduction; this was due to a larger participation of sales to the Government, which offered a lower gross margin than that obtained on sales to the general market. As a result, the margin fell from 69.4% in 2002 to 65.7% in 2003. Operating Result Operating expenses grew by 26% in the period in question. This increase, higher than the growth in gross sales (20%), is the result of some non-recurrent events, such as the expenditure connected with the implementation of the SVM management system, pre-operational outlays relating to the acquisition of Formato, and search expenses connected with another acquisition, which did not materialize. The increase in expenditure was also caused by the outlay relating to the big publicity effort for sales to the Government under the PNLD/04. Although a significant part of the sales were carried over to 2004, it was decided not to defer those expenses. The counterpart to this effect should be seen in 2004, when a significant dilution of expenditure is expected. Other operating revenues, however, were greatly reduced, dropping from R$ 3 million in 2002 to R$ 0.2 million in 2003. In 2002, certain financial results from previous years were booked in this account, especially those referring to the reversal of contingent liabilities in connection with a lawsuit relating to the PIS contribution, which was paid with waiver of fines and interest. Cash-flow The operating cash-flow as measured by EBITDA, excluding extraordinary events that took place in both periods, is shown below:
Financial Result There was a significant improvement in the net financial result, from a net expense of R$ 22.8 million in 2002 to R$ 16.1 million in 2003, thanks to the exchange-rate appreciation that occurred in 2003, vis-à-vis the large devaluation recorded in the previous year. Net Profit The Net Profit, before the equity account for the subsidiary Livraria Saraiva, posted a slight reduction, falling from R$ 16.8 million in 2002 to R$ 16.5 million in 2003. In the comparison between the two years, the 2002 results were favored by the reversal of contingent liabilities and by non-operating revenues from a sale of assets. The return on equity recorded by Editora Saraiva¹ in 2003 reached the figure of 42%. In comparison with the other national listed companies², Editora Saraiva achieved the third best profitability in the 1997-2002 period (the 2003 data for some companies are not yet available), with an average return on equity of 36% p.a. in this period, as shown below:  1-Net Profit before equity accounts for the year / Net Equity at the beginning of the year, excluding the investment in Livraria Saraiva 2-Source: Economática Livraria Saraiva (Livraria e Papelaria Saraiva S/A) The table below shows the main data relating to the economic and financial performance:
Gross Revenues Livraria Saraiva’s gross revenues amounted to R$ 237.5 million in 2003, with 8% growth when compared to 2002; the highlight was the strong 52% rise in the e-commerce division. With regard to the physical stores, there was an expansion of 2%; this result is lower than expected, and was due to the adverse economic scenario, with clear effects on available consumer income. Expectations for 2004 include a recovery in the population’s purchasing power, with positive effects on the retail sector  Gross Profit An improvement was seen in the gross margin, which reached the figure of 38.3% in 2003, above the 36.9% figure posted in 2002. Even with the reduction in consumer purchasing power in the last few years, the gross margin level reached in the year was a record. It was the result of the efforts focused on increasing operating efficiency, promoted by: • investments in information technology and logistics, enabling a greater degree of centralization of purchases and a resulting improvement in acquisition conditions; • a change in the mix of products sold, with an increase in the participation of products with a higher gross margin; • the development of associations with suppliers, with a view to improving supply conditions; and • lower inventory shrinkage rates. Operating Result The operating expenses/net sales ratio showed a positive result, reaching 37.9% in 2003, a percentage slightly lower than the 38% booked in 2002. This result is even more significant when the following factors are taken into account: • inflationary pressures during the year 2003, which could not be passed through to our prices; • the annual collective labor agreement, with rises of 11.0% in December/02 and 12.5% in December/03; • non-recurrent expenses incurred with the implementation of the SVM management system; and • pre-operating expenses in connection with the two units inaugurated in 2003. For 2004, in view of the prospects of a recovery in consumption and the great effort made to rationalize expenditure, the indicators allow us to forecast a considerable dilution of expenses. Cash-flow The operating cash-flow as measured by EBITDA rose from R$ 6.7 million in 2002 to R$ 7.8 million in 2003, which corresponds to growth of 16%. The electronic retail segment reached break-even in operating cash-flow after moving from a negative EBITDA in 2002 (amounting to R$ 3.3 million) to a positive result of R$ 0.1 million in 2003. Working capital management showed new advances during the year, as a result of increasingly centralized purchases and closer associations with suppliers. Inventory turnover was reduced by one day and the average term for payment to suppliers was extended by four days. Net Result The better performance in the Internet sales platform more than compensated the drop in the net results of the physical stores. As a result, it was possible to reduce the Company’s losses by 40% - they fell from R$ 2.5 million in 2002 to R$ 1.5 million in 2003. Saraiva.com - We present below the evolution of some important performance indicators:
Financial & Economic Performance - Consolidated Figures  (a) Before the financial rsult (b) Operatinh]g result before interest, taxes, depreciation and amortizations Gross Revenues  Gross Profit Consolidated gross revenues amounted to R$ 443.7 million in 2003, with 13% growth in relation to 2002.  The gross profit reached R$ 216.2 million, 12% above that of 2002. The gross margin remained stable at 53%. The effect of the increased participation of sales to the Government (with a sales margin below that obtained in sales to the general market) at Editora Saraiva was offset by greater operating efficiency at Livraria Saraiva. Cash-flow and Operating Result The operating cash-flow as measured by EBITDA amounted to R$ 42.7 million. The EBITDA margin dropped from 13.6% in 2002 to 10.5%, which was the result of an increase in operating expenses in the course of the year, due to the outlay for the implementation of the SVM management system, expenses relating to the acquisition of Formato and also the significant publicity for sales to the Government under the PNLD/2004, in addition to search expenses incurred in relation to the acquisition of a company, which did not materialize. The operating result before financial expenses (EBIT) amounted to R$ 29.0 million. Financial Result Net financial expenses dropped from R$ 26.3 million in 2002 to R$ 19.7 million in 2003. The factor contributing to this better performance was the exchange-rate appreciation of 18.2%. Net Profit The consolidated net profit amounted to R$ 14.9 million in 2003, 4% above the result in 2002, indicating a return of 16% on the initial net equity. E-commerce operations, which offset the reduction in the physical stores’ results and added R$ 1.0 million to the consolidated result, contributed to this performance. It is important to point out that the consolidated net profit for 2002 included R$3.0 million from non-operating events and reversals of contingent liabilities. Capital Structure With a significant reduction, the consolidated net debt dropped from R$ 45.4 million in December, 2002 to R$ 31.4 million at the end of 2003. This performance enabled the net debt/EBITDA ratio to drop from 0.9 in the previous year to 0.7 in 2003. Financial liabilities exposed to the exchange-rate variation corresponded to US$ 3.5 million at the end of the month of January, 2004, with semi-annual installments maturing between June/2005 and June/2006. In line with the strategy to minimize the impact of the exchange-rate variation on the cash position, hedge operations were structured in September/03 and January/04, protecting the next short-term installments with maturity dates in June/04 and December/04. In 2003, the BNDES (National Bank for Economic and Social Development) released R$ 2.3 million of the financing obtained for our physical store chain expansion project. Investments In the course of the last financial year, R$ 18.9 million were invested, strengthening the Company’s foundations through projects with an expected return above our capital cost. Editora Saraiva Editora Saraiva invested R$ 12.8 million in 2003. The main investment in the period was the acquisition of Formato Editorial Ltda, adding a catalogue of approximately 450 new titles with recognized publishing quality and by renowned authors. With the strength of Saraiva’s differentiated structure for distribution and sales and the synergies resulting from the unification of operations, the acquisition of Formato will enable significant value generation for the Group’s shareholders. Other acquisitions were a rotary press with oven, which will further increase the productivity and the quality of books printed by the printing unit, and an important collection of science books, strengthening the Company’s position in this segment. In the Saraiva Data division (electronic publishing of law-book content) the highlights were as follows :: . The launching of two products in CD-ROMs, which were rapidly included in the list of legal software most sold in Brazil: • Sample Legal Texts for the Civil Area; and • Contests for Public Office in the Legal Area; . The launching of Praxis, a product developed in association with Microsoft and Paradigma, through which law professionals can consult all of Saraiva’s on-line content in the law area, directly from the Microsoft Office XP Word and Outlook applications; . Celebrated legal works by renowned authors were made available on-line, for sale through the law portal (www.saraivajur.com.br). An example of success among on-line works, our jurisprudence product (JUIS) has been used as an international reference, and also as a tool in law courses given by the University of Arizona, USA. Also in the on-line law products line, in 2004 we will launch all the works of authors already published in our law portal, in physical packages, with explanatory displays and demonstration CD-ROMs containing access codes, aimed specifically at the retail segment, making the purchase similar to that of a book and significantly expanding distribution channels. In 2004, Saraiva will also pay special attention to new acquisition and association opportunities. Livraria Saraiva Livraria Saraiva invested R$ 6.1 million in 2003. The most important events were as follows: . The inauguration, in November, of the Mega Store in the Flamboyant Shopping Mall, the main commercial point in the promising city of Goiânia; . The inauguration, in November, of the book-store Livraria Saraiva Itaim, in São Paulo, within the Brascan Century Plaza, a modern enterprise in which there are many different spaces for business and leisure, and which is located in a first-class district of São Paulo; . Expansion and refurbishing work at the store located in the Interlagos Shopping Mall, in São Paulo. The sales area was doubled and the product mix expanded, significantly increasing the flow of customers in the store; . The closing of a store in the traditional format (160 sq.m.), located at Rua João Cachoeira, in the District of Itaim, in São Paulo, due to the expected migration of customers to the new unit that was opened in the same district. The company closed the year of 2003 with a sales area of approximately 20,000 sq.m., 4% greater than that registered in 2002. The investments made in the last few years have been essential in order to reinforce Saraiva’s condition as the leader in the national book-store market. The units are situated in excellent commercial points, strategically located, enabling us to post significant gains in profitability as the economy recovers and the population’s purchasing power increases. For 2004, we shall maintain the proposed search for locations that efficiently enable the physical store chain expansion program to be carried out. In the electronic commerce platform, the Company plans new investments in information technology, in order to perfect our services and maximize synergies with the physical stores and other areas in which the Saraiva Group operates. In this respect, it is important to stress that, during the year of 2003, the e-commerce site received 128,000 visitors coming exclusively from the law portal (Saraivajur). All indicators have shown a significant increase in on-line activities and the consolidation of our position as national leaders in the electronic retail book-store segment. The Group is expected to maintain its expansion at significant rates. Forecasts made by e-bit, an institute that specializes in the Internet, point to 30% growth for the electronic retail segment during 2004. Capital Market The table below shows a summary of trading in Saraiva’s shares in the last three years:
(*) Price of PNB share (**)Price of PN share Shareholder Structure Saraiva’s subscribed and paid-up capital stock amounts to R$ 39,721,000.00, divided into 23,269,203 shares, all nominative, book-entry and with no nominal value, 9.622.313 being common shares (ON) and 13,646,890 preferred shares (PN). In 2003, the Company repurchased 46,000 shares, accumulating 332,000 shares in Treasury, an amount corresponding to 1.43% of the total capital.  Shareholder Remuneration The Board of Directors decided, on March 10, 2004, to allocate R$ 10.4 million (R$ 0.45403857 per share) to shareholder remuneration, in the form of interest on equity, already including the minimum obligatory dividend in this amount, which represents 70% of the year’s results. Corporate Governance In the year 2000, Saraiva was the first Brazilian company to grant tag-along rights to minority shareholders holding preferred shares. During the same year, a clause was included in the By-laws with a view to regulating the payment of dividends (another unprecedented initiative in the Brazilian market). This clause determines that the Company shall not retain for over four consecutive quarters a net cash position above 25% of its total assets. In line with the strategy of adopting the best corporate governance practices, a plan of action was developed in the course of 2003, to be implemented at the beginning of the following year, with a view to making Saraiva a benchmark in investor relations. Important items in the project include: • The hiring of Thomson Financial Investor Relations Brasil Ltda., a company specialized in consulting and advisory services in the investor relations area, in order to increase the Company’s visibility to the capital market and other agents interacting with Saraiva; and • Reformulation of the investor relations site, so that it becomes a more efficient and technologically updated communications channel |
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