Sample Executive Summary e Publishing

1 EXECUTIVE SUMMARY e-Publishing AG a Verlag for international on-line magazines Verlag KAVALLO GmbH Eichweg 3 (Postfach 169), CH-8154 Oberglatt, Switzerland Tel. + 41 (0)1 851 3141 Fax + 41 (0)1 851 3149 e-mail: kavallo@bluewin.ch Michael McCooe 16.05.2000 2 EXECUTIVE 1.1 OBJECTIVE SUMMARY An international on-line publishing business in special-interest magazines. 1.2 COST CHF 5.0 - 7.0 million. CHF 5.0 million (US$ 3.0 rail.) to fund initial acquisition: up to another CHF 2.0 million (US$1.1 mil.) over next 2 years (if required) to fund in-house development of further on-line titles and/or further title acquisitions. 1.3 CASHFLOW There are no initial losses. The first acquisition provides combined group profit (PBT) of CHF 1.5 million in Year 1, CHF 3.2 million in Year 2, CHF 3.5 million in Year 3, CHF 4.4 million in Year 4, CHF 5.2 million in Year 5. Total PBT of CHF 17.8 million available for further expansion and/or profit taking over the first 5 years. 1.4 METHODOLOGY - Initial acquisition of one highly profitable special-interest magazine. This magazine to be in a high advertising spend / high consumer spend / international special-interest category. Initial target is the German equestrian magazine REITER REVUE INTERNATIONAL. - Profits from the initially acquired special-interest magazine are then applied along with start-up budget to establish a new magazine in the same special-interest category. The new magazine is a 100% on-line publication. It is in the same special-interest category as the acquired magazine but in both content and concept is a completely different publication: it is internationally positioned, as an internet specific product. multi-lingual, and designed from the outset 3 - Combined profit from the print and on-line magazines to fund either the acquisition or development of a core group of approximately 4 more special-interest magazine titles (e.g. Boats & Yachting, Aviation, Cars & Motor Cycles, Computers, Fashion, Interior Decoration, Cooking etc.) through the first 5 years. As in (a) and (b) above, if acquired as an existing print publication each such title to then spawn a new on-line magazine in the same area of special-interest. If specifically developed then that title would be published as an on-line magazine only. Again each on-line magazine is internationally positioned multi-linguaL and designed from the outset as an internet specific product. - Mainstream advertisers from the print titles to be gradually absorbed into the related online titles also. Over the initial 5 year period some will leave the print media completely: others will continue to advertise in both. Extensive classified advertising services (international) will be supplied by the on-line titles. These will be heavily marketed. They will be extremely cheap (e.g. CHF 10 per advertisement) and in the long term (post Year 5) may even go gratis. 1.5 POSITION AT YEAR 5 By year 5 the combined e-Publishing group to collectively dominate the market for both Mainstream and Classified advertising in Special Interest publishing. Considerable additional revenues (maximized by international positioning) will also be generated by on-line Link fees. Through the same period the print titles within the group to be systematically restructured to the point where they can either cover margins on magazine sales alone or be completely absorbed into the on-line media. 1.6 ANSWERS TO THE 10 SOFTBANK QUESTIONS 4 1.6.1 Our Business. We publish Special-Interest magazines (currently Equestrian only) in print. We want to publish On-Line Special-Interest magazines (Equestrian + others). 1.6.2 Primary Source of Revenue. Print Media: Advertising (mostly Swiss Domestic in Mainstream commercial + Classifieds) Magazine Sales (Swiss Domestic) On-Line Media: Advertising (Mainstream commercial + Classifieds: both international) Link/Referral fees and commissions (international) Merchandising (international) 1.6.3 Need/Problem Fulfilled. The restructure of Special-Interest magazine publishing out ofprint-media exclusively - i.e.: high print & production costs high distribution & point of sales commission costs high cost to consumer high cost/limited market to advertiser limited market: language and country/region to a combination of a. On-Line - i.e.: zero print & production costs zero distribution & point of sale commission costs zero cost to consumer low cost/unlimited market to advertiser specific unlimited market: multi-lingual format and global within each Special-Interest category Plus b. restructured/redeveloped print- media - i.e.: 5 - more reader-focused product able to cover margins on magazine sales revenues alone. Over a 5 year period the primary revenue stream to shift from print media to on-line but the end result (Yr 5) to be both divisions profitable and in growth. 1.6.3 Competitors Print Media (Equestrian only) ST GEORG (Germany) REITER REVUE INTERNATIONAL (Germany) - the target acquisition CAVALLO (Germany) These are the 3 leading publications in the Equestrian Special-Interest category worldwide. On-line: There are no on-line magazines in the initial Special-Interest category to date. There are some general Websites (e.g. www.equi-search.com - USA, 45,000 hits-per day: www.kickon.com - UK only - recent,: no hit figures yet available) but no magazines as yet, and nothing international or multi-lingual. 1.6.4 Customers Print Media: Special-Interest ReadersConsumers. Post initial acquisition: combined audited circulation of 310,000 German-speaking (Equestrian) readers per issue. Total Equestrian reader market in German-speaking countries is : Sports market: 1.0 million people (quantified) Leisure market: 2.0-4.0 million people (unquantified) Advertisers. Mainstream commercial.: related industries Classifieds: German-speaking countries all European+ International (export to Europe) equestrian- On-Line: 6 Special-Interest ReadersConsumers. (Equestrian) Sports market: 3.0 million people in first tranche group of countries (dual German/English format): up to 2.0 million more in 2nd& 3rdtranche groups. Target 15% weekly hit rate among those countries: 450,000 hits per week/65,000 hits per day in tranche 1, 750,000 hits per week/110,000 hits per day total tranches 1-3 (end Yr 4). (Equestrian) Leisure market: unquantified - project up to equal of Sports market hit rate i.e. another 750,000 hits per week/110,000 Advertising. Worldwide equestrian-related industries (esp. EU, USA/CAN, GB/Eire, ANZ) in both Mainstream commercial and Classifieds. hits per day total tranches 1-3 (Yr 4). 1.6.5 Status of Development Existing Editorial & Advertising infrastructure and existing well-established print media products. Initial acquisition identified with negotiations to final stage: financial due diligence completed. Combined PBT of first 2 print media magazines: CHF 2.2 mil. p.a. (US$1.3 mil p.a.). 1.6.6 VC Amount sought. CHF 5.0 - 7.0 million. CHF 5.0 million (US$ 3.0 mil.) to fund initial acquisition: up to another CHF 2.0 million (US$1.1 mil.) over next 2 years (if required) to fund in-house development of further on-line titles and/or further title acquisitions. 1.6.7 Target Valuation. Ingoing capital value CHF 6.3 million (US$ 3.6 mil.) . At Yr 5 a function of cashflow + balance sheet value of further assets acquired/developed: capital value end Yr 5. estimate CHF 16-20 mil. (US$ 9.2 - 11.5 mil.) 1.6.8 Current Investors.: of our company. CV's in Business Plan. The 2 directors/founders 1.6.9 Headquarters.: End of Executive Summary Ziirich, Switzerland.