Warsaw Voice - Like an Open Book

By Wanda Jelonkiewicz
11 September 2003

The Wydawnictwa Szkolne i Pedagogiczne (WSiP) publishing house is preparing to enter the Warsaw stock exchange.

Jan Rurański, president of this biggest Polish educational publisher which possesses an over 30-percent share in the school textbook market, plans the firm's stock exchange debut for the first quarter of 2004.

Every year WSiP publishes about 500 textbooks and multimedia publications as well as 10 periodicals. In all, it offers 3,000 titles. Nearly half of all Polish first grade elementary students use WSiP's textbook entitled Wesoła szkoła (Happy School).

Dozens of educational publishers compete on the Polish market. The most powerful, besides WSiP, are Nowa Era, GWO, Mac, and Wydawnictwo Szkolne PWN. Many textbooks for every grade are offered by publishers. The choice of a textbook to be used in class depends on the teacher. Therefore, publishers strive to win over teachers. "We hope that we will manage to increase our share in the educational market by several percentage points, although it is still not clear what its exact worth will be in 2003," said Rurański at a press conference held in Warsaw Aug. 29.

The Wydawnictwa Szkolne i Pedagogiczne publishing house is owned by the Ministry of the Treasury. In contrast to numerous large state-owned companies waiting to be privatized, WSiP is in good condition-the business is profitable and has zl.170 million of liqudassets. In 2002, its income from gross sales amounted to zl.257.8 million (compared to zl.197 million in 2001) and net profit reached zl.26.4 million (zl.17 million in 2001).

The publisher is developing its own distribution network. In February 2003, WSiP bought Wkra wholesalers, at that time on the verge of bankruptcy. Wkra's condition has improved considerably since then. In August 2003 alone, its books sales were worth zl.37 million. The annual sale in 2003 will reach about zl.100 million, exactly the amount which was planned. After last year's loss, Wkra's operating results should now approach zero.

Consolidation is inevitable on the wholesale market due to the number of competitors. An Internet wholesaler was opened by WSiP in August. In terms of retail sales, WSiP has four of its own and 66 agency bookstores.

"We are entering the stock exchange so that the company can be privatized," says Rurański. "This is one way of selling a company. It can be sold to an individual, financial or trade investor, or on the stock exchange."

WSiP Financial Director Jarosław Kusto refuses to provide a valuation of the publishing house. He emphasizes that selling a company to a strategic investor, who buys it with his own money, is a different transaction than selling the company on the stock exchange. "If the purchase were made by a strategic investor, I think they would be ready to pay zl.1 for every zl.1 of the company's resources," says Kusto. "The situation is different on the stock exchange. I don't think the institution would be eager to pay even 90 groszy for every zl.1 of WSiP's financial resources. The aim of the company's board and supervising council is to implement a policy which would make the largest possible proportion of the company's income from operational activity in order for us to benefit as much as possible from scale effect."

A group of advisors from the Ministry of the Treasury is preparing WSiP's issuing prospectus. It should be submitted to the Securities and Exchange Commission in 2003 so that the company can enter the stock exchange not later than in the first quarter of 2004.

According to regulations in force, 15 percent of the shares will be distributed among company personnel. The minister of the Treasury has already declared that he would like to keep 35 percent of WSiP's shares. To complete the privatization process, at least 51 percent of the company's shares has to be bought by non-state investors. The board hopes that these will be stable and long-term investors, for example, such as pension funds.

This is already the fourth attempt to privatize the publisher, whose worth is estimated by analysts at zl.300-400 million. Three former privatization projects were invalidated by the minister of the Treasury.