MAIN NEWS HEADLINES
September 6 – September 13, 2007 Edition
Random House
Sales Decline
in First Half Year
NEW YORK, NY/9/4/07–Random House, owned by media conglomerate Bertelsmann AG, today showed a decline in sales for the first half of the fiscal year. RH publishing sales and profits dipped to 8.96 billion, down 180 million from the previous year. The division also showed a net loss of 51 million, compared to a year-ago profit of 258 million.
Bertelsmann attributed the loss to “the cost of investing in future growth, especially for new publishing businesses in the UK, as well as the unfavorable US exchange rates.”
Random House outperformed the market in Germany and the U.K. Random House UK Group titles accounted for 30 percent of the Sunday Times bestseller lists. In the U.S., Random House, Inc. placed more than 100 titles on the New York Times bestseller lists. The July North America launch of the Random House audiobook of “Harry Potter and the Deathly Hallows” produced record-breaking sales. In Germany, Random House was successful with greater sales from several paperback imprints.
“The company is having a strongly profitable 2007, ” Random House CEO Peter Olson emphasized in an employee memo today. “In the Bertelsmann half-year press release, however, you’ll read about a small decrease in Random House worldwide earnings over the same period last year, which is attributable to our investments in overseas growth and the decline in value of the dollar against the euro. While we had more than one hundred New York Times bestsellers in the first six months, we’ll need many additional successful books over the next four months to reach our full-year financial goals. Fortunately, we publish most of the titles that produce our biggest sales in the fall, enabling us to achieve a strong finish to our fiscal year.”
“Even with the considerable commercial appeal of these titles, the potential ongoing impact of the jittery national economy on our book buyers will have us working smarter for every sale,” Olson said. “This is just the kind of challenge the Random House publishing and sales teams long have turned into winning opportunities.”
Bertelsmann, company-wide, grew its revenues by 1.3 percent (adjusted), to 9.0 billion in the first six months. Operating EBIT grew by 1.9 percent compared with the first six months of 2006, to 714 million. Adjusted for portfolio effects, first-half Operating EBIT was up 8.2 percent. Earnings growth accelerated considerably year-on-year during the second quarter.
Return on sales for the first half increased to 8 percent, which puts it above the 7.7 percent ROS seen in 1/2006. This performance was driven primarily by RTL Group, with increased income from TV advertising and a flourishing TV production business, and Gruner + Jahr slightly on the plus side. The media and communications services provider, Arvato, remained stable at a high level of profitability, while operating profits in the book publishing business (Random House) and the club business (Direct Group) did not reach the previous year’s levels. In the BMG division, a significant performance improvement at Sony BMG mostly offset the loss of profits from recently sold BMG Music Publishing.
Bertelsmann AG Chairman & CEO Gunter Thielen said: “Bertelsmann had a gratifying first half. Most of our businesses are on plan after six months. We can safely say that Bertelsmann is on track. We are also pleased to have arrived at important out-of-court settlements in connection with Napster, which eliminates a potential significant risk for Bertelsmann’s future.”
Bertelsmann’s net income for the first half amounted to 51 million, after 354 million for the first six months of 2006. First-half net income was considerably impacted by the Napster settlement agreements and other special items.
About Bertelsmann AG
Bertelsmann is an international media company encompassing television (RTL Group), book publishing (Random House), magazine publishing (Gruner + Jahr), music (BMG), media services (Arvato), and media clubs (Direct Group) in more than 60 countries. Bertelsmann’s claim is to inspire people around the world with first-class media and communications offerings entertainment, information and services and occupy leading positions in its respective markets. The foundation of Bertelsmann’s success is a corporate culture based on partnership, entrepreneurial spirit, creativity, and corporate responsibility.
Bertelsmann is comprised of the television channels, television production companies, and radio stations of Europe’s largest entertainment group, RTL Group (RTL Television, M6, Five, Fremantle Media), and the more than 120 publishing houses of Random House, the world’s largest trade book publisher (Alfred A. Knopf, Bantam, Goldmann). Gruner + Jahr is Europe’s number one magazine publisher (Stern, Geo, Neon, Capital). The Sony BMG joint venture in the BMG division is synonymous with creativity and strong international music brands (Beyonce, Dixie Chicks, Justin Timberlake, Christina Aguilera). The Arvato media and communications services division brings together distribution, service centers and customer-relationship management, state-of-the art printing manufacturing, storage media production, mobile services, and comprehensive IT services. Bertelsmann’s direct-to-customer businesses are unified within the Direct Group: book, DVD, and music clubs (Der Club, France Loisirs), as well as book retailers in France and Portugal.
