MAIN NEWS HEADLINES
September 7 – September 14, 2006 Edition
Bertelsmann
Continues Growth
In First Half of 2006
Gütersloh/9/6/2006Bertelsmann, which owns Random House, continued on its expansionist course during the first half of the 2006 fiscal year, increasing both its revenues and its operating profit.
The international media company announced on Wednesday that revenues grew by 14.5 percent to 9.1 billion (H1/2005: 8.0 billion) due to acquisitions and a strong operating performance. Organic growth improved year-on-year to 4.0 percent (H1/2005: 1.2 percent). Operating EBIT for the period under review grew by 8.9 percent year on year to 701 million (H1/2005: 644 million). The main contributors to this growth were RTL Group with improved TV advertising sales and a thriving TV production business, and Direct Group, which improved performance in all its lines of business (primarily book and music clubs).
The book business Random House and the media and communications services provider Arvato remained stable at a high earnings level, while operating profits at Gruner + Jahr were slightly below previous year. In the music division BMG, a very positive performance in publishing only partly cushioned a marked decline in the recorded music business, where numerous album releases scheduled for the second half will increase business performance. In general, the second half of the year is traditionally stronger in the media business.
Gunter Thielen, Chairman and CEO of Bertelsmann AG, said: Bertelsmann started the year with a great deal of momentum. Our business is going well; last years investment offensive is bearing results. Our multifaceted portfolio and broad international presence puts us in an excellent position to generate profit-oriented growth. We will actively pursue the opportunities offered by rapid technological progress in the media sector. For example, we are setting up a Venture Capital fund, initially endowed with 50 million, designed to ensure direct access to emerging technologies and businesses.
Bertelsmanns net income for the first half-year was 339 million, after 330 million last year, which included one-time positive tax items. Dynamic growth in the groups operations led to an increase in the number of employees to 92,772 as of June 30, 2006 (December 31, 2005: 88,516).
The buyback of Groupe Bruxelles Lamberts (GBL) 25.1-percent stake in Bertelsmann for 4.5 billion, agreed to in May 2006, increased the groups economic debt to 8.7 billion as of June 30, 2006 (December 31, 2005: 3.9 billion). The sale of the music publishing business, a strong flow of funds from operations, a restrained investment policy at present, and a moderate dividend policy will contribute to a rapid repayment of the debt.
Thomas Rabe, Chief Financial Officer of Bertelsmann AG, stated: We are confident that by the end of 2007 we will again have achieved our internal financing targets. Consequently, given the reaction we have so far had from the capital markets and the rating agencies, this means that by 2008 we should be in a position where, once again, we have at our disposal 1 billion per year. For the current fiscal year we can confirm our forecast of an increase of up to 10 percent in both revenue and profits, giving Bertelsmann another record year.
Random House (Revenues: 859 million; Operating EBIT: 48 million), the worlds largest trade book publishing group, increased its first-half revenues, despite a book market that continues flat, and kept operating profits stable. This was due mainly to year-on-year performance improvements in North America and Germany and a continued high level of profitability in the United Kingdom. In the U.S., Random House had more #1 New York Times bestsellers in the first six months of 2006twenty-fourthan in all of 2005. In the U.K., Random House titles accounted for over 25 percent of the rankings on the Sunday Times of London bestseller lists. The record-breaking sale of Dan Browns The Da Vinci Code continued with seven million copies in print of the movie tie-in paperback edition in North America and the U.K. alone. Verlagsgruppe Random Houses business in Germany expanded with the purchase of Gerth Media and the first-time inclusion of books published by the DVA, Kösel, and Manesse imprints acquired last year.
About Bertelsmann AG
The media company Bertelsmann commands globally leading positions in the major markets. Its core business is the creation of first-class media content. Bertelsmann includes RTL Group, Europes No.1 in television and radio, as well as the worlds biggest book-publishing group, Random House, with more than 100 publishing imprints (Alfred A. Knopf, Bantam, Goldmann). Gruner + Jahr, the European No.1 in magazine publishing (Stern, Geo, Capital) and the BMG music division comprised of the Sony BMG joint venture (Anastacia, Alicia Keys, Beyoncé, Dido, Usher) and BMG Music Publishing also stand for creativity and powerful brands. The Arvato division bundles the groups media and communications services, which include the expanding units Arvato Logistics Services and Arvato Direct Services (distribution, service centers, customer relationship management), along with state-of-the-art printers, storage media production and comprehensive IT-services. Bertelsmanns direct-to-customer businesses are bundled in Direct Group: book and music clubs with more than 35 million members all over the world.