Aug 30 – Sept 5, 2010 Edition Random House Profits Leap in First Half of 2010

Gütersloh/Authorlink News/August 31, 2010–The international media group Bertelsmann, which owns Random House, today reported record profits from January to June 2010 to €755 million, compared to mid-year 2009 profits of €497 million.

In the Random House division alone revenues increased from € 734 million at mid-year in 2009 to €791million. Operating profits for the division doubled from €20 million in 2009 to €40 million for the period ending June 30, 2010.

The company attributed the upturn to Europe’s improved advertising markets and to its long-term cost-cutting measures taken in the previous year.

The Group improved its result by more than a half billion Euros, for a net profit of €246 million (H1 2009: €-333 million). Group turnover, now adjusted for the British TV channel Five which has since been sold, amounted to €7.4 billion for the first six months of the year (H1 2009: 7.1 billion €); Return on Sales increased to 10.3 percent (H1 2009: 7.0 percent).

“I am very pleased that business is going so remarkably well in the year of our 175th anniversary. Our operating result has achieved a record high. The economy and especially the advertising markets are friendlier. We now are profiting from having expanded our marketleading positions, while also having lastingly improved our cost structures. This makes us confident for the rest of the year, and that is why we are raising our profit forecast,” declared Bertelsmann’s Chairman & CEO Hartmut Ostrowski. “We are well equipped for the future and will systematically continue to develop our many different businesses. The entire field of digitization will play an increasingly important role.”

Growth was mainly fueled by the advertising-driven divisions, RTL Group and Gruner + Jahr, and by Random House where the U.S. business and digital activities have shown particularly positive development. At RTL Group, all units played a part in boosting profits, and especially Mediengruppe RTL Deutschland, Groupe M6 in France, and RTL Nederland.

Gruner + Jahr benefited from an improved advertising environment and has gained market share. Arvato did well, as its services business thrived and the print sector made a recovery, while Direct Group continued to adjust its portfolio during the period under review. The savings from the previous year’s costs program contributed significantly to the positive performance across all of Bertelsmann’s companies and divisions.

The first half of the year also saw strong operating free cash flow from operations. Debt was further reduced: at the reporting date of June 30, 2010, net financial debt was €2.78 billion (December 31, 2009: €2.79 billion). Bertelsmann has significantly reduced its debt by more than €800 million in the past twelve months. At 2.8, the Leverage Factor remains below the mark of 3.0. In relation to net financial debt, the factor was 1.2.

“Bertelsmann is financially solid. After the measures taken during the previous year, there was no need for adjustments to the first-half balance sheet,” explained Bertelsmann’s CFO Thomas Rabe. “We are raising our forecast for the full year. Instead of the stable revenue and operating EBIT performance predicted at the Annual Press Conference in March, we now expect to see a year-on-year increase in both, and a Return on Sales of around 10 percent. We are increasing the predicted Group result corridor of between €400 and €500 million to over € 500 million. Nonetheless, visibility for the important fourth quarter still remains low in the advertising markets.”

On June 30, 2010, Bertelsmann had 100,151 employees worldwide (December 31, 2009: 102,704).

At Random House sales and profitability increased, especially in U.S. The division saw rapid growth in e-book sales and digital publishing programs, and Pulitzer Prizes for three Random House titles

The world’s largest trade book publishing group, despite difficult market conditions, significantly increased its first-half 2010 sales and operating EBIT, driven by major increases in revenues and profits from its U.S. division and rapidly rising digital sales. Random House placed 138 titles on the “New York Times” bestseller lists, including the Stieg Larsson Millennium trilogy, which sold 6.5 million print and e-books in the U.S. and Germany during the half year. Random House UK contributed one quarter of the “Sunday Times” bestsellers. Verlagsgruppe Random House grew its market share in a flat overall market. Random House U.S. ebook sales surged 300 percent in the first six months, and comparably in Germany and UK. The company’s e-book program in these countries cumulatively expanded to 20,000 titles. The UK Group’s Nigella Lawson digital cooking app became an immediate global bestseller. Random House announced the discontinuation of its publishing operations in Japan and Korea.