- Revenues increase 3.1 percent to €16.7 billion
- Operating EBITDA grows 2.7 percent to €2.37 billion
- Group profit affected by special items
- Investments continue at high level and hit €1.6 billion
- Advances in strategy implementation improve growth profile
- Merger of Penguin and Random House contributes to growth
- Education business as third pillar alongside media and services
- Medium-term target for Group profit at €1 billion
Bertelsmann in the last fiscal year increased both its revenues and its operating result to the highest levels in seven years, while again investing in growing its business: The international media, services and education company improved its growth profile and expanded its digital business as well as its international presence with the acquisition of the e-learning provider Relias Learning in the United States and majority stakes in the video marketer SpotXchange and the multichannel network StyleHaul.
Revenues from Bertelsmann’s continuing operations grew by 3.1 percent, to €16.7 billion in 2014 (previous year: €16.2 billion). Key drivers were strategic transactions such as the merger of the Penguin and Random House trade book publishing groups, the full acquisition of the music rights company BMG, and the expansion of financial and e-commerce services at Arvato. The downscaling of businesses in structural decline in part offset this growth. During the past fiscal year, Bertelsmann improved its operating EBITDA by 2.7 percent, to €2.37 billion, also the highest level since 2007 (previous year: €2.31 billion). In particular, the result reflects a record performance by Mediengruppe RTL Deutschland, a strong list of bestsellers at Penguin Random House in the U.S. and U.K., and growth in the music rights business.
The EBITDA margin was again high at 14.2 percent (previous year: 14.3 percent). Group profit of €573 million was below the prior year’s level of €885 million. This was the result of downscaling the print and direct-marketing businesses, expenditures on profitimprovement measures, a value adjustment to the Hungarian television business, and the absence of special items which had boosted group profit the previous fiscal year.
Thomas Rabe, Chairman and CEO of Bertelsmann, said: “2014 was a gratifying year for us. Our revenue is the highest it has been in seven years. The same goes for our operating result – it is one of the best in Bertelsmann’s history. The implementation of our strategy is paying off. We again made a number of major advances during the past year. We significantly increased our activities in high-growth areas, further expanded the globally unique diversity of our creative activities and services, and at the same time disposed of businesses in structural decline. This transformation over the past few years has significantly improved the company’s growth profile. Since 2012 alone, we have invested more than two billion euros in growth businesses. We will keep up this brisk pace and continue to invest in expanding existing businesses and building new ones in the years ahead. The contours of the ‘new Bertelsmann’ are already clearly visible – faster growing, more digital, and more international than before.”
By successfully implementing its strategy Bertelsmann increased the revenue contribution of high-growth businesses to 27 percent in 2014 (2011: 22 percent). In this three-year period, the revenue share of structurally declining businesses fell from 15 percent to below 10 percent. In the medium term, growth businesses are expected to make up around 40 percent of group revenues, businesses in structural decline about five percent.
Thomas Rabe emphasized that in 2014 and the first few months of the present year, Bertelsmann had taken big steps towards reaching all four of its strategic priorities – strengthening the core, digital transformation, expanding growth platforms, and forging ahead in growth regions.
For instance, the core businesses were strengthened by the expansion of RTL Group’s families of channels, as well as increasing distribution revenues from platform operators. At Penguin Random House, the world’s largest trade book publishing group, the integration of the two companies has progressed faster than planned; the merger is already paying off on the creative and commercial fronts: Penguin Random House publishers achieved outstanding creative results on all continents. The publishing group rose to number one in the Latin American Spanish-language book market through the acquisition of Santillana’s Spanish- and Portuguese-language trade publishing businesses. Similarly, the complete takeover of Gruner + Jahr in 2014 was a strategic milestone. Bertelsmann will continue to develop Gruner + Jahr into a leading house of content by, among other initiatives, investing in the company’s transformation. Concurrently, Bertelsmann intensified the downscaling of businesses in structural decline: the Group sold businesses including Brown Printing in the U.S., the Italian printing operations and the calendar business, and decided to discontinue the German club business at the end of this year. In parallel, Bertelsmann launched a number of measures to improve the results of its core businesses, with a medium-term volume of about €500 million.
Bertelsmann also increased its footprint and reach in the digital world. RTL Group’s catchup services, its web productions and web channels, and its multi-channel networks together recorded 36.4 billion online video views in 2014, turning RTL Group into the world’s fourthlargest provider of online video content. Penguin Random House last year expanded its e-book catalog to more than 100,000 titles, and sold over 100 million of its titles in electronic form worldwide. Gruner + Jahr expanded its portfolio of e-magazines, high-reach mobile sites and apps, and its digital advertising sales. Arvato achieved further growth as a service provider for IT, high-tech and e-commerce companies. Bertelsmann’s various companies and editorial platforms now reach about 750 million followers on Twitter, Facebook, Google+ and YouTube via their social media channels.
An important milestone in the Group’s expansion of its growth platforms in 2014 was the acquisition of the online education provider Relias Learning, also Bertelsmann’s biggest purchase in the U.S. since the acquisition of Random House in 1998. Investments in California-based Alliant University and the educational services provider Synergis Education served to further expand the education business. In addition, RTL Group subsidiary Fremantle Media bought the majority of shares in TV production company 495 Productions; Arvato acquired the e-commerce service provider Netrada; and BMG, among a number of deals, purchased the music publishers Talpa and Union Square, and the music-rights catalogs Montana and Hal David.
Bertelsmann also expanded its business activities in growth regions. The company enlarged its content businesses, including Penguin Random House’s trade publishing operations in India, and its TV business in Asia. Here, RTL Group and CBS Studios International launched a second joint pay-TV channel. Also, BMG entered the market in China. In the course of last year, the Bertelsmann Asia Investments fund participated in eleven promising companies with predominantly digital business models – more than ever before in a single year – and significantly increased the value of its portfolio. Bertelsmann’s investments in China include the online shopping platform Mogujie and the leading online performance marketing company iClick. In India, Bertelsmann made investments in several businesses, including digital marketplace Pepperfry and education provider iNurture.
Bertelsmann Chairman and CEO Thomas Rabe said: “There is hardly another media company that is transforming as rapidly as we are. Our strong core businesses, numerous growth initiatives, and ongoing acquisitions will, step by step, increase our revenues to around 20 billion euros in the years ahead. Our education business and our activities in the growth regions of Brazil, China and India will each contribute one billion to this overall number.”
Business expansion again led to a high investment volume in 2014. Including financial debt assumed, Bertelsmann invested €1.6 billion (previous year: €2.0 billion), mainly in the acquisitions of Relias Learning, SpotXchange and StyleHaul, Santillana, and the Netrada group. There were also acquisitions of music catalogs and packages of film rights. Net financial debt rose to €1.69 billion (previous year: €681 million) due to the acquisition activities. The previous year’s value also included proceeds from the placement of RTL Group shares. The Group’s broader economic debt increased to €6.04 billion at December 31, 2014, partly due to higher provisions for pensions, after €4.22 billion in the previous year. Adjusted operating free cash flow amounted to €1.71 billion (previous year: €1.83 billion). Thomas Rabe added: “Bertelsmann is on an expansionist course – we have started this year off nicely. Given the ongoing transformation of our Group, we expect higher revenues and higher operating EBITDA in 2015. We want to significantly increase our Group profit to one billion euros in the medium term.”
Bertelsmann’s employees are participating in the successes achieved: For the past financial year, they will receive profit participation amounting to €85 million. In accordance with the terms governing the Bertelsmann 2001 profit participation certificate (ISIN DE0005229942), 15 percent on the nominal value will be paid out on May 6, 2015. The payout for the 1992 profit participation certificate (ISIN DE0005229900) will be 5.93 percent (previous year: 7.49 percent).
Bertelsmann is a media, services and education company that operates in about 50 countries around the world. It includes the broadcaster RTL Group, the trade book publisher Penguin Random House, the magazine publisher Gruner + Jahr, the service providers Arvato and Be Printers, the music rights company BMG and the e-learning provider Relias Learning. The company has more than 112,000 employees and generated revenues of €16.7 billion in financial year 2014. Bertelsmann stands for creativity and entrepreneurship. This combination promotes the creation of first-class media content and innovative service solutions that inspire customers around the world.