Navigation

Follow Authorlink:

All about publishing a book, getting help to convert a PDF to eBook, and keeping up with publishing industry news

Random House Performance Steady Despite Lagging Market

Pub Date:

MAIN NEWS HEADLINES
March 25 – April 1, 2010 Edition Random House Performance Steady Despite Lagging Market

Berlin/Authorlink News/March 23, 2010—Random House, the world’s leading trade-book publishing group, generated stable revenues in 2009 and maintained its operating earnings (before interest and taxes), according to its parent company, Bertelsmann, the international media group.

The Random House division’s revenues amounted to €1.7 billion (previous year: €1.7 billion, +0.1 percent), while the operating profit reached €137 million (previous year: €137 million). The return on sales remained at 8.0 percent.

At the end of the year, Random House, with its more than 120 individual publishing imprints, had a total of 5,432 employees (December 31, 2008: 5,779). In 2009, Random House

confronted the widening effects of the global recession by enhancing its author and retailer partnerships and taking advantage of emerging digital publishing opportunities. Bertelsmann attributes the publisher’s performance to commercially strong publishing programs, cost reductions in all core divisions, and exchange rate effects, the company maintained its income even year on year.

In most markets, Random House was able to increase its market share of physical and electronic books. The restructuring of the U.S. publishing units, which was initiated in 2008, was successfully implemented in 2009. In February 2009, Random House’s U.S. division acquired the nonfiction publisher Ten Speed Press and integrated it into the Crown Publishing Group.

The year’s biggest success was Dan Brown’s “The Lost Symbol,”published in mid-September which in its hardcover, audio, and e-book editions sold five million copies for Random House North America alone and almost three million copies for the U.K. Group. Stieg Larsson’s Millennium series proved to be very successful and sold more than seven million copies in Germany and the U.S. in hardcover and paperback. Random House Mondadori benefited from the half-million copy hardcover sales of the new Ildefonso Falcones novel in Spain and Latin America. In the U.S., Random House publishing houses placed 238 titles on the “New York Times” bestseller lists, including 28 at #1. Random House Group U.K. reinforced its outstanding presence on the “Sunday Times” bestseller lists, with 34 titles at #1.

In German-speaking countries, Verlagsgruppe Random House provided booksellers with several million-copy titles and a dominant share of “Der Spiegel” nonfiction bestsellers. Year on year, Random House publishing companies registered triple-digit percentage increases in e-book sales in the U.S., U.K., Germany and Canada. While e-book downloads currently

represent under two percent of the company’s total revenues, it is the company’s fastest growing business segment, and gaining market share through its digital publishing is a primary goal of Random House’s corporate strategy.

Random House authors won a number of prestigious awards in 2009, including three Pulitzer Prizes: Elizabeth Stroud won the award for “Olive Kitteridge” (Fiction), Jon Meacham for “American Lion: Andrew Jackson in the White House” (Biography) and Douglas A. Blackmon for “Slavery By Another Name” (Nonfiction). Other major honors bestowed upon Random House books included two National Book Awards in the U.S., the coveted Canadian Scotiabank Giller Prize, and the “Best Read” at the British Book Awards.

 Bertlesmann overall ended fiscal 2009 with a profit. After a cost and efficiency program was implemented across the group in the first half year and all identifiable risks were taken into account on the balance sheet, a turnaround was achieved in the second half-year. The cost-cutting program achieved its full effect and the businesses – in particular advertising – recovered towards the end of the year. Revenues, operating EBIT and consolidated net income in the second half year were ahead of the first half-year and above the previous year in terms of earnings. As a result of this, the decline in revenues and operating income for the full year was comparatively moderate; Bertelsmann was able to cushion itself to a large extent against the effects of the economic crisis. Ultimately the company achieved a net profit. In fiscal 2009 Bertelsmann was able to gain market share in different sectors and regions.

Debts were significantly reduced and the core businesses were developed through targeted investments. For 2010, the year in which Bertelsmann celebrates its 175th anniversary, the company is expecting to achieve stable revenues and operating income, and significant growth in net income in an economic environment which will continue to be challenging.

The CEO of Bertelsmann AG, Hartmut Ostrowski, said: “Bertelsmann has proven itself to be robust and flexible. Like other media companies we felt the global effects of the economic crisis, particularly in the areas dependent on advertising. But Bertelsmann responded quickly and in a decentralized way, aligned to their markets and to its customers. We have reduced costs as never before, while maintaining, or even strengthening, our market positions. We have enhanced our processes and productivity. Within just a few months we achieved savings of around one billion euros, which will continue to have a lasting effect beyond 2009. At the same time we further increased our digital revenues – closely synchronized with the respective businesses, in line with our strategy and our company’s structure. All corporate divisions had a role in this achievement. Today, Bertelsmann is fitter than it was a year ago and is wellpositioned for future growth.”

In the face of the economic crisis, Bertelsmann recorded consolidated revenues of €15.4 billion in 2009, following €16.2 billion in the previous year (-5.4 percent). Adjusted for portfolio and exchange rate effects, revenues fell by 5.8 percent. Profits before interest, tax and special items (Operating EBIT) remained at a high level at €1,424 million, down from €1,575 million in the previous year (-9.6 percent). The operating return on sales was 9.3 percent (previous year: 9.7 percent).

Ostrowski added: “We are now shifting the focus of our strategic work. Where the main priority in 2009 was cost and cash management, we will concentrate in this year on steering a course for growth. The emphasis here will be on continuing to develop the wide range of digital activities in all divisions and to gain market share. The digitization and the convergence of digital devices offer enormous potential for a company like Bertelsmann, which provides high quality content as well as a wide range of services. Bertelsmann makes its content available through all relevant channels, supported not only by our strong brands but also by our expertise in digital services. Throughout the 175-year history of our company, we have repeatedly shown that we can leverage our core competences to develop new businesses and to lead them to market fulfillment and success.”

Bertelsmann’s planning for fiscal year 2010 is characterized by lingering uncertainties in the markets. At this time, economic conditions are expected to begin stabilizing in 2010, although no sustainable recovery is foreseeable as yet. Likewise, visibility in the advertising markets remains low. In view of this, Bertelsmann expects revenues and operating profits to remain stable; the group result should increase significantly.

Cash flow: In the period under review, Bertelsmann generated net cash from operating activities of €1,777 million (previous year: €1,789 million). The Group’s sustainable operating free cash flow adjusted for one-time effects was €1,771 (previous year: €1,624), resulting in a cash conversion rate of 125 percent compared with 105 percent for the previous year.

Total assets: Total assets came to €19.4 billion as of December 31, 2009 (December 31, 2008: €20.1 billion). The effects of the economic crisis and the measures undertaken in response resulted only in slight changes to the balance sheet structure. Equity fell from €6.2 billion to €6.0 billion due to the decline in operating EBIT and special items, in particular goodwill impairments.

Bertelsmann is an international media company encompassing television (RTL Group), book publishing (Random House), magazine publishing (Gruner + Jahr), media services (Arvato), and media clubs (Direct Group) in more than 50 countries.