Berlin, March 26, 2013 Random House parent company Bertelsmann today reported a record year for the publishing house, announcing that the publishers worldwide revenue rose 22.5%, to 2.14 billion euros, while operating EBIT skyrocketed 75.6% to 325 million euros. The jump was attributed to the Fifty Shades trilogy which Bertelsmann said sold more than 70 million copies in all formats and languages.
The worlds leading trade publishing group harnessed the power of its content portfolio, most notably the Fifty Shades trilogy, to achieve a record financial year in 2012. Revenues increased 22.5 percent to 2.1 billion (previous year: 1.7 billion), and operating EBIT rose significantly by 75.7 percent to 325 million (previous year: 185 million). Return on sales was 15.2 percent after 10.6 percent in the previous year. At year-end 2012, Random House had 5,712 employees (December 31, 2011: 5,343). In late October, Bertelsmann and Pearson announced the future combination of their trade book publishers, Random House and Penguin. Pending antitrust approvals, the transaction is scheduled to close in the second half of 2013.
During the reporting period, Random House posted year-on-year increases in revenue and operating EBIT across all its territories. Growth was driven primarily by numerous bigselling titles, with cost management, a lower returns rate, and currency effects impacting favorably on the results. From March to December 2012, Random Houses English- German- and Spanish-language publishing divisions sold more than 70 million print, audio, and e-book editions of E L Jamess Fifty Shades trilogy, making it the fastest-selling series in the
The James novels were the years biggest sellers in the United States, the worlds largest book market, where Random House placed 252 titles on the 2012 New York Times bestseller lists, including 33 at number one. Among other top US titles were Gone Girl by Gillian Flynn; Thomas Jefferson by Jon Meacham; and John Grishams The Racketeer. Random House Group UK contributed 28 number one bestsellers and almost one-quarter of all titles on the Sunday Times bestseller lists, led by the Fifty Shades trilogy; A Wanted Man by Lee Child; Rod Stewarts autobiography Rod; and Private Games by James Patterson. Germanys Verlagsgruppe Random House recorded growth in a flat book market; results were lifted by paperback and e-book sales revenues. In the Spanish-language markets, Random House Mondadori also improved its revenues and operating EBIT despite the ongoing economic crisis in Spain. The publishing company has been wholly owned by Random House since December 2012: Bertelsmann acquired Mondadoris 50 percent stake in the company in order to expand Random Houses position in Spain, as well as its access to the growing book markets of Latin America.
Random House further underscored its cutting-edge role in the transformation to digital with the expansion of its e-book catalogue to over 47,000 titles, the launch of author portals, new apps, and the increasing integration of social media in its book marketing. Random House authors won numerous prestigious awards in 2012, including a U.S. National Book Award for Katherine Boos Behind the Beautiful Forevers.
Bertelsmann has made good progress in reshaping the Group, and for the ongoing process can rely on strong financials for 2012: growth in revenues, a stable operating EBIT, and a slight increase in Group profit. In the years ahead, Bertelsmann is targeting for continued organic and acquisition growth. First steps are the planned combination of Random House and Penguin as one of the world's leading book publishers; the complete ownership of the music rights company BMG; and the establishment and expansion of new, mainly digital, businesses in sectors and regions with high-growth potential.
Bertelsmann Chairman & CEO Thomas Rabe said: Bertelsmann is undergoing a fastpaced and sustained process of change. In 2012, and in the first months of this year, we made important strategic decisions for improving our growth profile. This will have a positive impact already in this current year: Both the future combination for our book publishing business and the BMG full acquisition, once the regulatory approvals have been received, will result in significant additions to our revenues. We will maintain this accelerated pace, particularly in the expansion of our growth platforms, such as television production, financial services, rights management, and education. Additionally, we plan to launch business information as a new area of enterprise. All these measures are aimed at making Bertelsmann a faster-growing, more digital, and more international company over the next few years. We are well on track to achieve this.
Success in implementing the strategy
Rabe stressed that in implementing its strategy, Bertelsmann had made progress in all four defined priorities: strengthening the core, digital transformation, development of growth platforms, and expansion in growth regions. For our core business, we have put ourselves at the forefront of consolidation in the book market. At the same time, we have expanded access to the Latin American book markets with the full-ownership purchase of Random House Mondadori. RTL Group strengthened its core with several initiatives, among them launching five new TV channels in Europe and Asia more than ever before in a single year, said Rabe.
Regarding digital transformation, he referred to the rapid expansion of nextgeneration TV and the growing success of RTLs video-on-demand platforms, which generated 2.4 billion views across Europe in 2012. Random House has expanded its e-book portfolio to 47,000 titles, and Arvato is growing with major digital customers, he said. At Gruner + Jahr, the expansion of digital offerings is accelerating, especially in the digital ad sales sector.
After divesting low-growth businesses in recent years, with the associated decline in revenues, Bertelsmann is back on the growth path. We will make every effort to consolidate this upswing. We will use innovative financing models, like the combination of our book business with a strong partner such as Pearson, or the successful buildup of BMG. Also, as announced, we are currently examining the possibility of reducing our shareholding in RTL Group while retaining our qualified majority, said Rabe.
Double-digit return on sales in 2012
Positive impetus in 2012 mainly came from the Random House book-publishing groups strong portfolio of bestsellers, from the German TV business, and growing services businesses. In a difficult economic environment, Group revenue in 2012 grew by 4.5 percent to 16.1 billion (previous year: 15.4 billion); organic growth was 3.1 percent. The years operating EBIT of 1.74 billion was nearly on par with the high level of the prior year (previous year: 1.76 billion). Record results from important divisional profit centers contributed to this: for example, from the book sector overall; Mediengruppe RTL Deutschland; Gruner + Jahrs China business; and Arvato Infoscores financial services unit. This was offset by declining sales in some major advertising markets especially in the print sector and scheduled expenditure for reshaping the Group.
The return on sales of 10.8 percent (previous year: 11.4 percent) demonstrates that profitability remains at a good level. Despite the impact of high special items, mainly in structurally declining businesses like printing, replication, and direct marketing, as well as the media businesses in Southern Europe, Group profit increased slightly to 619 million after 612 million in the prior year.
Thanks to high operating free cash flow during the reporting period, net financial debt was down about one-third at year-end to 1,218 million (previous year: 1,809 million). Broader economic debt declined to 4,778 million after 4,913 million in the prior year; the drop was less pronounced here as pension provisions were increased due to the lower discount rate. The adjusted operating free cash flow amounted to almost 1.9 billion (previous year: 1.7 billion).
Bertelsmann CFO Judith Hartmann said: Bertelsmann looks back on a good financial year, with a strong operating performance and organic growth. Our company is very profitable and enjoys a solid financial position.
Bertelsmann is an international media company whose core divisions encompass television (RTL Group), book publishing (Random House), magazine publishing (Gruner + Jahr), services (Arvato), and printing (Be Printers) in some 50 countries. In 2012, the companys businesses, with their more than 100,000 employees, generated revenues of 16.1 billion. Bertelsmann stands for a combination of creativity and entrepreneurship that empowers the creation of first-rate media, communications, and service offerings to inspire people around the world and to provide innovative solutions for customers.
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