Bertelsmann post record operating results in first half of 2016
Penguin Random House's parent company Bertelsmann closed the first half of 2016 with record operating results and a significant improvement in net income, with operating EBITDA reaching €1.1 billion, the best value in the company's history. In a letter to all employees, CEO Thomas Rabe presents the balance sheet for the first half of the year and gives details of the individual results of the eight Bertelsmann divisions:
Our good news today is that Bertelsmann ended the first half of 2016 with a record operating result and a significant improvement in Group profit. Operating EBITDA reached €1.1 billion – the best in the company's history. Even with startup losses for digital and new businesses, the EBITDA margin improved from 13.2 to 13.9 percent. Group net income rose by about 20 percent year-on-year to €482 million. At the same time, Bertelsmann grew organically by 1.3, percent and generated revenues of €8.0 billion.
We have every reason to be very pleased with these results, to which all divisions contributed. They show that the implementation of our strategic priorities is paying off. By strengthening the core, pursuing a comprehensive digital transformation of our businesses, expanding our growth platforms and expanding in the growth regions of China, India and Brazil, we have significantly improved Bertelsmann’s growth profile: The share contributed by growth businesses to our total revenue increased to 29 percent in the first half of the year – and these activities represent average growth of over five percent. We have also become more digital at all levels – just consider the fact that Bertelsmann companies and media now reach 1.4 billion fans and followers on their social media channels. And we have become more international in recent years: Bertelsmann now generates more than one-quarter of its sales outside Europe. The U.S. is our second-largest market.
At the same time, we have definitively allocated our businesses to our now eight divisions in the three pillars of media, services and education – and today, we report about all these divisions for the first time:
In a successful first-half performance, RTL Group increased its revenues by 3 percent year-on-year to €2.9 billion. Operating EBITDA rose by 8 percent to €676 million. Key drivers of this significant improvement in earnings were Groupe M6 in France and Mediengruppe RTL Deutschland in Germany.
Penguin Random House’s strong bestseller performance was offset by an expected decline in e-book sales in the U.S. and U.K., which was partly due to new retail sales conditions. In combination with currency and portfolio-related effects, this led to reduced revenues year-on-year of €1.5 billion and an operating EBITDA of €185 million.
For Gruner + Jahr, the first half of the year was characterized by acquisitions and collaborations in all major markets. Revenues were nearly stable at €777 million, with revenues from the digital businesses in the core markets of Germany and France growing by 31 percent. Operating EBITDA was down to €52 million, mainly due to high expenditure for digital businesses – especially at G+J Germany.
BMG expanded its market position in the publishing and recorded-music sectors and reported uninterrupted business growth. Revenues increased by 4.6 percent to €182 million. Operating EBITDA was up year-on-year to €32 million.
Arvato increased its first-half revenues by 3.6 percent year-on-year to €1.9 billion, with all three of the division’s biggest Solution Groups – CRM, SCM and Financial Solutions – achieving organic growth. Operating EBITDA increased 27 percent to €180 million. All Arvato Solution Groups contributed to this result.
Revenues at the Bertelsmann Printing Group declined to €774 million, primarily due to the sale of the Spanish operations completed in 2015. Adjusted for portfolio-related and exchange-rate effects, revenues remained roughly on par with the previous year. Operating EBITDA increased from €40 million to €47 million due to improved capacity utilization and cost-cutting measures.
The businesses in the Bertelsmann Education Group founded a year ago posted a 28-percent increase in revenues to €64 million. Operating EBITDA fell to €-13 million due to planned startup losses.
Bertelsmann is currently invested in 125 companies via the digital funds pooled in Bertelsmann Investments: BAI, BBI, BII and BDMI. Gains from the disposal of select Bertelsmann Investments holdings – especially at BAI in China – made a significant, €56 million contribution to the Group’s net income during the first half of the year. Altogether, revenues from divestitures at BAI since the fund was established amount to nearly $200 million.
The impressive financials and figures in the 2016 half-year report are the result of our shared work and commitment, and I sincerely thank you for your contribution. We can be confident that Bertelsmann will continue its positive development in the second half of the year.