Bertelsmann Again Generates Half-Year Profit Exceeding €500 million
2018-11-28 08:37 [Médiainfó - www.mediainfo.hu]
Bertelsmann recorded a successful first half of 2018 driven by the positive performance of its digital and growth businesses.
Thanks to numerous strategic advances, the international media, services, and education company further improved its growth profile, and again achieved Group profit of over half a billion euros.
Bertelsmann's organic revenue growth rose to 2.4 percent (H1 2017: 1.4 percent). The Group's growth businesses collectively achieved a 9.2 percent organic increase in revenues to EUR2.9 billion (H1 2017: EUR2.7 billion). These businesses now account for around one third of total revenues. The digital activities of RTL Group, Fremantle Media, Arvato and Bertelsmann Education Group did notably well. Despite high negative exchange rate effects - in particular from the U.S. dollar - reported revenues were up by 1.3 percent to EUR8.2 billion (H1 2017: EUR8.1 billion), the highest result in eleven years. Bertelsmann generates approximately 20 percent of its revenues in the United States.
Operating EBITDA was EUR1.07 billion (H1 2017: EUR1.10 billion) and, before exchange rate effects, again reached the high prior-year level. The services subsidiary Arvato, whose four Solutions Groups all exceeded their prior-year results, recorded a good 20 percent increase in earnings. RTL Group, BMG and Bertelsmann Education Group also reported growth. Start-up losses for digital and new business had a countervailing effect.
At EUR501 million (H1 2017: EUR502 million), Group net profit once again exceeded the half-billion-euro mark despite negative exchange rate effects and lower positive special items. The Bertelsmann Investments division's fund activities made a substantial contribution Group profit.
Thomas Rabe, Chairman and CEO of Bertelsmann, said: "Bertelsmann's organic growth in the first half of 2018 was the strongest it has been in years. The expansion of our growth businesses is bearing ever more visible fruit. It is particularly gratifying that the investments made in our services business in recent years are increasingly paying off. We want to continue improving the company's growth profile. To this end, we are investing heavily in our businesses, especially in creative content. So as not to jeopardize this expenditure, there is an urgent need to modernize the regulatory framework for creative industries in Europe. This concerns areas such as data protection, copyright, antitrust law, advertising law, media law, and taxation."
Thomas Rabe emphasized that Bertelsmann had made significant progress on its four strategic priorities - strengthening the core, digital transformation, expansion of growth platforms, and expansion in growth regions - in the first six months of the year.
Strengthening the core
- RTL Group was able to maintain its position in TV advertising revenues in its core markets of Germany, France, and the Netherlands, even though this year's Soccer World Cup matches were broadcast by competitors.
- Penguin Random House had 178 titles on the "New York Times" bestseller lists, 25 of them at number one. The group's bestsellers include the thriller "The President is Missing" by Bill Clinton and James Patterson. In addition, Penguin Random House acquired the U.S. nonfiction publisher Rodale Books in January. In November, the Group will lead the global publication of the memoirs of the former First Lady of the United States, Michelle Obama, in 24 languages.
- With the launches of the new magazines "JWD" and "Dr. v. Hirschhausen's stern Gesund leben", Gruner + Jahr continued its strategy of building media products around well-known personalities.
- Arvato renewed master contracts with key customers, including with Daimler and Facebook, and successfully launched various IT services.
- The Bertelsmann Printing Group extended several print contracts, including for "SPIEGEL" magazine. Sonopress won a new major customer from the United States.
- RTL Group increased its digital revenues in the first half of the year by nine percent to EUR424 million, and merged the online advertising marketers SpotX and SmartClip into a single, integrated company. Mediengruppe RTL Deutschland teamed up with United Internet and ProSiebenSat.1 to establish the European netID Foundation in Germany, to offer customers a central login for various online services.
- Penguin Random House expanded its e-book offerings and generated growing revenues with audio downloads.
- The revenue share attributable to Gruner + Jahr's digital business in its core markets of Germany and France increased to 26 percent. The company also further expanded the AppLike app-discovery platform.
- Bertelsmann now reaches more than 2.6 billion followers with its social media activities.
Expansion of growth platforms
- Fremantle Media benefited from the successful return of the "American Idol" format, which was shown on the U.S. broadcast channel ABC TV. The company also started production of other series such as "The New Pope."
- In April, BMG acquired the Australian production music company Big Bang & Fuzz, and signed an exclusive worldwide publishing agreement with former Beatles drummer Ringo Starr.
- Arvato continued the organic expansion of its logistics and financial services activities. The Bertelsmann services subsidiary also purchased a stake in the Israeli FinTech start-up Secured Touch, and acquired 3C Deutschland GmbH.
- In the period under review, Bertelsmann Education Group acquired a majority stake in the U.S. university services provider HotChalk. The e-learning subsidiary Relias experienced double-digit organic growth and expanded its customer base to around 6,750 institutions, whose users completed more than 21 million online courses. The advanced training platform Udacity, in which Bertelsmann owns a significant interest, introduced new nanodegrees, including in the fields of artificial intelligence and blockchain technology.
Expansion in growth regions
- Bertelsmann expanded its global network of start-up participations; the four funds Bertelsmann Asia Investments (BAI), Bertelsmann Brazil Investments (BBI), Bertelsmann India Investments (BII), and Bertelsmann Digital Media Investments (BDMI) cumulatively made 31 new and follow-up investments, and completed three successful exits in the first half of 2018. As of June 30, 2018, Bertelsmann owned 176 shareholdings via its funds, more than half of them via BAI.
- In Brazil, Bertelsmann acquired a majority stake in Affero Lab, one of the country's largest providers of corporate training.
- In India, Penguin Random House expanded its range of local-language offerings by acquiring the renowned publisher Hind Pocket Books.
Thomas Rabe: "In the first half of 2018, Bertelsmann made further progress towards becoming stronger, more digital, more international, and more diversified. Despite the increasing political uncertainties in connection with Brexit or the trade dispute between the United States and China, we are confident that we will achieve our targets for the full year."
Bertelsmann is currently reviewing strategic options for the further development of Arvato's CRM activities. Besides a complete or partial sale, the review also covers partnerships. Preliminary results are expected in the second half of 2018.
Bertelsmann's Chief Financial Officer Bernd Hirsch added: "Bertelsmann continues to enjoy a solid financial position. We are optimistic about the full year and continue to expect higher revenues and continued high operating profitability. Our Group net profit will once again surpass the billion-euro mark."
RTL Group Highlights
- Focus on local, original productions: in the first half of 2018, around 70 new productions are on air at Mediengruppe RTL Deutschland, and the German broadcasting family is planning more than 100 new formats for the upcoming 2018/2019 TV season.
- Alliance in France: Groupe M6, France Télévisions and TF1 are planning to set up a video-on-demand platform that offers a broad variety of broadcast inventory and local exclusive content - live and on demand.
- Successful comeback of "American Idol": the latest season of Fremantle Media's hit show attracts an average of 8.7 million viewers on the US network ABC.
RTL Group recorded a positive business performance with revenue and earnings growth in the first half of 2018. RTL Group revenues increased by 2.3 percent to EUR3.0 billion (H1 2017: EUR3.0 billion). This was driven by the growing digital businesses, rising platform revenues and, in particular, the positive performance of Fremantle Media and RTL Nederland. RTL Group's Operating EBITDA improved by 3.0 percent to EUR643 million (H1 2017: EUR624 million). Alongside a significant improvement in earnings at RTL Nederland, the two largest business units - Mediengruppe RTL Deutschland and Groupe M6 - also recorded higher earnings. Despite the FIFA World Cup 2018 being broadcast by competitors, the families of channels in the core markets of Germany, France and the Netherlands were largely able to maintain their position in the net TV advertising markets. In Germany, the flagship channel RTL Television once again was the only channel to attract a double-digit audience share in its core target demographic; the channels RTL Plus and Super RTL both achieved higher ratings in the first half of 2018. In France, the Groupe M6 family of channels largely maintained its audience share in its core target group. The Dutch family of channels led by the flagship RTL 4 remained number one among young audiences in the Netherlands. Fremantle Media recorded a significant rise in revenues despite negative exchange rate effects. The upturn is mainly due to the positive performance of Fremantle Media North America, driven by the return of "American Idol" and UFA. RTL Group's digital businesses, including its multi-platform networks and ad-tech businesses, continued their dynamic growth. In the period under review, digital revenues increased by 9.0 percent to EUR424 million (H1 2017: €389 million).