Penguin Random House Merger Pays Off For Bertelsmann: $750 For Staffers

Bertelsmann Achieves Highest Revenues and Operating Result in Seven Years

• 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

Berlin, March 31, 2015 – 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 profit-improvement 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.”

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 catch-up 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 fourth-largest 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’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).