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Bertelsmann Announces 2013 Fiscal Year Results, Part I

Bertelsmann SE & Company KGaA is an international media and financial services corporate group founded by Carl Bertelsmann as a religious publishing house and print shop in 1835. Core operating businesses encompass television (RTL Group), book publishing (Penguin Random House), magazine publishing (Gruner + Jahr), services (Arvato), and printing (Be Printers) in some fifty countries. In 2013, the Bertelsmann Group’s businesses, with over 111,000 employees, generated revenues of €16,400,000,000.

Although the Bertelsmann Group has sold stock in the RTL Group, it retains controlling interest. The RTL Group, based in Luxembourg, owns television and radio stations in Luxembourg, Holland, Belgium, France, Spain, Germany, Hungary, Croatia, Russia, and India. Thomas Rabe is Chairman of the Board of Director and C.E.O. of the Bertelsmann Group and Chairman of the Board of Directors of the RTL Group.

On March 26, 2014, Bertelsmann announced that revenues improved in 2013; the Bertelsmann Group had its highest level of investment activity since 2005; the net financial debt was reduced to €636,000,000; the Bertelsmann Group had made substantial progress on all four strategic priorities; and education business will be significantly expanded. Investments in implementing the Bertelsmann Group’s strategy amounted to €2,000,000, including financial debt assumed, up from €655,000,000 in 2012, and its largest sum since 2005. Bertelsmann Group profit increased by 42% to €870,000,000. This is the highest Bertelsmann Group profit since 2006, and is well above the latest expectations. Penguin Random House, which is a joint venture with Pearson plc, made the same announcement.

With transactions such as the merger [on July 1, 2013] of Penguin and Random House to create the world’s largest trade book publisher, the acquisition of full ownership in BMG and the acquisition of Gothia, the Arvato division’s biggest purchase to date, Bertelsmann made significant strides in implementing its strategy. These also include the realignment of key business units and stepped-up activity in growth regions. Further steps to advance all the strategic priorities are planned this year… Bertelsmann has announced as a priority significant expansion of its education business over the next few months. The Group has also initiated the market entry of its BMG music rights subsidiary in China. Over the next few years, Bertelsmann will invest several billion euros in expanding existing and new businesses, and aims to make further acquisitions.

Rabe stated, “Bertelsmann delivered a gratifying business performance in 2013, and is acting from a position of strength. We have improved our growth profile through strategic decisions and have pushed forward the transformation to digital across all divisions…”

He added that the Bertelsmann Group will invest in growth areas such as education and music rights, as well as in the creative core of the company. “We want to gradually expand education into our third revenue mainstay, alongside media content and services. In music rights, the focus will be on further internationalization and strengthening the master rights business.”

Rabe emphasized that in 2013 and in the first few months of 2014, Bertelsmann has made significant progress on all four strategic priorities – strengthening the core businesses, digital transformation, developing growth platforms, and expansion in growth regions.

For example, the core businesses were particularly strengthened through the creation of… Penguin Random House… RTL Group further expanded its families of channels. It also acquired TV production companies and, in Germany, much-sought broadcasting rights to the national soccer team’s qualifying matches for Euro 2016 and the 2018 World Cup…

Bertelsmann also increased its footprint and reach in the digital world. In 2013, RTL Group reported a total of 16.8 billion online video views. Through its participation in multi-channel networks it became the third largest YouTube provider (excluding music videos). Penguin Random House grew its e-book offerings to more than 77,000 titles. Gruner + Jahr broadened its portfolio of e-magazines, high-reach mobile services and apps. Arvato achieved further growth as a service provider for leading IT, high-tech and e-commerce companies. Bertelsmann’s various companies and editorial teams now operate approximately 3,500 social media channels with a combined total of 300 million followers on Twitter, Facebook, Google+ and YouTube.

An important milestone in the expansion of growth platforms was achieved in 2013 with the complete takeover of BMG. Five years after its exit from the traditional recorded-music business, Bertelsmann is again one of the leading players in the music industry. During the reporting period, BMG expanded with several catalog acquisitions and prominent artist signings, including Mick Jagger and Keith Richards… In the education sector, an attractive portfolio of holdings has been built in the US and Europe via the ‘University Ventures Fund I’ in which Bertelsmann is an anchor investor. Arvato enhanced its strengths in the fast-growing financial services sector by acquiring the Gothia Financial Group, which serves customers in 21 countries. Furthermore, with the acquisition of Netrada at the beginning of this year, Arvato became a leading European provider of integrated e-commerce services.

Bertelsmann also accelerated its business-building activities in growth regions. Together with CBS, RTL Group expanded into Southeast Asia for the first time. In the book publishing business Bertelsmann improved its position in China, India and South America through the merger of Penguin and Random House. In China, Arvato achieved further profitable growth with its service offerings. The Bertelsmann Asia Investments fund enlarged its portfolio and recorded a very positive performance. In Brazil, a step-by-step expansion of the business was initiated by investing in funds and innovative startups.

Rabe stated, “We are on track to increase our revenue volume to around 20 billion euros by 2017 and gradually increasing our Group profit to over one billion euros. The various growth initiatives in our divisions and at corporate level, possible acquisitions, and the full consolidation of Penguin Random House, BMG and Gothia in the current year will contribute to this. At the same time, we are downscaling low-growth businesses such as replication, printing and direct-to-customer businesses.”

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