Bertelsmann Revenues Increase, Profits Drop Following Key Acquisitions

The German media group Bertelsmann reported Thursday that revenues increased 4.3 percent to 11.82 billion euros (over the previous year's 11.33 billion euros) in the first nine months of 2014. At 1.48 billion euros ($1.84 billion), adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) exceeded the high level of the previous year (1.46 billion euros). The EBITDA margin was 12.5 percent (previous: 12.9 percent). 

Strategic acquisitions and other transactions of the past 18 months contributed significantly to these increases -- including the combination of Penguin and Random House, Arvato's takeover of the financial services company Gothia and the e-commerce service provider Netrada. In 2014 Bertelsmann assumed full ownership of the music rights company BMG. BMG took over the publishers Talpa and Union Square as well as the Montana and Hal David rights catalogs. Billboard learned from Bertelsmann sources that BMG will concentrate in the next months in recorded music by buying labels and stars' catalogues. Insiders estimate that BMG will invest a three digit million euro amount. 

Bertelsmann strengthened its core in the current fiscal year, among other things with the full takeover of the magazine publisher Gruner + Jahr, which was concluded on Nov. 1, and the acquisition of the book publisher Santillana. Several structurally declining businesses were sold, including the Brown Printing Company in the U.S., Be Printers' Italian printing plants, and the Club businesses in Spain and the Czech Republic; others were downscaled as planned, for example the direct-to-customer businesses in Germany.

But the group profit amounted to 285 million euros as of Sept. 30. This was below the previous year's figure of 623 million euros, which reflects BMG and RTL Group's investment in the Spanish TV group Atresmedia. An impairment loss on RTL Group's TV activities in Hungary, where the parliament passed a special tax on advertising in the summer, negatively impacted the 2014 figure. There were also losses from the sale of the Be Printers' Italian printing plants and the Club businesses in Spain, as well as costs for the integration of Penguin and Random House and for downscaling the direct-to-customer businesses in Germany. 

Bertelsmann's chairman & CEO Thomas Rabe said in a statement: "Bertelsmann increases revenue to highest level in seven years. We are very happy with the financial year to date. Overall, we have exceeded our expectations: Bertelsmann is growing, is very profitable, and is making good progress in the implementation of its strategy. For instance, a few weeks ago we entered the U.S. e-learning market with the purchase of Relias Learning. We will resolutely continue on our course to ensure that Bertelsmann becomes a faster growing, more digital and more international company long-term."

Bertelsmann is in some 50 countries with their more than 111,000 employees.