Bertelsmann Shrugs Off Costs
Setting up and growing BMG Rights Management with U.S. private equity firm KKR is a big factor in its corporate division losing more than euro 80 million in a year, but Bertelsmann Group chief Hartmut Ostrowski reckons the company is through the economic crisis and hinted it may spend even more money.
“We will use these funds to strengthen our core businesses, develop our portfolio and expand into new growth segments,” he said March 28, as the company announced its operating 2010 EBIT surged 28.8 percent from euro 1.4 million to euro 1.8 million.
Group revenues increased by 4.5 percent to euro 15.8 billion and profit rose to euro 656 million, well up on the euro 500 million the company was forecasting last summer.
Ostrowski says Bertelsmann has overcome the economic crisis and is advancing businesses at a considerable rate.
“Revenues are growing, profits are on a steep rise, and key indicators like returns on sales and cash flow from operations have soared to new highs,” he said. “We have managed to pay down our debt to a point where significant new room for financial maneuver is emerging.”
In the last year Bertelsmann’s net financial debt has fallen from euro 2.8 billion to euro 1.9 billion.
Ostrowski reported that the upswing in the advertising economy led to particularly strong operating performances from the European entertainment group RTL and the magazine subsidiary Gruner + Jahr.
Publishing firm Random House placed 230 titles on the New York Times bestseller lists, including 25 at No. 1. “Decision Points” by former U.S. President George W. Bush sold more than 2 million copies in print and digital editions in the first eight weeks.
Ostrowski also said he’s “especially happy” that the company will pay out a record-breaking euro 118 million in its employee profit participation scheme.
Bertelsmann chief financial officer Thomas Rabe said the high cash flow from operations has resulted in the company reducing its liabilities to such an extent that at the end of 2010 the leverage factor was at 2.3, well below the new, self-imposed ceiling of 2.5.
“The euro 1.9 billion in net financial debt stands against operating EBITDA of euro 2.4 billion. In other words; the issue of debt has been dealt with for good. Financially speaking, Bertelsmann is ready to invest again,” he explained.
The Corporate division, which includes the Bertelsmann Group Corporate Center and Corporate Investments, reported an operating EBIT of minus euro 88 million, compared with minus euro 84 million for 2009.
The change can be attributed among other things to the scheduled startup costs for expanding the BMG music rights company, the joint venture operated between Bertelsmann and KKR.
It significantly expanded its business operations during the year, including the acquisition of music publishers such as Cherry Lane, Evergreen and Adage IV in the U.S. and Stage Three Music in the UK.
At the end of the year it also initiated the £108 million acquisition of UK music publisher Chrysalis.