Bertelsmann profit tops €1 billion as bets pay off
BERLIN: German media and publishing group Bertelsmann SE Tuesday presented ambitious objectives for 2020, as its bets on digital and international expansion paid off with a second €1 billion annual profit in 2016.
“Effectively, what we have to do in the next years is to do what we have done in the last years,” chief executive Thomas Rabe told journalists at a press conference.
The group reported net profit of €1.14 billion ($1.23 billion) in 2016, an increase of 2.6% over 2015’s figure.
While higher taxes weighed on the bottom line, operating or underlying profit before taxes and interest stood at €2.6 billion, compared with €2.5 billion the previous year.
Bertelsmann, which owns broadcaster RTL, a stable of magazines and most of publisher Penguin Random House, saw revenues slip slightly to €17 billion.
Exchange rate effects were to blame for much of the drop, the firm said, as the fall in the value of the pound following Britain’s vote to quit the European Union in June meant its UK revenues were worth less.
Since taking the top seat at the familyowned firm in 2012, Rabe has invested some €4 billion to close Bertelsmann’s digital gap with other publishers and expand outside Germany.
Looking ahead to 2020, the CEO aims for revenues of €20 billion, with some 40% generated from “growth” activities such as online media and e-commerce, compared with 30% today.
The group’s digital product range has also grown to educational software, while it plans to completely abandon shrinking legacy businesses like its book clubs.
Half of investments will go to the United States, with other big bets on China, India and Brazil.
Within three years, Bertelsmann hopes to make 60% of its revenue in Europe and 40% internationally, including some 30% in the US.
The group offered little detail about its objectives for 2017, saying only that it aims to increase profits and revenues while maintaining its high margins.
This year could see Bertelsmann expand in book publishing, as it plans to increase its stake in Penguin Random House — a merged publisher it created with Britain’s Pearson Plc in 2013.
With Pearson looking to sell its share, the German firm could increase its holdings in the group as high as 75% from its present 53% if the price is “reasonable,” Rabe said, but “it will take a bit of time.”
“No assessment of the publisher’s value will be available until the summer,’’ he went on.
“There’s a pretty long queue for the remainder of the shares,’’ Rabe added, but “we are looking for an investor with a real interest for the business.”
Impacts on Bertelsmann from Brexit have so far been “pretty limited” according to the CEO, but he made no secret of his concerns for the future.
“Beyond the fall in the pound, economic uncertainty is expected to sap the advertising market, while questions remain over non-British employees’ right to remain in the UK and UK firms’ access to the European single market,’’ Rabe said.
Nevertheless, “clearly our objective is to maintain our business in the UK and to continue to invest in the UK,” he added.