Revenue, Profits Up at German Giant Bertelsmann

2:39 AM PST 03/26/2014 by Scott Roxborough
Bertelsmann CEO Thomas Rabe

The owner of 'American Idol' Producer FremantleMedia, music group BMG and broadcaster RTL Group posts net profits of $1.2 billion for 2013.

Record operating profits at its European broadcasting division RTL Group lifted results for German media giant Bertelsmann, which posted its 2013 figures Wednesday.

Total revenue was up by around 2 percent to $22.6 billion (€16.4 billion) last year, with net profits soaring 42 percent to $1.2 billion (€870 million).

Going forward, Bertelsmann CEO Thomas Rabe forecast growth in revenue, stable operating profits and an increasing net profit for this year. Over the next three to five years, Bertelsmann is targeting annual revenues of $27.6 billion (€20 billion) and net profits of more than $1.38 billion (€1 billion), with growth to come both internally and through third-party acquisitions. In emerging markets, particularly China, Indian and Brazil, Bertelsmann is targeting annual revenues of $1.38 billion (€1 billion), compared to around $550 million (€400 million) from those territories last year.

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Bertelsmann CEO Thomas Rabe pointed to several major acquisitions and mergers as growth engines, including the company's purchase of KKR's stake in music rights division BMG, giving Bertelsmann full control of the group, which manages rights to more than 1 million songs, including titles from Bruno Mars, Will.i.am and the Rolling Stones' Mike Jagger and Keith Richards.

"In just five years, BMG has become the number four company in music rights and is one of the most active protagonists in the business," said Rabe.

Bertelsmann last year also took majority control of new books giant Penguin-Random House, taking a 53 percent stake in the group set up with Pearson last year, with Pearson holding a 47 percent stake.

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Without the blockbuster sales of E.L. James's Fifty Shades of Grey last year, revenue at Random House alone declined in 2013, but the addition of Penguin in the newly merged book group meant revenue at the division was up 23.9 percent to $3.66 billion (€2.655 billion) last year. Operating profits were up 11 percent to $500 million (€363 million).

Random House CEO Markus Dohle said the release of the Fifty Shades of Grey film, set for Valentine's Day 2015, will provide a bump for sales of the erotic novel. Dohle added that Random House is in close contact with James, with an eye to publishing whatever her next novel would be.

At Bertelsmann's largest division, RTL Group, the still-booming TV market in Germany and The Netherlands helped paper over declines in other territories -- including France -- as well as lower returns from Bertelsmann's TV production division FremantleMedia, which produces shows such as American Idol and X Factor.

RTL's German division, Mediengruppe RTL Deutschland, posted its best-ever financial result, with EBITA jumping 7.1 per cent to $859 million (€622 million), against $767 million (€581 million) in 2012.

Bertelsmann's Germany operations even had a rare cinematic hit last year in the form of period drama The Physician from Berlin-based Ufa Cinema.

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The literary adaptation starring Stellan Skarsgard, Ben Kingsley and Tom Payne has earned more than $50 million from just two territories -- Germany and Spain.

Financially, Bertelsmann is in robust health, after floating some 25.5 million shares in RTL Group last year, which raised $2.07 billion (€1.5 billion), cash Bertelsmann plans to invest mainly in digital media and in expansion in such high-growth territories as Asia and Latin America. Following the share issue, Bertelsmann retained a majority 75.1 percent stake in RTL Group.

Bertelsmann also used the cash raised to help pay down its debt, which it cut to $878 million (€636 million) by the end of 2013 from $1.66 billion (€1.2 billion) in 2012.

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