Bertelsmann First-Half Profit Rises 5.2% on BMG Takeover

Bertelsmann SE, Europe’s biggest media company, said first-half operating profit rose 5.2 percent to a record, helped by the assumption of full control of music publishing-rights venture BMG Rights Management GmbH.

Operating earnings before interest and taxes from continuing operations increased to 768 million euros ($1.02 billion) from 730 million euros a year earlier, the Guetersloh, Germany-based company said in a statement today. Revenue fell 1.9 percent to 7.43 billion euros.

Closely held Bertelsmann sold shares in April in broadcaster RTL Group SA for 1.4 billion euros to help finance acquisitions targeted at expanding beyond print media and television channels and becoming less reliant on Europe. In addition to Bertelsmann’s purchase of the remaining 51 percent of BMG from partner KKR & Co. in April, the Random House division merged with Pearson Plc (PSON)’s Penguin unit in July to form the largest book publisher in the U.K. and the U.S.

“The acquisitions need to be digested, so we don’t feel under pressure for more this year,” Chief Executive Officer Thomas Rabe told journalists on a conference call. “We’re not interested in big acquisitions in the billions.”

Revenue and operating profit will rise this year, Chief Financial Officer Judith Hartmann said in the statement. On an organic basis, which excludes takeovers, disposals or currency effects, growth will remain stable or slow down slightly.

Double Digits

The average return on sales will “remain in double digits,” the CFO said. First-half operating Ebit as a proportion of revenue climbed to 10.3 percent from 9.6 percent a year earlier.

“Our businesses are performing soundly,” and the first-half figures are “a good foundation for the upcoming revamp of our company,” Rabe said in a video statement on Bertelsmann’s website. “The overall environment remains very difficult, though.”

RTL’s first-half operating Ebit increased 9.4 percent to 545 million euros, the biggest gain among Bertelsmann’s divisions, as revenue growth at German and Dutch units countered the effects of declining TV advertising markets across Europe.

Earnings rose 3.5 percent to 117 million euros at Random House and 1.2 percent to 86 million euros at the Gruner & Jahr magazine-publishing business. Profit at the Be Printers offset and gravure unit plunged 80 percent to 3 million euros as a large U.K. customer scaled back orders and a recession in southern Europe resulted in lower volume and price cuts.

Bertelsmann doesn’t plan to cut jobs at Be Printers after shuttering a plant in Itzehoe, Germany, in 2014, and a sale of the business isn’t planned, Rabe said on the call. Management at Gruner & Jahr, which owns Stern and Brigitte magazines in Germany, will give details about the unit’s reorganization in coming weeks, he said.

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net; Weixin Zha in Frankfurt at wzha2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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