Letter from the CEO

Dear Readers,
Dear Friends of Bertelsmann,

Bertelsmann performed well in the 2018 financial year. Driven by creativity and entrepreneurship, we have made further progress in implementing our strategy, and again improved our growth profile. This report documents these achievements.

Group revenue rose to €17.7 billion. At 2.7 percent, organic growth was higher than it has been for many years. This positive development was driven by our growth businesses, which accounted for more than one-third of Group revenues. Around half of our revenues now come from digital activities, and about 30percent of them from outside Europe, primarily the United States. As a result, we have become a faster-growing, more digital and more international Group.

At €2.6 billion, operating EBITDA almost reached the previous year’s record level, when we benefited from real estate disposals. On a comparable basis, operating profit was significantly higher than in 2017. In addition to Penguin Random House, BMG and the Bertelsmann Education Group, Arvato in particular recorded significant earnings growth.

At €1.1 billion, Group profit exceeded the billion-euro mark for the fourth consecutive year.

This positive business performance is accompanied by progress in our four strategic priorities.

Strengthening the core: RTL Group’s families of channels largely maintained their positions in the TV advertising markets in Germany, France and the Netherlands. Penguin Random House placed 481 titles on the “New York Times” bestseller lists, led by Michelle Obama’s memoir “Becoming.” A strategic milestone was achieved with the combination of Arvato’s global CRM businesses with those of Morocco’s Saham Group at the beginning of 2019. The new group, Majorel, will invest heavily in the digitalization of its service portfolio in the years ahead.

Digital transformation: RTL Group accelerated the expansion of its VOD activities and increased its digital revenues by 19 percent to nearly €1 billion. Gruner + Jahr grew its digital revenues in Germany, due in part to the growth of the app discovery platform AppLike. Arvato grew with customers from the IT and high-tech sectors.

Expansion of growth platforms: Fremantle benefited from the return of the successful “American Idol” format and internationally popular series such as “My Brilliant Friend.” BMG strengthened its position with new artist signings and catalog acquisitions. Arvato’s e-commerce and financial services activities grew significantly. Our Education division expanded through the acquisition of the US online education provider OnCourse Learning. Overall, our growth platforms grew organically by 10 percent in 2018.

Expansion in growth regions: Our funds made 44 investments in innovative companies in Brazil, China and India; our global network comprised 189 investments at year-end. Bertelsmann Asia Investments once again made a major contribution to the Group profit. In Brazil, we strengthened our presence by acquiring a majority stake in the corporate training provider Afferolab, and by increasing our stake in the renowned trade book publishing group Companhia das Letras.

These strategic successes are fueled by our 117,000 employees worldwide. My sincere thanks go out to them.

We will continue to invest in the creative and entrepreneurial power of our businesses with confidence that we will continue on our successful path. I welcome your ongoing interest in our progress.

Thomas Rabe
Chairman and CEO of Bertelsmann