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27.09.2001 – 10:59

Bertelsmann SE & Co. KGaA

Bertelsmann well prepared for the future with record results

    Berlin (ots)

    Revenues increase by 21 percent to 20bn EUR / Earnings before
interest, taxes and amortization rise by 79 percent to over three
billion EUR / Annual net income up by 44 percent to 968 million EUR /
Transition at Bertelsmann: half of current corporate value
attributable to initiatives and decisions implemented after 1995 /
RTL Group biggest business with highest profits / Turnaround in the
club businesses / Music business restructured / Capital expenditures
up again / 82,000 employees worldwide
    Bertelsmann launches the BEX innovation and synergy program /
Ambitious target yields
    Bertelsmann, the international media company, is pushing through
with its realignment in the global media and communications markets
with strategic determination in spite of the difficult economic
situation. In the process, it has managed to serve up good economic
results. With revenues up by 21 percent to 20bn EUR (previous year:
16.5bn EUR), Bertelsmann achieved earnings before interest, taxes and
amortization of 3.16bn EUR in FY 2000/01, a 79 percent increase (PY:
1.77bn EUR). At the company's business press conference on Thursday
in Berlin, Bertelsmann Chairman & CEO Thomas Middelhoff emphasized
that this is the highest profit in the history of the company. At
1.20bn EUR, the divisional results (EBITA) - excluding Internet
businesses and positive/negative one-off items - were nearly on a par
with the previous year's record levels (1.25bn EUR). During the
period under review (July 1, 2000 through June 30, 2001), net income
increased by 44 percent to 968m EUR (PY: 672m EUR), large investments
and disproportionate tax expenditures notwithstanding.
    The focus of corporate strategy has shifted away from access
ventures (AOL Europe) and network operators (mediaWays). Bertelsmann
is able to realize profits of nearly ten billion EUR from the
holdings it sold off as part of this strategic shift. Only about half
of this sum has been included in the present balance sheet and in
those of previous years. It allowed Bertelsmann to further develop
existing fields of business and make strategic investments.
    Says Thomas Middelhoff: "Over the past three years, Bertelsmann
has nearly doubled its revenues and more than tripled its profits.
During this time, we have undergone more changes than ever before: we
have become a content powerhouse. In 1985, content ventures
contributed 30 percent to total turnover - today, they make up more
than 60 percent. In the past three and a half years alone,
Bertelsmann has invested some three billion Euros into its content
businesses. Add to this our acquisition of the majority stake in RTL
Group, which was agreed upon in February, and the integration of
Pearson TV (now FremantleMedia) prior to that. Whether you consider
print media, music or moving pictures: Bertelsmann offers the entire
range from a single source. Our future vision is of an integrated
media company that generates appealing content and fosters talent on
the one hand and sustains an in-depth, trusting relationship with its
customers, club members and subscribers on the other."
    The television business forms the top of the group, both in a
strategic sense and from an economic performance point of view.
Middelhoff stressed that RTL Group has delivered an exemplary
performance in a difficult market environment. Following personnel
and structural changes, BMG's music business now strides confidently
into the future. After long years of low yields, the company is back
on track under a new management, which has brought a new leadership
style and a new focus to the business. Although plans of a merger
with the British music company EMI were abandoned because of
antitrust concerns, in Bertelsmann's opinion, there are opportunities
for expansion both through organic growth and through acquisitions in
the medium term. Despite its leading position in quality-oriented
markets, the magazine, newspaper and print publisher Gruner + Jahr is
laboring under the worldwide cyclical decline in advertising spend,
but nonetheless managed to make the second-largest contribution to
Bertelsmann's divisional results.
    Random House's book-publishing business, the media services group
Arvato, and the specialist information and science publisher
BertelsmannSpringer all show encouraging development. DirectGroup's
book clubs are increasingly benefiting from the opportunities that
arise from the convergence between online and offline. Innovations
including special-interest clubs, a modern IT system and resolute
cost management have yielded positive results in this
long-established division.
    On the Internet, Bertelsmann pointed the way to the future early
on. Today, the company is on of the leaders in this field and is well
positioned for competition. The ecommerce ventures and websites
operated by Bertelsmann and affiliated companies reach 41 million
unique visitors (June 2001). This figure puts them close to the
world's biggest media corporation AOL Time Warner and far ahead of
all other competitors. The Internet has been integrated into all
Bertelsmann businesses. BeMusic, the world's biggest music retailer,
was created in early summer. Bertelsmann's media e-commerce division
is on its way to profitability: the online media vendor BOL has been
integrated into club business. In the US, Bertelsmann's holding is showing faster growth than its competitors in
the media e-commerce sector.
    "In a difficult economic environment, Bertelsmann has mastered a
year of forwardlooking strategic and operational initiatives,"
emphasized Middelhoff. "The fact that we enjoy such a good position
today is mainly attributable to hard work and successful investments,
the resolute realignment of our corporate structure over the past
three years, and the conscious evolution of our corporate culture.
Half of our current corporate value is the result of initiatives and
decisions implemented since 1995."
    Both the ability to change and the acumen to make the right
business decisions will continue to be important in the future.
Middelhoff pointed to the recently launched Bertelsmann Excellence
Initiative (BEX), which not only includes measures for cutting costs
and boosting growth, but is also designed to foster innovation and
the creation of synergies by way of cooperation throughout the group.
Going forward, the range of services will focus more than before on
strong brands and will be aligned to rapidly changing customer
interests. Thus Bertelsmann has already adjusted to a worldwide
cyclical downturn early on.
    Major developments during FY 2000/01
    The fiscal year saw an extension of the content business, major
capital expenditures on extending the core Internet businesses, a
realignment of the club and music businesses, and a massive influx of
funds from sales of Internet holdings. Capital expenditures reached
an all-time high at 3.27bn EUR. Nevertheless, the company managed to
reduce its financial debt by 0.3bn EUR during the period under
review, while strengthening the equity base. At the end of the fiscal
year, Bertelsmann employed a staff of 82,162 employees in 58
countries - roughly 5,900 employees more than last year.
    - A share swap with Groupe Bruxelles Lambert (GBL) gave
Bertelsmann the majority share in and control of RTL Group. The
pan-European company, which saw firstever full-year consolidation
this fiscal year, has become the media company's biggest and most
profitable division. RTL Group is by far Europe's leading TV and
radio corporation and one of the world's biggest producers of TV
programming. By effectively linking its TV and radio business with
program production and Internet activities, RTL Group has managed to
further strengthen its powerful channels and program brands while
tapping a wide range of synergy and cross-promotion potential. In the
TV business, the company was able to grow counter to the market trend
in the major markets. RTL Group was able to increase its share of ad
spending and audience both for RTL in Germany and for M6 in France
with top programs like "Who wants to be a Millionaire" and "Loft
Story." The 85 Internet websites run by RTL Group throughout Europe
get approximately 300 million page views per month and attract
approximately four million visitors. In Germany and France,
and are the most frequently visited entertainment sites on the
Net. The group is thus very well positioned to take advantage of the
emerging convergence between TV and Internet in the cable network.
All in all, RTL Group has a healthy core business and is in an
excellent position to defend and extend its market position.
    - The Random House publishing companies, in which all
Bertelsmann's trade book businesses have been united since April
2001, once again published a record number of bestsellers. In the
period under review, 169 titles made it on to the New York Times
bestseller list, 22 of them reaching No. 1. Eighteen titles climbed
to the top of the London Sunday Times bestseller list. Random House
authors received numerous prestigious literary awards, including two
Pulitzer Prizes. Random House once again set standards for
technological innovations and the development of new distribution
paths (audiobooks, e-books, books-on-demand)
    - A process of transition has been initiated at Bertelsmann Music
Group (BMG). The company underwent insufficient development over the
past ten years. Now, changes in management and comprehensive
restructuring have re-set the points for BMG's future. The music
clubs, for instance, have now been assigned to DirectGroup, which
bundles all the group's direct-to-customer businesses (clubs,
ecommerce), while the Storage Media division (which includes CD and
DVD production) was reassigned to Arvato at the beginning of the new
fiscal year. Under its new management, BMG can now concentrate on its
core business: developing and promoting music. The streamlining of
BMG's organizational structure to boost the company's competitiveness
is accompanied by job cuts. This is done after careful deliberation
in each individual case, and executed in a reasonable manner.
    - The club businesses have reached a turning point in their
earnings development: restructuring and realignment in the book
clubs, and investments in their IT infrastructure promise to bring
breakeven in 2002. This success is attributable in part to
DirectGroup Bertelsmann's multi-channel strategy, which fosters an
interweaving of online and offline offerings. In the medium term,
measures such as the integration of BOL into Bertelsmann's book clubs
are expected to greatly reduce start-up losses associated with
e-commerce. The book clubs' Internet sites are seeing increasing
traffic, and the number of new members won via the Internet also
continues to grow steadily.
    - With its acquisition of the prestigious business publications
"Fast Company" and "Inc.", Gruner + Jahr worked its way up from No. 7
to No. 5 of the biggest magazine publishers in the US. This strategic
investment created the base for continued growth in what is by far
the world's most important magazine market.
    - The specialist publisher BertelsmannSpringer experienced a very
positive development, in particular the science publishing unit.
Springer Verlag science publishers were able to improve their results
by 40 percent over the previous year, with an expanded range of
biomedical, mathematics and computer science titles, sales growth in
the US, and tight cost management. BertelsmannSpringer as a whole
also performed above last year.
    - Its proclaimed withdrawal from the online service AOL Europe,
and the sale of the network provider mediaWays to Telefónica, brought
Bertelsmann pre-tax capital gains of 3.2bn EUR during FY 2000/01.
Under the terms of the agreement with AOL, additional proceeds from
the sale are expected in 2002. These funds give Bertelsmann
additional room for maneuver in its growth and investment activities.
    "Bertelsmann has made the transition to being a global player in
the content business," declared Middelhoff. "Approximately 86 million
customers - from club members and ecommerce customers, to magazine
subscribers - and the provision of international media services -
from logistics, distribution and fulfillment, to efficient customer
care centers - are other keystones of our success. Building on its
pillars of content, media services and direct-to-customer businesses,
Bertelsmann is now in a position to permeate the media value chain
and exploit group synergies, such as cross-marketing." One of the
units that will ensure that this is carried out comprehensively is
the Bertelsmann Content Network (BCN), which fosters content sharing
and cooperation within the group. Another new unit founded during the
past fiscal year is the Executive Board division Bertelsmann Capital,
which controls strategic corporate development, mergers &
acquisitions, IT strategy and all Bertelsmann's venture capital
    Bertelsmann sets its sights on further future markets and the
stock market
    The Bertelsmann CEO explained that his company's goals for the
years ahead are clearly defined: "We will extend our various
market-leading positions in the content business and continue
aligning Bertelsmann's portfolio to the group strategy and to a
changed overall environment. Media services, offered by Arvato AG,
will continue to extend their rapidly growing range of offerings,
expand into tomorrow's markets, and become even more active as a
connecting link and service provider for the group's several hundred
companies. In its direct-to-customer business, Bertelsmann will
devote all its energy to maximizing the potential inherent in its
millions of customer contacts. We intend to take advantage of this
wealth in every possible way - with creative, innovative business
ideas and with contemporary sales concepts. The declared goal is to
bring our media content to the customer on all possible paths.
Customers can choose whether they wish to buy the latest hit on CD in
a store or order it online, download it to their mobile phone, or
keep it as a file in their digital locker (personal rights archive on
the Internet). Later, the file-sharing technology made popular by
Napster will round out this range of services. Bertelsmann has great
hopes for file sharing, a technology that will be a permanent fixture
in tomorrow's media landscape."
    Bertelsmann's Chairman & CEO also stressed the possibility of his
company going public in three or four years. The acquisition of a
majority stake in RTL Group, agreed upon in February 2001 and
completed in July, gave Groupe Bruxelles Lambert (GBL) a 25.1 percent
share in the Bertelsmann AG, 0.1 percent of which are non-voting
shares. GBL has the option of selling all or part of these shares on
the market in the event that Bertelsmann goes public.
    "The share swap with our partner and shareholder GBL means more
than a broadening of our equity base," said Middelhoff. "By preparing
for an IPO, we are becoming more modern and transparent." Last year,
Bertelsmann switched from using the financial indicators of
"operating result" and "return on total assets" to using EBITA and
Bertelsmann Value Added (BVA) for purposes of assessing return on
capital. At the same time, Bertelsmann is aligning its fiscal year to
the calendar year, to simplify the group's accounting and increase
its comparability with other companies. Moreover, the abbreviated
business year from July 1 to December 31, 2001 marks the first time
that the group balanced its accounts according to the IAS instead of
the HGB as in the past.
    Middelhoff announced that in the future there would be an
increased focus on returns: "We have set ambitious targets; part of
the BEX initiative launched by the Executive Board is to raise the
net yield throughout the group to approximately ten percent within
three years." Middelhoff stressed that the Bertelsmann Excellence
Initiative comprises far more than target yields: "Our aim is not a
short-term profit scheme, but a lasting, group-wide effort to improve
all work processes. Every corporate division, every Bertelsmann
company and each and every employee is being called on to see whether
there isn't a way to create even more attractive media products and
services for our customers by applying more creativity, cooperation,
innovation, synergies or by optimizing processes. We are striving for
excellence in corporate management and performance."
    Another part of the Bertelsmann Excellence Initiative is the
company's new look. Since early July, Bertelsmann AG has been doing
business with a new logo and brand architecture for the group. A
consistent corporate image will help sharpen Bertelsmann's profile
and its appeal for opinion-makers, especially in the financial and
job markets. "Although Bertelsmann has many hundreds of
popular-appeal brands, we have failed to develop our corporate brand,
i.e. the actual umbrella brand Bertelsmann. It was no longer
contemporary. Our new brand management is designed to arouse the
curiosity of artists, performers, authors, entrepreneurial talents
and business partners, and win them over for Bertelsmann," explained
Middelhoff. "No matter how rapidly the media landscape and our
companies change: our corporate brand will ensure recognition."
    Conscious evolution of the corporate culture
    The transition at Bertelsmann is accompanied by a conscious
evolution and internationalization of the media company's proven
corporate culture of partnership. "Along with promoting
entrepreneurial action, we also foster knowledge sharing at all
levels, as well as internal communications and internal networking
between companies," said Middelhoff. "This is the only way to
actively shape the upheaval. Everyone must sense that they are a part
of it and feel empowered to provide ideas."
    A few words on knowledge sharing: extensive training and
continuing-education programs ranging from PC tutorials to the
Bertelsmann University for executives tighten the networks that link
employees all over the world for purposes of knowledge exchange,
identification and motivation. Among other things, this has already
resulted in a number of cooperation agreements between companies.
Chairman & CEO Middelhoff personally attends each Bertelsmann
University event. Virtual knowledge sharing takes place in chat
forums, e.g. a forum that can be visited by all executives working in
Asia. A bilingual corporate intranet - the BeNet - offers all
employees a wealth of news and background information about the
company on a daily basis.
    Meanwhile, "townhall meetings", at which Thomas Middelhoff
presents a yearly management report for employees - an institution
limited to Germany in the past - are now organized for staff at all
major international locations (Paris, Barcelona, London and New
York). Next year, a worldwide employee survey will provide insights
into workplace satisfaction and employee opinions. The
profit-participation scheme introduced for Bertelsmann employees in
Germany in the 1970s has since been expanded to include numerous
Bertelsmann locations in Western Europe. This year will see its
extension to some corporate units in the US as well. Another measure
that met with great acclaim was the "PC4All!" campaign, wherein
Bertelsmann offered all its employees worldwide a free PC including
Internet access. The aim is to get employees and their families to
embrace the new media in their personal lives as well. The company
has successfully concluded the first phase of the campaign; 50,000 PC
packages have been shipped to date.
    Our Information on the Internet
    Point your browser to to find, among
other things:
    - All press releases on the press conference on fiscal year-end
    - Presentation charts for the press conference on fiscal year-end
    - Video coverage of the entire press conference on fiscal year-end
    - Downloadable, printable photos of all Executive Board members
    - Quotes from Thomas Middelhoff and Siegfried Luther
    - CVs of all Executive Board members
ots Originaltext: Bertelsmann AG
Im Internet recherchierbar:

For further Questions:
Oliver Herrgesell,
Bertelsmann AG
Media Relations
Phone + 49 - 52 41 - 80 24 66
Fax + 49 - 52 41 - 80 66 13

Original content of: Bertelsmann SE & Co. KGaA, transmitted by news aktuell

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