Annual Report 2019 At a Glance 2019 Key Figures (IFRS) in € millions 2019 2018 2017 2016 2015 Business Development Group revenues 18,023 17,673 17,190 16,950 17,141 Operating EBITDA 2,909 2,586 2,636 2,568 2,485 EBITDA margin in percent1) 16.1 14.6 15.3 15.2 14.5 Bertelsmann Value Added (BVA)2) 89 121 163 180 180 Group profit 1,091 1,104 1,198 1,137 1,108 Investments3) 1,270 1,434 1,103 1,240 1,259 Consolidated Balance Sheet Equity 10,445 9,838 9,127 9,895 9,434 Equity ratio in percent 38.2 38.8 38.5 41.6 41.2 Total assets 27,317 25,343 23,713 23,794 22,908 Net financial debt 3,364 3,932 3,479 2,625 2,765 Economic debt4) 6,511 6,619 6,213 5,913 5,609 Leverage factor 2.6 2.7 2.5 2.5 2.4 Dividends to Bertelsmann shareholders 180 180 180 180 180 Distribution on profit participation certificates 44 44 44 44 44 Employee profit sharing 96 116 105 105 95 As of January 1, 2019, the new financial reporting standard IFRS 16 Leases was applied for the first time. In accordance with the transitional provisions of IFRS 16, prior-year comparatives have not been adjusted. Further details are presented in the section “Impact of New Financial Reporting Standards.” The figures shown in the table are, in some cases, so-called Alternative Performance Measures (APM), which are neither defined nor described in IFRS. Details are presented in the section “Alternative Performance Measures” in the Combined Management Report. Rounding may result in minor variations in the calculation of percentages. 1) Operating EBITDA as a percentage of revenues. 2) Bertelsmann uses BVA as a strictly defined key performance indicator to evaluate the profitability of the operating business and return on investment. Since the financial year 2018, Bertelsmann Value Added has been calculated excluding the Bertelsmann Investments division. 3) Taking into account the financial debt assumed, investments amounted to €1,276 million (2018: €1,461 million). 4) Net financial debt less 50 percent of the par value of the hybrid bonds plus pension provisions, profit participation capital and lease liabilities. Bertelsmann is a media, services and education company that operates in about 50 countries around the world. It includes the broadcaster RTL Group, the trade book publisher Penguin Random House, the magazine publisher Gruner + Jahr, the music company BMG, the service provider Arvato, the Bertelsmann Printing Group, the Bertelsmann Education Group and Bertelsmann Investments, an international network of funds. The company has 126,000 employees and generated revenues of €18.0 billion in the 2019 financial year. Bertelsmann stands for creativity and entrepreneurship. This combination promotes first-class media content and innovative service solutions that inspire customers around the world. Bertelsmann aspires to achieve climate neutrality by 2030. www.bertelsmann.com Interactive Online Report The Bertelsmann Annual Report can also be accessed online at: ar2019.bertelsmann.com As well as company information and an extensive financial section, the online report offers many extra features, including several videos, extracts and additional web links. 2 Financial Information Financial Information 4 Combined Management Report 47 Consolidated Financial Statements 47 Consolidated Income Statement Fundamental Information about the Group 48 Consolidated Statement of Comprehensive Income 49 Consolidated Balance Sheet 5 Corporate Profile 50 Consolidated Cash Flow Statement 6 Strategy 51 Consolidated Statement of Changes in Equity 8 Value-Oriented Management System 52 Notes 8 Non-Financial Performance Indicators 134 Responsibility Statement Report on Economic Position 135 Auditor’s Report 11 Corporate Environment 11 Significant Events in the Financial Year 142 Corporate Governance 12 Results of Operations 15 Net Assets and Financial Position 145 Report of the Supervisory Board 19 Performance of the Group Divisions 27 General Statement by Company Management 150 Boards / Mandates on the Economic Situation 150 Supervisory Board 27 Alternative Performance Measures 153 Executive Board 30 Significant Events after the Balance Sheet Date 30 Risks and Opportunities 154 Additional Information 38 Outlook 154 Selected Terms at a Glance 39 Notes to the Financial Statements of 156 Financial Calendar / Contact/ Bertelsmann SE & Co. KGaA (in accordance Production Credits with HGB, German Commercial Code) 41 Combined Non-Financial Statement Bertelsmann Annual Report 2019 3 Combined Management Report Financial Year 2019 in Review Bertelsmann reported successful business performance in the financial year 2019, with continued organic growth and high operating profit. Group revenues rose 2.0 percent to €18.0 billion (previous year: €17.7 billion), with organic growth of 1.2 percent. In addition to the book publishing business, the Group’s strategic growth platforms were the main contributors to this, especially Fremantle, Arvato Supply Chain Solutions, the digital businesses of RTL Group, BMG, Arvato Systems, and the digital businesses of Gruner + Jahr. Operating EBITDA increased to €2,909 million (previous year: €2,586 million). In addition to the positive business performance, the significant increase is also attributable to the initial application of the new IFRS 16 Leases financial reporting standard. As a result, the EBITDA margin rose to 16.1 percent (previous year: 14.6 percent). Group profit was once again high, at €1,091 million, compared with €1,104 million in the previous year. Bertelsmann anticipates positive business performance for 2020 as well. Revenues in € billions Operating EBITDA in € millions Group Profit in € millions 20 17.2 17.7 18.0 3,000 2,636 2,586 2,909 1,200 1,198 1,104 1,091 15 2,250 900 10 1,500 600 5 750 300 0 0 0 2017 2018 2019 2017 2018 2019 2017 2018 2019 • Revenue growth of 2.0 percent, • Increase in operating EBITDA to • Group profit exceeding the continued organic growth of €2,909 million, attributable in part to billion-euro mark for the fifth 1.2 percent the new financial reporting standard, consecutive year • Continued expansion of growth on a comparable basis above the • Continued high profit contribution businesses with strong organic high prior-year level from fund activities of Bertelsmann revenue growth • EBITDA margin of 16.1 percent, Investments compared to 14.6 percent during the same period last year 4 Financial Information Combined Management Report Fundamental Information about the Group In this Management Report, the Group is using the the world. RTL Group is active in the area of online video with the option to combine the Group Management Report and streaming services of its broadcasters (including TV Now, 6play the Management Report of Bertelsmann SE & Co. KGaA. and Videoland); the digital video networks BroadbandTV and This Combined Management Report outlines the business Divimove; and Fremantle’s more than 300 YouTube channels. performance, including the business result and the position RTL Group also owns the ad-tech companies Smartclip and of the Bertelsmann Group and Bertelsmann SE & Co. KGaA. SpotX. RTL AdConnect is RTL Group’s international advertising Information about Bertelsmann SE & Co. KGaA in accordance sales house. RTL Group is a listed company and a member of with the German Commercial Code (HGB) will be detailed in a the MDAX. separate section. The Combined Management Report will be published instead of the Group Management Report within Penguin Random House is, based on revenue, the world’s the Bertelsmann Annual Report. largest trade book publisher, with more than 300 imprints across six continents. Its well-known book brands include Doubleday, Riverhead, Viking and Alfred A. Knopf (United States); Ebury, Hamish Hamilton and Jonathan Cape Corporate Profile (United Kingdom); Plaza & Janés and Alfaguara (Spain); Sudamericana (Argentina); and the international imprint DK. Bertelsmann operates in the core business fields of media, Germany’s Verlagsgruppe Random House, which includes services and education in around 50 countries worldwide. illustrious publishing houses such as Goldmann and Heyne, The geographic core markets are Western Europe – in is not part of Penguin Random House from a legal point of particular, Germany, France and the United Kingdom – and view, but is under the same corporate management and the United States. In addition, Bertelsmann is strengthening is part of the Penguin Random House division. Each year its involvement in growth markets such as Brazil, India and Penguin Random House publishes about 15,000 new titles China. The Bertelsmann divisions are RTL Group (video), and sells around 600 million print books, e-books and Penguin Random House (books), Gruner + Jahr (magazines), audiobooks. BMG (music), Arvato (services), Bertelsmann Printing Group (printing), Bertelsmann Education Group (education) and Gruner + Jahr is one of Europe’s leading premium magazine Bertelsmann Investments (funds). publishers. Its magazine portfolio includes established brands such as “Stern,” “Brigitte” and “Geo”; young brands like Bertelsmann SE & Co. KGaA is a publicly traded but unlisted “ Barbara,” “Guido” and “Wohllebens Welt”; and the French company limited by shares. As a group holding company, it magazine publisher Prisma Media. It also has products and exercises key corporate functions such as the definition and licenses such as the “Schöner Wohnen” furniture collection further development of group strategy, capital allocation, and digital offerings in all publishing segments. In digital financing and management. Internal corporate management marketing, G+J operates international platforms such as and reporting follow the Group’s organizational structure, AppLike, and has a stake in the global leader of native which consists of the operating divisions and Corporate. advertising, Outbrain. The G+J enterprise Territory is one of the leading communication agencies in Germany and the leading RTL Group is, based on revenue, one of the leading television content communications provider in Europe. In addition, G+J groups in the broadcasting, content and digital business, with holds the majority stake in DDV Mediengruppe in Saxony, and interests in 68 television channels, eight streaming services, a stake in Spiegel-Gruppe.