Annual Report 2015 At a Glance Key Figures (IFRS) in € millions 2015 2014 2013 2012 2011 Business Development Group revenues 17,141 16,675 16,179 16,065 15,368 Operating EBITDA 2,485 2,374 2,311 2,210 2,243 EBITDA margin in percent1) 14.5 14.2 14.3 13.8 14.6 Bertelsmann Value Added (BVA)2) 155 188 283 362 359 Group profit 1,108 572 885 612 612 Investments3) 1,259 1,578 1,312 655 956 Consolidated Balance Sheet Equity 9,434 8,380 8,761 6,083 6,149 Equity ratio in percent 41.2 38.9 40.9 32.2 33.9 Total assets 22,908 21,560 21,418 18,864 18,149 Net financial debt 2,765 1,689 681 1,218 1,809 Economic debt4) 5,609 6,039 4,216 4,773 4,913 Leverage factor 2.4 2.7 2.0 2.3 2.4 Dividends to Bertelsmann shareholders 180 180 180 180 180 Distribution on profit participation certificates 44 44 44 44 44 Employee profit sharing 95 85 101 92 107 Figures adjusted for the financial year 2014; figures before 2014 are the most recently reported previous year’s figures. Rounding may result in minor variations in the calculation of percentages in this report. 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 the return on investment. 3) Taking into account the financial debt assumed, investments amounted to €1,281 million (2014: €1,601 million). 4) Net financial debt less 50 percent of the par value of the hybrid bonds plus pension provisions, profit participation capital and present value of operating leases. The Bertelsmann Divisions in € millions 2015 2014 2013 2012 2011 Revenues 6,029 5,808 5,824 6,002 5,814 Operating EBITDA 1,355 1,334 1,324 1,253 1,311 in € millions* 2015 2014 2013 2012 2011 Revenues 3,717 3,324 2,654 2,142 1,749 Operating EBITDA 557 452 363 352 211 *2011 and 2012 figures for Random House only. in € millions 2015 2014 2013 2012 2011 Revenues 1,538 1,747 2,014 2,218 2,287 Operating EBITDA 128 166 193 213 279 in € millions 2015 2014 2013 2012 2011 Revenues 4,847 4,662 4,388 4,419 4,201 Operating EBITDA 394 384 397 391 416 in € millions 2015 2014 2013 2012 2011 Revenues 742 996 1,122 1,214 1,199 Operating EBITDA 47 64 92 115 128 Effective January 1, 2016, Bertelsmann changed the structure of its financial reporting. As of the first half year of 2016, the following eight business sectors will be used for reporting purposes: • RTL Group • Penguin Random House • Gruner + Jahr • BMG • Arvato • Bertelsmann Printing Group • Bertelsmann Education Group • Bertelsmann Investments Interactive Online Report The report “The New Bertelsmann” and the Annual Report 2015 can also be accessed online at: ar2015.bertelsmann.com As well as company information and the extensive financial section, the online report offers lots of extra features, including several videos and extracts. Both reports are also available as a free app on the Apple App Store and in Google Play. 2 Financial Information Financial Information 4 Combined Management Report 39 Consolidated Financial Statements 39 Consolidated Income Statement Fundamental Information about the Group 40 Consolidated Statement of Comprehensive Income 41 Consolidated Balance Sheet 5 Corporate Profile 42 Consolidated Cash Flow Statement 6 Strategy 43 Consolidated Statement of Changes in Equity 7 Value-Oriented Management System 44 Notes 9 Non-Financial Performance Indicators 124 Corporate Governance Report on Economic Position 127 Report of the Supervisory Board 11 Corporate Environment 11 Significant Events in the Financial Year 131 Boards / Mandates 12 Results of Operations 131 Supervisory Board 15 Net Assets and Financial Position 135 Executive Board 20 Performance of the Group Divisions 26 General Statement by Company Management 136 Auditor’s Report on the Economic Situation 26 Significant Events After the Balance Sheet Date 137 Responsibility Statement 27 Risks and Opportunities 34 Outlook 138 Additional Information 35 Notes to the Financial Statements of 138 Selected Terms at a Glance Bertelsmann SE & Co. KGaA (in accordance 140 Financial Calendar / Contact with HGB, German Commercial Code) 140 Production Credits Bertelsmann Annual Report 2015 3 Combined Management Report Financial Year 2015 in Review In the financial year 2015, Bertelsmann posted a strong operating performance with revenue and earnings growth as well as a significantly increased Group profit. Group revenues from continuing operations rose 2.8 percent to €17.1 billion (previous year: €16.7 billion), particularly as a result of positive exchange rate effects. The revenue share generated by the growth businesses increased to 28 percent overall (previous year: 25 percent) thanks to organic growth and acquisitions, while the revenue share of structurally declining businesses minimized to 5 percent overall (previous year: 8 percent) as a result of disposals and scaling back. Operating EBITDA increased by €111 million to €2,485 million (previous year: €2,374 million). Earnings improved in particular in the US book publishing business, the German television business, the service businesses in the Customer Relationship Management and Supply Chain Management segments, the music business BMG and the online education provider Relias Learning. Furthermore, Bertelsmann continued to implement the Group-wide earnings improvement program successfully. This was counteracted by start-up losses for new businesses and the digital transformation of existing businesses. The EBITDA margin of 14.5 percent was above the high level of 14.2 percent in the previous year. Group profit increased significantly from €572 million to €1,108 million. This is primarily attributable to higher operating earnings and the elimination of negative special items from the previous year. This means that for the first time since 2006, earnings again exceeded the €1 billion mark, which should be sustainable. Total investments, including acquired financial debt, in the reporting period were €1.3 billion (previous year: €1.6 billion). For 2016, Bertelsmann expects positive business performance and continued progress with the implementation of its strategy. Revenues in € billions1) Operating EBITDA in € millions1) Group Profit in € millions1) 20 16.2 16.7 17.1 3,000 2,311 2,374 2,485 1,200 885 572 1,108 15 2,250 900 10 1,500 600 5 750 300 0 0 0 2013 2014 2015 2013 2014 2015 2013 2014 2015 • Revenue increase of 2.8 percent • Operating EBITDA above previous • Significant growth of Group profit thanks to positive exchange rate year’s high level • Highest level since 2006 effects in particular • EBITDA margin increased to • Lower charges from special items • Revenue increase at RTL Group, 14.5 percent Penguin Random House and Arvato • Profitable growth and Group-wide • Increased share in revenues gener- earnings improvement program ated by growth businesses; lower revenue shares of structurally declin- ing businesses 1) The figures from the previous year have been adjusted. Further details are presented in the “Prior Year Information” section. Figures for the financial year 2013 have been adjusted. 4 Financial Information Combined Management Report Fundamental Information about the Group In this Management Report, the Group is using the option to the catch-up TV services of its broadcasters, the multichan- combine the Group Management Report and the Management nel networks BroadbandTV, StyleHaul and Divimove Report of Bertelsmann SE & Co. KGaA. This Combined as well as Fremantle Media’s more than 230 YouTube Management Report outlines the business performance, channels, RTL Group has become the leading European media including the business result and the position of the company in online video. Furthermore, RTL Group owns a Bertelsmann Group and Bertelsmann SE & Co. KGaA. Infor- majority stake in SpotX, one of the leading programmatic mation about Bertelsmann SE & Co. KGaA in accordance video advertising platforms. The publicly traded RTL Group with the German Commercial Code (HGB) will be detailed in a S.A. is listed on the German MDAX index. separate section. The Combined Management Report will be published instead of the Group Management Report within Penguin Random House is the world’s largest trade book pub- the Bertelsmann Annual Report. lisher, with nearly 250 editorially independent imprints across five continents. Its book brands include storied imprints such as Doubleday, Viking and Alfred A. Knopf (United States), Ebury, Hamish Hamilton and Jonathan Cape (UK), Plaza & Corporate Profile Janés and Alfaguara (Spain) and Sudamericana (Argentina), as well as the international imprint Dorling Kindersley. Each Bertelsmann operates in the core business fields of media and year Penguin Random House publishes over 15,000 new services as well as education in around 50 countries worldwide. titles and sells nearly 800 million books, e-books and audio The geographic core markets are Western Europe – in particular, books. More than 110,000 English-, German- and Spanish- Germany, France and the UK – and the United States. In addition, language Penguin Random House titles are now available as Bertelsmann is strengthening its involvement in growth markets e-books. Germany’s Verlagsgruppe Random House, which such as China, India and Brazil. As of the balance sheet date includes illustrious publishing houses such as Goldmann and December 31, 2015, the Bertelsmann divisions are RTL Group Heyne, is not part of Penguin Random House from a legal (television), Penguin Random House (books), Gruner + Jahr point of view, but is under the same corporate management (magazines), Arvato (services) and Be Printers (printing). and is part of the Penguin Random House operating division. The revised reporting structure effective January 1, 2016, including the newly created Bertelsmann Printing Group and the Gruner + Jahr is represented in over 20 countries with future independent divisions of BMG, Bertelsmann Education around 500 media activities, magazines and digital busi- Group and Bertelsmann Investments, is not yet shown in the nesses.