Development 2014 and Strategy, Bertelsmann Management SE ... · Operating EBITDA stable excluding...

Development 2014 and Strategy, Bertelsmann Management SE Executive BoardAnnual Press Conference, March 31, 2015 in Berlin

2 March 31, 2015 · Bertelsmann · Annual Press Conference

Financial year 2014 –Strong operating performance, significant progress on strategy implementation

Development 2014

Strategy

Progress on all four strategic priorities

Expansion of digital and growth businesses

Significant progress in building an education division

Revenues at highest level since 2007

Operating EBITDA also at highest level since 2007

Investments continue to be high at €1.6 billion

Thomas Rabe, Chairman and CEO Judith Hartmann, Chief Financial Officer

Development 2014


Key financials Group 2014 –Revenues and earnings at highest levels since 2007

Operating EBITDA (in € m)Revenues (in € bn)

EBITDA margin

14.3% 14.2%

16.2

2013 2014

16.72,311

2014

2,374

2013

+3.1%

Note: 2013 restated


RTL Group –High profitability with stable revenues

Stable revenues, strong prior-year result exceeded

Mediengruppe RTL Deutschland with record results

Continued expansion of families of channels

Production business strengthened through acquisition of 495 Productions

Expansion of digital businesses through acquisitions of StyleHaul and SpotXchange

Impairments at RTL Hungary due to new advertising tax

Operating EBITDA (in € m)

2014

5,808

2013

5,824

20142013

1,3341,324

22.7% 23.0%

Note: 2013 restated

Revenues (in € m)

EBITDA margin

-0.3%


Penguin Random House –Positive business development, successful merger

Organic growth, expansion of market positions

Strong performance of US publishers with film adaptations of bestsellers as well as children’s and juvenile books

Numerous literary awards, including Pulitzer Prize for Dan Fagin; more than 500 titles on New York Times Best Seller list

Further expansion of digital business, more than 100 million e-books sold

Continued successful integration

Acquisition of trade-book publishers from Santillana; strengthening position in Spain, No. 1 in Latin America

2014

3,324

2013

2,654

20142013

452363

13.7% 13.6%+25.2%

Note: 2013 restated

Operating EBITDA (in € m)Revenues (in € m)

EBITDA margin


Gruner + Jahr –Continuation of transformation, 100% acquisition through Bertelsmann

Revenue decline due to divestments (particularly sale of Brown Printing) as well as declining advertising and circulation revenues

Operating EBITDA stable excluding print business sold in 2014

Digital business in core markets grew 26%, to 17% of total revenues

Expansion of digital business through numerous new e-mags and apps, investments in Veeseo and Trnd

Efficiency program in Germany and France

Bertelsmann sole owner since November 1, 2014

2014

1,747

2013

2,014

20142013

166193

9.6% 9.5%-13.3%

Note: 2013 restated


EBITDA margin


Arvato –Expansion of e-commerce and financial services

Significant revenue growth

Operating result impacted by start-up losses for new businesses and margin pressure in some business units

Leading European e-commerce services provider for fashion and lifestyle

Strengthening of leading position in growing market for financial services and risk management

High demand for IT solutions

Profitability program

2014

4,662

2013

4,388

20142013

384397

9.0% 8.2%+6.2%

Note: 2013 restated


EBITDA margin


Be Printers –Ensuring competitiveness in structurally declining markets

Decline in revenues and earnings due to decreasing volumes and prices as well as continued overcapacities in the European businesses

Ensuring competitiveness in terms of quality and costs

Closing of Prinovis printing plant in Itzehoe

Sale of printing plants in Italy, calendar business and printing plant participation in Colombia

Stable development of US business

2014

996

2013

1,122

92

64

20142013

8.2% 6.4%-11.2%

Note: 2013 restated


EBITDA margin


Group profit 2014 –Below prior year due to special items for continued Group transformation

(in € m) 2013 2014

Operating EBITDA 2,311 2,374

Depreciation/amortization -548 -605

Special items -46 -619

EBIT 1,717 1,150

Financial result -361 -295

Income taxes -413 -286

Earnings after taxes from discontinued operations -58 4

Group profit 885 573

Note: 2013 restated

Run-down of structurally declining print and club businesses

Expenses for profitability improvement program- Integration of Penguin

Random House- Efficiency program at

Gruner + Jahr- Profitability program at

Arvato- Operational Excellence

Impairments at Hungarian TV business

Positive special items in prior year

Key effects


Financial position 2014 – Investments continue to be on high level,increase of pension provisions following interest rate increase

Operating Leases and Profit Participation Capital

Pensionprovisions

Net financialdebt

Baa1, stable

BBB+, stable

Leverage Factor

20132012

Rating

Target < 2.5

2014

1.6

2013

2.0

2012

0.7

2014

Economic debt (in € bn)Investments (in € bn)

2014 2.7

2013 2.0

2012 2.3

1.7

6.0

1.6

2.7

4.20.7

1.6

1.9

4.8

1.2

1.5

2.1

Bertelsmann Managment SE Executive Board

Strategy


Group strategy –Ongoing implementation of transformation and growth strategy based on 4 priorities

Target portfolio

Strengthening the core1

Digital transformation2

Growth platforms3

Growth regions4

Strategic priorities

Higher growth

More digital

More international


1 Strengthening the core –Creativity and reach


Strengthening the core –Creativity as a basis for publishing success

Bestseller of the year

New York TimesBest Sellers

Man Booker Prize 2014

Film adaptations of bestsellers

64No. 1 rankings

1

502Best sellers


Strengthening the core –Expansion of reach in core markets

28.2%

23.4%

15.4%

#1

#1

#2

12.6%#1

Market share Goals of the merger

Integration

Innovation

Internationality

1

Latin America#1


1 Strengthening the core –Passion for our authors and books as most important success factor

Mary Berry

James Dashner

Robert Galbraith

John GrishamAlice Munro

Jodi Picoult

Jeff KinneyIna GartenDan Brown

Sue Monk Kidd

Lee Child

Peter Thiel

Jacqueline Woodson

Arianna Huffington

Ken Follett

Stephen King Håkan Nesser

Charlotte Link

Jamie Oliver

Phil KlayJohn Green

Gillian Flynn

Paula Hawkins

Henry Kissinger

Sylvia Day

Richard Flanagan

Laura Hillenbrand

Gayle Forman

Sophie Kinsella

Elizabeth Gilbert

Nora Roberts Kazuo Ishiguro Erik Larson


7

17

36

Digital transformation –Video as the core of RTL Group’s digital strategy

# Company1 Google/YouTube2 Facebook3 AOL 4 RTL Group5 VEVO6 Maker Studios7 Yahoo Sites8 Fullscreen9 Hulu

10 Dailymotion

RTL Group video viewsFull year, in billions

Strong growth Top 10 Global Player

201420132012

2

×5


Acquisition of No. 1 fashion & beauty MCN StyleHaulRTL Group second largest player on YouTube1)

Digital transformation –Accelerated digital transformation of TV business

32,000YouTube channels

globally

No. 1 media companyin online videos in Europe

High growthof digital revenues

Globalmonetization opportunities

€295 million online revenues in 2014Revenues from online video advertising +22% versus prior year

Acquisition of leading online video marketplace SpotXchangeEstablishment of strong branded-content environments

+26%growth of online revenues

vs. prior year

1) MCN ranking by unique viewers, average Q4/2014 Comscore, without music

2


Growth platforms –Growth through innovative services and targeted acquisitions

European market leaderin e-commerce services

> 70 online shops for renowned brands

> 60 million shipments per year

> 3,000 employees

3

sales know-how

worldwide business activities

online marketing

transportation management

B2B logistics

financial services

e-commerce know-how

competency infashion industry

distribution network

B2C logistics

local expertise

customer relationships


Growth platforms –Intensified development of activities in financial solutions segment

Focus OutlookActivities 2014

Internationalization

Innovations

Expansion ofservices portfolio

Integration of Gothia Financial Group completed

Cooperation with incubator Startupbootcamp FinTech

Acquisition of AfterPay

Further expansion of international business activities

Development of fraud detection solutions for digital business models

Europe-wide rollout of solutions for „purchase on account“

3


Growth platforms – Further expansion of BMG,creative success, leading music publisher in Germany

BMG No. 4 globally in music rights managementSignificant expansion

Double-digit organic revenues growth

Most successful music publisher in Germany with a cumulative singles chart share of 18%

Business expansion through investment

Integration benefits

Successful market entry in China

53

1,900,000

Grammyand 52 Echonominations

10countries(+ global partner network)

publishing copyrights(owned/administered)

600,000master recordings(owned/under license)

3


Growth platforms –Three target segments to build Education division

Corporate and consumer e-learning

Higher education –health and human sciences

Higher education services

US$19bn globally

US$160bn globally

US$1bnUSA

Target segments Market attractiveness

Macro driversIncreasing importance of education in a knowledge societyMassive expansion of private educational offeringsGrowing demand in emerging marketsBroad access to education via online services

Overall characteristicsFragmented marketsHigh growthHigh profitabilityStrong entrepreneurship

3

Market size


Building a global e-learning enterpriseLeading US-based e-learning provider for healthcare2,500+ online courses, 2+ million users, 25+ million courses completed per year

Building a network of health and human sciences universitiesAlliant is a leading US university focusing on psychology 3,700 students at 10 international locations

Building a services provider focusing on premium universities and colleges in the healthcare segmentUS services provider for universities/colleges, e.g., (digital) program design, marketing, IT services8 partner universities, 61 programs with 5,000 students

Corporate and consumer e-learning

Higher education –Health and human sciences

Higher education services

Growth platforms –First direct investments, revenue target €1 billion

3


Growth regions – High potential through existing businesses, digital business models and education; €1 billion revenue target

Existing businesses and investments

4

BRAZILCHINA

INDIA

11 additional investments, highest number since start of BAI, continued value creationBMG market entry

Strengthened presence of content businesses through Penguin Random House, market leader for English-language booksInvestments into digital businesses and education

Acquisition of Objetiva (Santillana)Investment in education fund

Business expansion in 2014


Corporateculture

Corecompetencies

HR strategy –Key foundation for implementation of Group strategy

Talents

Processes, instruments, organization

Strengthening the core1

Digital transformation2

Growth platforms3

Growth regions4


Group strategy – Continuous expansion of growth businesses and active run-down of structurally declining businesses

Structurallydecliningbusinesses

Stable businesses

Growthbusinesses

63%64%

22% 27%

Trend

~5%

~55%

~40%

2014

9%

2011

15%

Share of Group revenues

Organic development and acquisitions

Securing a strong market position and high profitability

Strengthening competitive position, transformation or withdrawal

Strategic priorities


Group strategy –Investments of more than €2 billion in growth businesses

€+1.2 billion revenue growth

of growth businesses since 2011

Investments > €2 billion

2011 2012 2013 2014


Group strategy –Revenues of €20 billion with a target EBITDA margin of >15%

Outlook 2015

16.7>20

Target2014

Increased revenues

Significant increase of group profit

Higher operating EBITDA

Target

EducationExisting businesses

Growth regions

14% >15%EBITDAmargin

Revenues(in € bn)

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