Investor Update 2014
Transcript of Investor Update 2014
Education
Investor Update 2014
Dr. Judith Hartmann | CFO and Member of the Board
Dr. Roger Schweitzer | EVP Corporate Treasury and Finance
Henrik Pahls | SVP Corporate Finance
March/April 2014
London/Frankfurt/Paris
Page 2 March/April 2014 · Investor update
Agenda
Bertelsmann at a Glance
Divisional Performance
Financial Performance
Strategy
Outlook
Page 3 March/April 2014 · Investor update
Bertelsmann at a Glance –
International media group with diversified revenue base
Revenues/Operating EBITDA in € millions (financial year 2013, continuing operations)
5,889
1,333
2,655
363
4,414
401
2,065
193
Revenues:
Operating EBITDA:
Employees:
Revenues:
Op. EBITDA:
16,356
2,313
111,763
Bertelsmann: 53%
Pearson: 47%
Bertelsmann: 74.9%
Jahr Family: 25.1%
Bertelsmann: 100%
TV / Radio /
TV-Production Book Publishing Magazine Publishing Services
Bertelsmann: 75.1%
Free Float: 24.1%
Revenues:
Op. EBITDA:
1,123
92
Bertelsmann: 100%
Printing
Revenues:
Op. EBITDA:
Revenues:
Op. EBITDA:
Revenues:
Op. EBITDA:
Revenue share
37% RTL Group
16% Penguin
Random House 13% Gruner + Jahr
27% Arvato
7% Be Printers
Revenues by sources
40% Own Products
and merchandise
12% Rights
and licenses 23% Services
25% Advertising
Page 4 March/April 2014 · Investor update
International footprint –
Key Bertelsmann businesses with strong international presence
Revenues by region 2013 (in %)
35% Germany
15% France
7% Other countries
26% Other Europe
17% United States
Revenues by division 2013 (in € billions)
65%
35%
55%
45%
54%
35%
90%
10%
65%
46%
63%
37%
5.9 2.7 2.1 4.4 1.1 16.4
German revenues (in %) International revenues (in %)
Page 5 March/April 2014 · Investor update
International footprint – Fremantle Media, Penguin Random House
and Arvato as examples for Bertelsmann’s global reach
Global service provider
International
book publisher Global formats
• Productions in 62 countries,
distribution into more than
150 territories
• 11,000 employees on
six continents
• 250 independent imprints
in more than 20 countries
• Presences in more than
40 countries
• Significant growth from services
for customers in the internet,
high-tech and consumer
goods sectors
Charlotte Link
John Grisham
Jamie Oliver
Paulo Coelho
Ken Follett Isabel Allende
Jodi Picoult
James Patterson
Dan Brown
Timothy Geithner
Lauren Kate
Page 6 March/April 2014 · Investor update
Summary and highlights –
Financial year 2013
Positive performance
Solid financial position
Revenues up 1.8%,
profitability further
improved
Operating EBITDA
up 4.7%
Group profit
increased 42%
Stronger financial
position, high level
of investments
Comfortable liquidity
position
Target rating
Baa1/BBB+ with
stable outlook
Strategy implementation well on track
Significant progress
along strategic priorities
Page 7 March/April 2014 · Investor update
Group key figures – Positive performance, Operating EBITDA above
prior year, group profit increased significantly
2013
16.4
2012
16.1
Revenues (in € billions)
2,313
2012 2013
2,210
Operating EBITDA (in € millions ) Group profit (in € millions )
2013
870
2012
612
• Revenue growth driven by strategic
portfolio expansions (Penguin
Random House, BMG, Gothia)
• Accelerated scaling back of
structurally declining businesses
• Mediengruppe RTL Deutschland achieved best result ever, positive
development at Arvato
• Results impacted by investments in digitization and start-up losses for
new businesses as well as structurally declining businesses
• Group profit increased thanks to lower negative effects from special items
and improved operating performance
Continuing operations
13.8% 14.1% EBITDA-
margin
+42%
+1.8%
+4.7%
Page 8 March/April 2014 · Investor update
Group profit – Significant increase due to higher operating
performance and lower negative effects from special items
in € millions
2013 Change compared to 2012
Income taxes
Financial result
EBIT 1,708
Special items
Depreciation
Operating EBITDA 2,313
Earnings after taxes from
discontinued operations
Group profit 870
-46
-361
-58
-559
-419
+103
-81
+359
+381
-39
-26
-58
+258
+5%
-17%
fav.
+29%
-12%
-7%
unfav.
+42%
Page 9 March/April 2014 · Investor update
Investments and free cash flow 2013 – Strategy implementation
leads to significant increase in investments
2013
1,760
2012
1,861
Cash Conversion Rate
107% 100%
Operating free cash flow (in € millions) Investments (in € millions)
Acquisitions
Intangible assets
2013
1,988
397
411
1,180
2012
655
390
177 88
Other
Continued strong cash generation,
targeted cash conversion rate: 90-100%
Increase particularly through
acquisitions
+204%
-5.4%
Page 10 March/April 2014 · Investor update
Portfolio changes 2013 –
Important strategic portfolio steps taken
• Complete takeover of BMG – the
world’s fourth-largest music publisher
• Growth through further artist signings
and takeovers of music catalogs
• Diversified, international, stable and
profitable business model
Full ownership
• Successful placement of 25.5 million
RTL shares
• Proceeds support growth strategy
• Bertelsmann remains majority
shareholder
• Strengthening of book publishing
• Push forward the digital
transformation, develop new
distribution channels, and build up
new businesses in growth regions
Merger
• Combining businesses of Arvato
Infoscore with financial services provider
Gothia
• Expanding into business information
market characterized by profitable
growth and low cyclicality
Re-IPO
Takeover
Page 11 March/April 2014 · Investor update
Agenda
Bertelsmann at a Glance
Divisional Performance
Financial Performance
Strategy
Outlook
Page 12 March/April 2014 · Investor update
2012
Operating EBITDA (in € millions)
1.1 1.2 391
213
2.7
4.4
401
4.4
2.1
193
2.2 2.1
352
5.9 6.0
RTL Group Penguin Random House
Gruner + Jahr Arvato
EBITDA-
margin
Be Printers
2013
Divisions –
Overall high level of profitability maintained
Continuing operations
Revenues
(in € billions)
92
363
• RTL Group: High profitability despite largely declining TV advertising markets in Europe
• PRH: Merger to world’s largest trade book publisher, good operating performance given publishing success in 2012
• G+J: Digital growth and market share gains in Germany offset by continued decline of print magazines
• Arvato: Stable revenues and increased earnings, acquisition of Gothia Financial Group
• Be Printers: Decreasing volumes and continuing price pressure due to excess capacity in the industry
23% 21% 14% 16% 9% 10% 9% 9% 8% 9%
1,253 1,333
115
Page 13 March/April 2014 · Investor update
RTL Group – High profitability,
expansion of families of channels and non-linear TV
• High profitability despite mostly declining
advertising markets in Europe
• Further expansion of families of channels
• Continued strong expansion of digital
businesses and non-linear TV offerings, also
through participations
(e.g. Broadband TV, Divimove, StyleHaul,
Videoland)
• Regional expansion into Southeast Asia in
cooperation with CBS
• Placement of shares and listing on the Frankfurt
Stock Exchange, inclusion in MDAX
Significant increase in profitability Operating EBITDA (in € millions)
Revenues (in € millions)
2013
5,889
2012
6,002
2013
1,253
2012
1,333
EBITDA margin
20.9% 22.6% -1.9%
+80
Page 14 March/April 2014 · Investor update
Penguin Random House –
Merger to the world’s largest trade book publisher
• Merger of Random House with Penguin
(Pearson), presence on all continents
• Very good operating performance following
exceptional bestseller performance in 2012
• 261 titles on the “New York Times” bestseller list
since the merger
• More than 100 million e-books sold
• Numerous literary awards, including Nobel prize
for literature to Alice Munro and four Pulitzer
prizes
Closing July 1, 2013
2013
2,655
2012
2,142
2013
352
2012
363
16.4% 13.7%
+23.9%
+11
Operating EBITDA (in € millions)
Revenues (in € millions)
EBITDA margin
Page 15 March/April 2014 · Investor update
Gruner + Jahr – Strategic and organizational realignment
and management changes
• New Executive Board, strategic realignment in
Germany according to Communities of Interest
• Vitalization of major magazine brands
• Positive business development in Germany due
to good performance of the G+J magazines in
the advertising market
• Revenue shortfall due to divestitures and
declining revenues mainly in the international
business
• Investments in digital transformation and new
businesses
• Expansion of digital business through organic
growth and acquisitions
House of content with strong brands
2013
2,065
2012
2,218
2013
213
2012
193
9.6% 9.3%
-6.9%
-20
Operating EBITDA (in € millions)
Revenues (in € millions)
EBITDA margin
Page 16 March/April 2014 · Investor update
Arvato –
Focusing on fast-growing services
• New CEO and reorganization according to
Solution Groups and countries
• Slight increase in earnings, stable revenues
• Significant growth from services for customers
in the internet, high-tech and consumer goods
sectors
• Acquisition of Gothia Financial Group as largest
transaction in Arvato’s history
• Growth in China
Change in leadership and reorganization
2013
4,414
2012
4,419
2013
391
2012
401
8.8% 9.1%
-0.1%
+10
Operating EBITDA (in € millions)
Revenues (in € millions)
EBITDA margin
Page 17 March/April 2014 · Investor update
Be Printers –
Difficult market environment
• Revenue and operating EBITDA below previous
year due to lower volumes
• Price pressure due to overcapacity in the
market
• Efficiency programs and plant closures to offset
negative market development
• Stable earnings development in America
Strong position in the print market
2013
1,123
2012
1,214
92
2013
115
2012
9.5% 8.2%
-7.5%
-23
Operating EBITDA (in € millions)
Revenues (in € millions)
EBITDA margin
Page 18 March/April 2014 · Investor update
Agenda
Bertelsmann at a Glance
Divisional Performance
Financial Performance
Strategy
Outlook
Page 19 March/April 2014 · Investor update
Leverage Factor < 2.5x
Financial status –
Stronger financial position, in line with all financial targets
Interest Coverage Ratio > 4.0x
Equity Ratio > 25%
Economic debt (in € millions)
Baa1, outlook: stable
BBB+, outlook: stable 2013
41%
2012
32%
2011
34%
2010
35%
2009
31%
4.4x
2009
4.1x
2010 2013
6.0x
2012
6.4x
2011
5.2x
2013
2.0x
2012
2.3x
2011
2.4x
2010
2.3x
2009
3.2x
413
1,913
2009
6,024
1,119
706
2,793 4,178
1,185
413
636
2012
4,773
997
413
1,218
2013 2011
4,913
953
413
1,809
2010
4,915
1,024
1,565 1,406 1,944 2,146
1,738
Net debt
Profit Participation Capital
Operating Leases
Pensions
1) After modifications.
Economic debt
Operating EBITDA1)
Operating EBITDA
Financial result)1
Equity
Total assets
Page 20 March/April 2014 · Investor update
217 60
750
430
786
750
100
70
214
2014 2015 2016 2019 2022 2032
Repaid in 2013 Bonds Promissory notes
Financial status –
Bond tender improved maturity profile, no refinancing required
12/31/2013
1,200
2,745
Syndi-
cated
loan
(until
2018)
Liquidity
967
2013-2014 YTD Financing Activities
• Aug 2013: Early termination of US$200m US PP due 2015
• Dec 2013: Successful tender offer for 2015 and 2016 bonds (total €284m)
• Jan/Feb/March 2014: €750m bond and €217m promissory notes repaid from
existing liquidity
No further maturities in 2014
500
1,000
Repaid in 2014
in € millions
Page 21 March/April 2014 · Investor update
Agenda
Bertelsmann at a Glance
Divisional Performance
Financial Performance
Strategy
Outlook
Page 22 March/April 2014 · Investor update
Strengthening
the core
Digital
transformation
Growth
regions
Growth
platforms
Group strategy –
Transformation of Bertelsmann along four strategic priorities
1 2 3 4
Higher growth More digital More international
Target portfolio
Strategic priorities
Page 23 March/April 2014 · Investor update
Growth
regions
Growth
platforms
Strengthening
the core
1
Digital
transformation
2
Group strategy –
Significant progress in implementing strategic priorities
RTL: Expanding families of channels
Penguin Random House: Merger to the world’s largest trade book publisher
G+J: Strategic and organizational realignment, management changes
Arvato: Reorganized into Solution Groups and countries
Corporate: Implementation of Operational Excellence program
RTL: Online offerings generated total of 16.8 billion video views
Penguin Random House: Over 100 million e-books sold
G+J: Focus on e-magazines, mobile offerings and apps
3 BMG: Full acquisition, further artist signings and takeovers of music catalogs
Education: Further expansion of education business (UV I & II)
Arvato: Acquisition of financial services provider Gothia
4 RTL: Strategic partnership with CBS in Southeast Asia
Arvato: Further growth with services in China
Investments: BAI fund expanded portfolio
Page 24 March/April 2014 · Investor update
Strengthening the core – Merger of Random House with Penguin
completed on July 1, creating largest book publisher worldwide
Post-merger integration
and outlook
• Continued focus on operations and
publishing performance
• Integration progressing well
• Regional growth, e.g.
Buyout of co-shareholders in
India and South Africa in 2013
Acquisition of Santillana (Spain
and Latin America) in 2014 700,000,000
sold books per year
>70 Nobel Laureates
261 “The New York Times“
Bestsellers
July to December 2013
15,000 New publications per year
(incl. Verlagsgruppe RH
Germany)
3,000,000,000 €
4,000,000,000 $
2,600,000,000 £
Reven
ues
Page 25 March/April 2014 · Investor update
Digital transformation –
Video stands at the core of RTL Group’s digital strategy
# Companies
1 Google / YouTube
2 Facebook
3 AOL (incl. Adap.TV)
4 VEVO
5 DAILYMOTION
6 RTL Group
7 Maker Studios
8 Hulu
9 Microsoft Sites
10 Yahoo Sites
1) ComScore Video Metrix, based on the average figures for video views per month in Q4/2013; excluding Asia and Russia, ad networks and ad exchanges
RTL Group: adjusted internal figures, average Q4/2013, including Broadband TV and Videostrip, excluding Divimove, StyleHaul and Atresmedia
Strategic focus Strong growth Top 10 global players1)
Video on Demand
Catch-up TV services
Web Originals
Original content production
Multi Channel Networks
Worldwide distribution
1
2
3
+143%
2012
16.8
6.9
2013
Video views RTL Group
Full year (in billions)
Page 26 March/April 2014 · Investor update
Corporate Investments: BMG – Acquisition of 100%,
additional catalog purchases and artist signings
Number 4 worldwide
in the music rights business
• Buyout of partner KKR as of March 30, 2013
• Purchase of additional music catalogs, including
Mute, Primary Wave, Virgin/Famous, Sanctuary
and Talpa
• New contracts signed with numerous
international and national artists, e.g., Mick
Jagger, Keith Richards, Robbie Williams and
the Backstreet Boys
• Expansion of presence in the most important
music markets, including new office in Canada
• Music rights management for copyrights,
master rights and audiovisual rights
• More than 1 million copyrights
• 13 Grammy Awards in 2013
Page 27 March/April 2014 · Investor update
Growth platforms –
Accelerated expansion of activities in education segment
Bertelsmann focus Current activities Outlook
• Investment commitment in a
three-digit million range for
successor fund University
Ventures Fund II
• Initial investments of fund
already expected in second
quarter 2014
• Ongoing review of potential
investments
Higher education online
Higher education medical
Higher education services
High, profitable market
growth supported by
mega trends
Partnership with
entrepreneurs via
University Ventures I
Accelerated expansion,
University Ventures II
Page 28 March/April 2014 · Investor update
Growth regions –
Expansion of Bertelsmann’s activities in 2013
Brazil India
China
Thailand
Malaysia
Philippines
Singapore
Education
Ventures
Page 29 March/April 2014 · Investor update
Agenda
Bertelsmann at a Glance
Divisional Performance
Financial Performance
Strategy
Outlook
Page 30 March/April 2014 · Investor update
Summary and outlook –
Financial year 2014
Market development
Performance
Global economic growth
expected slightly above
prior year
Positive performance
in 2014, mixed market
expectations
Significant increase in
revenues due to strategic
portfolio expansions made
in 2013
High profitability
expected to be
maintained
Cash Conversion Ratio
within target range of
90-100%
Strategy
Continued transformation and further
implementation along strategic priorities