Thomas Rabe
Chairman and CEO of Bertelsmann

Dear Readers,
Dear Friends of Bertelsmann,

Our company has had a very gratifying first half of 2015. For the first time since 2007, our Group revenues exceeded eight billion euros. Operating EBITDA reached a record high at nearly 1.1 billion euros. We also improved our Group net income by more than 50 percent, to 398 million euros.

This positive business development is owed especially to our strategic measures of recent years. Our major revenue drivers – apart from Mediengruppe RTL Deutschland – were Penguin Random House’s book business in the US, RTL Group’s digital activities in online video (StyleHaul, BroadbandTV) and automated advertising sales (SpotXchange), Arvato’s financial services, our music company BMG, and our new education business. So many of our core and growth businesses, which we have systematically strengthened and expanded in recent years, already make a significant contribution to Bertelsmann’s growth – and to the reality that our company is becoming more digital and more international.

We will continue to build on this. That is why, during the first half of the present fiscal year, we continued to work intensively on the implementation of our strategy, which comprises four strategic thrusts:

  • The strengthening of our core businesses is exemplified by the strong performance of our television and book businesses. We also further advanced the integration of Penguin Random House. Gruner + Jahr launched new titles, including “Walden,” “Stern Crime” and “National Geographic Traveler” in Germany. At the same time, we have structurally declining businesses: e.g. with the disposal of Be Printers’ Spanish printing plants and the scheduled dismantling of our club and direct-marketing activities. Beyond this, we have implemented initial measures to improve the earnings from our core businesses.
  • The digital transformation of our businesses continues to make good progress. RTL Group acquired the French online company Oxygem and set up the RTL Digital Hub, which unites businesses including StyleHaul, BroadbandTV and SpotXchange. While SpotXchange recently expanded its activities to Europe, RTL Group’s online video sites collectively generated 42.5 billion views in the first six months of the year – a 171 percent increase over the same period last year. Concurrently, Penguin Random House expanded its e-book catalog to more than 100,000 titles, thereby solidifying its market leadership in this segment. And Gruner + Jahr expanded its digital business, both organically and through acquisitions, by fully taking over Delinero and acquiring Danato, and by setting up a media fund endowed with 50 million euros to invest in startups.
  • By acquiring a holding in the Brazilian financial services provider Intervalor, Arvato also contributed to the expansion of one of our growth platforms. One focus for this strategic priority during the first six months of the year was on expansion in the education sector. Following last year’s acquisition of the e-learning provider Relias Learning, in February, we expanded our portfolio by acquiring Alliant International University. A month later, we increased our stake in the educational services provider Synergis Education. As a result, Bertelsmann now has significant operations in all market segments that are relevant for us. In the medium term we want to build up our activities in the education sector into our company’s third mainstay of business alongside media content and services. We also successfully further developed our music business in the first half: BMG grew its revenues and acquired the US rock label Rise Records, as well as several rights catalogs.
  • BMG also succeeded in entering the Chinese market thanks to an extensive distribution agreement with Alibaba. And Bertelsmann expanded its presence in the growth regions beyond this endeavor: Also in China, our Bertelsmann Asia Investments fund (BAI) invested in more companies than ever before, while again recording high increases in the value of its holdings. In Brazil, we significantly expanded our education business with a stake in Affero Lab, the market leader in corporate training, and by joining a new fund whose investments are focused on medical education. In India, we increased our holdings in the online marketplace Pepperfry and the music streaming service Saavn.

These gratifying developments of the first six months signify that our strategic measures are paying off. And it highlights the contours of a new Bertelsmann that we will continue to sharpen. We have the necessary financial flexibility to do this, which we further increased in April by successful issuing two hybrid bonds with a total volume of 1.25 billion euros. We also have a variety of strategic options. One signal of this is the greater entrepreneurial independence we have granted Arvato’s business units in early July under the new leadership of Fernando Carro. Many other examples and all other information regarding our performance for the first half of the year can be found on the following pages.

Yours sincerely,

Thomas Rabe