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Financial Guidelines

The primary objective of Bertelsmann’s financial policy is to achieve a balance between financial security, return on equity and growth. For this, Bertelsmann bases its financing policy on the requirements of a “Baa1/BBB+” credit rating and the associated qualitative and quantitative criteria. Credit ratings and capital-market transparency make a considerable contribution to the Group’s financial security and independence.

In accordance with the Group structure, the capital allocation is made centrally by Bertelsmann SE & Co. KGaA, which provides the Group companies with liquidity and manages the issuance of guarantees and letters of comfort for them. The Group consists largely of a single financial unit, thereby optimizing capital procurement and investment opportunities.

Bertelsmann utilizes a financial-control system that employs quantitative financial targets concerning the Group’s economic debt and, to a lesser extent, its capital structure. One key financial target is a dynamic leverage factor, calculated as the ratio of economic debt to operating EBITDA over a 12-month period and limited to a maximum of 2.5. In determining the leverage factor, the hybrid bonds are accounted for at 50 percent. Economic debt is defined as net financial debt less the 50 percent par value component of the hybrid bonds plus provisions for pensions, profit participation capital and the net present value of operating leases. Like operating EBITDA, economic debt is modified for calculation purposes. The economic debt as of June 30, 2015, was €5,867 million (December 31, 2014: €6,039 million). As of June 30, 2015, the leverage factor was 2.6 (December 31, 2014: 2.7).

The net financial debt increased to €2,683 million compared to €1.689 million as of December 31, 2014. The increase is partly attributable to dividend payments to shareholders and non-controlling interests, most of which are made during the first half of the year. In addition, net financial debt increased due to a voluntary funding of €400 million from the plan assets held under the trusteeship of Bertelsmann Pension Trust e. V.

Financing Activities

In the reporting period, the capital resources of the Group were strengthened through the issuance of two hybrid bonds with a total volume of €1.25 billion. The subordinated bonds with a term of 60 years were issued by Bertelsmann in two tranches with early redemption options. The first tranche has a volume of €650 million, carries a coupon of 3.0 percent and contains an early redemption option for the first time after eight years. The second tranche has a volume of €600 million, carries a coupon of 3.5 percent and contains an early redemption option for the first time after 12 years.

The bonds listed in Luxembourg were rated by the rating agencies Moody’s and Standard & Poor’s (S&P) with instrument ratings of “Baa3” and “BBB-,” respectively. Both bonds are classified by the rating agencies as 50 percent equity and thus improve the financial key figures which are relevant for Bertelsmann’s credit rating.

Rating

Bertelsmann has issuer ratings from Moody’s and S&P. Bertelsmann is rated by Moody’s as “Baa1” (outlook: stable) and by S&P as “BBB+” (outlook: stable). Both credit ratings are in the investment grade category and meet Bertelsmann’s target rating. Bertelsmann’s short-term credit-quality rating is “P-2” from Moody’s and “A-2” from S&P.

Cash Flow Statement

Total Group earnings before interest and taxes are the starting parameter for preparing the Bertelsmann cash flow statement. In the reporting period, Bertelsmann generated cash flow from operating activities of €343 million (H1 2014: €405 million). The Group’s long-term operating free cash flow adjusted for non-recurring items was €434 million (H1 2014: €521 million). The decline mainly resulted from increased net working capital. At €-817 million, cash flow from investing activities was above the level for the first half of the previous year (H1 2014: €-359 million), primarily due to the endowment of €400 million from the plan assets held under the trusteeship of Bertelsmann Pension Trust e. V. The cash flow from financing activities was €595 million (H1 2014: €-1,600 million). The positive contribution is primarily attributable to proceeds from bonds in the reporting period. This increased the cash and cash equivalents as of June 30, 2015, to €1,507 million (December 31, 2014: €1,329 million).

Group Cash Flow Statement (Summary)  

in € millionsH1 2015H1 2014
(adjusted)
Cash flow from operating activities343405
Cash flow from investing activities(817)(359)
Cash flow from financing activities595(1,600)
Change in cash and cash equivalents121(1,554)
Currency effects and other changes in cash and cash equivalents5510
Cash and cash equivalents as of January 11,3312,715
Cash and cash equivalents as of June 301,5071,171
Less cash and cash equivalents included within assets held for sale
Cash and cash equivalents as of June 30 (according to the Group balance sheet)1,5071,171

Investments

In the first half of 2015, according to the cash flow statement, the investments were €514 million (H1 2014: €460 million). As in the same period last year, a large portion of the investments in property, plant and equipment, totaling €150 million (H1 2014: €143 million), stemmed from Arvato. Investments in intangible assets came to €126 million (H1 2014: €142 million) and were attributable primarily to RTL Group for investments in film rights and to BMG for the acquisition of music catalogs. The sum of €165 million was invested in financial assets (H1 2014: €77 million). Purchase price payments for consolidated investments (less acquired cash and cash equivalents) totaled €73 million in the reporting period (H1 2014: €98 million).

Consolidated Balance Sheet

Total assets came to €22.4 billion as of June 30, 2015 (December 31, 2014: €21.6 billion). The increase is primarily attributable to the taking up of financial liabilities. Equity was €8.8 billion compared to €8.4 billion as of December 31, 2014. This resulted in an equity ratio of 39.5 percent (December 31, 2014: 38.9 percent). As a result of the funding of €400 million from the plan assets held under the trusteeship of Bertelsmann Pension Trust e. V. and an adjustment of the discount rate, pension provisions decreased to €2.1 billion (December 31, 2014: €2.7 billion). Cash and cash equivalents increased to €1,507 million as of June 30, 2015, from €1,329 million as of December 31, 2014.

Employees

As of June 30, 2015, Bertelsmann had 119,019 employees worldwide (December 31, 2014: 112,037).