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


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


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 %)


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


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


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%


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%


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%


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


Agenda




Strategy

Outlook


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


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


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



EBITDA margin


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



EBITDA margin


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



EBITDA margin


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



EBITDA margin


Agenda




Strategy

Outlook


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


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


Agenda




Strategy

Outlook


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


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


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


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)


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


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

http://www.axs.tv/blogs/college-on-the-cheap-september-18-2012/


Growth regions –

Expansion of Bertelsmann’s activities in 2013

Brazil India

China

Thailand

Malaysia

Philippines

Singapore

Education

Ventures


Agenda




Strategy

Outlook


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

Documents

Investor Update 2014