Music sale boosts conglom

BERLIN — With profits more than doubling in 2006, Bertelsmann on Wednesday posted its most successful annual result ever.

Europe’s biggest media company saw net income grow to Euros 2.4 billion ($3.2 billion) from $1.25 billion the previous year, while revenue climbed nearly 8% to $25.6 billion — an historic high for the conglom.

Bertelsmann attributed the growth to last year’s $2 billion sale of its music publishing division to Vivendi’s Universal Music Group as well as to increased business at TV division RTL Group as well as in the book, DVD and magazine segments, which were spurred by acquisitions.

“Bertelsmann has never been more profitable,” said CEO Gunter Thielen during the company’s annual press conference in Berlin.

All of the group’s corporate divisions except BMG improved profitability year on year. Pan-European TV group RTL saw a dramatic surge in results thanks to a favorable advertising market and the performance of its content division, Fremantle Media, while its direct-to-customer division Direct Group doubled its results year on year.

Other divisions such as Random House, magazine publisher Gruner + Jahr and service unit Arvato surpassed their 2005 results.

Company last year intensified its focus on digital and other media-related ventures: RTL launched digital special-interest channels in several core markets, along with new video-on-demand, IPTV and mobile TV offerings; Random House established Random House Film; Sony BMG expanded its digital offerings and increased its total revenue contribution of digital music sales; and Gruner + Jahr extended its magazine brands to digital channels and intensified its activity in emerging markets such as China and southeastern Europe.

Last year also marked a pivotal event for the world’s largest private media conglom as it consolidated corporate ownership after buying back a 25.1% stake in the group held by Belgian investor Groupe Bruxelle Lambert for $6 billion — a move that all but assures the company will remain in the hands of the Mohn family.

“The buyback grants us a great deal of independence and entrepreneurial freedom,” Thielen noted. “It safeguards our corporate culture of partnership, and strengthens the values that have made Bertelsmann so big and successful over the past 170 years.”

Bertelsmann partially financed the buyback with proceeds from the sale of BMG Music Publishing, increased cash flow and the placement of two Euro bonds. Company also plans to refrain from purchases this year as it strives instead to cut debt.

Thielen said, however, that the company would “continue to grow both organically and through acquisitions.” He added, “We have our eye on our core markets in Europe and North America as well as emerging markets in Asia and Eastern Europe.”

Bertelsmann will put as much as $665 million into a new fund in the next three to four years to invest in media companies, said chief financial officer Thomas Rabe. “The strategy of the fund is to buy minority stakes in innovative and fast-growing companies and to decide after a couple of years whether to exit or to take full control,” he said.

Bertelsmann forecast higher operating profit and sales in the next two years as takeovers of businesses such as music and DVD retailer Columbia House and French bookstore chain Librairies Privat generate further growth.

Thielen, meanwhile, will step down from his post at the end of the year and hand over the chief exec chair to Hartmut Ostrowski, who currently heads Arvato.

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