Media giant buoyed by ad recovery, digital growth

Boasting far-better-than-expected financials for 2010, German media giant Bertelsmann has announced plans to beef up its core business and expand into new areas.

The group’s net profit skyrocketed to €656 million ($922 million), up from $49 million in 2009, as revenue climbed 4.5% to $22.2 billion.

The result was way above initial forecasts that put net profit at more than $700 million. Bertelsmann expects this figure to increase in 2011.

Chairman-CEO Hartmut Ostrowski said that 2010, “the year of our 175th anniversary, was one of Bertelsmann’s most successful years to date. We quickly overcame the economic crisis and advanced our businesses considerably.”

Ostrowski added that revenues were growing, profits were on a steep rise and key indicators such as return on sales and cash flow had “soared to new heights.”

The positive business performance has allowed Bertelsmann to pay down its debt significantly, allowing for greater financial maneuverability, Ostrowski said. “We will use these funds to strengthen our core businesses, develop our portfolio and expand into new growth segments.”

The company is looking to boost businesses closely related to existing operations, such as its digital offerings, e-commerce services for B2B customers and corporate publishing.

“We will continue to advance into growth regions such as China and India and will build entirely new businesses,” Ostrowski said.

The pan-European RTL Group, Bertelsmann’s core entertainment division and main moneymaking engine, performed particularly well, benefiting from inhouse cost cuts plus strong growth in Western Europe’s TV ad markets and high-rated shows. RTL’s revenue grew 8.4% to $7.9 billion while operating profit climbed 36.7% to $1.5 billion.

Magazine subsid Gruner and Jahr and publishing group Random House, which saw a boom in ebooks and dominated the bestseller lists with its titles, increased their revenue and operating result year on year. Gruner and Jahr’s profits actually surpassed pre-crisis levels.

Both divisions profited considerably from the advertising upswing and expanded their businesses in all core areas, including digital offerings.

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