The New Bertelsmann · Mediengruppe RTL Deutschland took over the online video marketer Smartclip....

The New

Bertelsmann

Interim Report 2016

in € millions H1 2016 H1 2015

Business Development

Group revenues 7,966 8,040

Operating EBITDA 1,111 1,063

EBITDA margin in percent1) 13.9 13.2

Group profi t 482 398

Investments2) 603 514

Consolidated Balance Sheet 6/30/2016 12/31/2015

Equity 8,986 9,434

Equity ratio in percent 38.4 41.2

Total assets 23,405 22,908

Economic debt3) 6,274 5,609

Due to rounding, there may be slight variances in the percentages calculated in this report.

1) Operating EBITDA as a percentage of revenues. 2) Taking into account the financial debt assumed, investments amounted to €605 million (H1 2015: €515 million).3) Net financial debt less 50 percent of the par value of the hybrid bonds plus pension provisions, profit participation capital and present value of operating leases.

At a Glance

Key Figures (IFRS)

Bertelsmann InterimReportJanuary–June2016 1

2 Highlights of the First Six Months

4 Foreword

6 Group Interim Management Report

Fundamental Information about the Group

7 CorporateProfile

7 Strategy

7 Value-OrientedManagementSystem

Report on Economic Position

8 CorporateEnvironment

9 SignificantEventsintheCurrent

FinancialYear

9 ResultsofOperations

10 NetAssetsandFinancialPosition

12 PerformanceoftheGroupDivisions

15 SignificantEventsAftertheBalance

SheetDate

15 RisksandOpportunities

16 Outlook

17 Condensed Interim Consolidated

Financial Statements

17 ConsolidatedIncomeStatement

18 ConsolidatedStatementofComprehensive

Income

19 ConsolidatedBalanceSheet

20 ConsolidatedCashFlowStatement

21 ConsolidatedStatementofChangesinEquity

22 SegmentInformation

22 SelectedExplanatoryNotes

30 Responsibility Statement

31 Auditor’s Review Report

Additional Information

32 Contact/ProductionCredits

Contents

Interactive Interim ReportTheBertelsmannInterimReport2016canalsobeaccessedonlineatir2016.bertelsmann.com

TogetherwiththelatestAnnualReport,from2015,theonlinereportofferslotsofextrafeatures,includingseveralvideosandextracts.

TheAnnualReportandInterimReportarealsoavailableasajointfreeappontheAppleAppStoreandinGooglePlay.

2

• Home of the “Mannschaft”: RTL Television secures the

broadcasting rights for 28 more games of the German

nationalsoccerteam.

• Allezlesbleus:M6scoresrecordratingswithbroadcastsof

theEuropeansoccerchampionshipinFrance.

• Digitalgrowth:RTLGroup’sonlinevideooffersgenerate

morethan20billionviewsamonth.

www.RTLGroup.com

• Thankstonewinternationalclientsandthecommissioning

ofanewdistributioncenter inGennep, theNetherlands,

Arvato is further expanding its business activities in the

strategicgrowthsectorofe-commerceservices.

• A service center with space for approximately 1,400

employeesopensinGurgaon,India.

• Arvato Financial Solutions opens “IT Development and

Innovation”centerinTallinn.

www.arvato.com

• Penguin Random House publishers sell an additional

2.2 million copies of Paula Hawkins’ 2015 debut novel

“TheGirlontheTrain,”and3.8millioncopiesofthenovels

“MeBeforeYou”and“AfterYou”byJojoMoyes.

• US Pulitzer Prizes are awarded for three authors: Joby

Warrick, “Black Flags: The Rise of ISIS”; T. J. Stiles,

“Custer’sTrials:ALifeontheFrontierofaNewAmerica”;

andWilliamFinnegan,“BarbarianDays:ASurfingLife.”

• VerlagsgruppeRandomHouseestablishesPenguinVerlag

topublishliteraryGerman-languagefictionandnonfiction.

www.penguinrandomhouse.com

• PrinovisUK‘seffortstoacquirenewcustomersareproving

successful,contributingtolong-termcapacityutilizationat

itsLiverpoolsite.

• Sonopressbecomestheworld’sfirstreplicationcompany

toofferfullyautomatedproductionof4Kdiscs,whichhave

astoragecapacityofupto100gigabytes.

www.bertelsmann-printing-group.com

Highlights of the First Six Months

Highlights of the First Six Months


• Expansion of the growth area Content Communication:

G+JlaunchesTerritory,Europe’slargestproviderofcontent-

drivencommunication.

• More relevance in the ad sales market: Gruner + Jahr

announces “Ad Alliance” marketing cooperation with

MediengruppeRTLDeutschland.

• “Landlust,” “Essen & Trinken” and more: G+J and

LandwirtschaftsverlagMünster foundDeutscheMedien-

Manufaktur.

www.guj.com

• Onanexpansionistcourse:theonlineeducationprovider

ReliasLearningachievesdouble-digitgrowthinthedomestic

USmarketandexpandstoEurope.

• Bertelsmann holding Udacity expands its international

activitiesanddevelopsnewNanodegreeprograms.

• TheonlineeducationplatformHotChalkgrowswithnew

andexistingpartneruniversities.

www.bertelsmann-education-group.com

• The Roger Waters signing is one of the music industry’s

most importantdealsof thefirst half of 2016andmarks

anothercreativemilestoneinthehistoryofBMG.

• WithBMG’ssupport,RickAstleyreleaseshisfirstalbumin

tenyears–andhismostsuccessfulin30years.

• BMGsongwriterscontributetomorethan20number-one

albumsintheUnitedStates,UKandGermany,including

releasesfromRihanna,BeyoncéandVolbeat.

www.bmg.com

• BAImakes significant contributions toGroupnet income

throughcapitalgainsfromdisposals.

• Strategic investmentvehiclesstrengthenBertelsmann’s

activities ingrowth regionsandsuccessfullyserveasa

digitaltrendscoutfortheGroup.

www.bertelsmann-investments.com

The New

Bertelsmann

4 Foreword

IamdelightedtoreportthatthenewBertelsmann–whichasofthebeginningofthisyearhasanew

corporatestructurewitheightdivisions–looksbackonasuccessfulfirsthalfofthefinancialyear.

Ourcompanyhasrecordedapositiveperformance,withrecordoperatingresultsinthefirstsixmonths

of2016.Bertelsmannachievedorganicgrowthandrevenuesof€8.0billion.OperatingEBITDAreached

itshighestlevelever,at€1.1billion.Evenwithstart-uplossesfordigitalandnewbusiness,theEBITDA

marginimprovedfrom13.2to13.9percent.Groupprofitrosesignificantly,bymorethan20percent,to

€482million.Thetotalrevenuesharecontributedbyourgrowthbusinessesincreasedto29percentinthe

firsthalfoftheyear.AndBertelsmannnowgeneratesmorethanaquarterofitsrevenuesoutsideEurope.

Inthisnewcorporatestructure,wehavekeptworkingintensivelyonimplementingourstrategy,which

continuestobecomprisedoffourpriorities:

• Wehavestrengthened our core.Asoneexample,MediengruppeRTLDeutschlandlaunchedtwo

newTVchannelsandsecuredthebroadcastingrightsfor28Germannationalsoccerteammatches.

PenguinRandomHousesuccessfullycompleteditspost-mergerintegrationandplaced316titlesonthe

“NewYorkTimes”bestsellerlists.Gruner+JahrlaunchednewmagazinetitlesandformedGermany’s

largestproviderofcontentcommunicationservices,Territory.TheBertelsmannPrintingGroupwassuc-

cessfulinnewcustomeracquisitionintheUK.

Thomas RabeChairmanandCEOofBertelsmann

Dear Readers, Dear Friends of Bertelsmann,


• Bertelsmannalsofurtheradvancedthedigital transformationof itsbusinesses.RTLGroup’sonline

videositescollectivelygenerated123.1billionviewsinthefirsthalfoftheyear–a190percentincrease

yearonyear.MediengruppeRTLDeutschlandtookovertheonlinevideomarketerSmartclip.Penguin

RandomHouseexpandeditse-bookportfoliotoover115,000titles.Gruner+Jahr’sdigitalbusiness

grewbymorethan30percentinGermanyandFrance,andArvatoachievedfurthergrowthwithcus-

tomersintheIT,high-techande-commercesectors.

• Wealsocontinuedexpandingourgrowth platformsinthefirsthalfoftheyear.Ourproductionarm

FremantleMediaconsolidateditspositionthroughacquisitionsintheUKandIsrael.BMGstrength-

eneditsportfoliothroughaseriesofacquisitionsandcatalogpurchases,aswellasthroughnewartist

signings,includingPinkFloydfounderandsongwriterRogerWaters.Arvatoannouncedplanstobuilda

newlogisticscenterinDorsten,Germany,tolaythegroundworkforfurtherexpandingitse-commerce

services.Inaddition,wegrewoureducationactivities:Oure-learningsubsidiaryReliasLearning

acquiredtheCanadiancompanyAssessment&IntelligenceSystems,andexpandedintotheUK.

Likewise,theonlinelearningproviderUdacityextendeditsbusinessinternationally,andnowoffersits

NanodegreesinBrazil,China,IndiaandGermany.

• Westrengthenedourpresence in thesegrowth regionswithanumberofothermeasures:Our

BertelsmannAsia Investmentsfund(BAI) invested intennewcompanies inChina, includingthe

e-commercebusinessXianLife.BAIalsomadeasignificantcontributiontoGroupprofitthroughgains

fromdisposals.InIndia,weexpandedouractivitiesinvariouslinesofbusinessbyinvestinginthesocial

fashionnetworkRoposo,thee-commerceserviceKartRocket,andthefintechcompanyLendingkart.

ArvatoopenedanewservicecenterinGurgaon,India,withroomforsome1,400employees.With

BMG,anotherdivisionisnowrepresentedinBrazil;there,wealsohavejointlyacceleratedourentryinto

theonlineeducationbusinesswithourpartnerBozanoInvestimentos.

Thisstrategicprogress,ourhighprofitabilityandourimprovedgrowthprofilegiveusconfidenceaswe

look forward to the fullyear,andtoBertelsmann’s furtherdevelopment.Having largelycompletedthe

portfolioadjustmentsofrecentyears,wenowwillconcentrateonthefurtherexpansionofourbusinesses.

Inthelongterm,Bertelsmannaimstoachieverevenuesofaround€20billionandanEBITDAmarginof

15percent–withitseightcreativeandinnovativedivisions,whosebusinessperformanceispresentedin

detailinthisInterimReport.

Yourssincerely,

ThomasRabe


In the first half of 2016, Bertelsmann achieved a record operating performance. Progress in all four strategic priorities had a positive effect on business development in the reporting period. Organic revenue growth of 1.3 percent almost fully offset portfolio effects and the impact of exchange rate effects. Group revenues declined by 0.9 percent to €7,966 million (H1 2015: €8,040 million). In contrast, operating EBITDA improved by 4.5 percent to the record level of €1,111 million (H1 2015: €1,063 million). The EBITDA margin increased to 13.9 percent (H1 2015: 13.2 percent). The primary contributors to the improved earnings were the French and German businesses of RTL Group, the Arvato service businesses, and the printing businesses that were combined at the beginning of the year. This was counteracted by start-up losses for digital and new businesses, which, for Bertelsmann Education Group and RTL Group alone, amounted to €-44 million (H1 2015: €-27 million). Additional costs for the digital transformation were incurred in particular by Gruner + Jahr. As a result of the positive earnings performance, lower special items and disposal gains from Bertelsmann Investments, Group profit increased to €482 million compared to €398 million in the same period last year. For the second half of 2016, Bertelsmann expects a continuation of the positive performance.

Group Interim Management Report

• Grouprevenues0.9percentbelow

thepreviousyear

• Organicrevenuegrowthof

1.3percentnearlyoffsetsportfolio

andexchangerateeffects

• RevenuegrowthatRTLGroup,

Arvato,BertelsmannEducation

GroupandBMG

• IncreaseinoperatingEBITDA

of4.5percenttorecordlevelof

€1,111million

• EBITDAmarginof13.9percent,

up0.7percentagepointscompared

tosameperiodlastyear

• Positivedevelopment,especially

atRTLGroupandArvato

• IncreaseinGroupprofitby

21.1percentto€482million

• Improvedoperatingresult

• Lowerimpactfromscale-back

ofbusinesses

• GainsondisposalsatBertelsmann

Investments

Group Profit in € millions

0

500

400

300

200

100

398

H1 2015 H1 2016

482

Operating EBITDA in € millions

0

500

1,000

1,500 1,063

H1 2015 H1 2016

1,111

Revenues in € billions

0

6

8

2

4

10 8.0

H1 2015 H1 2016

8.0

Bertelsmann Interim Report January–June 2016 7

Fundamental Information about the Group

Corporate Profile

Bertelsmann isamedia,servicesandeducationcompany

that operates in about 50 countries worldwide. The geo-

graphic core markets are Western Europe – in particular,

Germany,FranceandtheUK–andtheUnitedStates.Inaddi-

tion,Bertelsmannisstrengtheningitsinvolvementingrowth

regions such as Brazil, China and India. The Bertelsmann

divisions includetheTVbroadcasterRTLGroup,thebook

publishing group Penguin Random House, the magazine

publisherGruner+Jahr,themusiccompanyBMG,theser-

vice provider Arvato, the Bertelsmann Printing Group, the

Bertelsmann Education Group, and the international digital

fundBertelsmannInvestments.

BertelsmannSE&Co.KGaAisacapitalmarket-orientedbut

unlistedpartnership limitedbyshares.AsaGroupholding

company, itexercisescentralcorporatefunctions. Internal

corporate management and reporting follow the Group’s

organizationalstructure,whichconsistsoftheoperatingdivi-

sionsandCorporate.

Three foundations (Bertelsmann Stiftung, Reinhard Mohn

Stiftung and BVG-Stiftung) indirectly hold 80.9 percent of

Bertelsmann SE & Co. KGaA shares, with the remaining

19.1percentheldindirectlybytheMohnfamily.Bertelsmann

Verwaltungsgesellschaft (BVG) controls all voting rights at

the General Meeting of Bertelsmann SE & Co. KGaA and

BertelsmannManagementSE.

Strategy

Bertelsmann’sprimaryobjectiveiscontinuousgrowthofthe

company’s value through a sustained increase in profitabil-

ity (see the“Value-OrientedManagementSystem”section).

Bertelsmannaimstoachieveafaster-growing,moredigital

and more international Group portfolio. The Group strategy

comprises four strategic priorities: strengthening the core

businesses,driving thedigital transformation,developing

growthplatforms,andexpandingintogrowthregions.

Since January 1, 2016, the strategic transformation of

Bertelsmannhasbeen reflectedevenmore strongly in the

companystructure.Atthebeginningofthecurrentfinancial

year,threeadditionalindependentdivisionswereformedfrom

theformeroperatingactivitiesofCorporateInvestments.These

areBMG,BertelsmannEducationGroupandBertelsmann

Investments.Inaddition,theGroup’soffsetandgravureprint-

ing activities and someotherproduction-relatedbusinesses

werecombinedintotheBertelsmannPrintingGroupdivision

asofJanuary1,2016.ThenewBertelsmann,consistingof

eightdivisions,isnowbasedonthreepillars:media,services

andeducation.

Inthefirsthalfof2016,furtherprogresswasmadeinthefour

strategicprioritiesoftheGroupandinalltheGroupdivisions.

MediengruppeRTLDeutschlandfurtherexpandeditsfamilies

ofchannelsand,withtheacquisitionofSmartclip,itextended

its digital advertising marketing. Penguin Random House

recorded a strong bestseller performance. Gruner + Jahr

increaseditsstakeinthemarketingservicesproviderTrndand

alsoestablishedTerritory,Germany’slargestproviderinthe

contentcommunicationmarket.TheFrenchG+Jsubsidiary

PrismaMediaacquiredGroupCerise,oneoftheleadingdigi-

talvideoprovidersinFrance.BMGacquiredamajoritystakein

theARCmusiccatalogandsignedamongstothersanewcon-

tractwithPinkFloydfounderandsongwriterRogerWaters.

Thedevelopmentofanewlogisticscenterinthenorthern

Ruhrareawill enableArvato to furtherexpand itse-com-

merceservices.Theprintingbusinesseswerebundledinto

thenewly-formedBertelsmannPrintingGroup.Bertelsmann

EducationGroupcontinuedtoexpanditseducationalactivities

inthee-learningandonlineservicessector;andwithitsonline

educationproviderReliasLearning,itenteredtheEuropean

market.Thestrategicinvestmentplatformsbundledinthe

BertelsmannInvestmentsdivisionalsoexpandedtheiractivi-

ties.BertelsmannAsia Investments (BAI)madeacquisitions

whichincludedastakeintheChinesee-commercecompany

XianLife;BertelsmannIndiaInvestments(BII)investedinthe

fashionnetworkRoposo,thefintechcompanyLendingkart

andthee-commerceserviceproviderKartRocket.

Value-Oriented Management System

Inorder tomanage theGroup,Bertelsmannuses revenues,

operating EBITDA and Bertelsmann Value Added (BVA) as

strictlydefinedkeyperformanceindicatorstodirectlyassess

business performance; accordingly, these form the basis of

theoutlook.

Group revenues as a growth indicator of the businesses

decreased in the first half of 2016 by 0.9 percent to

€7,966million(H12015:€8,040million)duetoportfolioand

exchangerateeffects.Theorganicgrowthwas1.3percent.

Operating EBITDA is determined as earnings before inter-

est, tax,depreciationandamortizationand isadjustedfor

specialitems.Thismakesitameaningfulkeyperformance


indicator for determining a sustainable operating result.

During the reportingperiod,operatingEBITDA increased to

€1,111million(H12015:€1,063million).

Thecentralperformanceindicatorforassessingtheprofit-

abilityfromoperationsandreturnoninvestedcapitalisBVA.

BVA measures the profit realized above and beyond the

appropriatereturnoninvestedcapital.Thisformofvalueori-

entationisreflectedinstrategicinvestment,portfolioplanning

andthemanagementofGroupoperationsandisthebasisfor

managementcompensation.BVAiscalculatedasthediffer-

encebetweennetoperatingprofitaftertax(NOPAT)andthe

costofcapital.NOPATiscalculatedonthebasisofoperating

EBITDA. Depreciation, amortization and impairment losses

arededucted fromEBITDA,andadjustmentsaremade for

special items.Then,after furthermodificationsanddeduc-

tionofaflat33percenttax,theresultingNOPATisusedto

calculateBVA.Costofcapitalistheproductoftheweighted

averagecostofcapital(WACC)andtheaveragelevelofcapital

invested.TheuniformWACCaftertaxesis8percent.Invested

capital is calculated on the basis of the Group’s operating

assetslessnon-interest-bearingoperatingliabilities.Thepres-

entvalueofoperatingleasesisalsotakenintoaccountwhen

calculatingtheinvestedcapital.Inthefirsthalfof2016,BVA

decreasedto€-26million(H12015:€-21million)despitethe

overall improvement in the operating results. This develop-

mentisprimarilyduetoacquisitionsmadeinthecontextof

theportfolio transformation,which ledtoan increase in the

averageinvestedcapital.

Bertelsmann’s financial management system is defined by

theinternalfinancialtargetsoutlinedinthe“NetAssetsand

FinancialPosition”section.TheGroup ismanagedandcon-

trolledon thebasisof thesefinancingprinciples; they form

partofthevalue-orientedmanagementsysteminthebroader

senseof the term,alongwith theEBITDAmargin, thecash

conversionrateandnon-financialperformanceindicators.

Report on Economic Position

Corporate EnvironmentOverall Economic Developments

Theglobaleconomyrecordedlimitedgrowthinthefirsthalf

of2016.Therecoveryintheadvancedeconomieswasmoder-

ate,andthegrowthmomentuminmanyemergingcountries

declinedsignificantly.

Theoverallmoderateeconomicrecoveryintheeurozonecon-

tinuedduringthereportingperiod.AccordingtoEurostat,the

statisticalofficeoftheEuropeanUnion,realgrossdomestic

product(GDP)intheeurozoneroseby0.6percentinthefirst

quarter of 2016 compared to the previous quarter and by

0.3percentinthesecondquarter.

Thecontinuedrecovery inGermanywasprimarilydrivenby

strongdomesticeconomicactivity.AccordingtotheFederal

Statistical Office, real GDP rose by 0.7 percent in the first

quarter of 2016 compared to the previous quarter and by

0.4percentinthesecondquarter.

Followingasolidbeginningtotheyear,theFrencheconomy

stagnatedovertheremainderofthereportingperiod.Accord-

ingtoInsee,theFrenchNationalInstituteforStatisticsand

EconomicStudies,realGDProseby0.7percentinthefirst

quarterof2016butstagnatedinthesecondquarter.

Since theUK’s referendumresult in favorof leaving theEU

onlyoccurredhalfway through theyear, itdidnothaveany

concretequantifiableeffectsonrealGDP.RealGDProseby

0.4percentinthefirstquarterof2016andby0.6percentin

thesecondquarter.

Inthefirstfewmonthsofthecurrentfinancialyear,growthin

theUnitedStateswasweakerthanoriginallyexpected.Real

GDProseinthefirstquarterof2016ataprojectedannualrate

of0.8percent.Inthesecondquarter,realGDPincreasedbya

projectedannualrateof1.2percentaccordingtoinitialcalcu-

lationsbytheBureauofEconomicAnalysis.

Sofar,theoveralleconomicdevelopmentsareslightlybelow

thecurrent-year trendanticipated in the2015Combined

ManagementReport.

Developments in Relevant Markets

TheEuropeanTVadvertisingmarketsexperiencedprimarily

positivegrowthinthefirstsixmonthsof2016.TheTVadvertis-

ingmarketsinGermany,France,theNetherlands,Belgiumand

Croatiashowedslighttomoderategrowth,whiletheTVadver-

tisingmarketinSpainonceagainreportedstronggrowth.The

HungarianTVadvertisingmarket,incontrast,declined.

The physical book markets experienced mostly positive

growthinthefirstsixmonthsof2016.Thephysicalbookmar-

ketsintheUnitedStatesandtheUKrecordedsignificantto

stronggrowth,whereasthesemarketsinSpainandGermany

reportedlittlechange.

ThemagazinemarketsinGermanyandFrancewerecharac-

terizedbymoderatetostronglyfallingprintadvertisingbusi-

nessanddecliningcirculationbusinessduringthereporting

period,whereasthedigitalmarketsrecordedstronggrowth.


Theglobalmusicpublishing and recordedmusicmarkets

experiencedmoderategrowth.

TheservicemarketsrelevanttoArvatoshowedmoderateto

significantgrowthinthefirsthalfof2016.

TherelevantEuropeanprintmarketsinGermany,Franceand

theUKdeclinedinthefirstsixmonthsof2016,whiletheoff-

setmarketshowedmuchmorestabledevelopmentthanthe

gravureprintingmarket.TheNorthAmericanbookprinting

marketsawamoderatedeclineoverthesameperiod.

Asexpected,theeducationmarketsintheUnitedStatesgrew

stronglyinthefirsthalfof2016inthemarketsegmentswhere

Bertelsmannisinvolved–namely,e-learninginthehealthcare

andtechnologysectors,onlineservicesanduniversityeduca-

tion.

So far, the developments in the relevant markets are

mainlywithin thecurrent-year trendanticipated in the2015

CombinedManagementReport.

Significant Events in the Current Financial Year

At itsmeetingonJanuary26,2016, theSupervisoryBoard

appointed Bernd Hirsch as the new Bertelsmann Chief

FinancialOfficer.AsofApril1,2016,hetookoverthedepart-

mentfromExecutiveBoardChairmanThomasRabe,whowas

performingthisfunctioninadditiontohisotherresponsibili-

tiesonatransitionalbasis.

WiththeacquisitionofSmartclipinMarch2016,Mediengruppe

RTL Deutschland has extended its options in the area of

digitaladvertisingmarketingandhasthereforeenhancedits

growthstrategy.Theacquisitionsimultaneouslystrength-

ensRTLGroup’s technological competenceand, incoop-

erationwithSpotX,opensupglobalinnovationoptions.

At theendofMay2016, theFrenchG+JsubsidiaryPrisma

MediafullyacquiredGroupeCerise,adigitalmediacompany

inthevideosectorinFrance.Cerisedevelopsitsowntech-

nologiestoproduceanddistributecontentandthusreachesa

wideaudiencewithitsbrands.

Results of Operations Revenue Development

Group revenues in the first half of 2016 of €7,966 million

were0.9percentbelow thepreviousyear’sfigure (H12015:

€8,040 million). Adjusted for exchange rate effects of

-1.1percentandportfolioandothereffectsof -1.1percent,

organicrevenuegrowthamountedto1.3percent.

Inthefirsthalfof2016,RTLGroupachievedrevenuegrowth

primarily due to the positive development of Groupe M6,

Mediengruppe RTL Deutschland and the digital activities.

Penguin Random House recorded a decline in revenues,

attributableprimarilytodivestments,exchangerateeffects

andnewsalestermsfore-booksintheUnitedStatesand

the UK which led to lower sales. At Gruner+Jahr, rev-

enues decreased due to a decline in advertising and cir-

culation revenues and also due to divestments. On the

otherhand,revenuesfromdigitalbusinessescontinuedto

increase.BMGcontinuedtogrow,aidedbyitsacquisition

ofadditionalmusiccompaniesandrightscatalogs.Arvato

grew its revenues, inparticular in theCRMSolutionsand

FinancialSolutionsbusinessunits.Revenuedevelopmentat

BertelsmannPrintingGroupwasaffectedprimarilyby the

sale of printing activities in Southern Europe which were

includedforpartofthesameperiodlastyear.Bertelsmann

EducationGrouppressedaheadwiththeexpansionofthe

education business and increased its revenues. The fund

activities combined in the Bertelsmann Investments divi-

sionarenotconsolidatedand,forthisreason,norevenueis

reportedforthissegment.

There were moderate changes in the geographical break-

down of revenues compared to the same period in the

previous year. The revenue share in Germany increased to

35.2percent, compared to34.0percent in thefirsthalf of

2015. The revenue share generated by France amounted

to14.2percent (H12015:14.0percent). In theUK, rev-

enue share was 5.7 percent (H1 2015: 5.9 percent), while

other European countries achieved a revenue share of

18.5percent (H12015:17.8percent). The shareof total

revenuesgenerated in theUnitedStateswas20.4percent

(H1 2015: 21.5 percent); other countries accounted for a

shareof6.0percent (H12015:6.8percent). In total, these

figures show that the total share of revenues represented

byforeignbusinessdecreasedslightly,from66.0percentin

thefirsthalfof2015 to64.8percent.The ratioof the four

revenue streams (products and merchandise, advertising,

services,andrightsand licenses) tooneanother remained

mostlyunchangedcomparedtothefirsthalfof2015.

Operating EBITDA

Bertelsmann achieved operating EBITDA of €1,111 million

during the reporting period (H1 2015: €1,063 million). The

EBITDA margin of 13.9 percent was above the level of

13.2percentinthesameperiodlastyear.Theoperatingearn-

ingsofRTLGroupimprovedcomparedtothefirsthalfof2015.


Theincreasewasmainlyattributabletohigherearningscontri-

butionsfromGroupeM6andMediengruppeRTLDeutschland.

The decline in revenues at Penguin Random House also

impactedoperatingEBITDA.Asaresultoflowerrevenuesin

theadvertisingbusiness,andstart-uplossesfordigitalbusi-

nesses,operatingearningsatGruner+Jahrdecreased.Oper-

atingEBITDAatBMGwashigherthanthepreviousyear’s

figure.OperatingearningsatArvatoincreasedacrossallbusi-

nessunits.Duetoimprovedutilizationofproductioncapacity

asaresultoftheacquisitionofnewcustomersandfurthercost

savings,operatingEBITDA forBertelsmannPrintingGroup

increased.Asaresultofstart-uplossesinconnectionwith

business expansion and transformation costs, operating

earningsatBertelsmannEducationGroupdecreased in the

reportingperiod.Since the fundactivitiescombined in the

BertelsmannInvestmentsdivisionarenotfullyconsolidated,

operatingresultsarenotgenerallyreported.

Special Items

Specialitemsoffseteachotherinthereportingperiodcom-

pared to €-101 million in the same period last year. They

consistedof impairmentsonotherfinancial assets totaling

€-5million(H12015:€-5million),resultsfromdisposalsof

investmentsof€56million(H12015:€17million),andrestruc-

turingexpensesandotherspecialitemstotaling€-51million

(H12015:€-118million).Theresultfromdisposalsofinvest-

mentswasparticularlyaffectedbygainsondisposals inthe

Bertelsmann Investmentsdivision. In the reportingperiod

therewasnofairvalueremeasurementofinvestmentsfollow-

ing€5millioninthesameperiodlastyear.

EBIT

Taking into account adjusted operating EBITDA for special

items totaling €0 million (H1 2015: €-101 million) and the

amortization, depreciation, impairments and reversals of

impairments on intangible assets and property, plant and

equipment totaling €-306 million (H1 2015: €-292 million),

whichwerenotincludedinspecialitems,EBITamountedto

€805millioninthereportingperiod(H12015:€670million).

Group Profit or Loss

Thefinancialresultwas€-117million(H12015:€-119million).

Tax expenses amounted to €-206 million compared to

€-156millioninthesameperiodlastyear, inparticulardue

to the improved earnings before taxes from continuing

operations.Inaddition,thepositivespecialeffectsincluded

in tax expenses decreased compared to the same period

in the previous year. Earnings after taxes from continuing

operationswerethus€482million(H12015:€395million).

Sincenocompanieswereclassifiedasdiscontinuedopera-

tions during the reporting period, Group profit was also

€482million (H12015: €398million). The shareofGroup

profit held by Bertelsmann shareholders was €288 million

(H1 2015: €217 million). The non-controlling interests in

Groupprofitcameto€194million(H12015:€181million).

Net Assets and Financial PositionFinancing Guidelines

TheprimaryobjectiveofBertelsmann’sfinancialpolicyisto

achieveabalanceoffinancialsecurity,returnonequityand

growth.Forthis,Bertelsmannbasesitsfinancingpolicyonthe

requirementsofaBaa1/BBB+creditratingandtheassociated

qualitativeandquantitativecriteria.Creditratingsandcapital

markettransparencymakeaconsiderablecontributiontothe

company’sfinancialsecurityandindependence.

InaccordancewiththeGroupstructure,thecapitalallocation

ismadecentrallybyBertelsmannSE&Co.KGaA,whichpro-

vides theGroupcompanieswith liquidityandmanages the

issuanceofguaranteesand lettersofcomfort forthem.The

Groupconsistslargelyofasinglefinancialunit,therebyopti-

mizingcapitalprocurementandinvestmentopportunities.

Bertelsmann utilizes a financial control system employing

quantitative financial targets concerning the Group’s eco-

nomicdebtand,toalesserextent,itscapitalstructure.One

keyfinancialtargetisadynamicleveragefactor,calculatedas

theratioofeconomicdebttooperatingEBITDAoveratwelve-

monthperiodandlimitedtoamaximumof2.5.Economicdebt

isdefinedasnetfinancialdebt less50percentofthenomi-

nalcapitalofthehybridbondsplusprovisionsforpensions,

profitparticipationcapitalandthenetpresentvalueofoperat-

ingleases.LikeoperatingEBITDA,economicdebtismodi-

fiedforcalculationpurposes.AsofJune30,2016,economic

debtwas€6,274million(December31,2015:€5,609million).

Theincreaseisprimarilyattributabletothesignificantlyhigher

pensionprovisionsandsimilarobligationsasa resultof the

significantreductionintheinterestrate.AsofJune30,2016,

theleveragefactorwas2.7(December31,2015:2.4).

Due toseasonal influences,netfinancialdebt increased to

€2,954 million compared to €2,765 million as of Decem-

ber31,2015.Theincreaseispartlyattributabletodividend

paymentstoshareholdersandnon-controllinginterests,most

ofwhichweremadeduringthefirsthalfoftheyear.


Financing Activities

Withaview to thependingmaturities in thesecondhalf

of 2016, Bertelsmann placed a ten-year benchmark bond

in April 2016 with an issue volume of €500 million. The

bond is listed in Luxembourg and has a fixed coupon of

1.125percent.Furthermore,inJune2016,aspartofapri-

vateplacement,Bertelsmannalsoissuedapromissorynote

intheamountof€200millionwithatwo-yearterm.

Rating

Bertelsmann has issuer ratings from Moody’s and S&P.

BertelsmannisratedbyMoody’sasBaa1(outlook:stable)

andbyS&PasBBB+(outlook:stable).Bothcreditratingsare

inthe investment-gradecategoryandmeetBertelsmann’s

target rating.Bertelsmann’sshort-termcreditquality rating

isP-2fromMoody’sandA-2fromS&P.

Cash Flow Statement

In the reporting period, Bertelsmann generated cash

flow fromoperating activitiesof €751million (H12015:

€343million).TheGroup’s long-termoperatingfreecash

flow,adjustedforspecial items,was€718million(H12015:

€434million).Thecashflowfrominvestingactivitieswas

€-502millioncomparedto€-817millioninthesameperiod

last year. The deviation results primarily from the fund-

ing in the sameperiod last yearof theplanassetsheld

under the trusteeshipofBertelsmannPensionTruste.V.

which amounted to €400 million. At €276 million, cash

flow fromfinancingactivitieswasbelow thehigh levelof

thepreviousyear (H12015:€595million).Cashandcash

equivalents increased to €1,811 million as of June 30, 2016

(December31,2015:€1,310million),primarilyasaresultof

theissuingofbonds.

Investments

Inthefirsthalfof2016,accordingtothecashflowstatement,

investmentstotaled€603million(H12015:€514million).Invest-

ments in intangible assets came to €212 million (H1 2015:

€126million)andwereattributableprimarilytoRTLGroupfor

investmentsinfilmrightsandtoBMGfortheacquisitionofmusic

catalogs.Asinthesameperiodlastyear,alargeportionofthe

investmentsinproperty,plantandequipment,totaling€129million

(H1 2015: €150 million), stemmed from Arvato. The sum of

€134millionwasinvestedinfinancialassets(H12015:€165mil-

lion).Purchasepricepayments for consolidated investments

(lessacquiredcashandcashequivalents)totaled€128millionin

the reportingperiod (H12015:€73million)andwereprimarily

attributabletoinvestmentsinSmartclipandGroupeCerise.

Balance Sheet

Totalassetscameto€23.4billionasofJune30,2016(Decem-

ber31,2015:€22.9billion).Theincreaseisprimarilyattributable

totheincreaseinfinancialliabilities.Duetoreducedinterestrates,

pensionprovisionsincreasedsignificantlyto€2.3billion(Decem-

ber31,2015:€1.7billion).Equitywas€9.0billioncomparedto

€9.4billionasofDecember31,2015.Thisresultedinanequity

ratioof38.4percent(December31,2015:41.2percent).Dueto

theinterestraterelatedrevaluationoftheprovisionsfordefined

benefitpensionplans,equitydeclinedto€9.0billioncompared

to€9.4billionasofDecember31,2015.Thisresultedinanequity

ratioof38.4percent(December31,2015:41.2percent).Cashand

cashequivalentsincreasedto€1,811millionasofJune30,2016,

comparedto€1,310millionasofDecember31,2015.

Employees

AsofJune30,2016,Bertelsmannhad114,710employees

worldwide.

Group Cash Flow Statement (Summary)


Cash flow from operating activities 751 343

Cash flow from investing activities (502) (817)

Cash flow from financing activities 276 595

Change in cash and cash equivalents 525 121

Exchange rate effects and other changes in cash and cash equivalents (24) 55

Cash and cash equivalents on 1/1 1,310 1,331

Cash and cash equivalents on 6/30 1,811 1,507

Less cash and cash equivalents included within assets held for sale — —

Cash and cash equivalents on 6/30 (as per consolidated balance sheet) 1,811 1,507


Performance of the Group DivisionsRTL Group

RTLGroupsawpositivebusinessdevelopment in thefirst

half of the year, growing both its revenues and earnings.

First-half revenues increased 3.2 percent year on year to

€2.9billion(H12015:€2.8billion).Keycontributorstothis

were Mediengruppe RTL Deutschland, the further expan-

sion of the international digital businesses, and the TV

activitiesinFrance.OperatingEBITDAgrewby8.2percent

to €676 million (H1 2015: €625 million). This significant

earnings improvement was primarily fueled by Groupe

M6 and Mediengruppe RTL Deutschland. The increase at

GroupeM6wasmainlydrivenbyapositiveeffectassoci-

atedwiththegradualphase-outoftheM6Mobilecontract.

Mediengruppe RTL Deutschland once again generated

recordearnings.

Overall,RTLGroup’sfamiliesofchannelsdevelopedpositively

inafavorablemarketenvironment,withallrelevantEuropean

TVadvertisingmarkets exceptHungary showinggrowth.

AsthelivematchesoftheEuropeansoccerchampionships

wereairedbythepublicbroadcasters,MediengruppeRTL

Deutschland'scombinedaudienceshareinthemaintarget

groupdecreasedslightly.However,itsleadoverthelargest

commercial competitor grew to three percentage points.

Inaddition,MediengruppeRTLDeutschland launchedtwo

newTVchannelsandsecured thebroadcasting rights for

28 more matches of Germany’s national soccer team. In

France,GroupeM6achievedsignificantaudiencesharegains

in the commercial target group; its flagship channel M6

benefited from the broadcast of eight European soccer

championshipmatchesinJune.

FremantleMediageneratedlowerfirst-halfrevenuesyearon

year,mainlyduetodeclinesinNorthAmerica.However,the

revenuedecreasewasmorethanoffsetontheearningsside.

Atthesametime,theproductioncompanystrengthenedits

position with further acquisitions, including in the UK and

Israel.

RTL Group’s digital businesses continued their dynamic

growth, increasing theirfirst-half revenueby20.5percent

from€219million in thefirsthalfof2015 to€264million

in thefirsthalfof2016.Theonlinevideositesgenerated

a totalof123.1billionviews,up190percentyearonyear.

MediengruppeRTLDeutschlandstrengtheneditsdigitalport-

foliobyacquiringamajoritystakeintheonlinevideoadvertis-

ingsaleshouseSmartClip.

Penguin Random House

The world’s leading trade book publisher Penguin

Random House delivered a strong bestseller-sales perfor-

mancethatwasimpactedbyanexpecteddeclineine-book

salesintheUnitedStatesandUKdueinparttonewretailsales

terms,leadingtoadecreaseinrevenuesandoperatingEBITDA

duringthereportingperiod.Thepublishinggroup’sfirst-half

revenues,inclusiveofVerlagsgruppeRandomHouse,which

is wholly owned by Bertelsmann, declined 10.7 percent

yearonyearto€1.5billion(H12015:€1.7billion).Thefinan-

cialimpactonrevenuesfromportfoliochangesandnegative

currencyeffectswerepartlyoffsetbysteadyphysicalbook

sales,andgrowthintheaudioformat.Savingsfromthenow-

completedintegrationcontributedsignificantlytooperating

EBITDA,whichwasdownby10.6percent to€185million

(H12015:€207million).

IntheUnitedStates,PenguinRandomHousehad316“New

YorkTimes”bestsellersinthefirstsixmonthsoftheyear,59at

numberone.Itstop-sellingtitleswerethenovels“MeBefore

You”and“AfterYou”byJojoMoyes,with2.4millioncop-

iessold.“TheGirlontheTrain”byPaulaHawkinsremained

anumber-onebestseller formuchof theperiod, sellingover

800,000print,audioande-books.Multi-titleDr.Seussclassics

soldmorethanthreemillionbooks.

IntheUK,PenguinRandomHousepublishedmorethanhalf

ofthe“SundayTimes”weeklytop-tenbestsellerlisttitles,

113books.TogetherwiththenovelsbyHawkinsandMoyes,

topsellersincludedBillBryson’s“TheRoadtoLittleDribbling”

andRoaldDahl’schildren’sbook“TheBFG.”

InSpainandLatinAmerica,PenguinRandomHouseGrupo

EditorialexpandeditsSpanish-andPortuguese-language

publishingactivities,withhighersalesandincreasedmarket

shareinSpain,offsetbyworseningeconomicconditionsin

LatinAmerica.

VerlagsgruppeRandomHouseinGermanyhadastablefirst

sixmonths,placing236titlesonthe“Spiegel”bestsellerlists.

Many of the publishing group’s authors won prestigious

awards during the reporting period, including US Pulitzer

PrizesforGeneralNonfiction,History,andAutobiography.

Bertelsmann owns 53 percent of shares in Penguin

RandomHouse,Pearson47percent.


Gruner + Jahr

Gruner + Jahr continued its strategic transformation. The

firsthalfoftheyearsawacquisitionsandcooperationagree-

ments inallkeymarkets.Revenues remainednear-stableat

€777million(H12015:€785million),reflectingayear-on-year

declineof1.0percent.Themainrevenue-reducingeffects

were overall developments in the print advertising market

andchangestotheportfolio–e.g.,thesaleofMotorPresse

StuttgartinFrance.Thesedeclineswerenearlyentirelycom-

pensatedbysteepgrowthindigitalrevenuesinGermanyand

France.Revenues fromG+J’sdigitalbusinesses in thecore

marketsgrewby31percent.OperatingEBITDAdecreasedby

7.1percentto€52million(H12015:€56million).Thiswasdue

inparticulartohighexpensesfordigitalbusinesses,especially

at G+J Germany. G+J France’s businesses and Deutsche

PresseVertrieb (DPV) contributedhigher results than in the

firsthalfof2015.

G+JGermany increased itsfirst-half revenuesyearonyear.

Thiswasdriven largelybyorganicandacquisitiveexpansion

ofthedigitalbusinessesbothinthegrowthareasofContent,

Community and Commerce, and in the digital marketing

business.TheacquiredcompaniesTrnd,Danato,Delineroand

Employourcontributedadditional revenues.Thanks to the

successfullaunchofnewmagazinetitles,G+JGermanywas

alsoabletokeepitscirculationrevenuesnearlystable.During

thereportingperiod,G+JformedGermany’slargestcontent

communicationserviceprovider:Territory.DresdnerDruck-

und Verlagshaus and DPV both generated higher revenues

thaninthesameperiodlastyear.

InFrance,PrismaMedia increased its revenuesandearn-

ings.Thecontinuedstronggrowthofthedigitalbusinesses

morethancompensatedformarket-relateddeclinesinthe

print advertising business. Prisma Media also acquired

Groupe Cerise, one of the country’s leading digital video

providers.

BMG

TheBertelsmannmusicsubsidiaryBMG,whichhasoperated

as an independent division since January 1, 2016, further

consolidated its market position in publishing and recorded

musicrightswhilecontinuingtogrowitsbusiness.Revenues

increased4.6percentto€182million(H12015:€174million),

drivenbygrowth in thepublishingbusiness in theUKand

continentalEuropeaswellastherecordedmusicbusinessin

theUnitedStatesandcontinentalEurope.OperatingEBITDA

amounted to €32 million, up by 6.7 percent year on year

(H12015:€30million).

BMG strengthened its portfolio through a series of acquisi-

tionsandcatalogpurchases inthefirsthalfof theyear.The

acquisitionof amajority stake in theARCmusicpublishing

catalog secured thecompany the rights to songsby artists

includingChuckBerry,theBeachBoysandJohnLeeHooker.

BMGhasalsomadeprogressimplementingkeystrategicini-

tiativessuchasconsolidating itsworldwide recordedmusic

distribution,andenteringthemarketsinAustraliaandBrazil.

JustafewmonthsafterenteringthemarketinAustralia,BMG

announced itwould takeoverAlberts, oneof the country’s

mosthistoricindependentmusiccompanies.

AmongthemostimportantclientsnewlysignedtoBMGduring

thefirsthalfoftheyearwasPinkFloydfounderandsongwriter

Roger Waters. BMG now represents Roger Waters’ publish-

inginterests inthePinkFloydcatalog,whichincludethetitles

“Money,”“AnotherBrickintheWall”and“ComfortablyNumb.”

NumerousBMGclientsachievedsuccessintheperiod,among

themRickAstley,whosenewalbumwenttonumberoneinthe

UKcharts.Intotal,BMG-signedmusiciansandsongwriterswere

involvedin19GrammyawardsintheUnitedStates,19Echo

awardsinGermany,andtwelveBumasintheNetherlands.

Arvato

Arvatorecordedapositivefirst-halfbusinessperformance,

growingbothitsrevenuesandearnings.Revenuesincreased

by3.6percentto€1.9billion(H12015:€1.8billion).Thethree

biggestSolutionGroupsCRM,SCMandFinancialSolutions

all achieved organic growth. Operating EBITDA grew by

26.8 percent to €180 million (H1 2015: €142 million); all

SolutionGroupscontributedtothisincrease.

Theservicesbusinessesgrouped inArvatoCRMposteda

powerfulperformanceinthefirsthalfof2016andcontributed

significantlytoArvato’srevenueandearningsgrowth.Besides

traditionalcustomerservicebyphone,thefocuswasondevel-

opingalternativecustomercommunicationchannels,suchas

socialmediaand(video)chat.Inaddition,newinternational

customerswerewon in the IT/Internetand tourismsectors.

Anewservicecenterwithspaceforaround1,400employees

wasopenedinGurgaon,India.

ArvatoSCMSolutionsfurtherexpandeditsexistingnational

andinternationalcustomerrelationshipsduringthereporting

period, and implemented projects with new clients. It also


expandeditsnetworkofEuropeanlogisticssites, including

bycommissioninganewdistributioncenter inGennep, the

Netherlands.

Thefinancialservicesbusinessesalsodevelopedpositively

in thefirsthalfof2016.Beyondstablegrowth inbusiness

in Germany, this development was fueled in particular by

anexcellentperformanceinthebusinesswithBPOservices

formajorinternationalclients.Tofurtherstrengtheninnova-

tion,anITdevelopmentandinnovationcenterwasopenedin

Tallinn,andaroboticslabestablishedinDublin.

The IT services provider Arvato Systems recorded a con-

stantly high demand for solutions related to application

development and digital transformation. All of the digi-

tal marketing business units developed positively; the

DeutschlandCardmulti-partnerprograminparticularshowed

profitablegrowth.

Bertelsmann Printing Group

SinceJanuary1,2016,allofBertelsmann’sglobaloffsetand

gravure printing operations, and several other service and

productionbusinesses,havebeengroupedinanewdivision:

theBertelsmannPrintingGroup.Thegroupwasabletomake

importantprogresson its integrationduring thefirsthalfof

the year and successfully stood its ground in a challenging

marketenvironment.Itsrevenuesdeclinedby5.3percentto

€774million(H12015:€817million),mainlyduetothesale

of the Spanish operations completed in 2015. Adjusted for

portfoliochangesandexchangerateeffects, revenueswere

roughlyonparwiththepreviousyear.Thegroup’soperating

EBITDAincreasedsignificantlyby17.5percentto€47million

(H12015:€40million),thankstoimprovedutilizationofpro-

ductioncapacityasaresultoftheacquisitionofnewcustom-

ersandtosuccessfulcost-cuttingmeasures.

TheBertelsmannPrintingGroup’soffsetprintingbusinesses

remainedstableatagoodearningslevelinthefirstsixmonths.

Europe’s leading offset printing company, Mohn Media,

upheld the good revenues andprofitability of theprevious

year.

ThegravureprintingoperationspooledinthePrinovisgroup

developed positively and contributed higher revenue and

earningsthan inthefirsthalfof2015. IntheUK,effortsto

acquirenewcustomersweresuccessful.Thiswillcontribute

tolong-termcapacityutilizationattheLiverpoolsiteandwill

alsobenefitthePrinovisprintingplantsinGermany.

Despite continued intense competition in the field of letter-

pressprinting,theBertelsmannPrintingGroup’sUSprinters

were able to increase both their revenues and earnings.

Declines in paperback production were compensated by

expandingthebusinesswithinnovativeprintproductstonew

industries.

Asexpected,revenuesinstoragemediareplicationdeclined

duetotheclosureoftheUSsiteinWeavervilleatthebegin-

ningof2016.Thebusinessesatthegroup’sprimarylocation

inGüterslohbuckedthegeneralmarkettrend,increasingtheir

productionvolumes,revenuesandearnings.Thisdevelop-

ment was due among other things to the UHD production

businesslaunchedinspring.

Bertelsmann Education Group

Duringthereportingperiod,Bertelsmanncontinuedtheexpan-

sionofitseducation-relatedactivitiesinthee-learning(health

andtechnology)andonlineservicessectors.InSeptember2015,

thesebusinessesweremergedintotheBertelsmannEducation

Group,whichhasoperatedasanindependentdivisionsince

January1,2016.

Inthefirstsixmonthsoftheyear,thosebusinesses,which

Bertelsmann has fully consolidated, saw a 28 percent

increase in revenues to€64million (H12015:€50million).

Thedivision’soperatingEBITDA,meanwhile,declinedto

€-13million(H12015:€-3million),primarilyduetosched-

uled start-up losses for further business expansion, trans-

formationcostsatAlliantInternationalUniversityandequity

pickupofHotChalklosses.

Inparticular,thee-learningproviderReliasLearningrecorded

a positive performance, growing both organically and

through acquisitions. The Bertelsmann subsidiary added

newcustomers,whoseemployeescompletedapproximately

15milliononlinecoursesinthefirstsixmonthsofthecur-

rent year. During the reporting period, the company also

took over Assessment & Intelligence Systems, a Canadian

companyspecializing in training forhomecare,andstarted

upoperationsintheUK.

The online learning provider Udacity, in which Bertelsmann

ownsastake,alsoexpanded itsbusiness internationallyand

recentlybeganofferingitsNanodegreerangeinChina,India

andGermany.

The online education platform HotChalk grew with existing

andnewpartneruniversities.Therearesome6,600students

currentlyenrolledatsevenuniversitiesinprogramssupported

byHotChalk.

Alliant InternationalUniversity,whichspecializes inpsychol-

ogy,continueditstransformation;around3,500studentsare

currentlystudyingattheuniversity’selevencampuses.


Bertelsmann Investments

Bertelsmann’sfourdigitalfunds,groupedintothenewdivision

BertelsmannInvestmentssincethebeginningofthisyear,have

furtherexpandedtheirportfoliosofstartupsaroundtheworld.

ThroughBertelsmannAsiaInvestments(BAI),BertelsmannBrazil

Investments(BBI),BertelsmannIndiaInvestments(BII),and

BertelsmannDigitalMediaInvestments(BDMI),Bertelsmannis

investedin125companiesasofJune30,2016.Thebusiness

developmentofBertelsmannInvestmentsisdeterminedmainly

onthebasisofEBIT,whichincreasedto€42million(H12015:

€-7million).CapitalgainsfromexitsofBertelsmannInvestments

shareholdings–primarilyatBAI–thuscontributedsignificantly

totheGroup’searnings.

In China, BAI invested in ten new companies during the

reportingperiod,andalsoparticipatedinfollow-onfinancing

roundsforcompaniesincludingthefitnessappKeepandthe

datingplatformTantan.

InIndia,Bertelsmannstrengtheneditsactivitiesinstrategically

relevantbusinesssegmentsbyacquiringstakesinthee-com-

merceenablerKartRocket,thesocialfashionnetworkRoposo,

andthefintechcompanyLendingkart.BIIalsomadefollow-on

investmentsinexistingcompaniessuchasPepperfry,WizIQ

andiNurture.

In Brazil, BBI together with its strategic partner Bozano

InvestimentosadvancedtheGroup’sexpansioninhigheredu-

cationthroughits investment intheonlineeducationbusiness

Medcel,whichprovidespreparationcoursesformedicalstudents.

Duringthereportingperiod,BDMI’sinvestmentsincludedthe

acquisitionofstakesinthevideoplatformVemba,thenext-

generationpublisher Inverse, theVRstartupVisionaryVR

intheUnitedStates,andtheVRstartupSplashinGermany,

amongstothers.

All platforms contributed to identifying digital trends and

supporting innovative portfolio companies in their develop-

ment.

Significant Events After the Balance Sheet Date

Noreportableeventsoccurred.

Risks and OpportunitiesRisk Management System

Pleaserefertothe2015CombinedManagementReportfora

descriptionofBertelsmann’sriskmanagementsystem(RMS)

andtheaccounting-relatedRMSandinternalcontrolsystem

(ICS).

Significant Changes in Risks Since the 2015 Combined Management Report

Pleaserefertothe2015CombinedManagementReportfora

presentationofthekeyriskstotheBertelsmannGroup.The

followingsignificantchangeshavebeenidentifiedaspartof

theriskreportasofJune30,2016.Overall,afterthefirsthalf-

year2016, thesameGrouprisksareconsideredmaterialas

those existing as of December 31, 2015. However, the sig-

nificanceofindividualtypesofriskintermsofBertelsmann’s

futurebusinessdevelopmenthaschanged.Thecustomerrisks

thatwereclassifiedasmoderateasofDecember31,2015,

haveincreasedinsignificance.Thisisprimarilyattributableto

theincreaseinindividualriskpositionsatArvatoandPenguin

RandomHouse.ThemostsignificantriskintheGroupremains

thepricinganddiscountingrisk.

Strategic and Operational Risks

The strategic and operational risk position for the Group

remainsessentiallyunchangedfromthatdepictedinthe2015

CombinedManagementReport.

Expectationsofamoderateeconomicrecoveryintheeuro-

zone remain unchanged. However, the risks for the world

economyarenowgreater,especiallyfollowingtheBrexitref-

erendum.Thelong-termeffectsoneconomicdevelopment,in

particularintheUKandintheeurozone,willdependgreatly

ontheframeworkconditionsfortheUK’sexitfromtheEU.For

Bertelsmann,thiscouldresultprimarilyinriskstobusinesses

thatdependontheadvertisingmarkets.

Legal and Regulatory Risks

Pleaserefertothe2015CombinedManagementReportfor

detailsofthelegalandregulatoryrisks.Nosignificantchanges

havebeenidentified.

Financial Market Risks

Comparedtothesituationinthe2015CombinedManagement

Report,thefinancialmarketrisksremainatamoderatelevel.

Overall Risk

Theoverallriskpositionhasincreasedslightlycomparedwith

thepreviousyear.Nogoingconcernriskswereidentifiedfor

BertelsmannasofJune30,2016.Therearealsonosubstan-

tialgoingconcernrisksdiscerniblefromthecurrentperspec-

tivethatcouldthreatenthecontinuedexistenceoftheGroup.


Opportunities

The assessment of opportunities has not changed sub-

stantiallycompared to the informationpresented in the

2015CombinedManagementReport.

Outlook

With a view to the whole of 2016, the global economy is

expectedtocontinuetogrowatamoderatepace.Theprospects

fortheadvancedeconomieswillbeboostedbythefavorable

financing conditions and the continuing growth in employ-

ment. Incontrast, theoutlookfortheemergingeconomies

remainssubjecttogreateruncertainty.Theeconomicestimates

bytheKiel InstitutefortheWorldEconomy(IfW)concerning

globaldevelopmentare3.1percentfor2016,whichisslightly

belowpreviousexpectations.Inaddition,therisksfortheworld

economyhaveincreasedfollowingtheBrexitreferendum.

Expectationsofamoderateeconomicrecoveryintheeuro-

zoneremainunchanged.TheIfWexpectsrealGDPgrowthof

1.7percentin2016.InGermany,moderateeconomicgrowth

isexpectedtocontinue;theIfW’sestimatesforgrowthin

realGDPfor2016areslightlybelowpreviousexpectations

at1.9percent.EconomicexpansioninFranceisexpectedto

accelerateslightly in2016withrealgrowthof1.6percent.

Ontheotherhand,expectationsforeconomicrecoveryinthe

UKhavebeenlowered;thisyear,theIfWexpectsrealGDPto

growbyonly1.8percent.FortheUnitedStates,theIfWalso

expects realGDP togrowby2.0percent in2016,which is

lowerthanpreviousexpectations.

Theseexpectationsremainsubjecttoahighlevelofuncer-

tainty due to difficulties in forecasting economic devel-

opments. Certain risks remain for the global recovery.

Geopolitical crises, government deficits, currency turbu-

lenceorthehighratesofunemploymentinsomedeveloped

countries could interfere with economic development. In

addition,highvolatility inthefinancialmarkets iscreating

uncertainty. The resulting developments could adversely

affecttheeconomicsituation,whichisakeyfactorinfluenc-

ingBertelsmann’sbusinessdevelopment.

Bertelsmann confirms the forecast. On a comparable basis

with the forecast details from the Annual Report 2015,

Bertelsmannstillexpectsslightlyincreasingrevenuesandsta-

bleoperatingEBITDAforthecurrentfinancialyear.Also,due

toincreasedinvestedcapital,expectationsofstronglydeclin-

ingBVAinthefinancialyear2016remainunchanged.

TheseforecastsarebasedonBertelsmann’scurrentbusiness

strategy,asoutlinedinthe“CompanyProfile”section.Ingen-

eral, the forecasts reflect careful consideration of risks and

opportunitiesandarebasedonoperationalplanningand the

medium-termoutlookforthecorporatedivisions.Allstatements

concerning potential economic and business developments

representopinionsadvancedon thebasisof the information

that iscurrentlyavailable.Shouldunderlyingsuppositionsfail

toapplyand/orfurtherrisksarise,actualresultsmaydifferfrom

thoseexpected.Accordingly,noassurancescanbeprovided

concerningtheaccuracyofsuchstatements.


Condensed Interim Consolidated Financial Statements


Revenues 7,966 8,040

Other operating income 299 251

Changes in inventories 267 183

Own costs capitalized 15 15

Cost of materials (2,782) (2,723)

Royalty and license fees (647) (666)

Personnel costs (2,669) (2,663)

Amortization/depreciation, impairment losses and reversals of intangible assets and property, plant and equipment

(309) (293)

Other operating expenses (1,410) (1,501)

Results from investments accounted for using the equity method 16 4

Results from financial assets 3 6

Results from disposals of investments 56 17

EBIT (earnings before interest and taxes) 805 670

Interest income 6 9

Interest expenses (78) (66)

Other financial income 16 6

Other financial expenses (61) (68)

Financial result (117) (119)

Earnings before taxes from continuing operations 688 551

Income tax expense (206) (156)

Earnings after taxes from continuing operations 482 395

Earnings after taxes from discontinued operations – 3

Group profit or loss 482 398

attributable to:

Bertelsmann shareholders

Earnings from continuing operations 288 214

Earnings from discontinued operations – 3

Earnings attributable to Bertelsmann shareholders 288 217

Non-controlling interests

Earnings from continuing operations 194 181

Earnings from discontinued operations – –

Earnings attributable to non-controlling interests 194 181

Consolidated Income Statement

18 Condensed Interim Consolidated Financial Statements



Items that will not be reclassified subsequently to profit or loss

Remeasurement component of defined benefit plans (415) 176

Share of other comprehensive income of investments accounted for using the equity method – –

Items that will be reclassified subsequently to profit or loss when specific conditions are met

Currency translation differences

– changes recognized in equity (124) 281

– reclassification adjustments for gains (losses) included in profit or loss – (2)

Available-for-sale financial assets

– changes in fair value recognized in equity 3 1

– reclassification adjustments for gains (losses) included in profit or loss – –

Cash flow hedges

– changes in fair value recognized in equity (10) 16

– reclassification adjustments for gains (losses) included in profit or loss – (9)

Share of other comprehensive income of investments accounted for using the equity method 6 3

Other comprehensive income net of tax (540) 466

Group total comprehensive income (58) 864

attributable to:

Bertelsmann shareholders (214) 627

Non-controlling interests 156 237

in € millions H1 2016

H1 2015

EBIT from continuing operations 805 670

Special items

Impairment on other financial assets 5 5

Results from disposals of investments (56) (17)

Fair value remeasurement of investments – (5)

Restructuring and other special items 51 118


309 293

Adjustments on amortization/depreciation, impairment losses and reversals of intangible assets and property, plant and equipment included in special items

(3) (1)

Operating EBITDA from continuing operations 1,111 1,063

Consolidated Statement of Comprehensive Income

Reconciliation to Operating EBITDA (Continuing Operations)


in € millions 6/30/2016 12/31/2015

Assets

Non-current assets

Goodwill 7,946 7,895

Other intangible assets 2,444 2,522

Property, plant and equipment 1,584 1,605

Investments accounted for using the equity method 1,002 945

Other financial assets 415 405

Trade and other receivables 89 146

Other non-financial assets 631 640

Deferred tax assets 1,090 961

15,201 15,119

Current assets

Inventories 1,807 1,661

Trade and other receivables 3,408 3,707

Other financial assets 123 113

Other non-financial assets 955 858

Current income tax receivables 100 140

Cash and cash equivalents 1,811 1,310

8,204 7,789

Assets held for sale – –

23,405 22,908

Equity and liabilities

Equity

Subscribed capital 1,000 1,000

Capital reserve 2,345 2,345

Retained earnings 3,752 4,146

Bertelsmann shareholders’ equity 7,097 7,491

Non-controlling interests 1,889 1,943

8,986 9,434

Non-current liabilities

Provisions for pensions and similar obligations 2,254 1,709

Other provisions 117 122

Deferred tax liabilities 135 160

Profit participation capital 413 413

Financial debt 3,774 3,075

Trade and other payables 349 375

Other non-financial liabilities 337 375

7,379 6,229

Current liabilities

Other provisions 314 346

Financial debt 991 1,000

Trade and other payables 3,980 4,276

Other non-financial liabilities 1,644 1,529

Current income tax payables 111 94

7,040 7,245

Liabilities related to assets held for sale – –

23,405 22,908

Consolidated Balance Sheet



Group earnings before interest and taxes 805 673

Taxes paid (134) (163)

Depreciation and write-ups of non-current assets 314 298

Results from disposals of investments (56) (20)

Change in provisions for pensions and similar obligations (40) (42)

Change in other provisions (41) (108)

Change in net working capital (108) (327)

Fair value remeasurement of investments – (5)

Other effects 11 37


– thereof discontinued operations – –

Investments in:

– intangible assets (212) (126)

– property, plant and equipment (129) (150)

– financial assets (134) (165)

– purchase prices for consolidated investments (net of acquired cash) (128) (73)

Cash receipts for disposal of subsidiaries and other business units (4) (5)

Cash receipts from disposal of other fixed assets 105 102

Contribution to/withdrawals from defined benefit plans – (400)



Proceeds from bonds and promissory notes 694 1,241

Proceeds from/redemption of other financial debt 71 (178)

Interest paid (106) (62)

Interest received 5 8

Dividends to Bertelsmann shareholders (180) (180)

Dividends to non-controlling interests and payments to partners in partnerships (IAS 32.18b) (205) (239)

Change in equity (3) 5

Cash flow from financing activities 276 595


Change in cash and cash equivalents 525 121

Exchange rate effects and other changes in cash and cash equivalents (24) 55

Cash and cash equivalents 1/1 1,310 1,331

Cash and cash equivalents 6/30 1,811 1,507

Less cash and cash equivalents included within assets held for sale – –

Cash and cash equivalents 6/30 (according to the Group balance sheet) 1,811 1,507

Consolidated Cash Flow Statement


Net financial debt at 1/1 (2,765) (1,689)



Interest, dividends and changes in equity, additional payments (IAS 32.18b) (489) (468)

Exchange rate effects and other changes in net financial debt 51 (52)

Net financial debt at 6/30 (2,954) (2,683)

Net financial debt is the balance of the balance sheet positions “Cash and cash equivalents” and “Financial debt.”

Change in Net Financial Debt


in € millions

Sub-scribed capital

Capital reserve

Retained earnings Bertels- mann share-holders’ equity

Non- controlling interests

Total

Other retained earnings

Cumulated other comprehensive income1)

Currency transla-tion dif-ferences


Cash flow hedges

Share of other compre-hensive income of invest-ments accounted for using the equity method

Balance as of 1/1/2015 1,000 2,345 3,256 (117) 16 21 13 6,534 1,846 8,380

Group profit or loss – – 217 – – – – 217 181 398

Other comprehensive income

174 224 1 8 3 410 56 466

Group total comprehensive income

– – 391 224 1 8 3 627 237 864

Dividend distributions – – (180) – – – – (180) (250) (430)

Changes in ownership interests in subsidiaries that do not result in a loss of control

– – (18) – – – – (18) 23 5

Equity transactions with shareholders

– – (198) – – – – (198) (227) (425)

Other changes – – 7 – – – – 7 14 21

Balance as of 6/30/2015 1,000 2,345 3,456 107 17 29 16 6,970 1,870 8,840

Balance as of 1/1/2016 1,000 2,345 3,993 96 13 29 15 7,491 1,943 9,434

Group profit or loss – – 288 – – – – 288 194 482

Other comprehensive income

– – (399) (99) 2 (8) 2 (502) (38) (540)

Group total comprehensive income

– – (111) (99) 2 (8) 2 (214) 156 (58)

Dividend distributions – – (180) – – – – (180) (213) (393)

Changes in ownership interests in subsidiaries that do not result in a loss of control

– – 5 – – – – 5 4 9

Equity transactions with shareholders

– – (175) – – – – (175) (209) (384)

Other changes – – (5) – – – – (5) (1) (6)

Balance as of 6/30/2016 1,000 2,345 3,702 (3) 15 21 17 7,097 1,889 8,986

1) As of June 30, 2016, and as of June 30, 2015, no assets classified as held for sale in accordance with IFRS 5 were affected.

Consolidated Statement of Changes in Equity


Selected Explanatory NotesAccounting Principles

TheInterimFinancialReportforBertelsmannSE&Co.KGaA

hasbeenpreparedaccording toSection37wof theGerman

SecuritiesTradingAct(Wertpapierhandelsgesetz–WpHG)and

hasbeensubject toa limited reviewby theGroup’sauditor.

It complies with International Financial Reporting Standards

(IFRS)andtherelatedinterpretations(IFRIC)oftheIFRSInter-

pretations Committee (IFRS IC) applicable in the European

Union(EU-IFRS)andcontainscondensedinterimconsolidated

financialstatementspreparedinaccordancewithIAS34Interim

FinancialReporting,includingselectedexplanatorynotes.This

reportwasprepared–withtheexceptionofthefinancialreport-

ingstandardsappliedforthefirsttimeinthecurrentfinancial

year–usingfundamentallythesameaccountingandmeasure-

mentpoliciesas intheConsolidatedFinancialStatementsof

December31,2015.Adetaileddescriptionofthesepoliciesand

theneworrevisedfinancialreportingstandardsandinterpreta-

tionstobeappliedfrom2016arepresentedinthenotestothe

ConsolidatedFinancialStatementsinthe2015AnnualReport.

Asof June30, 2016, the followingfinancial reporting stan-

dardshavebeenappliedforthefirsttime:

• AnnualImprovementstoIFRSs2010–2012Cycle(issuedin

December2013)

• AnnualImprovementstoIFRSs2012–2014Cycle(issuedin

September2014)

• AmendmentstoIFRS11JointArrangements:Accounting

forAcquisitionsofInterestsinJointOperations

• AmendmentstoIAS1:DisclosureInitiative

• AmendmentstoIAS16andIAS38:ClarificationofAccept-

ableMethodsofDepreciationandAmortization

• AmendmentstoIAS16andIAS41:BearerPlants

• AmendmentstoIAS19:DefinedBenefitPlans–Employee

Contributions

• Amendments to IAS 27 Separate Financial Statements:

EquityMethodinSeparateFinancialStatements

The first-time application does not have a material impact

on theBertelsmannGroup.TheBertelsmannGrouphasnot

optedfor furtherearlyadoptionofanyadditionalstandards,

interpretationsoramendmentsthathavebeenissuedbutare

notyetmandatory.

Segment Information (Continuing Operations)

in € millions

RTL GroupPenguin

Random House Gruner + Jahr BMG ArvatoBertelsmann

Printing GroupBertelsmann

Education GroupBertelsmannInvestments2) Total divisions Corporate Consolidation

Continuing operations

H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015

Revenues from external customers 2,874 2,786 1,515 1,697 765 774 181 172 1,865 1,794 677 705 64 50 – – 7,941 7,978 25 62 – – 7,966 8,040

Intersegment revenues 4 2 1 – 12 11 1 2 30 36 97 112 – – – – 145 163 16 15 (161) (178) – –

Divisional revenues 2,878 2,788 1,516 1,697 777 785 182 174 1,895 1,830 774 817 64 50 – – 8,086 8,141 41 77 (161) (178) 7,966 8,040

Operating EBITDA 676 625 185 207 52 56 32 30 180 142 47 40 (13) (3) 1 2 1,160 1,099 (43) (35) (6) (1) 1,111 1,063

EBITDA margin1) 23.5% 22.4% 12.2% 12.2% 6.8% 7.2% 17.4% 17.4% 9.5% 7.8% 6.0% 4.8% -20.9% -6.9% – – 14.3% 13.5% – – – – 13.9% 13.2%

Impairment (-)/reversals (+) on intangible assets and property, plant and equipment

(5) 8 – – – – – – (1) – – – – – – – (6) 8 – – – – (6) 8

Results from investments accounted for using the equity method

32 29 – (1) – – – – 4 5 – – (14) (22) (7) (8) 15 3 – 1 1 – 16 4

Figures for H1 2015 have been adjusted. Further details on the adjustment of previously published information are presented in the “Notes on Segment Reporting” section.1) Operating EBITDA as a percentage of revenues.2) The business development of Bertelsmann Investments is determined primarily based on EBIT. EBIT totaled €42 million (H1 2015: €-7 million).


TheCondensedInterimConsolidatedFinancialStatementsas

ofJune30,2016,includeBertelsmannSE&Co.KGaAandall

materialsubsidiariesoverwhichBertelsmannSE&Co.KGaA

isabletoexercisecontrolinaccordancewithIFRS10.Joint

venturesandassociatesareaccounted forusingtheequity

methodinaccordancewithIAS28.AsofJune30,2016,the

scopeofconsolidationincludingBertelsmannSE&Co.KGaA

consistsof956companies(December31,2015:954)with

49entriesand47exitsinthefirsthalfof2016.Thisincludes

876(December31,2015:883)fullyconsolidatedcompanies,of

which763(December31,2015:758)arewhollyownedsubsid-

iaries.Inaddition,investmentsin29(December31,2015:29)

jointventuresand51(December31,2015:42)associatesare

accounted forusing theequitymethod in theConsolidated

FinancialStatements.Atotalof230(December31,2015:224)

companies without significant business operations are

excludedfromthescopeofconsolidationduetotheirnegli-

gibleimportanceforthefinancialpositionandfinancialperfor-

manceoftheBertelsmannGroup.

Inthefirsthalfof2016,thecashflowfromacquisitionactivi-

ties totaled€128million,ofwhich€108million relates to

newacquisitionsduring thefirsthalfof theyear lesscash

andcashequivalentsacquired.Theconsiderationtransferred

inaccordancewithIFRS3amountedto€144milliontaking

accountofcontingentconsiderationof€6million. Inaddi-

tion,putoptions totaling€3million related to thebusiness

combinationswereaccountedfor.

InMarch2016,RTLGroupacquiredaninterestof93.75percent

inSmartclipHoldingAGincludingitsfivesubsidiaries.Smartclip

bundlestheonlinevideoadvertisinginventoryof700publishers

worldwide,andmanagestheintegrationandservingofvideo

advertisingtoallInternet-connectedscreens.Thecompany

complementsRTLGroup’sinvestmentsindigitaladvertising

sales.TheGermanFederalCartelOfficeapprovedthetrans-

action inApril2016.Theconsideration transferredamounted

to€48millionandwasfullypaidincash.Thepreliminarypur-

chasepriceallocation resulted innon-tax-deductiblegood-

will intheamountof€38millionresultingfromtheskillsand

marketcompetenceofSmartclip’sworkforceandthesyner-

giesexpected.RTLGroupholdsaputandcalloptionforthe

Acquisitions and Disposals

Scope of Consolidation

in € millions

RTL GroupPenguin

Random House Gruner + Jahr BMG ArvatoBertelsmann

Printing GroupBertelsmann

Education GroupBertelsmannInvestments2) Total divisions Corporate Consolidation

Continuing operations

H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015 (adjusted)

H1 2016 H1 2015

Revenues from external customers 2,874 2,786 1,515 1,697 765 774 181 172 1,865 1,794 677 705 64 50 – – 7,941 7,978 25 62 – – 7,966 8,040

Intersegment revenues 4 2 1 – 12 11 1 2 30 36 97 112 – – – – 145 163 16 15 (161) (178) – –

Divisional revenues 2,878 2,788 1,516 1,697 777 785 182 174 1,895 1,830 774 817 64 50 – – 8,086 8,141 41 77 (161) (178) 7,966 8,040

Operating EBITDA 676 625 185 207 52 56 32 30 180 142 47 40 (13) (3) 1 2 1,160 1,099 (43) (35) (6) (1) 1,111 1,063

EBITDA margin1) 23.5% 22.4% 12.2% 12.2% 6.8% 7.2% 17.4% 17.4% 9.5% 7.8% 6.0% 4.8% -20.9% -6.9% – – 14.3% 13.5% – – – – 13.9% 13.2%

Impairment (-)/reversals (+) on intangible assets and property, plant and equipment

(5) 8 – – – – – – (1) – – – – – – – (6) 8 – – – – (6) 8

Results from investments accounted for using the equity method

32 29 – (1) – – – – 4 5 – – (14) (22) (7) (8) 15 3 – 1 1 – 16 4

Figures for H1 2015 have been adjusted. Further details on the adjustment of previously published information are presented in the “Notes on Segment Reporting” section.1) Operating EBITDA as a percentage of revenues.2) The business development of Bertelsmann Investments is determined primarily based on EBIT. EBIT totaled €42 million (H1 2015: €-7 million).


remainingnon-controlling interestsof6.25percentexercisable

in2017.Theexercisepriceoftheputoptionisbasedonavari-

ablecomponentandcappedat€200millionona100percent

basis.Thecorrespondingamounthasbeeninitiallyrecognized

asafinancialliabilityatthepresentvalueoftheredemption

amounttotaling€3millionwithacorrespondingreductionin

equity.Thefinancial liabilitysubsequentlymeasuredatamor-

tizedcostremainedunchangedasofJune30,2016.Anyfur-

therremeasurementoftheliabilitywillberecognizedinthe

incomestatement.Transaction-relatedcostsamountedtoless

than€1millionandhavebeenrecognizedinprofitorloss.

InMay2016,Gruner+Jahr’sFrenchsubsidiaryPrismaMedia

acquiredaninterestof100percentinGroupeCerise.Thecom-

panyisoneofFrance’sleadingdigitalmediagroups,primarily

duetoitsvideooffers.Withtheacquisition,Gruner+Jahr

reinforces thepositionofPrismaMedia in theareas that

arestrategically important fordigitaldevelopment:video,

mobile,technologyandsocialnetworks.Thepreliminarycon-

siderationtransferredamountsto€42millionandwaspaid

completelyincash.Thepreliminarypurchasepricealloca-

tion resulted innon-tax-deductiblegoodwill amounting to

€32million,mainly representingsynergypotential tobe

realizedbycombiningexistingbrandsandbusinessesand

strengthening theposition indigital advertisingmarkets.

Transaction-relatedcostsamountedtolessthan€1million

andhavebeenrecognizedinprofitorloss.

Asof theendof the reportingperiod, thepurchaseprice

allocationsforSmartclipandGroupeCerisehavenotyetbeen

completed,astheunderlyingfinancial information isstill

beingpreparedandaudited.Asaresult,changesintheallo-

cationofthepurchasepricetotheindividualassetsand

liabilitiesarestillpossible.

Inaddition, theBertelsmannGroupmadeseveralacquisi-

tionsinthefirsthalfof2016,noneofwhichwasmaterialon

astand-alonebasis.Intotal,theimpactoftheseacquisitions

ontheGroup’sfinancialpositionandfinancialperformance

wasalsominor.Theotheracquisitionsresultedinnon-tax-

deductiblegoodwilltotaling€41million,whichreflectssyn-

ergypotential.Thecostsofthesetransactionsamountedto

€2millionandhavebeenrecognizedinprofitorloss.Thefol-

lowingtableshowsthefairvaluesoftheassetsandliabilities

oftheacquisitionsontheirdatesofinitialconsolidationbased

onthecurrentlystillpreliminarypurchasepriceallocations:

Since initialconsolidation,allnewacquisitions inaccor-

dancewith IFRS3 inthefirsthalfof2016havecontributed

€22milliontorevenueand€0milliontoGroupprofitorloss.

IfconsolidatedasofJanuary1,2016,theywouldhavecon-

tributed€45milliontorevenueand€-2milliontoGroupprofit

orloss.

Effects of Acquisitions

in € millions Smartclip Cerise Other Total

Non-current assets

Goodwill 38 32 41 111

Other intangible assets 9 13 13 35

Property, plant and equipment – – 1 1

Other non-current assets 3 – 1 4

Current assets

Inventories – – 8 8

Trade and other receivables 9 2 6 17

Other current assets – – 1 1

Cash and cash equivalents 11 1 2 14

Liabilities

Financial debt – (1) (2) (3)

Other financial and non-financial liabilities (21) (5) (17) (43)

Non-controlling interests (1) – – (1)


Afterconsideringthecashandcashequivalentsdisposed

of, the Bertelsmann Group generated cash flows total-

ing€-4millionfromdisposals inthefirsthalfof2016.The

disposalsledtoincomefromdeconsolidationof€6million,

which is recognized in“Results fromdisposalsof invest-

ments.”

Additional Disclosures on Financial Instruments

Theprinciplesandmethodsusedforthefairvaluemeasure-

ment remainunchangedcompared to thepreviousyear.

Furtherinformationabouttheadditionalinformationanddis-

closuresonfinancial instrumentsarepresentedinthenotes

totheConsolidatedFinancialStatementsintheAnnualReport

2015.Onlydisclosuresonfinancialinstrumentsthataresignif-

icanttoanunderstandingofthechangesinfinancialposition

andperformancesincetheendofthelastannualreporting

periodareexplainedbelow.

Thefollowinghierarchyisusedtodeterminethefairvalueof

financialinstruments:

Level1:

The fair valueof theexistingfinancial instruments isdeter-

minedonthebasisofstockexchange listingsat theendof

thereportingperiod.

Level2:

For measuring the fair value of unlisted derivatives,

Bertelsmann uses various financial methods reflecting the

prevailingmarketconditionsandrisksattherespectivebal-

ancesheetdates.Irrespectiveofthetypeoffinancialinstru-

ment, future cash flows are discounted at the end of the

reporting period based on the respective market interest

Currency Translation

Thefollowingeuroexchangerateswereusedtotranslatethe

currenciesthataremostsignificanttotheBertelsmannGroup.

Effects of Disposals

in € millions Total

Non-current assets

Goodwill 2

Other intangible assets 2

Property, plant and equipment 2

Other non-current assets 1

Current assets

Inventories 6

Other current assets 14

Cash and cash equivalents 9

Liabilities

Provisions for pensions and similar obligations 6

Financial debt 1

Other financial and non-financial liabilities 31

Average rate Closing rate

Foreign currency unit per €1 H1 2016 H1 2015 6/30/2016 12/31/2015 6/30/2015

Australian dollar AUD 1.5221 1.4258 1.4929 1.4897 1.4550

Canadian dollar CAD 1.4840 1.3768 1.4384 1.5116 1.3839

Chinese renminbi CNY 7.2956 6.9378 7.3755 7.0608 6.9366

British pound GBP 0.7788 0.7324 0.8265 0.7340 0.7114

US dollar USD 1.1161 1.1152 1.1102 1.0887 1.1189


rates and interest rate structure curves at the end of the

reportingperiod.

Thefairvalueofforwardexchangetransactionsiscalculated

using the average spotprices at the endof the reporting

periodandtakingintoaccountforwardmarkdownsandmark-

upsfortheremainingtermofthetransactions.Thefairvalue

of interestratederivatives iscalculatedonthebasisof the

respectivemarketratesandinterestratestructurecurvesat

theendofthereportingperiod.Thefairvalueofforwardcom-

modity transactions isderivedfromthestockexchange list-

ingspublishedonthebalancesheetdate.Anyincongruities

to thestandardizedstockexchangecontractsare reflected

throughinterpolationoradditions.

Level3:

Ifnoobservablemarketdataisavailable,measuringfairvalues

isbasedprimarilyoncashflow-basedvaluationtechniques.

Thevaluationoffinancialassetsandfinancialliabilitiesaccord-

ingtolevel2andlevel3requiresmanagementtomakecer-

tain assumptions about the model inputs including cash

flows,discountrateandcredit risk. Inthefirsthalfof2016,

noreclassificationswereperformedbetweenlevels1,2and3.

Theoptionoffered in IFRS13.48 (net riskposition) isused

formeasuringthefairvalueoffinancialderivatives. Inorder

toidentifythecreditexposurefromfinancialderivatives,the

respectivenetpositionofthefairvalueswiththecontractual

partnersisusedasabasis,asthesearemanagedbasedon

anetpositioninviewoftheirmarketorcreditdefaultrisks.

Investmentsinaffiliatesandotherinvestmentsthatareclassi-

fiedasavailable-for-salewithinfinancialassetsaremeasured

atcostastheydonothaveaquotedpriceonanactivemar-

ket and a reliable estimate of the fair value is not possible.

Asof June30, 2016, thesefinancial assets amounted to

€293million (December31,2015:€288million).Noplan

has been made to sell significant holdings of the other

available-for-saleinvestmentsinthenearfuture.Ofthefinancial

assetsmeasuredatcost,mostnotablytheinvestmentinSpring

RainMobileHealthHoldingsInc.andsharesinMorningside

ChinaTMTFundIweresoldinthefirsthalfof2016.Forallother

financialassetsandfinancial liabilities, theircarryingamount

representsareasonableapproximationoffairvalue.

Themarketvalueof the2001profitparticipationcertificates

withaclosingrateof314.00percentonthelastdayoftrading

inthefirsthalfof2016ontheFrankfurtStockExchangewas

€893million(December31,2015:€903millionwitharateof

317.50percent)and,correspondingly,€30millionforthe1992

profitparticipationcertificateswitha rateof178.62percent

(December31,2015:€29millionwitharateof172.00percent).

Thefairvaluesarebasedonlevel1ofthefairvaluehierarchy.

InApril2016,Bertelsmann issuedapublicly listedbondof

€500millionwithatermoftenyears.Inaddition,Bertelsmann

issuedapromissorynoteintheamountof€200millionwitha

termoftwoyearsinaprivateplacementinJune2016.

OnJune30,2016,thecumulativefairvalueofthelistedbonds

totaled€3,902million(December31,2015:€3,272million)

withanominalvolumeof€3,786million(December31,2015:

€3,286 million) and a carrying amount of €3,761 million

(December31,2015:€3,266million).Thestockmarketprices

arebasedonlevel1ofthefairvaluehierarchy.OnJune30,2016,

the total carrying amount of the private placements and

promissorynotestotaled€707million(December31,2015:

€507million)andthetotalfairvalueamountedto€762million

(December31,2015:€540million).Thefairvaluesofprivate

placementsandpromissorynotesaredeterminedusingactu-

arialmethodsbasedonyieldcurvesadjustedfortheGroup’s

creditmargin.Thiscreditmarginresultsfromthemarketprice

forcreditdefaultswapsattheendoftherespectivereporting

periods.Fairvalueismeasuredonthebasisofdiscountrates

rangingfrom-0.24percentto1.57percent.Thefairvaluesof

theprivateplacementsandpromissorynotesarebasedon

level2ofthefairvaluehierarchy.


in € millions

Level 1: Quoted prices in active markets

Level 2: Observable market data

Level 3: Unobservable market data

Balance as of 6/30/2016

Financial assets initially recognized at fair value through profit or loss – 11 – 11

Available-for-sale financial assets 10 1 30 41

Primary and derivative financial assets held for trading – 88 5 93

Derivatives with hedge relation – 50 – 50

10 150 35 195

Fair Values of Financial Assets Categorized Using the Fair Value Measurement Hierarchy

in € millions

Financial assets initially recognized at fair value through profit or loss


Primary and derivative financial assets held for trading

Derivatives with hedge relation

Total

Balance as of 1/1/2016 – 30 6 – 36

Total gain (+) or loss (-) – – (1) – (1)

– in profit or loss – – (1) – (1)

– in other comprehensive income – – – – –

Transfers from “Investments accounted for using the equity method”

– – – – –

Purchases – – – – –

Issues – – – – –

Sales/settlements – – – – –

Transfers out of/into level 3 – – – – –

Balance as of 6/30/2016 – 30 5 – 35

Gain (+) or loss (-) for assets still held at the end of the reporting period

– – (1) – (1)

Financial Assets Measured at Fair Value Based on Level 3


Other Information

Asaresultofseasonalinfluencesonthedivisions,higherrev-

enuesandahigheroperatingresulttendtobeexpectedinthe

secondhalfoftheyearcomparedtothefirsthalfoftheyear.

Thehigherrevenuesinthesecondhalfoftheyearareprimarily

duetotheincreasingdemandduringtheyear-endholiday

season,inparticularinadvertising-drivenbusinessesandin

thepublishingbusinessaswellastothecustomaryseasonal-

ityinthemusicbusiness.

The results from disposals of investments are attributable to

severaltransactionsconductedintheBertelsmannInvestments

division,mainlyfromthesaleoftheinvestmentinSpringRain

MobileHealthHoldingsInc.andsharesinMorningsideChina

TMTFundI.

Asaresultofthedecreaseinthediscountrateformeasur-

ingprovisions forpensions,actuarial lossesamounting to

Income Taxes

Taxexpensesforthefirsthalfof2016werecalculatedinaccor-

dancewithIAS34usingtheaverageannualtaxrateexpected

for thewholeof2016,which iscalculatedat34.6percent

accordingtoBertelsmannmanagement’scurrentestimation.

Inaddition,non-recurringtax itemshavebeenrecognized

incurrenttaxanddeferredtax,whichresultedinalowertax

rateintheincomestatement.

in € millions

Level 1: Quoted prices in active markets

Level 2: Observable market data

Level 3: Unobservable market data

Balance as of 6/30/2016

Financial liabilities initially recognized at fair value through profit or loss – – 46 46

Primary and derivative financial liabilities held for trading – 60 – 60

Derivatives with hedge relation – 6 – 6

– 66 46 112

Fair Values of Financial Liabilities Categorized Using the Fair Value Measurement Hierarchy

Financial Liabilities Measured at Fair Value Based on Level 3

in € millions

Financial liabilities initially recog-nized at fair value through profit or loss

Primary and derivative financial li-abilities held for trading

Derivatives with hedge relation

Total

Balance as of 1/1/2016 45 – – 45

Total gain (-) or loss (+) – – – –

– in profit or loss – – – –

– in other comprehensive income – – – –

Purchases 4 – – 4

Issues – – – –

Settlements (3) – – (3)

Transfers out of/into level 3 – – – –

Balance as of 6/30/2016 46 – – 46

Gain (-) or loss (+) for liabilities still held at the end of the reporting period

– – – –


Notes on Segment Reporting

Atthebeginningofthefinancialyear2016,thestrategicgrowth

segmentsBMGandEducationaswellasthefundactivitiesof

CorporateInvestmentsweresplit intothreeindependentdivi-

sions:BMG,BertelsmannEducationGroupandBertelsmann

Investments.BMGisaninternationalmusiccompany.The

BertelsmannEducationGroupdivisioncomprisesthegrowth

businessesandhigh-qualityeducationofferings.Bertelsmann

InvestmentscomprisesthefundsBertelsmannDigitalMedia

Investments (BDMI),BertelsmannAsia Investments (BAI),

BertelsmannBrazilInvestments(BBI)andBertelsmannIndia

Investments(BII),investinginpromisingbusinesses.Inaddi-

tion,sinceJanuary1,2016,theBertelsmannPrintingGroup

divisionhasbundledtheGroup’soffsetandgravureprinting

activities.ItincludesMohnMedia,GGPMediaandVogelDruck,

whichwerepreviouslyconsideredpartoftheArvatodivision,

thegravureactivitiesofPrinovis inGermanyandtheUnited

KingdompreviouslyoperatingunderBePrinters,andtheoffset

anddigitalprintersofBePrintersintheUnitedStates.Thenew

divisionalso includesadditionalbusinesses thatwerepre-

viouslyallocatedtotheArvatodivision,includingRTVMedia

Group,thelettershopbusinessCampaignandthestoragemedia

replicationbusinessSonopress.Furthermore,Medienfabrik,a

companythatwaspreviouslyallocatedtotheArvatodivision

untilDecember31,2015,hasbeenpartoftheGruner+Jahr

divisionsinceJanuary1,2016.

AsofJanuary1,2016,theBertelsmannExecutiveBoardman-

agesandmonitorsthethreenewdivisionsseparatelysothat,

since2016,internalreportingandexternalsegmentreport-

ingreflecteightoperatingreportablesegments:RTLGroup,

Penguin Random House, Gruner + Jahr, BMG, Arvato,

Bertelsmann Printing Group, Bertelsmann Education Group

andBertelsmannInvestments.Thefiguresfromtheprevious

yearwereadjustedaccordinglyinthisreport.

€569millionbeforerelatedtaxeffectswererecognized in

theitem“Remeasurementcomponentofdefinedbenefit

plans.”

Earningsaftertaxesfromdiscontinuedoperationsof€3million

inthepreviousyearcomprisedfollow-oneffectsrelatedtothe

disposaloftheformerDirectGroupdivision.

AsofJune30,2016, thecash-generatingunitsFremantle

Media and StyleHaul have been tested for impairment in

accordancewithIAS36.Takingintoaccountthedevelopment

ofFremantleMediaoverthefirstsixmonthsinthefinancial

year2016, itsbusinessplanhasbeen revisedmoderately

upward.Thistakesintoaccountthestrengtheningofthepro-

ductionbusinessthroughanumberoftalentdealsandrecent

acquisitionsandthecontinuingstrengthofFremantleMedia’s

main franchises. Accordingly, despite the continued pric-

ingpressurewithintheoverallcontentbusiness,Fremantle

MediaexpectstoincreaseitsEBITAmarginslightlyoverthe

lifeofthebusinessplan.Therecoverableamountwasdeter-

minedusingthevalue inusewitha long-termgrowthrate

of2.5percent (December31,2015:2.5percent)andadis-

count rateof 7.1percent (December31, 2015: 7.4percent).

AsofJune30,2016,therecoverableamountexceedsthecarry-

ingamounton the levelofFremantleMediaby€374million

(December31,2015:€189million).Intheeventofanincrease

inthediscountrateby1.3percentagepoints,areductionin

theannualrevenueof1.9percentorareductionintheEBITDA

marginby1.7percentagepoints,therecoverableamountis

lowerthanthecarryingamount.

Thesignificantincreaseofvideoviewswasnotfullyreflected

in the revenue growth of StyleHaul due to the delayed

launchofcertaindiversification revenuestreams,mostly

oncontent revenue,andthe lower revenueper thousand

impressions (“RPM”).The recoverableamountwasdeter-

minedusingthevalue inusewitha long-termgrowthrate

of2.0percent (December31,2015:2.0percent)andadis-

countrateof13.0percent(December31,2015:13.0percent).

AsofJune30,2016,therecoverableamountexceedsthe

carrying amount on the level of StyleHaul by €10 million

(December31,2015:€11million).Intheeventofanincrease

inthediscountrateby0.7percentagepoints,areduction

intheannualrevenueof1.3percent,orareductioninthe

EBITDAmarginby1.6percentagepoints, the recoverable

amountislowerthanthecarryingamount.


Responsibility Statement

Tothebestofourknowledge,andinaccordancewiththe

applicable reportingprinciples for InterimFinancialReporting,

theCondensed InterimConsolidatedFinancialStatementsgive

atrueandfairviewoftheassets,liabilities,financialposition

andprofitorlossoftheGroup,andtheInterimManagement

ReportoftheGroupincludesafairreviewofthedevelopment

and performance of the business and the position of the

Group,togetherwithadescriptionofthematerialopportuni-

tiesandrisksassociatedwiththeexpecteddevelopmentof

theGroupfortheremainingmonthsofthefinancialyear.

Events After the Reporting Period

Noeventsofspecialimportanceoccurredafterthereporting

periodthatcouldhaveamaterialimpactonthefinancialposi-

tionandresultsofoperationsoftheBertelsmannGroup.


Operating EBITDA of divisions 1,160 1,099

Corporate (43) (35)

Consolidation (6) (1)


309 293

Adjustments on amortization/depreciation, impairment losses and reversals of intangible assets and property, plant and equipment included in special items

(3) (1)

Special items – 101

EBIT from continuing operations 805 670

Financial result (117) (119)

Earnings before taxes from continuing operations 688 551

Income tax expense (206) (156)

Earnings after taxes from continuing operations 482 395

Earnings after taxes from discontinued operations – 3


Reconciliation of Segments’ EBIT to Group Profit or Loss

Gütersloh,August25,2016

BertelsmannSE&Co.KGaA

representedby:

BertelsmannManagementSE,thepersonallyliablepartner

TheExecutiveBoard

Dr.ThomasRabe FernandoCarrodePrada MarkusDohle

Dr.ImmanuelHermreck BerndHirsch AnkeSchäferkordt


Auditor’s Review Report

ToBertelsmannSE&Co.KGaA,

Wehavereviewedthecondensedconsolidatedinterimfinan-

cialstatements–comprisingtheincomestatementandthe

statementofcomprehensive income,balancesheet,cash

flowstatement,statementofchangesinequity,andselected

explanatorynotes–andtheinterimgroupmanagementreport

ofBertelsmannSE&Co.KGaA,Gütersloh,fortheperiodfrom

January1toJune30,2016,whicharepartofthehalf-yearfinan-

cialreportpursuantto§(Article)37wWpHG(“Wertpapierhan-

delsgesetz”:GermanSecuritiesTradingAct).Thepreparation

ofthecondensedconsolidatedinterimfinancialstatementsin

accordancewiththeIFRSapplicabletointerimfinancialreport-

ingasadoptedbytheEUandoftheinterimgroupmanage-

mentreportinaccordancewiththeprovisionsoftheGerman

SecuritiesTradingActapplicabletointerimgroupmanagement

reports is the responsibilityof theExecutiveBoardof the

personallyliablepartnerBertelsmannManagementSE.Our

responsibilityistoissueareviewreportonthecondensedcon-

solidatedinterimfinancialstatementsandontheinterimgroup

managementreportbasedonourreview.

Weconductedour reviewof thecondensedconsolidated

interimfinancialstatementsandtheinterimgroupmanage-

ment report inaccordancewithGermangenerallyaccepted

standardsforthereviewoffinancialstatementspromulgated

bytheInstitutderWirtschaftsprüfer(InstituteofPublicAuditors

inGermany)(IDW).Thosestandardsrequirethatweplanand

performthereviewsothatwecanprecludethroughcritical

evaluation,withmoderateassurance,thatthecondensedcon-

solidatedinterimfinancialstatementshavenotbeenprepared,

inallmaterialrespects,inaccordancewiththeIFRSapplicable

to interimfinancialreportingasadoptedbytheEUandthat

theinterimgroupmanagementreporthasnotbeenprepared,

inallmaterialrespects,inaccordancewiththeprovisionsof

theGermanSecuritiesTradingActapplicabletointerimgroup

managementreports.Areviewislimitedprimarilytoinquiries

ofcompanypersonnelandanalyticalproceduresandthere-

foredoesnotprovidetheassuranceattainable inafinancial

statementaudit.Since,inaccordancewithourengagement,

wehavenotperformedafinancialstatementaudit,wecannot

expressanauditopinion.

Basedonourreview,nomattershavecometoourattention

thatcauseustopresumethatthecondensedconsolidated

interimfinancial statementshavenotbeenprepared, in all

materialrespects, inaccordancewiththeIFRSapplicableto

interimfinancialreportingasadoptedbytheEUnorthatthe

interimgroupmanagementreporthasnotbeenprepared,in

allmaterialrespects,inaccordancewiththeprovisionsofthe

German Securities Trading Act applicable to interim group

managementreports.

Bielefeld,August26,2016

PricewaterhouseCoopers

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

WernerBallhaus ChristianLandau

Wirtschaftsprüfer Wirtschaftsprüfer

(GermanPublicAuditor) (GermanPublicAuditor)

32 Additional Information

Contact

For journalistsCorporateCommunications/MediaRelations

Phone:+49(0)5241-80-2466

[email protected]

For analysts and investorsInvestorRelations

Phone:+49(0)5241-80-2342

[email protected]

For global jobs and careersRecruitingServices

[email protected]

www.createyourowncareer.com

The Interim Report and current information about Bertelsmann are also posted onwww.bertelsmann.com

TheInterimReportisalsoavailableinGerman.

Production Credits

PublisherBertelsmannSE&Co.KGaA

Carl-Bertelsmann-Strasse270

33311Gütersloh

Germany

ResponsibleKarinSchlautmann


ExecutiveVicePresident

CorporateCommunications

Project ManagementSimoneFratczak


CorporateCommunications

Design and ProductionTerritoryCTRGmbH,Gütersloh

Print ServicesMohnMediaMohndruckGmbH,Gütersloh

TheFSC®logoidentifiesproductswhichcontainwoodfromwell-managedforestscertifiedinaccordancewiththerulesoftheForestStewardshipCouncil®.

www.bertelsmann.com

Bertelsmann SE & Co. KGaA Carl-Bertelsmann-Strasse27033311GüterslohGermany

The New Bertelsmann · Mediengruppe RTL Deutschland took over the online video marketer Smartclip....

Documents

Transcript of The New Bertelsmann · Mediengruppe RTL Deutschland took over the online video marketer Smartclip....