Guenther, graemlicher Mann

26 March 2003

Creditors have replaced minority shareholders as the media group’s key audience, and are the real beneficiaries of its improved disclosure. If Bertelsmann is to meet it debt reduction target, its drive to boost profits has a long way to go yet.

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Bertelsmann, the media group, has improved its operating margin despite falling sales. Although 2002 revenues fell nearly 4% compared to proforma 2001 figures, earnings before interest, tax, and amortisation of goodwill rose to E936m, 63% up on the previous year. Comparisons were complicated by Bertelsmann's decision to change it reporting year and to move from German GAAP to international standards during 2002. The headline figures also leave out of account the group's scientific publisher, BertelsmannSpringer, which it hopes to sell by April.

Bertelsmann's net debt rose from E0.7bn to E2.7bn between September and December 2002, mainly as a result of having to buy music company Zomba under a put option. The group is close to finalising a E500m private debt placement in the US. The issue is being managed by RBS and ABN Amro. Together with a E200m 3year loan placed in July 2002, the debt partly fills the gap left when Bertelsmann withdrew a planned E1bn benchmark bond last July.

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