PRH revenues stable in first half

Penguin Random House’s (PRH) revenues in the first half of 2017 have remained stable at €1.5bn (£1.38bn), building marginally on 2016's first-half revenue by 1.1% year-on-year, its parent Bertelsmann has reported.

Bertelsmann also revealed on Thursday (31st August) that it will close the deal to acquire a further 22% stake in PRH in the fourth quarter, first announced in July, increasing its overall stake in the trade publisher to 75%.

Bertelsmann attributed PRH's result (which includes Verlagsgruppe Random House, the German publishing group wholly owned by Bertelsmann) to growth in audiobook sales, higher revenues in the Asia Pacific region and expansion of third-party publisher services business, offsetting a decline in e-book revenues in the English-speaking countries. 

Without breaking the results for the trade publisher down by region, it reported PRH had recorded a positive business performance with earnings growth and "impactful" post-merger operational improvements. PRH's operating EBITDA rose by 11.4% to €206m (£189m) from €185m in 2016.

At the start of August PRH co-shareholder Pearson revealed the trade publisher had seen a “solid” start to 2017, with profit up 44% to £46m. At the time Pearson said PRH revenue had fallen "slightly". When asked, Bertlesmann said the difference was down to the exchange rate.

Markus Dohle, chief executive of PRH, said the trade publisher’s performance was “primarily driven by the strength of print and the growth of audio book sales", as well as strong-selling titles such as Camino Island by John Grisham, Into The Water by Paula Hawkins, which has sold more than 600,000 copies in English- and German-speaking territories in the space of two months, and Netflix tie-in Thirteen Reasons Why by Jay Asher.

Other highlights in the first half of the year for PRH included a global publishing deal for two books by former US President Barack Obama and former First Lady Michelle Obama and the expansion of Penguin Random House Grupo Editorial in Spain and Latin America with the acquisition of Ediciones B publishing group.

The publisher will continue to identify opportunities for growth and explore ways to expand and be more efficient, Dohle said, for example, by aligning IT systems and supply chain in the UK and Australia and ramping up its audio publishing business in several territories including Canada and India.

Dohle added 2017 had also seen backlist sales boost the company’s bottom line.

“Beyond acquisitions and integrations, 2017 has also been marked by growth in the core economic engine of our company: our backlist sales, a result in part of our data-driven approach to increasing the online visibility of our books and a reflection of the timeless strength and impact of our unparalleled publishing treasures worldwide,” he said.

He told the company’s staff they had to be “laser-focused on every sale, every title marketing and publicity plan, every innovative idea, and every readercentric initiative” heading into the busy autumn period ahead of Christmas, where they faced a marketplace with “unrelenting new-title competition each week and a crowded media landscape with constantly breaking news and attention-grabbing headlines”. 

Overall Bertelsmann reported a "successful" first half for the company in 2017, achieving a record first-half group operating profit of over €500m (£460m) for the first time in its history. The financial results showed operating EBITDA at €1.1bn (£1.0bn) and revenues rise 2.1% to €8.1bn (£7.46bn). Organic growth improved to 1.4% (2016: 1.3%).

Bertelsmann said increasing its share in PRH to a "strategic" 75% in the fourth quarter would provide "the best possible conditions for successfully further developing this core business that is part of our identity".

Bertelsmann chairman and c.e.o. Thomas Rabe said: “Bertelsmann looks back on a successful first half. The increase in revenues and earnings, as well as our improved growth profile, are the result of the systematic implementation of our strategy. The Penguin Random House ownership share increase, which we have been preparing over the past few months and will complete in the second half of the year, is especially worth noting. Bertelsmann will possess a strategic three-quarters majority in the world's largest trade publishing group – the best possible conditions for successfully further developing this core business that is part of our identity.“

Bertelsmann’s chief financial officer Bernd Hirsch added: “Bertelsmann has a solid financial position and a high equity ratio of 42%. Even after the Penguin Random House share increase, we will continue our conservative financial policy and continue to be guided by our self-imposed financing objectives. We are confident about the operating performance for the rest of the year, and continue to expect higher revenues, continued high operating profitability, and Group profit of over a billion euros.”