Financial Targets

Financial guidelines

The primary objective of Bertelsmann’s financial policy is to achieve a balance between financial security, return on equity, and growth. For this, Bertelsmann bases its financing policy on the requirements of a “Baa1/BBB+” credit rating and the associated qualitative and quantitative criteria. Credit ratings and transparency are of great importance to the company’s financial security and independence. 

The Bertelsmann Group is centrally financed by Bertelsmann SE & Co. KGaA and its financing company Bertelsmann U.S. Finance LLC. Bertelsmann SE & Co. KGaA provides the Group companies with liquidity and manages the issuance of guarantees and letters of comfort for Group companies. The Group consists largely of a single financial unit, thereby optimizing capital procurement and investment opportunities. 

Bertelsmann utilizes a financial control system employing quantitative financial targets concerning the Group’s economic debt and, to a lesser extent, its capital structure. One key financial target is a dynamic leverage factor calculated as the ratio of economic debt to operating EBITDA and limited to a maximum of 2.5. Economic debt is defined as net financial debt plus provisions for pensions, profit participation capital, and the net present value of operating leases. Like the operating EBITDA, the economic debt may be modified for calculation purposes. 

As of December 31, 2011, the Group had a leverage factor of 2.4 (December 31, 2010: 2.3). Despite increased investment activities, the net financial debt fell from €1,913 million to €1,809 million as of December 31, 2011. Economic debt of €4,913 million remained nearly unchanged from the previous year (€4,915 million). One factor to consider here is the rise in pension provisions, which grew from €1,565 million in the previous year to €1,738 million primarily as a result of a reduced discount interest rate. 

Another key financial target is the coverage ratio, calculated as the ratio of operating EBITDA (after modifications) to financial result, which is supposed to be above 4.0. The coverage ratio rose in the past fiscal year to 5.2 (previous year: 4.1) thanks to an improved financial result. The Group’s equity ratio of 33.9 percent was down slightly from the previous year’s high level of 34.7 percent but well above the self-imposed minimum of 25 percent.