Bertelsmann increases consolidated net income significantly for the first half of ‘08

• Adjusted revenues up by 1.4 percent
• EBIT increased to €637 million
• Portfolio measures improve growth profile

The international media company Bertelsmann significantly increased consolidated net income in the first six months of 2008, reaching €372 million compared with €51 million in the corresponding period of the previous year. Since the beginning of the year, the Bertelsmann Executive Board has made wide-reaching portfolio decisions, improving the company’s growth profile.

The increased net income was primarily due to improved EBIT (earnings before interest and tax). EBIT in continuing operations climbed to €637 million compared to €472 million in the same period of the previous year, which was influenced by significant special items. Operating EBIT amounted to €681 million compared to €739 million in the previous year. The continued weakness of the dollar and the economic situation impacted revenues. Revenues from continuing operations fell by 1.2 percent to €7.6 billion (previous year: €7.7 billion). Adjusted for portfolio and exchange rate effects, consolidated revenues grew by 1.4 percent.

In the first half, RTL Group revenues were almost even year on year, with the operating result declining slightly; revenues remained at nearly the same level. Negative exchange rate effects and a decline in consumer spending have led to decreases in revenues and Operating EBIT at Random House. Gruner + Jahr fell slightly in revenues; however, Operating EBIT was marginally above the previous year’s level. Arvato raised both revenues and Operating EBIT. Direct Group’s continuing operations reported revenues on almost the same level as the previous year and operating EBIT below the previous year.

Discontinued activities were reported separately in the interim report. They include the 50 percent interest in the Sony BMG music joint venture that Bertelsmann is selling to Sony and certain Direct Group club activities that are awaiting sale or have been sold.

“In view of the difficult economic conditions, we are satisfied with our business performance for the first six months of the year. Strategically, we are now concentrating on growth initiatives, following the portfolio measures, in order to sustainably increase the value of our enterprise,” explained Hartmut Ostrowski, Chairman and CEO of Bertelsmann AG.

Mr. Ostrowski emphasized that expanding and strengthening existing business, as well as setting up new businesses will now become the company’s main focus, in such areas as education, or regionally, in the growth markets of Eastern Europe and Asia. With the intensive use of versatile digital distribution channels and through innovative media offerings for the Internet or mobile phones, Bertelsmann also benefits from the opportunities provided by digitization. “In these areas, all of our businesses are displaying a high level of creativity and entrepreneurial drive,” Ostrowski said.

Thomas Rabe, Bertelsmann’s Chief Financial Officer, added: “For 2008, we are aiming for higher revenues than in the comparable period of the previous year for continuing activities. In view of the subdued economic outlook, operating EBIT is estimated to come in slightly lower year-on-year, while net income is expected to rise significantly given the elimination of certain special items and lower tax expense versus the previous year.”

As of June 30, 2008, the number of Group employees in continuing activities rose to 94,644 worldwide (December 31, 2007: 93,660).

Corporate Divisions:

RTL Group
The leading European entertainment network reports virtually consistent revenues and a slight decrease in operating result for the first half of the year. Mediengruppe RTL Deutschland saw a clear increase in profits, while operating results at Groupe M6 in France were diminished by a large investment in broadcasting rights for the European Football Championship. M6’s live broadcasts from the event set new viewer records. The channel also increased its access primetime audience share. Mediengruppe RTL Deutschland registered a significant increase in ad sales and remained the undisputed market leader among its core target demographic of 14- to 49-year-old viewers. The worldwide production arm Fremantle Media once again made a major profit contribution, driven by its U.S. business. RTL Group expanded its “catch-up TV” offerings in Germany, France, the U.K. and Netherlands, giving viewers the option to watch popular TV programs free on the Internet.

Random House
The world’s largest trade book publishing group registered a decline in first-half revenues and operating results, mainly due to unfavorable currency exchange rates, a slowdown in consumer spending in some key markets, as well as such ongoing economic pressures as rising shipping and marketing costs. Random House, Inc. placed 161 titles on the N.Y. Times bestseller lists. The London-based Random House Group outperformed its marketplace, accounting for over 30 percent of all bestsellers listed in the Sunday Times. Since January, Random House Mondadori has sold more than one million hardcover copies of Ken Follett’s “Un Mundo Sin Fin” in Spain and Latin America. Random House grew its portfolio with the acquisition of the distinctive publishers The Monacelli Press and Watson-Guptill Publications in the U.S. and Hugendubel Verlage in Germany. In the U.S., Random House sold more e-book downloads in the first half of 2008 than in all of 2007, while Random House U.K. enhanced its digital business with new services. The company also saw a changeover at the top on June 1, 2008 with the appointment of Markus Dohle as Chairman and CEO.

Gruner +Jahr
Europe’s largest magazine publisher posted slightly lower half-year revenues than in H1 2007, while the operating result came in marginally higher. Declining revenues primarily reflected deteriorating consumer confidence and adverse conditions in the print ad markets. The salient activities in the first half-year were increasing online capacity, investing in new publications, cost management and disposing of weaker publications. The “Expand Your Brand“ initiative continued on track. In Germany, the “Brigitte” family of brands and “Gala” performed well despite difficult conditions for print ads and publication sales. In March G+J bought “Financial Times Deutschland” outright, and sold the publication “Frau im Spiegel.” In France, revenues rose, counter to the market trend. The new monthly Magazine “Femmes” was launched there. Sales in the growth market China remained solid, while business in Spain suffered from recessionary tendencies. The Prinovis gravure joint ventures was impacted by persistent costs and competitive pressures.

Arvato
Media and communications service provider Arvato posted higher revenues and operating results for the first six months of the year. The service operations benefited from an increasing trend towards outsourcing, strong service center demand and brisk logistics business. The worldwide service center network was expanded through the takeover of additional Telekom locations and establishment of a new subsidiary in Mexico. Arvato launched the DeutschlandCard, a new customer-retention program. The Print unit performed well overall. The offset printing business grew considerably in Germany and the US, while losing momentum somewhat in Spain and Italy. Prinovis’ gravure earnings were stable despite a difficult business environment. The newly organized Storage Media unit increased its earnings in a similarly difficult market, thanks primarily to ancillary integrated services. Production capacity for Blu-ray discs was expanded.

Direct Group
The Direct Group club and bookselling businesses maintained steady revenues in the first half-year in the markets where operations are now concentrated pursuant to the strategic realignment toward German- and French-language countries and Southern European countries, posting a lower operating result year-on-year. The club businesses in Germany and France were stable; in Portugal the Direct Group acquired the venerable Pergaminho publishing house. The Direct Group continued pursuing the strategic goal of building up the club value chain (proprietary publishers, bookselling, online, distribution) and marketing our expanded product offering to club members and new customer groups.

Overview of key figures (€ million, continuing operations)

	January 1, 2008 – June 30, 2008	January 1, 2007 – June 30, 2007
Consolidated revenues	7,635	7,728
Operating EBIT by division Corporate/Consolidation Operating EBIT	733 (52) 681	762 (23) 739
Special items	(44)	(267)
EBIT (Earnings before interest and taxes)	637	472
Financial result	(201)	(196)
Earnings before taxes from continuing operations	436	276
Income taxes	6	(164)
Earnings after taxes from continuing operations	442	112
Earnings after taxes from discontinued operations	(70)	(61)
Net income	372	51
attributable to: Share of profit of Bertelsmann shareholders	284	(51)
attributable to: Minority interest	88	102

Investments

405

494

	Balance as of June 30, 2008	Balance as of December 31, 2007
Economic debt	7,368	7,720
Employees	94,644	93,660

The corresponding figures for the previous period have been adjusted in accordance with IFRS 5.

*continuing operations

About Bertelsmann AG

Bertelsmann is an international media company encompassing television (RTL Group), book publishing (Random House), magazine publishing (Gruner + Jahr), music (BMG), media services (Arvato), and media clubs (Direct Group) in more than 50 countries. Bertelsmann’s claim is to inspire people around the world with first-class media and communications offerings – entertainment, information and services – and occupy leading positions in its respective markets. The foundation of Bertelsmann's success is a corporate culture based on partnership, entrepreneurial spirit, creativity, and corporate responsibility. The company strives to bring creative new ideas to market and create value.

For further questions, please contact:

Andreas Grafemeyer

Senior Vice President Media Relations

Phone: +49 – 52 41 / 80 24 66

andreas.grafemeyer@bertelsmann.de

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