Interview with Thomas Rabe: The 2020 Business Year Will Be A Challenge
In an interview, Thomas Rabe discusses the results for the first quarter of 2020, published today, the further course of the business year, and Bertelsmann’s package of measures to counteract the economic fallout of the coronavirus. The CEO also emphasizes the protection of the employees’ health, which remains a top priority.
Mr. Rabe, how would you sum up the first quarter of 2020 for Bertelsmann?
Thomas Rabe: The 2020 business year, with the economic repercussions of the coronavirus pandemic, will be a challenge. We started the year well, but have been feeling an increasing impact on our businesses since March. Revenues in the first three months of the year fell moderately by 2.7 percent to €4.1 billion. While the advertising-financed businesses were noticeably affected by the coronavirus situation, BMG, Arvato’s services businesses, and the education businesses did well. Organically, Group revenues declined slightly by 2.1 percent. Bertelsmann’s growth businesses recorded a 2.8 percent revenue increase. The breadth of Bertelsmann’s business portfolio is having a positive effect in this crisis, as is the high proportion of digital businesses, which for the first time accounted for more than 50 percent of total revenues last year.
What business and strategic milestones were defining for the first quarter?
Thomas Rabe: RTL Group recorded higher viewer market shares in Germany, France, and the Netherlands. Its channels’ news coverage ensured record ratings and high reach. The number of paying subscribers for the streaming services TV Now and Videoland increased by 34 percent to 1.53 million. At Penguin Random House, demand for children’s and young-adult books and digital formats increased. Since April 1, the world’s largest book publishing group has been a wholly owned subsidiary of Bertelsmann. G+J registered higher newsstand sales and new subscriptions for its magazines. BMG signed global recording or publishing contracts with international artists. BMG artists and songwriters also achieved significant chart success...
... and what is the situation outside our media businesses?
Thomas Rabe: Arvato developed positively in all lines of business and invested in the expansion and automation of its sites. Arvato Financial Solutions benefited from the continued growth of its purchase-on-account solution for a major client. The Bertelsmann Printing Group extended several printing contracts and won a new major customer in the brochure printing segment. The Bertelsmann Education Group recorded increased demand for online learning offerings at Relias and Udacity. As of March 31, Bertelsmann Investments owned around 240 shareholdings in companies and funds, primarily through its four international funds. In February, Bertelsmann Brasil Investments benefited from a successful partial exit of an indirect investment in Afya, an education provider operating in Brazil.
How did media usage and the relevance of the media develop during the emergence coronavirus crisis?
Thomas Rabe: Many people now have a great need for information about the crisis, but also for entertainment and diversion, which is reflected in significantly rising viewer, listener, reader, and user figures. Mediengruppe RTL Deutschland reaches 30 million people a day with its journalistic offerings. In France, the ratings for the expanded news formats of M6 and RTL Radio soared to new record highs, while video views on the online platform 6play increased by 45 percent. Our media report, educate, explain, and reflect the diversity of opinion in our society. In crises like the present one, they are of great social relevance and are an integral part of the critical infrastructure.
This was the first and probably also the last quarter of the 2020 business year that was not yet significantly affected by the coronavirus crisis. How do you assess the further development for the full business year?
Thomas Rabe: In view ofthe dynamically developing coronavirus crisis, we cannot maintain our original forecast for the 2020 business year. It is impossible to make a reliable assessment of the future business development in 2020 at this time. We have taken extensive countermeasures in the area of costs and investments, but expect to see negative effects on our earnings situation in the months ahead.
What contribution is Bertelsmann making to society during the coronavirus crisis?
Thomas Rabe: The companies of the Bertelsmann Content Alliance in Germany are supporting the fight against the spread of the virus under the heading “Together against coronavirus.” Penguin Random House is supporting reader groups who are especially hard-hit, as well as stationary booksellers. Gruner + Jahr has opened up its digital offerings. Arvato Supply Chain Solutions enables the delivery of urgently needed medical supplies. Relias is making training programs on hygiene and prevention measures from its online learning curriculum available on its website. And Udacity is offering free Nanodegree programs.
In general, what measures is Bertelsmann taking to counter the coronavirus crisis?
Thomas Rabe: The Executive Board implemented a package of measures at an early stage to secure and expand the company’s liquidity. Among other things, we successfully placed a Eurobond for €750 million with a term of eight years. We have also considerably increased our liquid funds through additional short-term measures. The focus now is on counteracting the outflow of liquidity through cost measures and investment restraint.
... and how did the placement of the bond you mentioned go?
Thomas Rabe: Very well. The bond was several times oversubscribed.
Bertelsmann still has very few employees infected with the coronavirus. How has this been achieved?
Thomas Rabe: We were well prepared and responded early on. A Group-wide crisis management team took up its work back at the end of January, when the crisis first erupted out in China, monitoring the situation and developing recommendations. At the beginning of March, the Executive Board imposed a travel ban, and in mid-March ordered the shift to working from home. At the same time, we did everything possible to protect employees in the factories with protective masks, distancing rules, and hygiene measures. We actively communicated with employees, keeping them comprehensively informed daily on BENET.
How will Bertelsmann proceed – what measures will you adopt or retain – after the easing of the rules decided by governments in many places?
Thomas Rabe: We will proceed with great circumspection and caution to protect our employees. Just as we gradually tightened our measures while the crisis deepened, we will gradually ease them again. There are plans for this, which we are now putting into action, but they vary from company to company and country to country. We will stick to working from home for some time yet, especially for vulnerable workers. There are also comprehensive rules on preventive measures in the offices, and in the production and service companies.