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Bertelsmann mulls book clubs sale

18.03.08 Graeme Neill

Bertelsmann is mulling a possible sale of its book club wing Direct Group—which includes BCA—after its profits plummeted by nearly 91% last year.

Direct Group's profits fell to E10m in 2007 from E110m in 2006. Revenues also fell from E2,665m in 2006 to E2,555m in 2007. The wider German media company, which includes publisher Random House and music company BMG, reported a profit of E1,811m for last year, down from E1,867m in 2006.

Hartmut Ostrowski, Bertelsmann’s chairman, described the company's performance as "successful". "We are strong in operating terms and are profitable at a high level," he said. However, he said that in light of its growth strategy, Bertelsmann would focus its investment on its "strongly growing business". "We are examining all strategic options [for Direct Group], including a possible sale."

Matthias Wulff, a spokesman for Direct Group, told the Bookseller that Direct Group's future would be resolved by the middle of next year. "We will look at how the business can be developed into better shape," he said. "This includes perhaps a total disposal of the business or everything staying as it is."

George Saul, c.e.o. of BCA, shrugged off the announcement, saying the UK book club was one of 20 businesses that make up Direct Group, and that it was in a position of health. "The UK business has enjoyed a solid performance over the past year," he said. "It has put in place changes to ensure its long term health."

Bertelsmann said that the drop in Direct Group profits was "primarily driven by the weak performance of the division’s US operations". It did not refer to BCA specifically, but did note that "some clubs outside the US and bookstore chains also recorded lower profits" in 2007.

The media company also revealed that Random House’s worldwide revenues fell by 5.6% to E1.8bn in 2007, while profit declined by 4.9% to E173m. It put the falls down to a weak US dollar, and a slowdown in consumer spending in North America. However, it said that the UK business "had outperformed all other publishers on the Sunday Times bestseller lists, accounting for nearly one-third of the year's overall rankings".

Financial Bertelsmann Graeme Neill Home Direct Group

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