Sales and profits rise at 'stronger' Penguin Random House

Sales and profits rise at 'stronger' Penguin Random House

Penguin Random House delivered a "strong performance in its first full year after the merger", media group Bertelsmann has said. Penguin Random House chief executive Markus Dohle said the combined businesses had "made a powerful statement: We are stronger together" describing 2014 as "a bar-setting year".

Revenues at Penguin Random House worldwide for 2014 were €3.3bn, up 25.2% from €2.7bn the year before. Operating EBITDA (earnings before interests, taxes, depreciation and amortisation) rose by 24.5% to €452m, from €363m in 2013. Bertelsmann, which owns 53% of PRH, said the performance was “driven by numerous major bestsellers, especially in the field of children’s books, as well as tie-ins to popular movies and TV series and the outstanding performance of its US division”. In the UK, Bertelsmann said Penguin Random House had “a solid year despite a difficult market environment”. Titles highlighted as successful in the UK included Zoella’s Girl Online, The Fault in Our Stars by John Green, and Jeff Kinney’s Diary of a Wimpy Kid: The Long Haul.

The overall sales growth was also attributed to "portfolio effects": during the period it acquired the Spanish- and Portuguese- language publishing activities of Santillana Ediciones Generales, including the Brazilian publisher Objetiva, which established the group "as the market leader in Spanish-speaking Latin America". There was also expansion in India.

In a memo to staff following the results, Dohle said the publisher had made the statement that “we are stronger together”. He said Penguin Random House was focussing on innovation, international presence, and integration. Dohle highlighted new markets for the publisher, including the acquisition of Santillana Ediciones for Penguin Random House Grupo Editorial. Dohle said: “This is our moment. Now, with the depth and reach of our combined company, a fantastic line up of books for 2015 and beyond, and the best publishing talent in the world, this is our time to take the fullest advantage of the opportunities we have created for our authors and for our books. Our commitment to them, and to creativity and collaboration, made 2014 a bar-setting year for our new company—and it is precisely this commitment that will ensure our success ahead.”

Penguin Random House worldwide employed 12,812 people at the end of 2014, compared to 11,838 at the end of December 2013, the company said. The publisher’s biggest seller in 2014 was Green’s The Fault in Our Stars, which sold more than 10m copies in print and e-book formats worldwide. Total worldwide sales of book tie-ins inspired by the Disney film "Frozen" exceeded 17m copies during the period. In 2014 Penguin Random House expanded its e-book catalog to more than 100,000 titles, and sold more than 100m of its titles in electronic form worldwide. Bertelsmann said “significant progress” was made with the integration of the two companies, with organisational structures, processes and functions “merged or reshaped without negatively impacting operations”.

The merger of Penguin and Random House also helped Bertelsmann to reach its highest revenues and operating result in seven years. Overall revenues increased 3.1% to €16.7bn in 2014, compared to €16.2bn the year before, with EBITDA up by 2.7% to €2.37bn, reflecting a “record performance” by television company Mediengruppe RTL Deutschland, and “a strong list of bestsellers at Penguin Random House in the US and UK”, among other things. However, overall Bertelsmann group profit was down 35% from €885m in 2013 to €573m in 2014 - “the result of downscaling the print and direct-marketing businesses, expenditures on profit-improvement measures, a value adjustment to the Hungarian television business, and the absence of special items which had boosted group profit the previous fiscal year.”

Bertelsmann, which also owns media, education and services businesses, said: “Key drivers were strategic transactions such as the merger of Penguin and Random House trade book publishing groups, the full acquisition of the music rights company BMG, and the expansion of financial and e-commerce services at Arvato." Thomas Rabe, chairman and c.e.o. of Bertelsmann, said: “2014 was a gratifying year for us. Our revenue is the highest it has been in seven years. The same goes for our operating result – it is one of the best in Bertelsmann’s history. The implementation of our strategy is paying off.” He said the company would “continue to invest in expanding existing businesses and building new ones in the years ahead”.

Bertelsmann said the merger of Penguin and Random House was “already paying off on the creative and commercial fronts: Penguin Random House publishers achieved outstanding creative results on all continents”.

Rabe said: “The contours of the ‘new Bertelsmann’ are already clearly visible – faster growing, more digital, and more international than before." Bertelsmann also announced today that it was “significantly increasing” its direct shareholding in Synergis Education, a university services provider in the United States, in a new round of financing. The size of the funding round has not been disclosed.