Business News

arvato increases revenue and profits

Monday 30. March 2009 - Organic growth in a difficult market environment

• Revenue: €4,993 million
• Operating EBIT: €369 million
• Investments: €314 million
• 62,591 employees worldwide

arvato is satisfied with the overall results of the 2008 financial year. In a market environment that was difficult due to the onset of the global economic crisis in the second half of the year, revenue and profits increased slightly year on year, despite negative exchange rate effects. Revenue for the year totalled €4,993 million (+€76 million), while operating EBIT amounted to €369 million (+€3 million).
The predominantly organic growth was achieved through new services, the acquisition of new customers and the expansion of international activities. In addition, arvato’s transformation from ‘producer’ to ‘provider of integrated solutions’ continues apace. The overall positive development is also reflected in the number of employees: at the end of the year, arvato had more than 62,000 employees worldwide – about 10,000 more than 12 months earlier. The group invested €314 million (+€16 million) in establishing and expanding its operations.

“Overall, we succeeded in further improving the strategic position of arvato last year. We did our homework, worked on our portfolio and further broadened the company’s positioning by acquiring new customers and entering new lines of business,” said Rolf Buch (43), CEO of arvato AG and a member of the Executive Board of Bertelsmann AG, at the presentation of the annual figures in Gütersloh. “We were able to slightly increase both sales and earnings, a development in which all three major operating divisions played a part, and a stable basis for the challenges of 2009.”

arvato services
The services businesses, united in arvato services, recorded steady good demand in the service-centre sector internationally in 2008. “This sector has developed very positively, especially in France and Germany and has once more proven to be an engine for growth,” said Buch. The service sector increased its revenue and profits, with overall development boosted by the continuing trend towards outsourcing, said Buch.
In Spain and South America, arvato services expanded its international service network and strengthened its market position with the acquisition of Qualytel, the largest independent call-centre service provider with 6,000 employees. In Germany, the multi-partner programme DeutschlandCard was successfully launched. arvato infoscore, the integrated service provider for data, information and claim management, increased both revenue and profits, and the cooperation between arvato and the public sector in Britain was expanded with the acquisition of a new customer, Sefton Metropolitan Borough Council.

arvato print
The printing services division, arvato print, achieved good results in 2008 despite difficult conditions in the core markets. In Germany and the US, the offset printing business developed positively, while the printing plants in Spain and Italy reported stable financial figures.
“All the arvato print companies extended their value chain, advanced their development into integrated service providers in print production and thereby strengthened their market position,” said Buch. In particular, the Mohn media group expanded its business by augmenting its service spectrum and production capacity, and continued on its growth course.
The performance of the gravure joint venture, Prinovis, was impacted by a sharp drop in volumes in continental Europe. Moreover, results were burdened by restructuring expenses.

arvato digital services
The storage media division, which was restructured in 2007, achieved revenue and profit increases last year. arvato digital services in the US recorded a significant improvement in its business. DVD output increased again year on year, while CD production fell slightly, not least due to the persistent weakness of the music industry. arvato digital services has, however, increased its market share in both segments against the market trend by progressively and consistently focusing on integrated storage media solutions.
Production capacity for the high-resolution Blu-ray format was also further expanded in the US and Germany.

arvato IT / inmediaONE]
Sales fell again at arvato mobile, partly because of the continued decline in demand in the traditional ringtone business. Against this background and due to the fact that neither arvato mobile nor empolis are part of arvato’s core business, sales processes initiated were initiated for both companies in 2008, and successfully concluded at the end of the year. “We are convinced that both companies will have much better opportunities for development and growth with their new owners,” said Buch.
The IT service provider arvato systems continued on its successful course and grew again last year.
The results of the direct sales organisation inmediaONE] failed to meet expectations due to staff shortages in the sales division.


arvato at the Gütersloh site
For the arvato companies at the Gütersloh location, fiscal 2008 was positive overall. Mohn media and arvato systems achieved record results, and all other major profit centres at the Gütersloh site also developed well. Moreover, as Buch points out, arvato invested more than €70 million into expanding the companies in Gütersloh. Buch: “At Mohn media, arvato digital services and VVA among others, we invested in the latest production technology and in expanding our existing storage capacity, and thereby again made a clear commitment to the Gütersloh site.” With approximately 9,300 employees, arvato AG is the largest industrial employer in the Gütersloh district. The number of employees rose again slightly by about 200 compared with 2007.

Outlook
Regarding the outlook for the current business year, Buch said: “The beginning of 2009 was unsatisfactory for arvato and I expect it will be a year of great challenges for us all. To optimize our cost structure and our competitiveness at short notice, it was necessary to quickly initiate cost-reduction initiatives at numerous Profit Centers. In the months ahead, we will take additional measures to safeguard the business and concentrate fully on our core businesses and on our strengths in order to systematically make use of any opportunities for new business that come our way.” In particular Buch sees opportunities based on the fact that outsourcing is increasingly becoming an issue for companies in a number of industries, especially ones that did not favour outsourcing in the past.

In the first few months of 2009, arvato resolutely and systematically tackled costs and worked on growing its business. The printers in the group expanded their integrated portfolio of services. For instance, Mohn media established the new Print Management product line, which offers print customers worldwide complete process management, from paper procurement to the actual printing, through to logistics.

At arvato services the focus was once again on expanding the international businesses. In early 2009, a joint venture was launched with local mobile phone providers Telling Group and Sinomaster Group in Shenzhen, southern China. The joint venture will provide supply chain management services in China. Its portfolio of services includes shipping, picking & packing, fulfilment and value-added services. “Establishing the joint venture is the first step in building a nationwide distribution and transportation network for the wireless and high-tech industry in China, and towards further strengthening arvato’s China business,” said Buch. In Spain, the integration of last year’s acquisition of call centre service provider Qualytel was concluded.

arvato digital services began the year by strengthening its presence in the American market with the acquisition of a former competitor’s site and customer base in the US. In Asia, the establishment and expansion of the supply chain continued. “Our long-term prospects in Asia are good thanks to our strong market presence in the field of digital media services,” said Buch. The services portfolio was expanded in January with “mSource” offering audio labels, distributors and publishers a platform which allows them to manage and archive their catalogues online and distribute products to partners for digital selling. A particular focus has also emerged in the field of services for the games industry. Says Buch: “Gütersloh is increasingly becoming a hub of the European games industry.” To back up this statement, he cited the construction of a large warehouse at the site where, starting in mid-2009, SCM services will be provided for international games manufacturers.

“All in all, arvato is well positioned. To remain on track for success, however, we now have to take additional safeguarding measures, quickly and in a spirit of partnership,” concluded Buch. “Our strategy works; not only in times of prosperity, but especially now in these economically difficult times. We offer our customers tailor-made, one-stop solution packages and our network puts us exactly wherever they need us to be, with precisely the services they need, and with creative and dedicated staff. That is why we will continue to be successful.”