Arvato boosts operative result, sales and employees in 2006
Arvato can look back on a positive fiscal year 2006. In an overall difficult market environment characterized by subdued growth in Germany, the core European markets and the United States, the internationally networked media and communication service provider still achieved strong sales growth and improved its operating result again. Sales rose by 9.6 percent to € 4.782 bn. from € 4.365 bn. in 2005. Operating EBIT climbed 7.6 percent to € 367 mn. This positive development can be attributed mostly to organic growth and only partially to portfolio effects such as the full consolidation of the intaglio joint venture Prinovis and the InFoScore group. Remarkably, all business divisions contributed to this positive business development.
“2006 was a satisfactory year for Arvato,” said Hartmut Ostrowski (49), chairman of the Executive Board of Arvato and a member of the Executive Board of Bertelsmann AG. “We went into the year with somewhat higher expectations, but soon realized that we would not quite be able to meet our growth plans because of higher start-up and integration expenses as well as the difficult market environment in the intaglio printing and logistics areas.” Last year, the group of companies invested a total of € 422 mn. in set-up and expansion efforts. That was € 65 mn. less than a year earlier. Arvato’s positive overall development is also reflected in the renewed growth of employment. The company’s workforce increased by about 4,000 people to 46,584 compared with the previous year (as of December 31, 2006). “Nearly two-thirds of this increase came from our foreign subsidiaries,” Ostrowski said. “But we also managed to add about 1,500 employees across our German business divisions.”
The past year’s positive business development was primarily fueled by the renewed disproportionate growth of Arvato’s services division. Ostrowski: said: “Sales, earnings and employee numbers rose primarily because of increased internationalization efforts in the services segment, the sustained extension of existing customer relationships, the successful acquisition of new customers, and the development of new products and services.” He added that Arvato managed once again in 2006 to “successfully implement its three-dimensional growth strategy with new customers in new markets and through new services.”
The services business of Arvato services once again developed favorably in fiscal year 2006. The division profited above all from strong demand in the servicecenter area, solid performance on the French market and strong customer loyalty business in Germany. “We have implemented a sustained expansion of our national and international business process outsourcing business by creating and extending locations in such markets as Germany, Estonia, France, Morocco and Argentina,” said Ostrowski, adding that the acquisition of new services contracts and the full integration of the InFoScore group (Baden-Baden) provided an additional growth boost. The areas of aftersales and repair for the cellular telephone sectors, in particular, moved forward as a result of an increased push into eastern European markets and the services partnership with the British East Riding Council. The direct marketing subsidiary inmediaONE] expanded its market leadership through the complete takeover of the Faksimile Verlag Luzern AG publishing group. “With an investment of more than € 20 mn. in a new media logistics system at Vereinigte Verlagsauslieferung in Gütersloh, we also laid the foundation for continued growth in this market segment in 2006,” Ostrowski said.
The printing business defied the difficult market situation. Strong pressure on prices and overcapacities dampened the earnings situation at the U.S. and Italian printers as well as at the intaglio printing joint venture Prinovis. This was counterbalanced by solid business in the German offset segment. For the Mohn media group, 2006 was the most successful year in the company’s history. The group of companies expanded its production capacity again, gained numerous new customers and established new services in the market. Positive momentum also came from the successful conclusion of the large-scale FIFA World Cup 2006 project. At Arvato subsidiary medienfabrik Gütersloh, FIFA World Cup projects not only boosted earnings, but also promoted long-term strengthening of the corporate publishing business. “Strong efforts to stay on the ball paid off here,” Ostrowski said. The executive is cautiously optimistic about the future: “With the creation of the joint venture Prinovis, the construction of new, state-of-the-art printing facilities in Treviglio, Italy, and Liverpool as well as our large-scale investments in the latest printing technologies, we are well positioned within the Arvato group to operate successfully on the market and on behalf of our customers.”
Arvato storage media
Despite tough competitive pressure, Arvato storage media has held its own in its markets and added market share both in the CD and the DVD segments. Sonopress strengthened its competitive position, in particular in the CD segment, where it has become the global No. 1. Production volumes also increased markedly in the DVD segment, where Sonopress now ranks fourth. By setting up and expanding locations in Russia and Australia, the storage media group also managed to tap new markets for its products and services. The highlight of fiscal year 2006 was the kickoff of full-phase production of HD DVDs and Blu-ray discs. “We produce this new generation of storage media in a cross-country manner in Gütersloh and Weaverville (United States),” Ostrowski said. “As a result, we are one of the world’s first storage media producers to be prepared to handle the expected growth in demand for high-resolution storage media.”
“Last year, we made good progress in the expansion of our IT and mobile communication areas,” Ostrowski said with respect to the companies of Arvato systems, Arvato mobile and empolis. Arvato systems recorded sustained sales growth in 2006 and expanded its services offering for companies in the media sector by integrating the system and consulting firm S4M - Solutions for Media. empolis strengthened its market position as an innovative service provider for company-wide content and knowledge management solutions in fiscal year 2006. Arvato mobile focused on a targeted extension of its services spectrum and customer base. In addition, Arvato mobile successfully marketed the Internet download platform gnab last year. gnab is an innovative combination of a central download platform with a decentralized peer-to-peer network. Such providers as in2movies, a joint venture of Warner Brothers and Arvato mobile, Terra as well as Medion use gnab technology to offer their customers safe, fast and high-quality downloads of movies and music. “The successful international rollout of gnab strengthens Arvato mobile’s position as the leading provider of digital service in Europe,” Ostrowski said. He sees gnab as “an innovative milestone on our way into a new era of digital downloads.”
A glance at external sales by division shows the steady rise in importance of services within Arvato’s portfolio. Compared with the previous year, the share of services activities rose by 2.7 percentage points to 45.6 percent. A year-earlier comparison of external sales by region shows a remarkable shift: The share of German sales rose slightly by 1.4 percentage points to 41.7 percent as a result of portfolio effects – including the complete integration of the InFoScore group – while the sales share of the other European countries fell by 1.2 percentage points to 42 percent during the same period.
With more than 270 subsidiaries worldwide, Arvato is one of the biggest internationally networked media and communication services providers. In fiscal 2006, the group of companies that is part of Bertelsmann AG generated sales of € 4.782 bn. Arvato’s worldwide subsidiaries employ 47,000 people. Arvato comprises the divisions Arvato print (intaglio and offset printers in Europe and the United States), Arvato services (financial services/data management, full-service CRM services, logistics/supply chain management and direct distribution of knowledge media), Arvato storage media (e.g. production of CD-ROMs, DVDs and audio CDs) and Arvato systems (international provider of qualified and customized IT services) as well as empolis, a leading provider of company-wide content and knowledge management solutions, and the mobile entertainment provider Arvato mobile.
Further information on Arvato is available on the Internet at www.arvato.de.
Arvato Public Relations
Tel.: +49 (0) 5241 80-3408
Fax: +49 (0) 5241 80-3315