Interim Financial Statements

Consolidated Income Statement

in € millionsH1 2019H1 2018
Revenues8,6128,237
Other operating income194190
Cost of materials(2,761)(2,568)
Royalty and license fees(715)(661)
Personnel costs(2,818)(2,761)
Amortization/depreciation, impairment losses and reversals on intangible assets, property, plant and equipment and right-of-use assets(461)(311)
Other operating expenses(1,365)(1,401)
Results from investments accounted for using the equity method6227
Impairment losses and reversals on investments accounted for using the equity method(2)
Results from disposals of investments7619
EBIT (earnings before interest and taxes)824769
 
Interest income79
Interest expenses(56)(55)
Other financial income294
Other financial expenses(148)(64)
Financial result(168)(106)
 
Earnings before taxes from continuing operations656663
Income tax expense(154)(162)
Earnings after taxes from continuing operations502501
 
Earnings after taxes from discontinued operations
 
Group profit or loss502501
 
attributable to:
Bertelsmann shareholders
Earnings from continuing operations325349
Earnings from discontinued operations
Earnings attributable to Bertelsmann shareholders325349
 
Non-controlling interests
Earnings from continuing operations177152
Earnings from discontinued operations
Earnings attributable to non-controlling interests177152

Consolidated Statement of Comprehensive Income

in € millions H1 2019H1 2018
Group profit or loss502501
 
Items that will not be reclassified subsequently to profit or loss
Remeasurement component of defined benefit plans(231)7
Changes in fair value of equity instruments1
Share of other comprehensive income of investments accounted for using the equity method
 
Items that will be reclassified subsequently to profit or loss when specific conditions are met
Exchange differences
– changes recognized in other comprehensive income2754
– reclassification adjustments to profit or loss720
Cash flow hedges
– changes in fair value recognized in other comprehensive income320
– reclassification adjustments to profit or loss(1)2
Share of other comprehensive income of investments accounted for using the equity method(2)(11)
 
Other comprehensive income net of tax(197)93
 
Group total comprehensive income305594
 
attributable to:
Bertelsmann shareholders136430
Non-controlling interests169164

Consolidated Balance Sheet

in € millions6/30/201912/31/2018
(adjusted)
Assets
Non-current assets
Goodwill8,3518,427
Other intangible assets2,4842,590
Property, plant and equipment and right-of-use assets2,8181,670
Investments accounted for using the equity method676658
Minority stakes and other financial assets1,1051,143
Trade and other receivables9059
Other non-financial assets832851
Deferred tax assets1,1421,051
17,49816,449
Current assets
Inventories1,7641,735
Trade and other receivables4,1514,443
Other financial assets10471
Other non-financial assets1,1041,002
Current income tax receivables189156
Cash and cash equivalents1,2311,405
8,5438,812
Assets held for sale18582
26,22625,343
 
Equity and liabilities
Equity
Subscribed capital1,0001,000
Capital reserve2,3452,345
Retained earnings5,0475,129
Bertelsmann shareholders’ equity8,3928,474
Non-controlling interests1,4791,364
9,8719,838
Non-current liabilities
Provisions for pensions and similar obligations1,9951,738
Other provisions137135
Deferred tax liabilities87127
Profit participation capital413413
Financial debt4,6434,638
Lease liabilities1,06032
Trade and other payables349353
Other non-financial liabilities358395
9,0427,831
Current liabilities
Other provisions240299
Financial debt571660
Lease liabilities2397
Trade and other payables4,3264,718
Other non-financial liabilities1,7801,839
Current income tax payables5888
7,2147,611
Liabilities related to assets held for sale9963
26,22625,343

Consolidated Cash Flow Statement

in € millionsH1 2019H1 2018
Group earnings before interest and taxes824769
Taxes paid(230)(283)
Depreciation and write-ups of non-current assets460317
Results from disposals of investments(76)(19)
Gains/losses from disposals of non-current assets(7)(23)
Change in provisions for pensions and similar obligations(44)(46)
Change in other provisions(17)(36)
Change in net working capital(296)(334)
Fair value measurement of investments(9)(44)
Other effects(37)8
Cash flow from operating activities 568309
– thereof discontinued operations
Investments in:
– intangible assets(141)(145)
– property, plant and equipment(155)(143)
– financial assets(189)(120)
– purchase prices for consolidated investments (net of acquired cash)(93)(68)
Disposals of subsidiaries and other business units21711
Disposals of other fixed assets254111
Cash flow from investing activities (107)(354)
– thereof discontinued operations
Issues of bonds and promissory notes
Redemption of bonds and promissory notes(210)(200)
Proceeds from/redemption of other financial debt 137298
Redemption of lease liabilities1)(120)(4)
Interest paid(159)(116)
Interest received168
Dividends to Bertelsmann shareholders(180)(180)
Dividends to non-controlling interests and payments to partners in partnerships (IAS 32.18(b))(202)(262)
Change in equity117(3)
Cash flow from financing activities (601)(459)
– thereof discontinued operations
Change in cash and cash equivalents(140)(504)
Exchange rate effects and other changes in cash and cash equivalents(5)9
Cash and cash equivalents 1/11,4051,442
Cash and cash equivalents 6/30 1,260947
Less cash and cash equivalents included within assets held for sale(29)
Cash and cash equivalents 6/30 (according to the consolidated balance sheet) 1,231947

Changes in Liabilities Arising from Financing Activities

in € millionsH1 2019H1 2018
Liabilities arising from financing activities at 1/11)(5,261)(3,479)
Cash flow from operating activities568309
Cash flow from investing activities(107)(354)
Interest, dividends and changes in equity, additional payments (IAS 32.18(b))(408)(553)
Exchange rate effects and other changes in liabilities arising from financing activities(74)(22)
Liabilities arising from financing activities at 6/30(5,282)(4,099)

Consolidated Statement of Changes in Equity

in € millions Sub-
scribed
capital
Capital
reserve1)
Retained earnings Bertels-
mann
share-
holders’
equity
Non-
controlling
interests
Total
Other
retained
earnings
Accumulated other comprehensive income2)
Exchange
differ-
ences
Available-
for-sale
financial
assets
Fair value
reserve
Cash flow
hedges
Share of
other com-
prehensive
income of
investments
accounted
for using
the equity
method
Balance as of 1/1/2018 1,000 2,345 4,631 (196) 69 n/a(22) 15 7,842 1,285 9,127
Adjustment 59 (69) 10 (8) (8) (3) (11)
Balance as of 1/1/20183) 1,000 2,345 4,690 (196) n/a 10(22) 7 7,834 1,282 9,116
Group profit or loss 349 n/a 349 152 501
Other comprehensive income 1 73 n/a 117 (11) 81 12 93
Group total comprehensive income 350 73 n/a 117 (11) 430 164 594
Dividend distributions (180) n/a (180) (198) (378)
Changes in ownership interests in subsidiaries that do not result in a loss of control 7 n/a 7 (3) 4
Equity transactions with shareholders (173) n/a (173) (201) (374)
Other changes n/a (1) (1) 20 19
Balance as of 6/30/2018 1,000 2,345 4,867 (123) n/a 10(5) (4) 8,090 1,265 9,355
 
Balance as of 1/1/2019 1,000 2,345 5,200 (85) n/a 12(3) 5 8,474 1,364 9,838
Adjustment (38) n/a (38) (12) (50)
Balance as of 1/1/20194) 1,000 2,345 5,162 (85) n/a 12(3) 5 8,436 1,352 9,788
Group profit or loss 325 n/a 325 177 502
Other comprehensive income (219) 31 n/a 1 (2) (189) (8) (197)
Group total comprehensive income 106 31 n/a 1 (2) 136 169 305
Dividend distributions (180) n/a (180) (198) (378)
Changes in ownership interests in subsidiaries that do not result in a loss of control (2) 8 n/a 6 94 100
Equity transactions with shareholders (182) 8 n/a (174) (104) (278)
Other changes (4) n/a (2) (6) 62 56
Balance as of 6/30/2019 1,000 2,345 5,082 (46) n/a 10(2) 3 8,392 1,479 9,871

Segment Information

Segment Information (Continuing Operations)

RTL GroupPenguin
Random House
Gruner + JahrBMGArvatoBertelsmann
Printing Group
Bertelsmann
Education Group
Bertelsmann
Investments2)
Total
divisions
CorporateConsolidationContinuing
operations
in € millionsH1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018H1 2019H1 2018
Revenues from external customers3,1403,0401,6501,4826696902682402,0191,968682689168111658,6028,22510128,6128,237
Intersegment revenues33681111303484791561311716(173)(147)
Divisional revenues3,1733,0461,6501,4826777012692412,0492,002766768168111658,7588,3562728(173)(147)8,6128,237
 
Operating EBITDA6656432271716251494226317530284110(1)1,3361,120(44)(44)(5)1,2921,071
 
EBITDA margin1)20.9 %21.1 %13.8 %11.5 %9.1 %7.3 %18.1 %17.3 %12.8 %8.8 %3.9 %3.7 %24.2 %8.9 %(13.4 %)(2.1 %)15.3 %13.4 %n/an/an/an/a15.0 %13.0 %
 
Impairment (-)/reversals (+) on intangible assets, property, plant and equipment and right-of-use assets(5)1(1)(3)(4)(13)1(1)(14)1
 
Results from investments accounted for using the equity method2826(1)4544253(10)612716227


Reconciliation to Operating EBITDA (Continuing Operations)

in € millionsH1 2019H1 2018
EBIT from continuing operations824769
Special items
– adjustment to carrying amounts on assets held for sale73
– Impairment (+)/reversals (-) on other financial assets at amortized cost(8)1
– Impairment (+)/reversals (-) on investments accounted for using the equity method2
– results from disposals of investments(76)(19)
– fair value measurement of investments(9)(44)
– restructuring and other special items10549
Amortization/depreciation, impairment losses and reversals on intangible assets, property, plant and equipment and right-of-use assets461311
Adjustments on amortization/depreciation, impairment losses and reversals on intangible assets, property, plant and equipment and right-of-use assets included in special items(12)(1)
Operating EBITDA from continuing operations1,2921,071

Selected Explanatory Notes

Accounting Principles

The Interim Financial Report for Bertelsmann SE & Co. KGaA has been prepared according to Section 115 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) and has been subject to a limited review by the Group’s auditor. It complies with International Financial Reporting Standards (IFRS) and the related interpretations (IFRIC) of the IFRS Interpretations Committee (IFRS IC) applicable in the European Union (EU-IFRS) and contains Condensed Interim Consolidated Financial Statements prepared in accordance with IAS 34 Interim Financial Reporting, including selected explanatory notes. This report was prepared – with the exception of the financial reporting standard IFRS 16 Leases applied for the first time in the current financial year – using fundamentally the same accounting and measurement policies as in the Consolidated Financial Statements of December 31, 2018. A detailed description of these policies is presented in the notes to the Consolidated Financial Statements in the 2018 Annual Report.

Impact of New Financial Reporting Standards

In terms of the merits and the amount, the effects from the initial application of the new financial reporting standard IFRS 16 Leases essentially meet the expectations presented in the 2018 Consolidated Financial Statements. The following sections provide explanations of the new accounting and measurement policies applied since January 1, 2019, with regard to leases where they differ from those applied as of December 31, 2018.

The changes mainly affect lessee accounting and generally require lessees to recognize all leases and the related contractual rights and obligations as a right-of-use asset and lease liability on the lessee’s balance sheet. Short-term leases with a lease term of up to one year, and leases covering low-value assets for which the Bertelsmann Group does not recognize right-of-use assets or lease liabilities, constitute an exception. The new standard replaces the previous straight-line recognition of operating lease expense in accordance with IAS 17 with the recognition of depreciation expenses for the right-of-use asset and interest expenses on the lease liability.

At the date of initial accounting, lease liabilities are recognized at the present value of the outstanding lease payments. The present value is determined using maturity, currency and risk-specific incremental borrowing rates. Subsequent measurement of a lease liability includes the increase of the carrying amount to reflect interest on the lease liability and reducing the carrying amount to reflect the lease payments made. The right-of-use assets are measured at cost less any accumulated depreciation and accumulated impairment losses. Cost comprises the amount of lease liabilities recognized, the initial direct costs and the lease payments made at or before the commencement date of the lease, less any lease incentives received. The right-of-use asset is depreciated on a straight-line basis over the shorter of the useful life or lease term.

The initial application of IFRS 16 took place in accordance with the transitional provisions of IFRS 16 using the modified retrospective method. The prior-year comparatives were therefore not adjusted. At the transition date, the new financial reporting standard was applied to all contracts previously classified as leases in accordance with IAS 17 and IFRIC 4. On the date of initial application, current knowledge was used in assessing extension or termination options. The lease liability as of January 1, 2019, was recognized at the present value of outstanding lease payments using maturity, currency and risk-specific incremental borrowing rates. The weighted average incremental borrowing rate used to determine the lease liability as of January 1, 2019, was 3.0 percent.

The following shows a reconciliation of the rental and lease commitments for already used real estate and movables as of December 31, 2018, to the opening balance of lease liabilities as of January 1, 2019:

in € millions
Rental and lease commitments for already used real estate and movables as of December 31, 20181,367
Practical expedients for short-term leases and for leases for low-value assets (17)
Adjusted estimates of extension options and termination options191
Other(1)
Commitments from operating leases (undiscounted)1,540
Discounting effect(210)
Commitments from operating leases (discounted)1,330
Carrying amount of finance lease liabilities as of December 31, 201839
Carrying amount of lease liabilities as of January 1, 20191,369

For individual real estate leases, the right-of-use asset was recognized at an amount as if IFRS 16 had been applied since the commencement date of the lease. In all other cases, the right-of-use assets corresponded to the amount of the related lease liability on the date of initial application, adjusted by the amounts for any prepaid or accrued lease payments. In addition, the right-of-use asset was adjusted by the amounts recognized as provisions for onerous leases of €28 million on the balance sheet as of December 31, 2018. In this regard, an impairment test was not carried out on the right-of-use assets on the date of initial application. Initial direct costs were not taken into account in the measurement of the right-of-use asset on the date of initial application. Furthermore, the new provisions were not applied in individual cases where the lease ends by December 31, 2019.

As part of the transition to IFRS 16 as of January 1, 2019, right-of-use assets of €1,245 million (including €35 million from finance leases existing as of December 31, 2018) and lease liabilities of €1,369 million (including €39 million from finance leases existing as of December 31, 2018) were recognized. The cumulative effect of initial application of IFRS 16 amounting to €-50 million was recognized directly in equity.

The vast majority of leases concern rental properties in the RTL Group, Penguin Random House and Arvato divisions. In addition, leases also exist for technical equipment and machinery, vehicles and other fixtures, and furniture and office equipment. In the consolidated income statement, the change in recognition of expenses from leases results in an increase in operating EBITDA of an estimated €0.1 billion compared to the first half of 2018. This is due to the replacement of the operating lease expenses formerly included in other operating expenses with depreciation of right-of-use assets and other financial expenses from the compounding of the lease liability shown in the financial result. In the first half of 2019, the change in recognition of lease payments in the consolidated cash flow statement results in an improvement of the cash flow from operating activities. The cash flow from financing activities is reduced by a corresponding amount.

Impact of Issued Financial Reporting Standards that Are Not Yet Effective

The Bertelsmann Group has not opted for early adoption of any standards, interpretations or amendments that have been issued but are not yet mandatory.

Scope of Consolidation

The Condensed Interim Consolidated Financial Statements as of June 30, 2019, include Bertelsmann SE & Co. KGaA and all material subsidiaries over which Bertelsmann SE & Co. KGaA is able to exercise control in accordance with IFRS 10. Joint ventures and associates are accounted for using the equity method in accordance with IAS 28. As of June 30, 2019, the scope of consolidation including Bertelsmann SE & Co. KGaA consists of 977 companies (December 31, 2018: 974) with 44 entries and 41 exits in the first half of 2019. This includes 902 (December 31, 2018: 901) consolidated companies. In addition, investments in 26 (December 31, 2018: 25) joint ventures and 49 (December 31, 2018: 48) associates are accounted for using the equity method in the Consolidated Financial Statements. A total of 199 (December 31, 2018: 209) companies were excluded from the scope of consolidation. These consist of the associates in the portfolio of the Bertelsmann Investments division and entities without significant business operations and of negligible importance for the financial position and financial performance of the Bertelsmann Group.

Acquisitions and Disposals

In the first half of 2019, the cash flow from acquisition activities totaled €-93 million, of which, after consideration of cash and cash equivalents acquired, €-78 million relates to new acquisitions during the first half of the year. The consideration transferred in accordance with IFRS 3 amounted to €100 million taking into account contingent consideration of €2 million.

In April 2019, Penguin Random House acquired a 100 percent interest in the British children’s publishing company Little Tiger Group, based in London, United Kingdom, from the owners, who included the CEO and co-founder Monty Bhatia and other members of the Bhatia family. The Little Tiger Group is made up of five imprints mainly active in the preschool sector and will work closely with Random House Children’s Books. With this acquisition, Penguin Random House further expands its leading position in the English-language children’s and young adult book sector. The consideration transferred amounted to €40 million and comprises a purchase price payment already made in the amount of €38 million and a contingent consideration in the amount of €2 million. The purchase price allocation resulted in goodwill of €17 million, which is not tax deductible, mainly representing improved distribution through Penguin Random House Publisher Services and international sales expansion. The purchase price allocation is still preliminary due to the proximity of the acquisition to the end of the reporting period. In the financial year 2019, transaction-related costs amounted to €1 million and have been recognized in profit or loss.

In addition, the Bertelsmann Group made several acquisitions in the first half of 2019, none of which was material on a standalone basis. Payments net of acquired cash and cash equivalents amounted to €43 million; the consideration transferred in accordance with IFRS 3 for these acquisitions amounted to €60 million. There were no contingent considerations. The other acquisitions resulted in goodwill totaling €40 million, which reflects synergy potential and is partly tax deductible. Transaction-related costs amounted to €2 million in the first half of 2019 and have been recognized in profit or loss.

The purchase price allocations consider all the facts and circumstances prevailing as of the respective dates of acquisition that were known prior to preparation of the Consolidated Financial Statements. In accordance with IFRS 3, should further facts and circumstances become known within the 12-month measurement period, the purchase price allocation will be adjusted accordingly.

The following table shows the fair values of the assets and liabilities of the acquisitions on their dates of initial consolidation based on the currently still preliminary purchase price allocations:

Effects of Acquisitions

in € millionsLittle Tiger GroupOtherTotal
Non-current assets
Goodwill174057
Other intangible assets141731
Property, plant and equipment and right-of-use assets Trade and other receivables1313
Other non-current assets22
Current assets11
Inventories
Trade and other receivables51116
Other current assets115869
Cash and cash equivalents99
Liabilities3710
 
Financial debt
Lease liabilities22
88
Other financial and non-financial liabilities105969
 
Fair value of pre-existing interests1212
Non-controlling interests1717

Since initial consolidation, all new acquisitions in accordance with IFRS 3 in the first half of 2019 have contributed €68 million to revenue and €5 million to Group profit or loss. If consolidated as of January 1, 2019, these would have contributed €82 million to revenue and €4 million to Group profit or loss.

In November 2018, Bertelsmann Education Group acquired an interest of 100 percent in the US online education provider OnCourse Learning. The initial accounting for the acquisition had not yet been completed in the last financial year. In accordance with IFRS 3.49, goodwill from the acquisition of OnCourse Learning was increased by €17 million to €380 million. The increase results mainly from the adjustment of the consideration transferred in the amount of €16 million and from further adjustments of the fair values of the acquired intangible assets in the amount of €‑1 million. The consolidated balance sheet figures from the previous year have been adjusted accordingly.

In May 2019, the Bertelsmann Education Group sold its membership interest in OnCourse Learning Financial Services and in the following month its interest in OnCourse Learning Real Estate (together referred to as “OCL entities”) for a total of €122 million. Net of transaction-related costs, the transactions resulted in an overall gain of €11 million recognized in the item “Results from disposals of investments.”

In April 2019, Mediengruppe RTL Deutschland, which belongs to RTL Group, sold its interests held in Universum Film GmbH (Universum), a home entertainment and theatrical distribution company, to the investor KKR for €91 million. Net of transactionrelated costs, the sale resulted in a gain of €63 million recognized in the item “Results from disposals of investments.”

From all disposals in the first half of 2019, the Bertelsmann Group generated cash flows totaling €217 million after considering the cash and cash equivalents disposed of. The disposals led to a gain from deconsolidation of €74 million, which is recognized in “Results from disposals of investments.” The following table shows their impact on the Bertelsmann Group’s assets and liabilities at the time of deconsolidation:

Effects of Disposals

in € millionsOCL entitiesUniversumOtherTotal
Non-current assets
Goodwill781320111
Other intangible assets335745
Property, plant and equipment and right-of-use assets22
Other non-current assets1414
Current assets
Inventories30232
Other current assets4132643
Cash and cash equivalents36817
 
Liabilities
Provisions for pensions and similar obligations617
Financial debt2810
Lease liabilities11
Other financial and non-financial liabilities9381764

Assets Held for Sale and Liabilities Related to Assets Held for Sale

The carrying amounts of the assets classified as held for sale and related liabilities are presented in the following table:

Assets Held for Sale and Related Liabilities

in € millionsMotor Presse
Stuttgart
LudiaBalance as of
6/30/2019
Balance as of
12/31/2018
Assets
Non-current assets
Goodwill21305113
Other intangible assets3021516
Property, plant and equipment and right-of-use assets16218
Investments accounted for using the equity method11
Other non-current assets32516
Current assets
Inventories3335
Trade and other receivables8101812
Other current assets310131
Cash and cash equivalents171229
 
Impairment on assets held for sale(4)(4)(1)
 
Assets held for sale988718582
 
Equity and liabilities
Non-current liabilities
Provisions for pensions and similar obligations16165
Other provisions11
Financial debt116
Lease liabilities22
Trade and other payables881
Deferred tax liabilities14822
Current liabilities
Other provisions221
Financial debt332
Lease liabilities11
Trade and other payables1181946
Other current liabilities168242
 
Liabilities related to assets held for sale74259963

The carrying amounts of the assets classified as held for sale and related liabilities are attributable to Gruner + Jahr and RTL Group divisions as of June 30, 2019. In June 2019, Gruner + Jahr announced that it would sell its interest in Motor Presse Stuttgart to the successors to the founding Pietsch family, Patricia Scholten and Peter-Paul Pietsch. The sale was approved by the competent authority in July 2019. In addition, as of June 30, 2019, RTL Group production unit Fremantle is in the process of negotiating the disposal of the majority of its interest in its mobile gaming company, Ludia Inc. (Ludia).

In the first half of 2019, for disposal groups, which are measured at fair value less costs to sell, impairment losses were recognized in the amount of €-7 million, which were attributable to planned and completed disposals in the Gruner + Jahr division. The fair values are based on level 3 of the hierarchy of non-recurring fair values. Valuations for level 3 are based on information from the contract negotiations. The impairment losses are recognized in the item “Other operating expenses.”

Change in Bertelsmann Shareholders’ Equity

In January 2019, the customer relationship management businesses of Bertelsmann (Arvato CRM) and the Moroccan Saham Group were merged to form the new CRM company Majorel. Each partner holds 50 percent of the shares in Majorel, which is one of the market leaders in Europe, Africa and the Middle East, and has a strong presence in America and Asia. The merger gives Bertelsmann access to the growth markets of the African continent. Bertelsmann has a majority in the relevant governing bodies and the resulting decision-making authorities over the relevant activities of Majorel and includes it as a subsidiary in the Consolidated Financial Statements. Under the transaction, the Saham Group made a valuation compensation payment in the amount of €100 million in addition to the CRM businesses it contributed. The transaction was accounted for as an equity transaction in accordance with IFRS 10. The difference between the consideration received in the amount of €125 million and the carrying amount attributable to the derecognized Arvato CRM business of €109 million was recognized in shareholders’ equity.

in € millionsChange in Bertelsmann
shareholders’ equity
Fair value of consideration received (including valuation compensation payment)125
Derecognized interests in Arvato-CRM-Geschäfte(109)
Increase in Bertelsmann shareholders’ equity16
– thereof increase in other retained earnings8
– thereof increase in the reserve of exchange differences8

The Saham Group’s contribution of the CRM businesses was accounted for in the Bertelsmann Consolidated Financial Statements as a business combination in accordance with IFRS 3. In this connection, €11 million attributable to noncontrolling interests in the businesses contributed by the Saham Group were included in other changes in equity.

Currency Translation

The following euro exchange rates were used to translate the currencies most significant to the Bertelsmann Group:

  Average ratesClosing rates
Foreign currency unit per €1 H1 2019H1 20186/30/201912/31/20186/30/2018
Australian dollarAUD1.60021.56911.62441.62201.5787
Canadian dollarCAD1.50701.54631.48931.56051.5442
Chinese renminbiCNY7.66537.70927.81857.87517.7170
British poundGBP0.87370.87980.89660.89450.8861
US dollarUSD1.12971.21081.13801.14501.1658

Additional Disclosures on Revenues

In the first half of 2019, Group revenues of €8,500 million were primarily generated from contracts with customers in accordance with IFRS 15 (H1 2018: €8,127 million). The other revenues amounting to €112 million (H1 2018: €110 million) not in the scope of IFRS 15 result almost entirely from financial services in the Arvato division. The following table shows the revenues from contracts with customers in accordance with IFRS 15 by division and broken down by revenue sources and geographical areas. The categorization of revenue sources shown corresponds to that used in segment reporting.

Revenue from Contracts with Customers

H1 2019

in € millionsRTL GroupPenguin
Random
House
Gruner +
Jahr
BMGArvatoBertels-
mann
Printing
Group
Bertels-
mann
Education
Group
Total
divisions1)
Revenue Sources
Own products and merchandise641,5782912075172,045
Services185442171,8326521683,098
Advertising1,719153131,885
Rights and licenses1,1722882481,456
3,1401,6506692681,9076821688,484
 
Geographical Areas
Germany1,0081154451775043212,768
France687714210194321,072
United Kingdom12418356210471549
Other European countries6711465226555871,537
United States58494112128137551642,021
Other countries66258132516753537
3,1401,6506692681,9076821688,484

H1 2018

in € millionsRTL GroupPenguin
Random
House
Gruner +
Jahr
BMGArvatoBertels-
mann
Printing
Group
Bertels-
mann
Education
Group
Total
divisions1)
Revenue Sources        
Own products and merchandise721,41530920106151,937
Services187401961,7526571112,943
Advertising1,760178171,955
Rights and licenses1,0212772201,275
3,0401,4826902401,8586891118,110
 
Geographical Areas
Germany1,0191044471775242512,765
France723615410195321,120
United Kingdom10615245910281504
Other European countries6691256728518921,499
United States441853998154511081,714
Other countries8224292813782508
3,0401,4826902401,8586891118,110

The revenues reported by source of revenue and geographical areas reflect exclusively the revenues in accordance with IFRS 15 and consequently differ in amount from the breakdown of revenues in segment reporting. During the reporting period, the revenues from contracts with customers result from performance obligations fulfilled at a certain point in time of €3,237 million (H1 2018: €3,124 million) and performance obligations fulfilled over a certain period of time of €5,247 million (H1 2018: €4,986 million). They are attributable to the following divisions:

Timing of Revenue Recognition from Contracts with Customers (H1 2019)

in € millionsPoint in timeOver timeTotal
divisions1)
RTL Group9802,1603,140
Penguin Random House1,606441,650
Gruner + Jahr432237669
BMG70198268
Arvato1091,7981,907
Bertelsmann Printing Group27655682
Bertelsmann Education Group13155168
3,2375,2478,484

Timing of Revenue Recognition from Contracts with Customers (H1 2018)

in € millionsPoint in timeOver timeTotal
divisions1)
RTL Group9102,1303,040
Penguin Random House1,432501,482
Gruner + Jahr438252690
BMG68172240
Arvato1971,6611,858
Bertelsmann Printing Group78611689
Bertelsmann Education Group1110111
3,1244,9868,110

Additional Disclosures on Financial Instruments

The principles and methods used for the fair value measurement remain unchanged compared to those used in the previous year. Only disclosures on financial instruments that are significant to an understanding of the changes in financial position and financial performance since the end of the last annual reporting period are explained below.

The following hierarchy is used to determine the fair value of financial instruments.

Level 1:
The fair value of the listed financial instruments is determined on the basis of stock exchange listings at the end of the reporting period.

Level 2:
For measuring the fair value of unlisted derivatives, Bertelsmann uses various financial methods reflecting the prevailing market conditions and risks at the respective balance sheet dates. Irrespective of the type of financial instrument, future cash flows are discounted at the end of the reporting period based on the respective market interest rates and yield curves at the end of the reporting period. The fair value of forward exchange transactions is calculated using the average spot prices at the end of the reporting period and taking into account forward markdowns and markups for the remaining term of the transactions. The fair value of interest rate derivatives is calculated on the basis of the respective market rates and yield curves at the end of the reporting period. The fair value of forward commodity transactions is derived from the stock exchange listings published at the end of the reporting period. Any mismatches to the standardized stock exchange contracts are reflected through interpolation or additions.

Level 3:
If no observable market data is available, fair value measurement is based primarily on cash flow-based valuation techniques. As a rule, so-called qualified financing rounds are used for minority stakes in the Bertelsmann Investments division. Listed financial instruments with contractual lockups held by Bertelsmann are also based on level 3.

The measurement of financial assets and financial liabilities according to level 2 and level 3 requires management to make certain assumptions about the model inputs, including cash flows, discount rate and credit risk, as well as the life and development cycle of startup investments.

The option offered in IFRS 13.48 (net risk position) is used for measuring the fair value of financial derivatives. To identify the credit exposure from financial derivatives, the respective net position of the fair values with the contractual partners is used as a basis, as these values are managed based on a net position in view of their market or credit default risks.

The measurement category “fair value through profit or loss” mainly includes the minority stakes in startups and fund investments purchased by the Bertelsmann Investments division. The fair value of its listed investments is measured on the basis of their market values and of its unlisted investments, when possible, on the basis of observable prices obtained as part of the most recently implemented qualified financing rounds, which meet the minimum requirements for volume and participants, taking into account life and development cycles of the entity. The item also includes so-called fund-of-fund investments, which are also measured at fair value through profit or loss. The measurement of their fair values is based on the valuations of the external management as presented in regular reporting and taking into account a fungibility discount. The gains and losses resulting from changes in the fair value are recognized as other operating income in the item “Fair value measurement of investments.”

The market value of the 2001 profit participation certificates with a closing rate of 328.10 percent on the last day of trading in the first half of 2019 on the Frankfurt Stock Exchange was €933 million (December 31, 2018: €901 million with a rate of 317.01 percent) and, correspondingly, €34 million for the 1992 profit participation certificates with a rate of 202.00 percent (December 31, 2018: €33 million with a rate of 193.00 percent). The market values are based on level 1 of the fair value hierarchy.

In February 2019, a fixed-rate promissory note due for repayment in the amount of €150 million was repaid on time. In addition, in May 2019, Bertelsmann repaid a fixedrate promissory note due for repayment in the amount of €60 million on time.

On June 30, 2019, the cumulative market value of the listed bonds totaled €4,486 million (December 31, 2018: €4,298 million) with a nominal volume of €4,250 million (December 31, 2018: €4,250 million) and a carrying amount of €4,225 million (December 31, 2018: €4,223 million). The stock market prices are based on level 1 of the fair value hierarchy. On June 30, 2019, the total carrying amount of the private placements and promissory notes totaled €499vmillion (December 31, 2018: €708 million), and the total market value amounted to €558 million (December 31, 2018: €750 million). The fair values of private placements and promissory notes are determined using actuarial methods based on yield curves adjusted for the Group’s credit margin. This credit margin results from the market price for credit default swaps at the end of the respective reporting periods. Fair value is measured on the basis of discount rates ranging from -0.36 percent to 0.82 percent. The fair values of the private placements and promissory notes are based on level 2 of the fair value hierarchy.

Financial Assets Measured at Fair Value Categorized Using the Fair Value Measurement Hierarchy

in € millionsLevel 1:
Quoted prices
in active
markets
Level 2:
Observable
market
data
Level 3:
Unobservable
market
data
Balance as of
6/30/2019
Financial assets recognized at fair value147109271,084
Primary and derivative financial assets held for trading5353
Derivatives with hedge relation1919
147829271,156

Financial Assets Measured at Fair Value Based on Level 3

in € millionsFinancial
assets
recognized
at fair value
Primary and
derivative
financial assets
held for trading
Total
Balance as of 1/1/2019983983
Total gain (+) or loss (-)(16)(16)
– in profit or loss(17)(17)
– in other comprehensive income11
Purchases211211
Sales/settlements(201)(201)
Transfers out of/into level 3(50)(50)
Balance as of 6/30/2019927927
Gain (+) or loss (-) for assets still held at the end of the reporting period(80)(80)

Financial Liabilities Measured at Fair Value Categorized Using the Fair Value Measurement Hierarchy

in € millionsLevel 1:
Quoted prices
in active
markets
Level 2:
Observable
market
data
Level 3:
Unobservable
market
data
Balance as of
6/30/2019
Financial liabilities recognized at fair value through profit or loss3232
Primary and derivative financial liabilities held for trading6969
Derivatives with hedge relation55
7432106

Financial Liabilities Measured at Fair Value Based on Level 3

in € millionsFinancial
liabilities rec-
ognized at fair
value through
profit or loss
Total
Balance as of 1/1/20193131
Total gain (-) or loss (+)
– in profit or loss
– in other comprehensive income
Purchases22
Settlements(3)(3)
Transfers out of/into level 322
Balance as of 6/30/20193232
Gain (-) or loss (+) for liabilities still held at the end of the reporting period

Income Taxes

The tax expense for the first half of 2019 was calculated in accordance with IAS 34 using the average annual tax rate expected for the whole of 2019, which is calculated at 33.2 percent according to Bertelsmann management’s current estimation. In addition, special tax effects were recognized in current and deferred taxes, resulting in a lower tax rate in the income statement.

The tax expense for the first half of 2019 was lower than in the same period of the previous year, in particular due to the increase in tax-exempt non-recurring items in earnings before tax, mainly in connection with the higher result from disposals of investments.

Other Information

As a result of seasonal influences on the divisions, higher revenues and a higher operating result tend to be expected in the second half of the year compared to the first half of the year. The higher revenues in the second half of the year are primarily due to the increasing demand during the year-end holiday season, in particular in advertising-driven businesses and in the publishing business, as well as to the customary seasonality in the music business.

The amount recognized in the Consolidated Cash Flow Statement under "Sales of other non-current assets" is mainly attributable to several transactions conducted in the Bertelsmann Investments division, including the sale of the investment in the tech company Bigo.

In April 2019, Bertelsmann restructured its global printing business in terms of both organization and staffing. In relation to the decision to close the Bertelsmann Printing Group Prinovis site in Nuremberg in spring 2021 which was made during restructuring, a provision in the amount of €47 million was recognized as of June 30, 2019.

Notes on Segment Reporting

Segment reporting continues to reflect eight operating reportable segments (RTL Group, Penguin Random House, Gruner + Jahr, BMG, Arvato, Bertelsmann Printing Group, Bertelsmann Education Group and Bertelsmann Investments). In line with internal management, in the segment report in accordance with IFRS 8, intercompany leases are presented as operating leases with straight-line recognition of expenses and income.

Reconciliation of Segment Information to Group Profit or Loss

in € millionsH1 2019H1 2018
Operating EBITDA from continuing operations1,2921,071
Amortization/depreciation, impairment losses and reversals on intangible assets, property, plant and equipment and right-of-use assets461311
Adjustments on amortization/depreciation, impairment losses and reversals on intangible assets, property, plant and equipment and right-of-use assets included in special items(12)(1)
Special items19(8)
EBIT from continuing operations824769
Financial result(168)(106)
Earnings before taxes from continuing operations656663
Income tax expense(154)(162)
Earnings after taxes from continuing operations502501
Earnings after taxes from discontinued operations
Group profit or loss502501

Events after the Reporting Period

The syndicated credit facility of €1,200 million, previously due in 2021, was renewed early in July 2019 until 2024.

In July 2019, the French broadcasting authority approved the acquisition by Groupe M6, which belongs to RTL Group, of 100 percent of the Lagardère Group’s television business (Gulli, excluding Mezzo), the French market leader in live and on-demand children’s TV. The acquisition represents an opportunity for Groupe M6 to complement its audiovisual offering for families and to strengthen its overall position in the French media market, both in TV advertising and the digital segment. The transaction is expected to be effective in September 2019. It will be accounted for as a business combination in accordance with IFRS 3.

Following the approval of the French audiovisual regulatory authority in July 2019 and the authorization issued by the French competition authority in August, the groups France Télévisions, TF1 and Groupe M6, which belongs to RTL Group, announced that the Salto joint venture will be able to start operations. Salto’s online video service is due to launch in the first quarter of 2020.