Bastei Lübbe AG: Despite positive development in core business strong burden on earnings in 2017/2018 financial year

Press Release

Bastei Lübbe AG: Despite positive development in core business strong burden on earnings in 2017/2018 financial year

- Core business of book publishing: Increase in revenue and adjusted EBIT in 2017/2018 financial year

- Balance-sheet adjustment hits consolidated earnings for 2017/2018 by around EUR 18 million

- Comprehensive efficiency programme on schedule

- 2017/2018 consolidated financial statements to be published on 31 July 2018

Cologne, 14 June 2018. Based on provisional calculations, Bastei Lübbe AG (ISIN DE000A1X3YY0) generated in the 2017/2018 financial year consolidated revenue of around EUR 140 million, an EBITDA of EUR 0.5 million (previously: approx EUR 5 million) and an EBIT of minus EUR 18 million (previously: approx. minus EUR 11 million). Several factors negatively impacted on earnings by EUR 18 million, including the loss of the affiliated company BuchPartner GmbH sold on 31 March 2018, as well as unscheduled impairments at further affiliated companies. Additional impairments stemmed from the reassessment of the course of amortization on capitalised royalties. The positive development of revenue and income in the core business of book publishing was not enough to offset this.

Revenue in the core business of book publishing was up by around 20% on the previous year at approx. EUR 85 million in the past financial year. There were several factors in this positive performance, including best-sellers by Dan Brown and Ken Follett, which were ranked first and second on the German book market in terms of sales. The 12th volume in the "Diary of a Wimpy Kid" series by US author Jeff Kinney became the year's best-selling book for children and young adults in just ten weeks. In addition, the high level of "digital" share in the book business compared to the competition, which accouns for around 30% is contributing to this pleasing performance.

Adjusted for one-time effects, the provisional operating result (EBIT) in the core business rose by around EUR 1 million to approx. EUR 3.5 million, this includes that the fourth quarter was below budget partly due to high remissions. "Although it is not properly reflected in the earnings for the current financial year due to the non-recurring factors, we can be really pleased with the operating performance in our core business, despite the rather subdued final quarter. Even so, we need to improve our efficiency in order to be successful again in future in what remains a challenging environment. Overall, we firmly believe that we are on the right track," explained Carel Halff, CEO of Bastei Lübbe AG.

The comprehensive efficiency programme launched in January 2018 is progressing as planned. Initial successes have been attained, and are already leading to improvements in the publishing catalogues. By the end of this year, marketing, sales and processes will also have been extensively reviewed and measures will have been instigated. Overall, the Management Board is therefore targeting a sustained improvement in the EBIT margin in the core business by 2 to 3 percentage points to between 6% and 8% in the medium term. "We still have a long way to go before Bastei Lübbe AG is in a position where we can properly leverage the potential of our business. At present, our cost structure doesn't allow us to generate the returns that appear possible and appropriate for our business. However, we are working hard to change this. But the most important thing is that our foundations are strong: we have a competitive, strong catalogue and a team of motivated employees who are getting on with the job together," stated Carel Halff, CEO of Bastei Lübbe AG.

One-time effects hit earnings hard in the 2017/2018 financial year. Unscheduled impairment at the affiliates and subsidiaries BookRix GmbH & Co. KG, Beam Shop GmbH and und B + M Entertainment GmbH resulted in a total negative impact of around EUR 5.5 million. Following a strategic and economic analysis in consultation with the Supervisory Board, the Management Board has decided to divest itself of these subsidiaries.

In capitalised royalties, the impact on earnings with no effect on cash flow amounts to EUR 8 million. This largely involves a one-time effect stemming from the reassessment of the course of amortization. In January, the Management Board assumed that the negative impact would be EUR 3 million lower. The detailed analysis carried out on the annual financial statements revealed a higher need for amortization and impairment.

The subsidiary Deadalic Entertainment GmbH managed in the "Digital" segment increased its revenue by around 40% to approx. EUR 9 million and fulfilled expectations with EBITDA of around EUR 3 million. The main drivers here were the successful games "Shadow Tactics" and "The Long Journey Home". However, the blockbuster game "The Pillars of the Earth", developed at great expense, failed to perform and sell as well as expected in the last quarter of the past financial year, thus necessitating an unscheduled impairment of around EUR 3 million.

The loss (EBIT) of the affiliated company BuchPartner GmbH, deconsolidated on 31 March 2018, amounted to around EUR 6 million in the last financial year. This includes the loss of approximately EUR 1.6 million from the sale of the company.

"Overall, the negative impact from the necessary balance-sheet adjustment was higher than we expected in February of this year. This is particularly evident in the light of the fact that the original estimate of the effects from the valuation of royalties could not be carried out with the same degree of detail as in the annual inventory that has now taken place. Nevertheless, applies: With an equity ratio of still 30%, the company has sufficient resources to withstand these high non-recurring negative impacts. Besides, most of these effects have not impacted on the Group's liquidity. And by selling BuchPartner, we have also reduced our debt by some EUR 10 million," explained Ulrich Zimmermann, CFO of Bastei Lübbe AG.

The consolidated financial statements for the 2017/2018 financial year, including an outlook for 2018/2019, will be published on 31 July 2018 due to the considerable additional work involved in this year's annual financial statements. The publication of the financial statements was originally planned for 2 July 2018.

The Management Board is confident about the progress of the current financial year. Firstly, the publishing group has an attractive autumn programme for 2018. Along with volume 13 of "Diary of a Wimpy Kid", which is regarded as a sure candidate for contributing revenues, the best-selling author Timur Vermes should be following up his huge hit "Look Who's Back" with a sensational political and media satire. Best-sellers are also guaranteed from authors in the LYX and Bastei Lübbe Paperbacks stables, especially Mona Kasten and Petra Hülsmann. The paperback edition of Dan Brown's "Origin", to be released in September, is a serious contender for topping the best-seller list.

On the other hand, following an intensive analysis and the progress of the portfolio adjustment, the Management Board now expects that the focus on the core business has also significantly improved the predictability of the earnings situation. With regard to the negative one-time effects at affiliates as well as the conversion of the accounting method for capitalised royalties, all necessary steps have now been taken and their effects have been incorporated in the balance sheet. At the same time, the rigorously continued and implemented efficiency programme is likely to have a positive effect.

The Management Board sees the bottom reached. In the current financial year 2018/2019, the company expects to return to positive figures with consolidated EBIT in the amount of between EUR 0.5 and 2 million despite expenses for the efficiency programm in the amount of EUR 2 million and the adjustment of the investment portfolio from EUR 0.5 million. Revenues are expected at around EUR 95 million in 2018/2019. In the upcoming financial year 2019/2020 and in the years beyond, the usual earnings capacity with an EBIT-margin of 6 to 8 percent should be achieved again with smaller revenue increases.


About Bastei Lübbe AG:

Bastei Lübbe AG is a media group with headquarters in Cologne. Its business activities primarily focus on the development and licencing of contents which are sold in physical and digital formats. The core business of the company in the book segment covers classic publishing and periodically published puzzle magazines and novels. With its total of twelve publishing houses and imprints, the company group currently offers around 3,600 titles in the areas of fiction, non-fiction as well as books for children and young adults. In the growing segment of hardcover fiction books, the company has been one of the market leader in Germany for many years. At the same time, Bastei Lübbe is an engine for innovation in the area of digital media and distribution channels, among other things by the production of thousands of audio and eBooks. This includes the stake in the renowned game publisher "Daedalic Entertainment".

With annual sales of approx. 146 million euros (financial year 2016/2017), Bastei Lübbe AG is one the largest medium-sized publishing companies in Germany. The shares of the company have been listed in the Prime Standard segment on the Frankfurt stock exchange (GSIN A1X3YY, ISIN DE000A1X3YY0) since 2013. Further information is available at www.luebbe.de.

Contact Bastei Lübbe AG:
Barbara Fischer
Head of Press and Public Relations
Tel.: 0221 / 82 00 28 50
E-Mail: barbara.fischer@luebbe.de