Random House is counting on an extremely strong list in the second half of 2003 to overcome lower results in the first six months of the year to give the company a good year. RH's global revenue in the first half of 2003 was 747 million euros ($806 million), 26% lower than during the first six months of 2002. Operating EBITDA fell 57%, to 29 million euros ($31 million), according to the mid-year financial release from parent company Bertelsmann. The lower results were attributed to a sluggish U.S. marketplace, a weak dollar and the closing of several German imprints, which more than offset a solid performance in the U.K.
In his letter to U.S. employees, Random chairman Peter Olson stressed that the lower January-to-June results were primarily the result of "currency exchange rate fluctuations, ongoing difficult retail marketplace conditions, and the weak economy." Olson further noted that, anticipating lower spending on books in the first half of 2003, many Random publishers pushed the release of major titles into the second half of the year, a tactic that will result in "consolidating our frontlist strength into the fourth quarter even more heavily than in previous years."
Olson wrote that while RH hit its "ambitious" sales targets for June, July and August, it is "premature to suggest that this upturn is the sustained book marketplace recovery we've been hoping for." Olson said that despite the uncertain marketplace, the strength of RH's fall list makes him optimistic that the company "can have a good full fiscal year." Big books due out between now and the end of the year include Bleachers by John Grisham, Safe Harbour by Danielle Steel, Babylon Rising by Tim LaHaye, Who's Looking Out for You by Bill O'Reilly and the recently signed I Am a Soldier Too: The Jessica Lynch Story by Rick Bragg.
The midyear report will not quell rumors that have been circulating on and off for several months that Random is looking to trim staff. Company spokesperson Stuart Applebaum said that Random "continues to watch all our costs very carefully in doing the best job we can for our books and their authors."
In other Bertelsmann operations, revenue in the direct group fell 17.4%, to 1.13 billion euros, but that division came close to breaking even with its EBITDA loss dropping to 17 million euros from 119 million euros in the first six months of 2002. Both the decline in revenue and the lower loss were attributed to the group's withdrawal from "pure e-commerce and media products," as well as "rigourously" pursued cost reductions, the company said. Bertelsmann provided no details on how Bookspan performed in the first half of the year, and a Bookspan spokesperson had no comment on first half results.
In the Arvato group, EBITDA rose 22.7%, to 54 million euros, despite a 2% decline in revenue, to 1.64 billion euros. The group's printing business was hurt by downward pressure on prices, while sales and profits were up in the services division.
Commenting on the 0utlook for the entire company, Bertelsmann said that its intensified concentration on core activities, together with a leaner organization, makes the media giant "well placed to face its international competitors." The company added that second-half results will benefit from the sale of its stake in Barnes & Noble.com to Barnes & Noble in late July.
