Bertelsmann anticipates that economic conditions will develop as follows in 2017. Overall, the global economy will expand slightly faster. The Kiel Institute for the World Economy (IfW) estimates that global production will increase by 3.5 percent in 2017, compared to 3.1 percent in 2016. The outlook for economic development on a global level continues to be overshadowed by a number of factors, including the adverse effects of low raw materials prices for raw material-exporting countries, the gradual realignment of the Chinese economy and a wide range of political uncertainties. By contrast, the continuing accommodative monetary policy overall will help to stimulate the economy.
In the eurozone, the economic recovery is set to continue even if downward risks remain. The IfW estimates real economic growth of 1.7 percent in 2017. The IfW also expects GDP for Germany to grow by 1.7 percent in real terms. It expects the growth rate in France to be 1.2 percent in real terms. For the United Kingdom, GDP is expected to rise at a lower pace by 1.2 percent in real terms in 2017. For the United States, real economic growth of 2.5 percent is expected, thanks to the continuing economic momentum.
The worldwide media industry is primarily influenced by global economic developments and the resulting growth dynamic. The continued trend toward digitization of content and distribution channels, changes in media usage and the increasing influence of emerging economies will continue to present risks and opportunities in the years to come. Through the intended transformation of the Group portfolio in line with the four strategic priorities, Bertelsmann expects to benefit to an increasing extent from the resulting opportunities. Through its businesses, Bertelsmann operates in a variety of different markets and regions whose developments are subject to a range of factors and that do not respond in a linear fashion to overall economic tendencies. The following takes into account only those markets and regions that are large enough to be relevant for forecasting purposes and whose expected development can be appropriately aggregated and evaluated or that are strategically important from a Group perspective.
For 2017, with the exception of continued significant growth in Spain and a slightly declining development in the Netherlands and Hungary, the European TV advertising markets are expected to remain stable or to show slight growth. In the book markets, an overall stable development is expected. In the magazine business, the print advertising and circulation markets in Germany and France are expected to decline further in 2017, while continued growth is expected in the digital segment. For 2017, continuing moderate growth of the global music market is expected in the publishing and recording rights segments. In 2017, the services markets are expected to achieve growth similar to the previous year. The relevant European print markets and the North American book printing market are likely to show continued decline in 2017. For the US education markets, continuing strong growth is expected in the relevant segments overall.
The global economy is on a moderate growth path. However, economic prospects continue to be subject to certain risks. The following expectations are therefore based on the assumption that the recovery of the overall economic situation will continue and that most of the forecasted market developments and the economic predictions of the research institutions will be realized.
For the financial year 2017, Bertelsmann anticipates that business development will be driven by the slightly positive market expectations for the European TV advertising markets, by stable book markets and by continuously growing service markets. The growth stimuli created through strategic portfolio expansions will continue to have a positive impact on Bertelsmann’s growth profile.
In addition to the assumed market developments, the predicted economic developments in the geographic core markets of Western Europe and the United States are the basis of the expected business development. With revenue and earnings share within the eurozone expected at around two-thirds, the extent of growth is above all based on the forecasted real and nominal economic development in this economic zone. The IfW therefore assumes that GDP in the eurozone will increase by 3.2 percent in nominal terms and by 1.7 percent in real terms for 2017. The OECD predicts that GDP in the eurozone will increase by 2.8 percent in nominal terms and by 1.6 percent in real terms for 2017. In view of these economic expectations, Bertelsmann expects Group revenues to increase slightly in the financial year 2017. Operating EBITDA is expected to show stable development in the financial year 2017. The average level of capital invested will continue to increase in the financial year 2017 as a result of ongoing acquisition activity. As a result of the growth profile of the acquired businesses, compensating effects from earnings contributions are not expected to materialize for some time. Consequently, a strong fall in BVA is expected for the Group.
At present, the expected performance of any individual unit of key significance for the Bertelsmann Group is not expected to deviate significantly from that of the Group.
Depending on how the economy develops, Bertelsmann does not currently anticipate interest rate changes to have any material impact on the average financing costs of mediumto long-term financing. The liquidity situation in the forecast period is expected to be sufficient.
These forecasts are based on Bertelsmann’s business strategy, as outlined in the “Corporate Profile” section. In general, the forecasts reflect careful consideration of risks and opportunities and are based on operational planning and the mediumterm outlook for the corporate divisions. All statements concerning potential economic and business developments represent opinions advanced on the basis of the information that is currently available. Should underlying assumptions fail to apply and/or further risks arise, actual results may differ from those expected. Accordingly, no assurances can be provided concerning the accuracy of such statements.