arvato AG is looking back on a successful fiscal year 2005. In an economic environment characterized by slack economic growth in Germany, the core European markets and the United States, as well as higher raw material prices, the internationally networked media and communication service provider managed to boost both sales and earnings. Sales rose to € 4.365 bn. from € 3.76 bn. in 2004, while operating EBIT increased by € 31 mn. to € 341 mn. This positive development was based primarily on organic growth, but acquisitions played a role as well. One particularly positive development was the individual contribution that each business division made to this result. “The year of 2005 was a good year for arvato,” said Hartmut Ostrowski (48), arvato AG’s chief executive officer and a member of the board of management of Bertelsmann AG. “We rigorously pursued our growth strategy, and thus tapped new markets, attracted new customers and developed new services.” The group of companies invested a total of € 487 mn. in the establishment and expansion of its business operations last year. That represents an increase of € 118 mn. from the previous year. The number of employees rose by more than 8,000 to 42,155 (as of December 31, 2005). “The lion’s share of this growth came from our foreign subsidiaries,” Ostrowski said. “But we also managed to add more than 3,000 employees across our business divisions in Germany.”
Once again, the key engine of growth was arvato’s services business, which comprises arvato direct services, a leading global provider of all kinds of client communication services, and arvato logistics services, an international provider of integrated supply chain management solutions.
arvato services
The trend toward outsourcing continued in 2005. arvato’s services divisions exploited this development by pushing ahead with their targeted expansion last year. “We have extended our international business process outsourcing operations by establishing and expanding locations in such markets as Germany, France, Poland, Japan, Canada and Argentina, and we have entered the public services market in the UK with the assumption of comprehensive services on behalf of the district of East Riding in Yorkshire,” Ostrowski said. In addition, he cited the growth stimulus from the acquisition of national and international service firms. The takeover of a majority stake in the InFoScore group (Baden-Baden) and the subsequent merger with the arvato companies AZ Direct and BFS finance led to the creation of arvato infoscore, a leading European provider of data, information and receivables management services. The division after-sales and repair for the mobile communications sector was strengthened with the acquisition of Teleservice International A/S, with 13 locations in eight European countries, and the establishment of additional locations in the United States, Mexico and Germany. The company strengthened its European market leadership in the health-care logistics business through the takeover of BG Group Healthcare SAS. In addition, arvato’s service division took on more cross-border service assignments on behalf of major international companies.
arvato print
Overall, capacity usage at arvato printing plants was good in fiscal 2005. The printers successfully defended their market positions in a difficult, overcrowded market environment. In addition, the intaglio printing joint venture PRINOVIS with G+J and Axel Springer was founded after cartel officials approved the plan. “The goal of this joint venture is to solidify and expand the PRINOVIS printing operations in the competitive European illustration printing market,” Hartmut Ostrowski said. The executive cited the on-time conclusion of construction work in Treviglio, Italy, as another important milestone. One of the world’s most modern intaglio printers, Eurogravure, has been set up near Milan at a cost of about 120 million euros. In Germany, the Würzburg-based offset printer Vogel Druck und Medienservice was integrated into the Mohn media group. Printing is and will remain a core business of arvato that the company continued to strengthen during the past fiscal year, through the continued expansion of its European network, the continued optimization of its structures, the use of sales synergies and comprehensive investments with which the company has rigorously advanced its technology leadership.
arvato storage media
Despite strong competitive pressure, the storage media group arvato storage media managed to gain market share in both the CD and the DVD segment. “Sonopress solidified its competitive position during the past year. We have expanded our international production network by establishing a new production plant in Australia. In addition, we entered the key growth market of China through an investment in one of the leading Chinese manufacturers of storage media at the beginning of this year.” Ostrowski said the results of the storage media group had not markedly improved primarily because of the steep increase in raw material prices, which, as in the previous year, severely dampened the storage media group’s profitability.
arvato IT
“Business in the IT and mobile communication areas developed very favorably during the past year,” Ostrowski said with regard to the companies arvato systems, arvato mobile and empolis. arvato systems recorded sustained growth and strengthened its international activities through the establishment and expansion of locations in Asia, while empolis reinforced its market position as an innovative service provider for company-wide content and knowledge management solutions. arvato mobile carried out the innovative GNAB project, a future-oriented download platform that combines the safety aspects of a central Internet download platform with the user-friendliness, efficiency and speed of a decentralized network in a unique manner. “With GNAB, arvato mobile is complementing its download offer in the Internet area and continues to pursue the future-oriented strategy of transforming itself into an integrated provider of digital content – for everybody, anywhere and anytime,” Ostrowski said. “Digital distribution extends arvato’s existing range of services, and fits seamlessly into our three-dimensional growth strategy,” he added. In addition, arvato mobile forged ahead with its successful strategy of internationalization, including partnerships in Brazil and Russia. arvato mobile now operates in 47 countries. The company broadened its offering in the value-added telephone services business across all channels with the acquisition of Movota in the UK and AS Interactive in Germany.
Sales areas
With regard to divisional external sales, one development stood out. For the first time, the share of service activities, at 42.9 % (41.5 % in 2004) was bigger than that of the printing business, which was 2.4 percentage points lower than a year earlier at 39.7 percent. External sales by region showed only one striking shift: Sales in Germany dropped by 5.4 percentage points to 38.6 percent, while sales in the other European countries rose by 4.3 percentage points to 44.9 percent during the same period. “This development proves that our strategy of internationalization is showing an effect and that we are achieving global growth with globally active customers,” Ostrowski said.
About arvato:
With more than 260 subsidiaries worldwide, arvato is one of the biggest internationally networked media and communication service providers. In fiscal 2005, the group of companies that is part of Bertelsmann AG generated sales of € 4.37 bn. arvato’s worldwide subsidiaries employ more than 42,000 people. arvato AG comprises the arvato print companies (e.g. Mohn media and numerous printers in Europe and America), the divisions arvato direct services (e.g. customer loyalty systems and service center services), arvato logistics services (logistics/supply chain management), 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 with its handy.de and TJ.net brands. |
