Bertelsmann anticipates that economic conditions will develop as follows in 2018. The solid global economic growth will continue. The Kiel Institute for the World Economy (IfW) estimates that global production will increase by 3.9 percent in 2018, compared to 3.8 percent in 2017. The increases in growth are expected to be spread evenly across industrial and emerging countries. Risks to the global economy arise in particular from the financial environment and from uncertainties over a possible normalization of monetary policy.

The economic upturn in the eurozone is set to continue. It is therefore expected that the increase in real GDP in 2018 of 2.3 percent will be similar to last year. The economic recovery in Germany is expected to continue over the coming year. This positive outlook is based on a consumer climate that is likely to remain good, coupled with increasing investment activity. The IfW expects GDP to grow by 2.5 percent in real terms. The growth rate in France is expected to be 2.0 percent in real terms. In the United Kingdom the growth of real GDP is likely to remain relatively modest at just 1.4 percent. The subdued growth expectations reflect the significant uncertainty over the outcome of the Brexit negotiations and future economic relations. Moreover, the devaluation of the local currency after the referendum on EU membership is having an increasingly adverse effect on the consumer climate. For the United States, real economic growth of 2.5 percent is expected.

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 2018 the European TV advertising markets are expected to remain stable or grow at a moderate rate, apart from the Netherlands where a moderate decline is anticipated. In the book markets, an overall stable development is expected. In the magazine business, the strong decline in the print advertising and circulation markets in Germany and France will persist in 2018, while continued strong growth is expected in the digital segment. For 2018, continuing moderate growth of the global music market is expected in the publishing rights segment. At the same time, significant growth is anticipated in the recording rights segment. In 2018, the services markets are expected to achieve growth similar to the previous year. The gravure printing market in 2018 is likely to show an ongoing significant decline. Continued stable development is expected, however, for the offset market in Europe and the book printing market in North America. Overall, sustained strong growth is anticipated for the relevant US education markets.

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 2018, Bertelsmann anticipates that business development will be driven by the stable to slightly positive market expectations for the European TV advertising markets, by stable book markets, and by continuously growing service and music 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 predicts that GDP in the eurozone will increase by 2.3 percent in real terms and that the International Monetary Fund will increase by 2.2 percent for 2018. In view of these economic expectations, Bertelsmann expects Group revenues to show a moderate increase in the financial year 2018. Not including the capital gains from strategic real estate transactions realized for the financial year 2017, stable development of Operating EBITDA  is anticipated for the financial year 2018. If these gains are included, however, operating EBITDA is expected to decline moderately in the financial year 2018. The average level of capital invested will continue to increase in the financial year 2018 as a result of acquisitions made and the organic expansion of growth businesses. Compensating effects from earnings contributions are not expected to materialize for some time. Consequently, a strong fall in BVA  is still expected for the Group. The same applies for BVA calculated by from financial year 2018 onward implemented methodology. These expectations are based on operational planning and the medium-term outlook for the corporate divisions, assuming that exchange rates remain constant.

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. 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.