In order to manage the Group, Bertelsmann uses revenues, Operating EBITDA and Bertelsmann Value Added (BVA) as strictly defined key performance indicators to directly assess business performance; accordingly, these form the basis of the outlook.

Group revenues as a growth indicator of the businesses decreased in the first half of 2016 by 0.9 percent to €7,966 million (H1 2015: €8,040 million) due to portfolio and exchange rate effects. The organic growth was 1.3 percent. Operating EBITDA is determined as earnings before interest, tax, depreciation and amortization and is adjusted for special items. This makes it a meaningful key performance indicator for determining a sustainable operating result. During the reporting period, operating EBITDA increased to €1,111 million (H1 2015: €1,063 million).

The central performance indicator for assessing the profitability from operations and return on invested capital is BVA. BVA measures the profit realized above and beyond the appropriate return on invested capital. This form of value orientation is reflected in strategic investment, portfolio planning and the management of Group operations and is the basis for management compensation. BVA is calculated as the difference between net operating profit after tax (NOPAT) and the cost of capital. NOPAT is calculated on the basis of operating EBITDA. Depreciation, amortization and impairment losses are deducted from EBITDA, and adjustments are made for special items. Then, after further modifications and deduction of a flat 33 percent tax, the resulting NOPAT is used to calculate BVA. Cost of capital is the product of the weighted average cost of capital (WACC) and the average level of capital invested. The uniform WACC after taxes is 8 percent. Invested capital is calculated on the basis of the Group’s operating assets less non-interest-bearing operating liabilities. The present value of operating leases is also taken into account when calculating the invested capital. In the first half of 2016, BVA decreased to €-26 million (H1 2015: €-21 million) despite the overall improvement in the operating results. This development is primarily due to acquisitions made in the context of the portfolio transformation, which led to an increase in the average invested capital.

Bertelsmann’s financial management system is defined by the internal financial targets outlined in the “Net Assets and Financial Position” section. The Group is managed and controlled on the basis of these financing principles; they form part of the value-oriented management system in the broader sense of the term, along with the EBITDA margin, the cash conversion rate and non-financial performance indicators.