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Vivendi: Growth In 2010 Earnings

Stocks in this article: VIV

Canal + Group

Canal+ Group reported full year revenues of €4,712 million, which represents a 3.5% increase year-on-year or 2.9% at constant currency. Canal+ Group’s total subscription base reached 12.7 million as of December 31, 2010, which represents a net increase of 344,000 year-on-year 10.

Canal+ France revenues were up 3.1% to reach €3,956 million, notably driven by subscription growth, increased revenue per subscriber and higher advertising revenues.

At the end of the year, Canal+ France had 11.1 million subscriptions, which represents a net growth of +335,000 year- on-year. Mainland France saw a net growth of 151,000 subscriptions year-on-year, reaching 9.7 million mainly due to a reduced digital subscriber churn rate, which stood at 11%, compared to 12.3% at the end of 2009. Average revenue per individual subscriber was up €1.6 year-on-year, reaching €46.3, due to the full effect of price increases implemented in 2009, improved cross-sell between Canal+ and CanalSat offerings, and a higher penetration of content and service options. Since the analog land signal switch-off in November 2010, Canal+ subscriber base is now almost 100% digitized. The subscriber base in regions operated by Canal+ Overseas (French overseas territories and Africa) grew by 184,000 to reach 1.3 million due to strong market dynamics, particularly in Africa.

Revenues from other Canal+ Group operations also increased, partly driven by Canal+ in Poland, where subscription revenues grew significantly. StudioCanal’s revenue decreased slightly. i>Télé channel continued to grow due to a steady increase in advertizing revenues.

Canal+ Group’s EBITA was €690 million, which represents a 5.8% increase year-on-year. Canal+ France’s EBITA was €616 million, or a 11% increase year-on-year. All pay-TV operations in mainland France and abroad contributed to this growth due to a general increase in the subscription bases combined with overall cost control. Canal+ Group continued to invest in Vietnam. StudioCanal was impacted by costs related to the release late December 2010 of the film The Tourist, for which most revenues was accounted in 2011.

Comments on Vivendi 2010 Financial Indicators

Revenues were €28,878 million, compared to €27,132 million in 2009 (+6.4%, or +4.2% at constant currency).

EBITA was €5,726 million, compared to €5,390 million in 2009 (+6.2%, or +4.5% at constant currency). This increase mainly reflected the performance of Activision Blizzard (+€208 million), Maroc Telecom Group (+€40 million) and Canal+ Group (+€38 million) respectively, as well as the consolidation of GVT (+€257 million).

Impairment losses on intangible assets acquired through business combinations were €252 million, compared to €920 million in 2009. In 2010, they mainly included the impairment of franchises and certain licenses (€217 million) acquired from Activision in July 2008. In 2009, they are primarily comprised of the impairment of goodwill related to UMG (€616 million) as well as video games franchises (€252 million).

Income from equity affiliates (mainly NBC Universal) was €195 million, compared to €171 million in 2009. Vivendi received a $390 million in dividends between January 2010 and the end of January 2011 relating to its NBC Universal equity interest (Vivendi finalized the sale of its entire equity interest in NBC Universal for a total of $5.8 billion on January 25, 2011).

Vivendi re-examined the amount of the reserve related to the Securities Class Action litigation in the United States, given the decision rendered by the US District Court for the Southern District of New-York on February 17, 2011 in our case, which followed the US Supreme Court’s decision on June 24, 2010 in the Morrison case. Using the same methodology and the same valuation experts as in 2009, Vivendi re-examined the amount of the reserve and set it at €100 million as of December 31, 2010, in respect of the damages, if any, that Vivendi might have to pay solely to shareholders who have purchased ADRs in the United States. Consequently, as of December 31, 2010, Vivendi recognized a €450 million reversal of reserve, compared to an accrual of €550 million as of December 31, 2009.

Other financial charges and income were a net charge of €17 million, compared to a net charge of €795 million in 2009. This change primarily reflected the adjustment to the reserve related to the Securities Class Action litigation in the United States.

Other financial charges and income related to financial investing activities were a net charge of €305 million, compared to a net charge of €106 million in 2009, and primarily included the impact of the agreement entered into in December 2009 between Vivendi and General Electric. In 2010, Vivendi recognized a capital loss incurred on the sale of a 7.66% interest in NBC Universal (-€232 million, which represented a foreign exchange loss attributable to the decline in value of the US dollar since January 1, 2004) completed at the end of September 2010 as the first step in the sale of Vivendi’s 20% interest in NBC Universal. In addition, in 2010, other financial charges and income included the €67 million cost incurred as part of the settlement reached with the Brazilian Comissao de Valores Mobiliarios (CVM). As stated under Brazilian law, this settlement does not imply the acknowledgement of any wrongdoing by Vivendi in the context of GVT’s acquisition, nor a determination by the CVM of any violation of the Brazilian Stock Exchange regulations by Vivendi.

Other financial charges and income related to financing activities were a net income of €288 million, compared to a net charge of €689 million in 2009. This change primarily reflected the impact of the Securities Class Action litigation in the United States.

Income taxes reported to adjusted net income was a net charge of €1,257 million, compared to a net charge of €747 million in 2009. This change was notably driven by the increase in taxable income of the business segments, particularly Activision Blizzard, and the impact of the consolidation of GVT since November 13, 2009, as well as the decrease of the share attributable to SFR’s non-controlling interest in the current tax savings realized as a result of the utilization by SFR of Neuf Cegetel’s tax losses from prior years carried forward (-€297 million).

Adjusted net income attributable to non-controlling interests was €1,481 million, compared to €1,778 million in 2009. This evolution primarily reflected the decrease in the share attributable to SFR’s non-controlling interest in the current tax savings realized as a result of the utilization by SFR of Neuf Cegetel’s ordinary tax losses from prior years carried forward (€33 million, compared to €330 million in 2009).

Adjusted net income was €2,698 million (or €2.19 per share) in 2010, compared to €2,585 million (or €2.15 per share) in 2009, a 4.4% increase.

Earnings attributable to Vivendi shareowners were €2,198 million (or €1.78 per share), compared to €830 million (or €0.69 per share) in 2009, an increase of €1,368 million (+164.8%).

About Vivendi

Vivendi is at the heart of the worlds of content, platforms and interactive networks.

Vivendi combines the world leader in video games (Activision Blizzard), the world leader in music (Universal Music Group), the French leader in alternative telecoms (SFR), the Moroccan leader in telecoms (Maroc Telecom Group), the leading alternative telecoms provider in Brazil (GVT) and the French leader in Pay TV (Canal+ Group).

In 2010, Vivendi achieved revenues of €28,9 billion and adjusted net income of €2.7 billion. With operations in 77 countries, the Group has about 51,300 employees.

www.vivendi.com

Important Disclaimers

Forward Looking Statements. This press release contains forward-looking statements with respect to the financial condition, results of operations, business, strategy, plans and outlook of Vivendi, including expectations regarding the payment of dividends as well as the anticipated impact of certain litigations. Although Vivendi believes that such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to the risks described in the documents Vivendi filed with the Autorité des Marchés Financiers (French securities regulator) and which are also available in English on Vivendi's web site ( www.vivendi.com ). Investors and security holders may obtain a free copy of documents filed by Vivendi with the Autorité des Marchés Financiers at www.amf-france.org , or directly from Vivendi. These forward-looking statements are made as of the date of this press release and Vivendi disclaims any intention or obligation to provide, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Unsponsored ADRs. Vivendi does not sponsor an American Depositary Receipt (ADR) facility in respect of its shares. Any ADR facility currently in existence is “unsponsored” and has no ties whatsoever to Vivendi. Vivendi disclaims any liability in respect of such facility.

 

ANALYST CONFERENCE (in English, with French translation)

 

Speakers:

Jean-Bernard Lévy

Chairman of the Management Board

Philippe Capron

Member of the Management Board and Chief Financial Officer

 

Date: Tuesday, March 1 st, 2011

9:00 am Paris time – 8:00 am London time – 3:00 am New York time
 
Media invited on a listen-only basis.
 

Address: Hôtel Salomon de Rothschild.

11 rue Berryer. 75008 Paris.
 

Internet: The conference can be followed on the Internet at: www.vivendi.com (audiocast)

 

Numbers to dial:

Number in France : +33 (0)1 70 99 43 00 ; Access Code : 37 483 75
Number in UK : +44 (0)20 7806 1951; Access Code : 12 502 14
Number in USA : +1 212 444 0412 ; Access Code : 12 502 14
Number in USA free : 1 888 935 4575; Access Code : 12 502 14
 

Numbers for replay:

Number France : +33 (0)1 74 20 28 00 ; Access Code 37 483 75#
Number UK : +44 (0)20 7111 1244 ; Access Code : 12502 14#
Number USA : +1 347 366 9565; Access Code : 12 502 14#
Number USA Free Phone : 1866 932 5017 ; Access Code : 12 502 14#
 

On our website www.vivendi.com will be available dial-in for the conference call and for replay (14 days), an audio webcast and the « slides » of the presentation.

 

PRESS CONFERENCE (in English, with French translation)

 

Speakers:

Jean-Bernard Lévy

Chairman of the Management Board

Philippe Capron

Member of the Management Board and Chief Financial Officer

 

Date: Tuesday, March 1 st, 2011

11:30 am Paris time – 10:30 am London time – 5:30 am New York time
 

Address: Hôtel Salomon de Rothschild.

11 rue Berryer. 75008 Paris.
 

Internet: The conference can be followed on the Internet at: www.vivendi.com (audiocast).

 

1 For the reconciliation of EBIT to EBITA see Appendix IV.

2 For the reconciliation of earnings attributable to Vivendi shareowners and adjusted net income see Appendix IV.

3 According to Blizzard Entertainment internal data.

4 According to Activision Blizzard internal estimates.

5 According to The NPD Group, Charttrack and Gfk.

6 Mobile revenues and broadband Internet and fixed revenues are determined as revenues before elimination of intersegments operations within SFR.

7 Mobile service revenues are determined as mobile revenues excluding revenues from equipment sales, net.

8 According to SFR.

9 Constant perimeter includes the consolidation of Sotelma, as if this transaction had occurred on January 1, 2009.

10 Canal+Overseas subscription base at the end of 2009 has been retreated under new calculation rules to include non-bindding, short term subscription offerings on a 12-month basis.

           
APPENDIX I
 
VIVENDI
ADJUSTED STATEMENT OF EARNINGS
 
(IFRS, audited)
4th Quarter 2010 4th Quarter 2009 % Change   Full Year 2010 Full Year 2009 % Change
 
8,009 7,607 + 5.3% Revenues 28,878 27,132 + 6.4%
(4,365) (4,072)

 

Cost of revenues (14,561) (13,627)

 

3,644 3,535 + 3.1% Margin from operations 14,317 13,505 + 6.0%
 
(2,505) (2,376) Selling, general and administrative expenses excluding amortization of intangible assets acquired through business combinations (8,456) (8,069)
 
(83) (14) Restructuring charges and other operating charges and income (135) (46)
       
1,056 1,145 - 7.8% EBITA (*) 5,726 5,390 + 6.2%
 
56 53 Income from equity affiliates 195 171
 
(117) (122) Interest (492) (458)
 
2 2 Income from investments 7 7
       
997 1,078 - 7.5% Adjusted earnings from continuing operations before provision for income taxes 5,436 5,110 + 6.4%
 
(281) (299) Provision for income taxes (1,257) (747)
       
716 779 - 8.1% Adjusted net income before non-controlling interests 4,179 4,363 - 4.2%
 
(232) (306) Non-controlling interests (1,481) (1,778)
       
484 473 + 2.3% Adjusted net income (*) 2,698 2,585 + 4.4%
             
 
0.39 0.38 + 1.7% Adjusted net income per share - basic 2.19 2.15 + 1.9%
 
0.39 0.38 + 1.6% Adjusted net income per share - diluted 2.18 2.14 + 1.9%
 

In millions of euros, per share amounts in euros.

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