A strong performance at Universal Music Group drove a 5 per cent increase in revenues at Vivendi in the first half of 2017 — but it was not enough to halt a slide in profits at the global media group controlled by French billionaire Vincent Bolloré.
A 45 per cent rise in subscription and streaming revenues, combined with a string of hits including the release of a 50th anniversary edition of The Beatles’ Sgt Pepper’s Lonely Hearts Club Band, helped lift revenues at Universal to €2.6bn.
Although that 14 per cent increase helped the group’s overall revenues rise to €5.4bn, Vivendi’s earnings before interest, taxes, and amortisation (Ebita) fell 11 per cent to €352m, mainly because of the continued decline of the company’s pay-TV arm Canal Plus.
Vivendi said revenues at Canal Plus were falling at a slower rate, but the business was still being hit by the longer term fall in pay-TV subscriptions in France.
At the same time, advertising revenues generated by Canal Plus’s three free-to-air channels have also been hit by an industry-wide slump in ad spending, contributing to a near 42 per cent drop in operating profits at the TV group to €171m.
Nevertheless, the strong performance at Universal is likely to fuel speculation that Mr Bolloré will push ahead with an initial public offering for the music group — something he confirmed he was considering earlier this year. The move would capitalise on the optimistic valuations being heaped on the global music business.
A new report this week from Goldman Sachs raised growth forecasts 16 per cent to predict global revenues from paid music streaming would hit $28bn by 2030.
The report came as Goldman increased its valuation of Universal by 16 per cent to €19.5bn ($23.5bn) from €16.8bn.
Vivendi used its trading update on Thursday to reiterate its statement to Italian regulators earlier this month that its 24 per cent stake in Telecom Italia does not give Bolloré’s media group de facto control over the company.
The company also confirmed it would be launching a simplified tender offer in the coming weeks for the remaining interest in advertising group Havas. In May, Vivendi offered €2.3bn in cash to buy a 60 per cent stake in Havas from the billionaire’s family holding company.
But some analysts have accused the media mogul of overpaying. Last week, Havas, run by Vincent Bolloré’s son Yannick, reported a 34 per cent drop in profit for the first half, partly because of bigger than expected cuts in advertising spending.
Analysts at Citi said that despite the performance of Universal they were “circumspect” about the more “muted trends” facing other parts of the business.
“The acquisition of Havas and the uncertainty in Italy makes the investment case even more complicated still,” Citi said in a note.