Posted a forecast-beating 5.7% rise.

Vivendi on Thursday posted a forecast-beating 5.7 percent rise in first-quarter sales, invigorated by strong performances by music artists such as Prince and online role-playing game World of Warcraft.

The group, which controls France's second largest mobile operator, SFR, and owns the world's biggest record company, Universal Music Group, generated revenues of 4.77 billion euros ($5.88 billion) in the three months to March 31.

The outcome compared with 4.51 billion euros in the year-ago period and a forecast of 4.68 billion euros from a Reuters poll of 10 analysts.

"A good surprise in terms of consolidated sales which could lead us to upgrade our annual estimates for the group," French broker Oddo said in a note.

World of Warcraft, one of the world's most popular online role-playing games, helped lift first-quarter games revenues by 18.6 percent to 134 million euros.

In the music business, best-sellers in the quarter included new releases from Andrea Bocelli and Jack Johnson in addition to the debut release from Ne-Yo that reached the top of the US album chart in March. Prince's latest album Musicology was also well received.

"By division, the main outperformer was music," UBS wrote in a note.

Vivendi's results came as EMI Group, the world's third largest record company, said on Thursday it was on track to deliver 12 percent annual profit growth and its first sales increase since 2001, partly driven by digital music.

Vivendi's annual report revealed that Doug Morris, chief executive of Universal Music, in 2005 received a total package worth 14.46 million euros, nearly six times more than Vivendi Chief Executive Jean-Bernard Levy who earned 2.46 million euros.

Vivendi shares, which have gained more than 20 percent over the past year and more than 8 percent in the last three months alone, were up 2.80 percent at 28.62 euros by 1228 GMT.

MORE AT THE AGM

Later on Thursday, Vivendi will hold its annual general meeting during which it could provide a trading update as well as more details on shareholder remuneration and use of its cash.

The French group can also expect to be asked about its relations with Sebastian Holdings, an investment company which represents the interests of Norwegian investor Alexander Vik and has built up a 4 percent stake in the French group, according to sources familiar with the situation.

Levy defended the French group's media-telecoms integration strategy in an interview with daily Les Echos published on Thursday and said Sebastian Holdings had not yet asked for a seat on the board.

The media have been awash with speculation that Sebastian Holdings could put pressure on Vivendi to review its options to maximize shareholder value, which could include a break-up.

Sebastian Holdings is a shareholder in French advertising group Havas and was instrumental in helping French media tycoon Vincent Bollore become chairman of Havas last year.

A spokesman for Bollore stressed on Thursday that the financier was not "remotely involved" with Sebastian Holding's stake build-up in Vivendi or any other dealings with the French media and telecoms group.

SFR IN LINE WITH FORECASTS

SFR, which generates the bulk of the group's cash, took in first-quarter sales of 2.14 billion euros, matching a Reuters forecast.

"The favorable effects of the increase in customer base along with the growth in voice and data usage are partly offset by the strong cut in regulated tariffs as from January 1, 2006...and by the cut in the price of communications charged to customers for the new offers launched in mid 2005," Vivendi said in a statement.

SFR's 12-month rolling average revenue per user fell 1.8 percent to 479 euros in March 2006 versus 487 euros in March 2005.

Universal Music Group posted revenues of 1.125 billion euros, above a Reuters consensus of 1.050 billion euros, with digital sales more than doubling on 2005 and making up 10 percent of total music revenues.

At constant currency, music sales were up 2.8 percent.

UMG said it had six albums featured in the top 10 best-sellers to date, including the top two.

Canal Plus saw its turnover reach 899 million euros, matching expectations, with sales from pay-TV operations in France up 11 percent against 2005 due to higher revenues per subscriber and a broader user base.

In the interview with Les Echos, Levy ruled out selling the group's film-production unit Studio Canal or acquiring a new games publisher although it could buy more development studios.

—Reuters

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