Vivendi Reports Lower Q4 Earnings, Predicts Two Year Decline After 2011 Record Year

Vivendi Reports Lower Q4 Earnings, Predicts Two Year Decline After 2011 Record Year

NEW YORK - French entertainment and telecom group Vivendi on Thursday reported lower fourth-quarter financials and predicted two years of lower profits.

Driven by challenges in its French telecom business, Vivendi's earnings excluding specials items could drop as much as 15 percent from a record 2.95 billion euros in 2011 to more than 2.5 billion euros this year and will also decline in 2013, the company said. As a result, it cut its dividend from 1.40 euros to 1 euro per share, plus one bonus share per 30 shares held. The stock dropped and was down 9.7 percent at $19.50 as of 12:20pm ET Thursday.

Vivendi Third-Quarter Results Exceed Expectations

"2011 was a record year for Vivendi," said CEO Jean-Bernard Levy. "We generated the highest adjusted net income in Vivendi's history thanks to the strong growth of our activities in Brazil with GVT and the exceptional profitability generated by Activision Blizzard's video games."

Discussing the profit outlook, he said: "Profit growth should resume in 2014 thanks to the positive and very significant effects of our strategy focused on innovation, the synergy driven acquisitions made in 2010 and 2011, and the strengthening of our positions in emerging countries."

Universal Music Formally Requests EU Approval to Purchase EMI's Labels

Fourth-quarter operating cash flow, a metric of profitability, declined 5.9 percent, or 5.6 percent at constant currency rates, to 994 million euros.

Revenue fell 2.8 percent, or 2.6 percent assuming constant currencies, to 7.78 billion euros as revenue declined in most units except for French pay TV arm Canal Plus, which was up 4.6 percent and GVT, which rose 30.5 percent.

Operating cash flow jumped from 6 million euros to 60 millions euros at Activision Blizzard as Universal Music Group grew operating cash flow by 15.4 percent and Canal Plus grew 56.2 percent. Other units posted declines.

At Activision, Call of Duty: Modern Warfare 3 was the number one selling video game in Europe and the U.S. last year, boosting Vivendi's full-year results.

At Vivendi's pay TV arm, Canal Plus France had 11.216 million subscriptions at the end of 2011, a net increase of 158,000.

Vivendi also reiterated its view that "the recorded music market is approaching an inflection point in the U.S.," saying that it "believes in the potential of this business."

At Universal Music Group, full-year 2011 revenue of 4.2 million euros meant a 5.7 percent decrease, or 4.6 percent at constant currencies, as operating profit rose 7.6 percent, or 8.2 percent, to 507 million euros due to cost savings thanks to a reorganization.

"The 9.6 percent growth in digital music sales (+11.3 percent at constant currency) and increased income from new business activities partially offset the falling demand for physical product," Vivendi said. Digital music sales represented 33.6 percent of recorded music revenue.

Major recorded music sellers for the year included Lady Gaga, Rihanna, Lil Wayne, Amy Winehouse, Justin Bieber and LMFAO.