Vivendi Q1 net income down 9.6% on lower video game sales

15 May 2008

French telecoms and media group Vivendi reported a 9.6% drop in profits for the three months ending 31 March 2008, attributing the downturn to lower sales volumes at its video-gaming unit. Adjusted net income (excluding one-off gains and some costs) dipped to EUR697 million (USD1.07 billion) in the period under review, down from EUR771 million in Q1 2007. The company reiterated its forecast for full-year 2008 net income to grow at a similar rate as in 2007. Group net income dropped 41% year-on-year from EUR932 million to EUR555 million, although its Q1 2007 results were impacted by a one-off gain of EUR239 million relating to the sale of a 10% stake in the Canal Plus pay-TV business to Lagardere. A Bloomberg poll of five analysts had predicted net profit of EUR660 million. First-quarter operating profit fell 5.6% y-o-y to EUR1.2 billion despite a 5.2% rise in revenues to EUR5.28 billion.

The rise in sales was bolstered by its telecoms arm SFR’s purchase of the fixed line assets of Tele2 (France). SFR, France’s second largest mobile operator by subscribers and Vivendi’s largest revenue and profit generator, said operating profit fell 3% to EUR624 million, as government-imposed tariff cuts and rising costs to develop its fixed line business combined to hit its bottom line. SFR’s EBITDA decreased by half a percentage point to EUR856 million, although mobile EBITDA was up 1% at EUR873 million on the back of higher revenues and cost control. SFR added 57,000 net new customers in the first three months of this year, taking its registered customer base to 18.82 million, up 5.1% compared with 31 March 2007. The mobile arm improved its pre-paid/post-paid mix in the twelve months to March; the proportion of SFR users on monthly contracts increasing by 6.2% to reach 12.43 million by the start of April 2008. In addition, the company had an estimated 1.3 million wholesale customers at the end of the most recent quarter. Fixed line and ADSL revenues rose by 4.5% y-o-y to EUR126 million. SFR had 1.85 million fixed voice customers and 438,000 ADSL customers at end-March. Canal Plus reported a 3.7% rise in operating profit to EUR170 million, driven by the addition of 180,000 new subscribers from a year earlier. The pay-TV firm posted sales of EUR1.12 billion, up 4.5% y-o-y.

France, SFR