PARIS — Vivendi is sticking to its forecast of a record Euros 2.6 billion ($3.38 billion) profit in 2006, chairman and CEO Jean-Bernard Levy said on Monday, despite the higher than expected cost of the Canal Plus/TPS merger.
The merger will affect operating profits to the tune of Euros 350 million ($455 million), spread over financial years 2006 and 2007, while lopping Euros 120 million ($156 million) off 2006 profits.
Profits in 2007 should match those in 2006, the Vivendi topper said.
“We had evoked a possible discontinuity in the growth of our profits. But despite the Canal Pus TPS merger there won’t be a bumpy patch,” Levy said.
Levy’s comments came after Vivendi published a lower than expected 1.2% hike in its 2006 revenues last week, to Euros 5.54 billion ($7.19 billion).
Fourth quarter revenues fell at Gallic cash cow telco SFR and Universal Music Group, down 1.4% to Euros 2.18 billion ($2.83 billion) and 1.5% to Euros 1.66 billion ($2.15 billion) respectively.
Levy said on Monday that UMG’s digital sales for the fourth quarter did not reflect true levels of business over the period because items such as pre-paid iTunes cards, given as Christmas gifts, would only begin to show up on the books in January, once they are used.
As for SFR, Levy complained that the telco is ” suffering from the re-regulation of the sector,” with the French government forcing down tariffs “beyond European averages.”
“We’ve very little visibility into 2008 because of the moves made by French and European regulators. In a very competitive climate, this phenomenon weighs considerably on the business,” Levy told the French daily Les Echos.
Nonetheless, across the whole group, Vivendi is projecting a net profit of Euros 3.5 billion ($4.54 billion) to Euros 4 billion ($5.19 billion) by 2011, Levy said.
To help it reach those numbers, Vivendi has set ambitious targets for Canal Plus Group over the next five years. Now that the pay TV operator no longer has a Gallic rival holding it back, the parent company has set a target of 20% operating profit margins by 2011, up to at least Euros 1 billion ($1.29 billion), Levy said, compared with around 5% currently.
The paybox is planning to save money by bringing down programming and operational costs.
“Because of competition between Canal Plus and TPS, some programs, starting with American films, were expensive: American films are sold in France for a higher price than in neighboring countries,” Levy said.