Writedowns sock Vivendi

Co. sees $11.8 bil loss under French regs

Vivendi Universal posted a giant one-time charge and a loss for 2001 amid strenuous assurances by chairman-CEO Jean Marie Messier that no surprises lurked in the conglom’s balance sheet.

Some 15.7 billion euros ($13.6 billion) in charges, mostly for amortization of goodwill — or writing down the value of acquired assets — meant a loss under French accounting of $11.8 billion.

Company clocked losses at a more modest $955 million under U.S. regs. It will now report both ways to appease U.S. investors.

Canal Plus was behind the biggest single chunk of the writedown ($5.2 billion), followed by Universal Music ($2.7 billion) and $1.1 billion to account for the depreciation in Universal Studios. Many companies have announced writedowns in recent months as a downturn in the market eroded the value of their businesses.

Revenue rose 10% to about $50 billion. Operating income jumped 47% to $3.2 billion. Debt stood at $16.6 billion euros and is heading higher.

In a post-Enron world, a dizzying display of year-end numbers was followed by a discussion of frequently asked accounting questions and an invite for analysts to attend a two-hour number-crunching session with the conglom’s finance execs.

“We’ve decided to take the bull by the horns,” Messier told reporters during a news conference in Paris, clearly still smarting at what he called “a hodgepodge” of rumors in recent months questioning Vivendi’s accounting. “The best way was not to say, ‘We’re fine,’ but to publish really everything.”

Media and communications, including Universal Studios, Universal Music and Canal Plus, saw revenue rise 10% to $24.5 billion. Cash flow rose 34% and operating income soared 89%.

Messier, who moved to New York from Paris last summer, is facing a double challenge: proving to a traumatized Wall Street that Vivendi’s accounting is conservative and transparent — no off-balance sheet loans or abstruse financial instruments — and convincing Vivendi’s old French and European investors that merging with Seagram was a smart move.

“We have not destroyed value for shareholders,” he said, insisting that despite weakness in the stock lately, the company’s asset value today is five to 10 euros higher than it would have been at a stand-alone Vivendi.

Shares fall Tuesday

Vivendi shares, hit like other media stocks by a slow economy and ad market, fell 1.06% Tuesday to $41.25. They traded at nearly $70 last spring.

Analysts and some Vivendi insiders say the ongoing transition to U.S. from French accounting has been rough going, as well as accounting for the company’s string of deals and its diverse businesses.

“What people are running away from are companies they don’t understand,” said Sanford Bernstein analyst Michael Nathanson.

“We don’t believe there are any accounting problems, it’s just that the numbers are really hard to penetrate,” he added. “With AOL Time Warner, Time Warner was a standalone for a long time and so was AOL, so you have some precedent to look back on.”

Messier, however, thinks some financial players foster the confusion for their own benefit. “We fight every day to manage our group,” he lamented. “It is unacceptable that hedge funds line their pockets at the expense of our shareholders.”

U Studios revenue up

At U Studios, revenue rose 4% to $4.3 billion and the unit jumped to an operating profit of $261 million. In TV and film alone, revenue rose 8% to $8.3 billion and cash flow grew 59% to $1.05 billion. In December, Vivendi bought out USA Networks for $10.3 billion and took a $1.5 billion stake in satcaster EchoStar.

Canal Plus revenue rose 13% to $3.98 billion as losses widened to $326 million. Messier blamed the red ink largely on Canal’s Italian pay-TV operation Telepiu, which is awaiting regulatory approval to merge with rival Stream.

Universal Music saw revenue and operating income dip 1% to, respectively, $5.7 billion and $626 million.

In other divisions: Publishing revenue rose 5% to $3.7 billion; telecom revenue grew 24% with healthy profits; and Internet revenue was up 36% with heavy losses.

Division a sore spot

Environment services, about half of Vivendi’s business, posted revenue of $25 billion. The division is a sore spot, as entertainment analysts and investors Stateside who aren’t familiar with the sector say they’ve got to take the numbers on faith.

Messier is looking for total revenue to rise by 10% and cash flow by 20% this year, not assuming any uptick in the U.S. economy.

(Justin Oppelaar in New York contributed to this story.)

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