Vivendi earnings fall 5.5%

Profits hit by provision for class-action lawsuit

PARIS — Vivendi, Europe’s biggest entertainment group, outperformed analysts’ expectations, posting revs up 6.9% for the fourth quarter to €27.1 billion ($37.04 billion) and operating profit up 8.8% to $7.35 billion.

Underlying net profit fell 5% to $3.53 billion — but a $750 million provision against possible damages in a U.S. class-action lawsuit was one of the factors that helped scythe Vivendi’s absolute bottom line of net group profits to $1.13 billion for 2009.

Chairman Jean-Bernard Levy said Monday that Paris-based Vivendi will “continue to vigorously defend the company and its current shareholders against the unfounded claims we and they are suffering.”

In January, a U.S. District Court in Manhattan found Vivendi liable for misleading shareholders about its financial health from 2000 to 2002.

Thousands of investors from the U.S., U.K., France and the Netherlands maintained that Vivendi covered up its troubles as then-CEO Jean-Marie Messier transformed the one-time public water utility into a media and communications empire, running up a huge amount of debt. The company teetered on the brink of bankruptcy before reorganizing.

Vivendi has appealed the ruling, but if that fails, it will likely be more than a year before payouts come due.

In entertainment terms, analysts’ focus Monday was on Vivendi’s Universal Music Group and paybox TV giant Canal Plus Group.

Aside from the $750 million damages provision, Vivendi was hit by a writeoff of $840.8 million on the value going forward of UMG, whose numbers framed a familiar story. Revenues slumped 6.2% to $5.96 billion, and operating profits fell 14.7% to $791 million as an 8.4% growth in digital sales could not compensate for the decrease in demand for physical product. The 2009 bestsellers were from Black Eyed Peas, U2, Eminem, Lady Gaga and Taylor Swift.

In a recession-resilient result, Canal Plus Group posted stable revenues of $6.21 billion and a 14.8% rise in operating profits to $1.2 billion, goosed by merger synergies with satcaster TPS, cost cuts, ad rises and subscriptions up from 12 million to 12.5 million.

“Net addition subscription figures for the last quarter were better than expected. A big part of recruitments in France came from collaboration with Vivendi-owned phone company SFR, which is encouraging,” said Francois Godard, at Enders Analysis.

Up by nearly $1.20 to $61, average revenues per subscriber were part-boosted by CPG’s strategy under prexy-CEO Bertrand Meheut of reaching out to ever more specialized subscribers. Initiatives include XBox Foot Plus and The Cube, an HD-capable, PVR, Internet-connected box.

“Management seems to understand growth will come not from higher prices but rather greater pick-up of services,” said Godard.

Results for film unit StudioCanal were not broken out, and vidgame arm Activision Blizzard announced its 2009 results on Feb. 10 — a banner $4.15 billion sales and operating profits of $661 million.

However, Vivendi’s stronger-than-expected 2009 results will not nix a longer-term debate as to whether the conglom has put enough by to cover damages, and whether its caution will hold back mergers and acquisitions as it mulls its future after selling its 20% stake in NBC Universal to General Electric for $5.8 billion.