Vivendi Se Unsp/Adr

Good evening, everyone, and welcome to the Vivendi third quarter revenue presentation. This conference call will be hosted by Mr. Arnaud de Pufontaine, Chairman of the Management Board and CEO, and Mr. Hervé Philippe, a member of the Management Board and CFO. As a reminder, this call is being recorded. During the call, you'll be on listen only. However, later on the call, during the Q&A session, analysts will have the opportunity to ask questions without any follow-up questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. I would now like to turn the call over to Mr. Arnaud de Prefontaine. Please go ahead, sir, your line is open.

Thank you very much and welcome, everyone. I hope that you are all keeping well and healthy. I would like to invite you to read carefully the disclaimer on slide two. Before ending over to Hervé Philippe, let me share some of the Q3 key highlights. Firstly, I am happy to report that Vivendi delivered improved revenue growth for the third quarter, plus 1.3%, and over the first nine months, of 2020 plus 2.4%. This increase in revenues was largely fueled by our two main businesses, Universal Music Group and Canal Plus Group. QFree has confirmed the strength of our subscription-based activities. UMG maintained positive momentum during the third quarter, driven by the significant increase in subscription and streaming revenues. Canal Plus Group pursued its dynamic growth mainly thanks to its international pay TV operations. I will come back to this. Of course, some of our businesses have been more affected than others by the coronavirus pandemic. This is particularly true in live events. Advertising is also a challenge industry in a difficult market environment Havas Group suffered from a slowdown in revenues. That being said, it reported a significant improvement in the third quarter of 2020 compared to the second quarter. Once again, Vivendi's resilient business model and complementary activities are real strengths in uncertain times. Let me now give you an update on current operations. The first one is the opening of UMG's capital. The process is progressing according to plan. After the successful completion of our agreement in March, the consortium led by our partner and friend Tencent has the possibility to acquire an additional amount of up to 10% of UMG at the same price and terms until January 15, 2021. We are pursuing the process of potentially selling an additional minority stake in UMG to other partners. The proceeds received from these sales may be used for service of Vivendi's financial debt, substantial share buybacks, and acquisitions. The IPO is planned for 2022. The second highlight is the positive international development of Canal Plus Group. Our global subscriber base grew by 1.2 million year-on-year thanks to the successful integration of M7 and the launch of Nyamnaha. More recently, Canal Plus Group announced its investment in the South African player multi-choice. This operation reinforces our partnerships with the leader in pay TV in Africa and our emerging presence in the English-speaking world. With regards to Editis, The significant rebound observed at the end of the first lockdown in France has been confirmed, plus 10.4% in revenues in Q3. This result is even more remarkable in that Editis had already delivered a solid performance in the same period last year, thanks to the curriculum reform. The strength of the recovery has helped offset a large part of negative effects of lockdown and bookstore closures. Let me conclude by saying a few words on the share buyback. Since January 1st, 2020, Vivendi has repurchased 4.92% of its share capital. As of October 19th, 2020, Vivendi holds 62.3 million treasury shares, representing 5.25% of the share capital. Delivering value to our shareholders remains a top priority. As you can see on the chart, slide seven, More than 15 billion euros have been returned to our shareholders since 2014, the year we repositioned Vivendi. To sum up, the Vivendi Group delivered good revenue performance in Q3. Despite the uncertainty created by the pandemic, we remain confident in the resilience of our main businesses. Let me thank once again our 45,000 Vivendi colleagues around the world who contribute to moving Vivendi forward every day. Thank you, and I will now hand over to Hervé.

Thank you very much, Arnaud, and good evening to everyone. My pleasure to present to you our revenues for the third quarter of 2020. Let's begin on slide nine with the impact of changes in currencies and in the scope of consolidation. The first table on this slide shows the impacts of the exchange rates and consolidation scope changes on our growth rates. In Q3, we experienced a downturn in our main currencies. The euro was up 3.1% against the US dollar and 2.5% against the Japanese yen, resulting in a negative impact of 210 basis points on Q3 revenues, mostly at the UMG level. Consequently, the positive scope effect of 2.7 points was almost entirely offset by the negative Forex impact. Keep in mind that should the US dollar continue to decline in Q4, it could materially affect our revenues in Euro for the rest of the year. Regarding the main changes in the scope of consolidation, the acquisition of Editis was closed in February 2019, and we have integrated M7 at the Canal Plus Group level since mid-September 2019. Let me give you a few updates on our balance sheet and liquidity situation. At the end of September, Vivendi's gross cash position amounted to €2.8 billion, and gross debt was just below €6 billion. As shown in the chart, the maturities of the bonds are spread over time until 2028, and the debt average maturity is quite long at 4.7 years. At the end of September 2020, Vivendi also had available long-term credit lines of 3.1 billion, and the market value of our listed equity portfolio was 4.4 billion. In short, Our balance sheet is in very good shape. Moving to slide 11 on the organic growth by quarter. After a 7.9% decline in Q2, EVENDI revenue rose by 0.7% organically in Q3. The rise was notably due to solid performances delivered by Universal Music, Canal+, and Editis in Q3. Improving significantly after the second quarter hit by the pandemic. Breaking it down, Universal Music posted a plus 6.1% growth in Q3, a strong improvement compared to Q2, thanks to the performance of both its recorded music and publishing activities. Canal Plus Group recorded slightly positive growth, driven by international TV operations. Editis also returned to growth in the third quarter with a solid plus 10% increase in revenues after nearly two quarters hit by the lockdown in France. In these challenging times, Avas reported an improvement in the third quarter with an organic decline of 10% compared to 18% in Q2. Moving to the next slide, you will find the aggregated figures for the first nine months of the year. At the end of September, Vivendi's total revenues amounted to over €11.6 billion, an increase of €275 million, mainly due to the good performances of Universal Music and Canal Plus Group, that also benefited from the acquisition of M7. Vivendi's organic revenue decreased by 1%, mainly due to the impact of the pandemic in Q2 at Havas, Editis and Vivendi Villas. Now, let's take a closer look at each business unit, starting with Universal Music on slide 14. As you can see on the left-hand side of the slide, streaming and subscription growth was in good shape, generating more than 400 million euros of additional revenues over the first nine months of the year. In publishing, revenues also grew with an increase of over 100 million euros driven by subscription and streaming, on the receipt of a digital royalty claim in Q2. Excluding this item, music publishing grew 9.7% over the nine-month period. Due to the impact of COVID-19 both on touring and retail activities, other business lines delivered mixed performances year on year. Physical sales were down 10%, license revenues decreased by 11%, and merchandising dropped by 42%. On the right, you can see in Q2, revenue from streaming and subscription grew by 8.5%, mainly due to the slowdown of the global ad market. Thanks to the improvement in both the advertising market and the consumption trends during the summer, subscription and streaming was back to strong growth in Q3 and increased, plus 22.6%. On the next slide, you have the 2020 revenues quarter by quarter. After being impacted by the pandemic in Q2, Universal Music's revenues returned to growth in Q3 with a plus 6.1% organic increase. Beyond the very good performance of streaming and subscription, physical sales were up 14% in Q3 thanks to strengths in Japan with BTS, King & Priest, Seventeen, as well as strong U.S. catalog sales. Other best sellers for the first nine months of 2020 included new releases from The Weeknd, Justin Bieber, Lil Baby, and continued sales from Billie Eilish. Finally, for Universal Music on slide 16, you can see all the Universal Music nine-month revenue figures which we have already gone through. Universal music revenues were 5.3 billion euros for the first nine months of 2020, up 4.4%, with growth in recorded music and music publishing. Excluding the two one-time items which were mentioned in H1, revenue grew 2.8%. Moving to Canal Plus Group, starting with the evolution of revenue quarter by quarter. After a 4% decline in Q2, Canal Plus Group posted revenues of €1.4 billion in Q3 2020, representing a slight improvement of plus 1% year-on-year. In mainland France, revenue decreased 0.4%, impacted by its downturn in the advertising market due to the COVID-19 pandemic. Meanwhile, international operations continued to grow. including M7 contributions, revenues grew 2.6% in Q3 2020, thanks to the growth in the number of subscribers across all geographic regions. In Africa, the activity was supported this summer by the broadcasting of the Champions League Final 8. And Studio Canal revenues were up 2% in Q3, the lack of income from fresh films has been partially offset by the sale of series and films from the catalog. Please also note that the basis of comparison was quite low as Studio Canal revenue declined by 16% in Q3 2019. Turning to Canal Plus Group's aggregated nine-month revenues on slide 19. Group Canada's revenue amounted to more than €4 billion for the first nine months of 2020. As mentioned, international operations continue to be very dynamic and revenues increased by 4.3% organically, thanks to the increase of the subscriber base by 1.2 million new subscribers, mainly from Africa. Let me here share another development in Africa during this quarter. Canal Plus announced that it acquired 6.5% of the share capital of MultiChoice, the South African company leader in pay TV. This investment is a long-term financial investment, demonstrating our confidence in the prospects of MultiChoice on the African continent. In mainland France, at the end of September, revenues decreased by 1.6%. However, in Q3, Canal Plus experienced good commercial trends thanks to its enriched sports programs and other premium content with new films and series. The subscriber base in mainland France reached 8.6 million at the end of September compared to 8.4 million one year ago. Moving to slide 21 on AVAS revenues per quarter. After a second quarter significantly impacted by the COVID-19, the advertising market is picking up in Q3, albeit to different degrees, depending on the regions and sectors, even if it remains highly volatile. In that context, Ava's performance in Q3 improved significantly. Indeed, organic growth reached minus 10.4% in the third quarter, compared to 18.3% in the second one. Avas, Health & You continues to report solid and positive performance, yet creative and media divisions remain impacted by the crisis. As you can see in the table, all geographic regions reported improved performance in Q3 compared to Q2. North American agencies continue to hold up well, thanks to the market's resilience and the growth of healthcare communications. Europe posted an overall reassuring performance as this area was strongly impacted in Q2. Slide 22 presents Avas aggregated revenues for the first nine months of 2020. At the end of September, Avas reported net revenues of almost 1.5 billion euros corresponding to reported growth of minus 8.8%. The positive consolidation scope effect amounted to 2.3%, a significant increase compared to the impact of plus 1.2% for the full year 2019. The main contributors were the consolidation of Get One, Buzman, and the three Indian agencies all acquired in Q3 and Q4 2019. As discussed at the beginning of this presentation, the ethics effect turned negative this quarter, leading to a minus 0.2% impact on nine-month growth. As a result, organic growth amounted to minus 10.9%. As already stated in July, the cost adjustment plan has been implemented since the early weeks of the crisis in both the media and creative divisions. Avas is intensifying its efforts in the second half of the year. This plan aims to mitigate the impact of COVID-19 on EBITDA. Slide 24, going to Editis. Vivendi has fully consolidated Editis since February 2019, and Editis revenues were just below €0.5 billion for the first nine months of 2020, down 4.8% pro forma. The pandemic significantly impacted all of Edity's activities during the shutdown of the book retailers between mid-March and mid-May. However, following the end of the lockdown period, Edity enjoyed a strong recovery with a revenue increase of 38% in June. This positive trend continues during Q3 leading to a plus 10% growth in Q3. Let me now give you the main factors behind the mixed performances of the other businesses in slide 25. In Q3, Gameloft's revenues were up 5.2% organically, and the revenues of new initiatives, which includes daily motions from Group Vivendi Africa, grew 4% organically. On the contrary, still significantly impacted by the measures linked to the COVID-19 pandemic, Vivendi Village Revenue amounted to €8 million, down 80% year-on-year. On slide 27, you see our conclusion, which is the third quarter revenues, which is driven by the good performances of Universal Music, Canal+, and Editees, Please note that we will release our full year 2020 results on March the 3rd after market close and our shareholders meeting will be held on June 2022 next year. Thank you very much for your attention and we are now ready to take your questions.