Vivendi Se Unsp/Adr

Good evening, everyone, and welcome to the Vivendi half-year 2024 earnings presentation. This conference call will be hosted by Mr. Arnaud Dupuy-Fontaine, Chairman of the Management Board and CEO, and Mr. François Larros, 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 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star 0 and you will be connected to an operator. I would now like to turn the call over to Mr. Arnaud de Puyfontaine Please go ahead, sir. Your line is open.

Thank you very much and hello everyone. Welcome and thank you for joining us for the Vivendi 2024 first half earnings presentation. Before handing over to Francois, I would like to highlight the robustness of our results with excellent renews of 9 billion euros up 5.8% at constant currency and perimeter. Our EBITDA also increased significantly, plus 13.5% at constant currency and perimeter. This performance confirms our group's momentum. It places our entities in the best possible position to embark on the next chapter in our history. First, CalPrius. All of its segments are growing. Canal Plus has recently made significant moves, pushing its international expansion one step further. In June, the group increased its stakes in VIEW, Asia's leading streaming platform, now owning 36.8% of the group. In the same month, it launched the mandatory offer for the multi-choice group shares not already owned. Africa and Asia are two decisive regions for achieving a real change of dimension which would open up exciting prospects for Canal Plus Group if and one listed. Second, Avas. While continuing to experience solid performance, strong commercial and creative activity, as well as dynamic external growth, the group has launched a new strategic plan named Converged. A lot has already been done under the leadership of Yannick Bolloré to better integrate teams and expertise. This new plan will take the group even further. Converged involves the launch of an operating system and major investments in technology, data and AI, which will represent €400 million over the next four years, €400 million investment. This announcement made in Cannes a few weeks ago has been extremely well received by the entire ecosystem. The solution has already been implemented by a number of clients and initial feedback has been very positive. More than ever, Avas is home of creativity powered by technology. Third, Lagardère and Prisma Media. The Lagardère group just published excellent results posting double digit growth. The group's two main divisions, Lagardère Travel Retail and Lagardère Publishing, are well positioned to capitalize on further growth opportunities. Today, the group led by Arnaud Lagardère is stronger than ever, and the transfer of the majority stake held by Vivendi in the Lagardère Group along with Prisma Media to a new company called Louis Hachette Group would enable the company to continue its growth dynamic and ensure its long-term influence both in France and internationally. Prisma Media would also open up an exciting new chapter by joining Louis Hachette Group. The group would have the opportunity to innovate and develop by drawing on its publishing, travel retail, and media business. The last few months have demonstrated Prisma's robustness under the leadership of Claire Leost. The company has proved its ability to navigate effectively in a complicated print market by acquiring or launching new titles, such as the design and lifestyle magazine Ideate and the Good Life. It has also demonstrated Its capacity to embrace new business segments, for example, digital affiliation activities and advertising revenues on social networks, have grown by more than 10% compared to the first half of 2023. Lastly, Vivendi will pursue its mission of developing and transforming Gemnoft as it did during the first semester, combining a clear cross-platform strategy, a stronger focus on a few high-potential franchises, and better cost management. All in all, Our business has once again demonstrated their solidity in recent months. More than ever, they are ready to be independent, to go public, and to seize all of the opportunities that this new chapter could offer them. As you have seen, this week, on Monday, we gave an important update on the feasibility study of the split project. The study has confirmed the feasibility and the satisfactory conditions of the project, the launch of preparatory work for its implementation, and has identified the most suitable listing venues for the transactions. For Canal+, the choice of the London Stock Exchange as a potential listing venue reflects the international dimension of the Group, with Delimotion, GBA, and the ongoing multi-choice acquisition. Avast would be listed on the Euronext Amsterdam Stock Exchange, a market which would enable the Group to stabilize its share capital, ensuring its sustainability for its talents and clients. It also reflects the group's global exposure, with the majority of its activities being carried out internationally. Louis Hachet Group would be listed on the Euronext Growth in Paris, consistent with the continued listing of its subsidiary, Lagardère SA, on the regulated market of Euronext Paris. It is important to emphasize that the three companies would keep the decision-making center of their activities, as well as their operational team and tax residency in France. As for Vivendi, It would remain the leading player within the creative and advertisement industry listed on the regulated market of Euronext Paris. In line with the strategic plan and enabling the group's different businesses to size investment opportunities post-split, Canal Plus and Avas would have virtually zero net debt, with the exception of the debt put in place by Canal Plus for the multi-choice public tender offer. Louis Hachette Group would have no debt of its own except a net debt of approximately 2 billion, which has recently been refinanced. Following the split, Vivendi could have a net debt of around 1.5 to 2 billion. Concerning the timeline, the relevant employee representative bodies are now being consulted and informed starting this week. This consultation, as well as other important steps, including a shareholder vote, must be carried out before the project can be implemented, which could take place by the end of the year. Once listed on the stock market, Our businesses would benefit from stronger visibility within their markets with clients and partners and with investors as well as from an increased agility to carry out external growth transactions. The share price performance since the announcement of the split project in December plus 20% is the best illustration of the project's relevance. The share price has decreased today but this is due to the market's overreaction to Universal Music Group's Q2 results. We are fully aligned with Lucien Grange's vision for the company's significant growth prospects for the medium and long term. Exciting times lie ahead for Vivendi. We are looking forward to the next milestones of our split project. Thank you for your attention and now let me hand over to Francois.

Thank you, Arnaud. Now I will walk you through the first half performance of the Vivendi Group. As Arnaud said, we have very sound figures for this first half. Let's remind you that for the first time we are consolidating the Lagardère Group for the six months of the first half and compared with zero months last year, first half, which explained the evolution in growth figures of the revenues and the EBITDA. That's why we focus more on the organic growth, restating the perimeter impact. And you see that the revenue went up by 5.8% for the first half, which is a very positive figures. Same for the EBITDA, which is up by 12.7%. In the same time, our adjusted net income went up by 1.5%. And the net earning group shares down by 8.3% to 159 million. mainly due to the settlement of a very old 24 years old litigation for 95 million. If we have a look at our financial situation, it's still very solid with a shareholder's equity of 16.9 billion and a net debt of 3.9 billion. The cash flow from operation has been solid as well from our business with 160 million during the first half. and we still have 2.9 billion of available credit facilities. If we focus on the H1 revenues, you see that all our main three business units, Canal+, Lagardère, and Avas, are delivering very positive revenue. 4.6% evolution on Canal+, 10.1% on Lagardère, and Avas 3.6% in gross figures and 0.3% in organic. The other business units have done roughly at the same level than the previous half. Let's also focus on currency impacts, which are slightly zero with 0.8 points of impact of the currency impact during this first half. The second quarter has been in the same trend, even accelerating a little bit compared with the first quarter, as we have reached 6.1% for the second quarter. And with the same positive trend on our three main business units, Canal+, plus 5%, Lagardère, 11, and Avas, 1.4 in gross figures, minus 2.3 in organic. If we look at the EBITDA, it's 12.7% decrease for our control business. And if we had the UMG impact, it's 13.5%. Canal Plus very solid at 337 million stable, Lagardère up by 65% to 200 million, and Avas increasing by 6% compared with last year at 125 million. Let's have a rapid look at the UMG result, even if you have all seen the evolution of stock price during this Thursday. Nevertheless, the figures in terms of consolidating earnings have been very solid. The net earning group share went up from 625 million to 914 million. As we do a restate the stock price impact on the figures, what we compute in Vivendi is a net profit of 485 compared with 393, and it's an increase. from 39 million to 48 if we take the 10% of Vivendi stake in UMG. The net income, we have already commented revenues and EBITDA, and then when we go down to the earning attributable to Vivendi shareholders, we see this decrease by 8.3%, which is mainly due, as I said, to the settlement agreement with the institutional investors As I said earlier, 24 years old litigation, which is now ended. If we look at the adjusted net income, which reflects our recurring results, we see it's going up by 1.5% compared with last year to 329 million. If we have a look at our financial net debt evolution, it went from 2.8 billion at the end of the previous year to 3.9 million at the end of the first half. It's an increase by 1.1 million. Important to point out that the increase mainly comes from investments that we did in many stocks, among which MultiChoice, Viaplay and Vu by Canal+, but also Avas, which has achieved many Bolton acquisitions. Lagardère, in which we have increased our stake, acquiring €120 million of shares during this first half, but also the share buyback, which we have achieved for €155 million. So if we add all these investments, it's roughly €1 billion of new investment, which explains the evolution of the net debt, knowing that in the same time, the different business units have delivered sound cash flows, 0.2 billion, and we have also realized the disposal of the festival and ticketing operation for 0.3 billion. This 3.9 billion net debt comes from 1.6 to Vivendi legacy business and 2.2 from La Gardere business, and we have the ambition to reduce this net debt before the end of the year, both in La Gardere and Vivendi. If we look at our portfolio asset, no major evolution compared with the previous presentation in terms of stock percentage. We're still exactly at the same level than during our previous communication for Universal, Prisa, and the other. The total value of our asset was $8.4 billion at the end of June. As you know, we have suffered today the strong impact on our UMG which is at the moment roughly 1.2 billion below the one at the end of June 2024. And we have received 105 million of dividend from these different stakes during the first half. Canal+, as Arnaud said, has done very well in terms of revenues. All the business units have largely contributed from international to Studio Canal, including mainland France, with the increase of the subscriber base and very profitable operation for Studio Canal, among which the Black to Black movie. In terms of subscriber base, we went up from 25.1 at the end of June 2023 to 25.7, out of which 18.9 come self-distributed, and this positive trend can be shown in all the geographies including France to 1.5, Europe 16.2 and Africa 7.6. The main events of the Canal Plus Group with the acquisition of OCS and Orange Studio, the distribution agreement which has been signed with Juan Arbos and the extension of the broadcasting rights for Rugby Top 14 and Pro T2 in France. Concerning the different stakes, you know that now we have a 45.2% stake in MultiChoice since May 2016, a 36.8% stake in VIEW after a new share capital increase in June 2021, and we are now the first shareholder of IAPLE with a 29.3% stake in this Nordics operation. Lagarde Arnaud commented, all the business units have done very well. You may have seen the presentation two days ago, but this first half was extremely solid in terms of revenue and EBIT evolution. For Avas, again, a very positive evolution of the EBITDA, which is up by 6% from 118 to 125. The organic growth is stable during this first half with a positive Q1 and negative Q2. The main evolution of the organic comes from the partial loss of a big client in the US and the reduction of COVID vaccines by main label, which are Avast clients. That explained the evolution of the North America organic performance during the first half, which is negative by 6.5%, knowing that this client was mainly based in the US. But in the same time, Europe has delivered 3.8% of positive organic growth, Latin America still accelerating at 8.8%, and Asia Pacific was up by 0.5%. Beyond Converge that Arnaud has already commented, let's tell you that Avas is still working on Bolton acquisition, and I finalized four of them during the first half, being one of the most active network of the industry, two in the UK, Ledger Bennett and Wilderness, one in France called TED, and the fourth in Middle East called Liquid. Prisma Media has quite positive figures in terms of revenue. from 163 to 147 has been able to mitigate the negative impact of the disposal of Gala by new launches, Bazaar, soon Bazaar Interiors, Mortadella as well, and by some acquisition in 2023, M6 digital site and Milk, but also in the beginning of the year 2024. The evolution of the EBITDA is negative because today the New launches and the acquisition are not as profitable as Gala was and the ambition of Prisma management is to reach this level of profitability in the coming half. Gameloft is still negative in this half. Two important things to point out. First one that it includes some restructuring costs to reduce the cost base of Gameloft all over the world and the second it does Gameloft makes most of its profit during the second half, and so the performance of the first half must not be projected on the second. It will be strongly better for the second half. Dailymotion and GVA have done very well with a growth of 39% of the cumulative operation. Both industries have done well. Dailymotion is a real success with the new launch, which has been preceded in 2023. and GVA is keep on increasing all these businesses in these now eight countries and soon a ninth country opening before the end of the year. So that's what we can rapidly sum up for this first half and we are with Arnaud now at your disposal to answer your questions.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question today, please sign it by pressing star one on your telephone keypad. That is star one for your questions today. And first up, we have Adrian Desaigne-Hilaire from Bank of America. Please go ahead.

Yes, good evening, everyone. Thanks for taking the questions. So three of them, please, on various different topics. Can you please discuss the tax application for Vivendi shareholders of the split? There is a comment that you make on page four, I'm not sure I understand the point you make about the tax treatment of the reimbursement of capital. I thought that was potentially tax-free. Secondly, on Canal+, could you discuss the impact that you expect from the negative arbitration on VAT and the discontinuation of French football rights for second half and next year? And then the third topic, there was quite a sharp deterioration in organic growth between Q1 and Q2 at Havas. François, you gave us some factors, but it seems that there was some underlying deterioration there. How do you think about the second half for organic sales growth at Havas? Thank you.

Okay. Thank you, Adrien. Thank you for your questions. First of all, the tax implication, I think we have given some flavor in the previous meeting, but what we can say today is that we have not stabilized the level of tax for the shareholders. If we focus on, I would say, French shareholders, we see that roughly the level of tax will depend on the level of reserves compared with the level of share capital. And today what we know is that when we look at the figures of our reserves and share capital at the end of the first half, that the impact of tax for the shareholders will be far lower than it was for the UMG operation two years ago. as the reserve compared with the share capital are really in minority. So we can't put really into figures the level of tax because it will depend on the level of valuation the day of the listing. But today we consider that it will be below 50% of taxes. So the base of taxation will be below 50% on which will be applied the rate, let's say, of 30% if we consider the flat tax. So what is important is that more than 50% of our distribution will come from share capital, and less than 50% will come from reserves. So more than 50% won't be taxed, and less than 50% will be taxed. That's roughly what we can say today. Am I clear, Adrien, or do you need some more?

Super clear.

Thank you. For VAT, there are still some good news, bad news discussions. So today the game is absolutely not over. There are still discussions with the French tax authority that will end hopefully before the end of the year. But today we do not consider that the decision which has been disclosed two or three days ago is a final one. So there are still discussions and we have also some positive signals that make us quite confident to convince the tax authority that Canal Plus is really a TV operation that should have most of its revenue taxed at a 10% rate. So we'll see in the second half the evolution, but we are still confident that we will be able to convince the tax authority that we are really operating a TV operation and not a streaming one. Concerning Avas, yes, I think I gave some data. I think we still have an organic growth impacted by the partial loss of this client during the third quarter. We hope we'll be able to bounce back during the fourth quarter or next first quarter 2025. So it's a strong impact on our organic growth. But let's remind that all the Avast Teams has been able to adapt their cost structure to this negative evolution of the organic growth, which explains the fact that we have been able to deliver sound results ahead of last year, increased by 6%, even with this stable organic growth during the first half. So we'll still struggle in terms of organic growth, but we are still very confident in terms of ability to increase our margin and increase our figures growth at the end of the year.

Thank you. And we now move on to our next question, which comes from Connor Oshie from Kebler Chauvre. Please go ahead.

Yes, good evening. Thanks for taking my questions. First question on Canoplus with the non-renewal of the DTT license for Cevit. There were some quite high annual losses mentioned in the press relating to this channel. What are the plans going forward for this and could those plans mean lower annual net losses or not? I think the contribution from M&A and Forex combined was about 400 basis points positive in the first half. With the acquisitions that you mentioned, Francois, in the first half, should we expect a similar boost to reported revenues in the second half or maybe even a bit more? And then the third question, just in terms of La Dardelle, obviously well ahead of expectations in the first half, particularly on margins. I don't think they raised their full year guidance, but can you give us a sense of what you expect in the second half of the year for that business? Thank you.

Thank you.

Hi Conor, it's Arnaud Dupuy-Fontaine speaking. So on the decision yesterday you're referring to on C8, it's very early stage should I say. The two words which have to be kept in mind are it's a shock and it's a sadness. Let's remind that this is the number one DTT channel in France and that this decision is is, I would say, strange, to say the least. So it's too early to comment anymore, to dwell on the situation. The team at Groupe Canal+, led by Maxime Saada, are currently working on the situation. and I'm sure that this is something that will, in due time, report to you with substance. Maybe I'll take the... Maybe you take the second one.

Second, yes, a question on the Avast acquisition. Yes, to confirm that we should be on the same train during the second half. We have several Bolton acquisitions in the pipe and we consider that we still still try to aim, I would say, roughly 10 acquisitions for the World Year as we did last year. So it's roughly the same trend than the first half.

And on your third question on Lagardère, there is a confident sentiment with regard to the performance of the group in the second half. Thank you.

Thank you. And up next, we have Jérôme Bourdin from Oddo BHF. Please go ahead.

Yes, good evening. Two questions on my side. The first one on Canal+, I see that the subscriber base is down in H1. Could you give us a bit more details on what packages or offers are concerned? And do you think that this is due to an elasticity link with the recent price increase that you made last year in France, which is overall positive and net-net? So that's my first question. And the second one on the free cash flow for advice, I see it's down in H1, so I was wondering if this is due to CapEx, to working cap, or to any other items. Thank you.

OK, Jérôme, thank you. On Canal+, we have to remind that there is a strong seasonality, which explains the fact that we are above last year's same moment. and below the end of the previous year. Nevertheless, what is very important that the evolution in France is very favorable and we keep on increasing our subscriber base in France. We have some ups and downs in Africa, mainly depending on the type of promotion we do and sometimes they are before or after the end of the first half, which explain this. But important to point out that It was clearly a very positive trend in France. And we also have written off some accounts with very low or above zero ARPU which were accounting and we have decided not to account anymore because it was not reflecting the impact on our revenues. On Avaaz, you're right, the evolution of the cash flow is negative which is Non-Common, even if the first half of Avas is always not as good as the second. We made most of our cash flow during the second half. Nevertheless, during the first half, we have some acquisitions, and not only the one we have launched today, but the finalization of a previous acquisition with Buyouts, which has been paid for several agencies, GateOne, but also Buzman in France. And for these reasons, we have had big cash out during the first half in terms of M&A, which is the main reason, but no main evolution on the working capital. When we look at our overdues in Avas, there are no things to worry about.

Thank you. As a brief reminder, that is Star 1 for your questions today. And we're now moving on to Christophe Gerblank from Bernstein. Please go ahead.

Thank you. Good evening. My first question was on the French football situation. BEAN is retaining some rights to the League One, so what is your exposure to BEAN for the new cycle? Are you still paying any distribution fee? What is the situation? The second question is also on football rights. You have a very deep European competition portfolio. Do you plan to sub-license part of it as you were doing in the past and should we hear about that very soon? And the last one is on Also, Canal+, on the free-to-air business, CNews has had a very good run, so I would assume they're coming closer to breakeven. C8 was loss-making in the past. So, net-net, what is the contribution of the free-to-air unit to the EBITDA that you're expecting for the full year? Thank you.

Thank you, Christophe. Concerning the French football, we have a distribution agreement until May 2025. Nevertheless, we are not sure today of the impact of this distribution impact with the type of agreement they are signing. So we do not know exactly how it will be broadcasted if they find this agreement with DAZN Today, we are still in discussion. Concerning the sublicense, the file is open. Today, we have not signed any sublicense, but we may sign one if we find an interesting agreement with a partner. And concerning CNews, yes, you're right, the audience are up. and we consider that we will be more than breakeven in the coming half.

Thank you. And from Deutsche Bank, we now have Silvia Cunil with our next question. Please go ahead.

Thank you. Good evening, everyone. I have a few questions from my side. The first one is on the timeline for the split potentially. Based on the latest communication, it sounds like you're working to the shortest timeline possible that was previously indicated, so December 2024. Can you please share more color about what are the next steps from here and whether you still see some risks that actually a potential split could complete instead in H1 next year? Then second question on the offer for multi-choice. After reviewing the offer documents, we noticed that there is potentially an option to adapt to the consideration with a combination of stock and cash. So just wanted to ask for more color about what would you consider to potentially revisit this offer and whether the listing of Canal Plus Se Unsp is somewhat related to this. And then final question, just briefly, if you had any updates on the capital allocation for Vivendi. Thanks for providing indications of what the net debt position would be. Just wondering if you are in a position already to comment on potential priorities for future capital allocation. Thank you.

Thank you for your question. So I'll take the first one. So when we announced the project in December 2023, we gave a timeline between 12 months and 18 months. What we did announce on Monday is threefold. Number one, A, as far as we are, there is no red flag as regarded to making real this pleat operation, which obviously is going to be subject to, A, approval and advice from the different employees' bodies, number one, and we started the different consultation on Monday post the communication we made in the morning. That's point number one. And point number two, final agreement from the supervisory board of Vivendi that should, if it were to be so, convene an extraordinary general meeting that could be held in the very first part of December. If we were to follow those different stages and from the kind of hypotheses from today, there is a timeline as regard to the operation that could enable us to get the operation implemented by mid-December. Again, this is only subject to the different parameters that I just developed, number one, but this is the plan within which we are currently thinking and working. And I'm reiterating that as we speak, there are no red flags as regard to the possibility to reach that objective as developed. Maybe Francois?

Yes. Concerning your second question, which was on the multi-choice type of takeover, for the moment we have proposed this 125 proposal in cash. And there is an option which was given maybe the day when Canal is listed. So it's not for now. And it's true that Canal could open an option after the listing. But today, it's not what we have proposed to the shareholder. We have proposed this level of 125 round in cash. Your third question. was on the capital allocation priorities. Let's remind that our intention today is that the final debt of Vivendi after the split will be between 1.5 and 2 billion, which is acceptable compared with this level of assets, which will be above 7 billion.

Thank you. As there are currently no further questions in the queue, I'd like to hand the call back over to you, Mr. de Puyfontaine, for any additional or closing remarks.

Well, thank you for your attendance to the call, and we at Vivendi wish you a fantastic summer, good Olympic Games, and very much looking forward to the next steps. Thank you very much. Have a good evening.

Thank you for joining today's call. Ladies and gentlemen, you may now disconnect.