Vivendi

Company Update:
Vivendi delivered mixed H1 results with progress on corporate costs cut and poor performance from Gameloft.

Quite surprisingly, Vivendi continued to not communicate directly on its NAV, which appears up by roughly €0.2bn qoq to €3.1bn approximately but has since deteriorated following UMG mixed results in July.

The performance of Gameloft was mixed, with revenue down by 12.9% organically to €64m in Q2 while its H1 EBITA improved by €1m to €9m. Corporate costs deteriorated significantly by €14m to -€52m but €21m were related to the collective mutual termination plan. The bottom line was boosted by equity associates of €75m (-€5m yoy) as well as the €62m contribution to EBITA from UMG, that we still find weird (stable yoy) and which aims to hide that Vivendi is currently EBITA negative with its current cost structure. All in all, the net income decreased by 7% yoy to €28m.

The net debt deteriorated again slightly from €1.55bn to €1.59bn, excluding the loan to Lagardère of €450m due to the investments in V Collection and Prisma Group. This is despite receiving €92m in dividends during the first half (of which €51m from UMG).

We expect a slightly negative reaction due to the mixed results from Gameloft notably. The main catalyst for the stock now will be the news flow around a potential fine by the European Commission regarding Lagardère acquisition. As a reminder, Bolloré logically (from the reading of the French Supreme Court previous decision) won the second judgement in the Paris Appeal Court, assessing there was no de facto control of Vivendi and will thus not be required to buy out the minority shareholders of Vivendi. We reiterate our cautious stance on the stock as the current discount to NAV does not offer enough room to offset governance shortcomings.

Expert Opinion:
We see no reason to become significantly more constructive on Vivendi. The deleveraging process has not advanced much due to the acquisition of V Collection and a stake in Prisma Group. We reiterate our cautious stance on the stock as the current discount to NAV does not offer enough room to offset governance shortcomings.


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