French-American media giant Vivendi Universal confirmed on Tuesday its profit and sales targets for this year and said it was well positioned for additional growth despite the uncertain economic environment.
The company issued its bullish outlook as it reported that net profit dwindled to a meager 22 million euros ($20.3 million), weighed down by goodwill from its Seagram merger, provisions and losses at companies in which it holds stakes.
The company’s outlook compared favorably with those of its top competitors, several of which have issued profit warnings in recent days.
Media firms, particularly those exposed to the tumbling advertising market, have come under pressure of late, with the September 11 attacks in New York and Washington expected to hit consumer confidence and add to their woes.
But Vivendi, which is not highly dependent on advertising, said it would meet its goal of boosting EBITDA (earnings before interest, taxes, depreciation and amortization) and revenues in its core media and communications business by 35 percent and 10 percent, respectively this year.
“Should the recent tragedy result in a further period of uncertainty and maybe recession, Vivendi Universal will continue to deliver growth and will benefit from strong defensive qualities,” Vivendi Chairman and CEO Jean-Marie Messier said.
The company declined to offer group forecasts for 2002 but said it was “very comfortable” with market estimates for an EBITDA of six billion euros ($5.5 billion) next year.
“I am a little disappointed that we did not hear more about the outlook for 2002,” said one Paris-based analyst.
Vivendi shares ended 1.78 percent lower in Paris following the results, underperforming the DJ Stoxx European media index, which was 0.40 percent higher. The stock has fallen about 30 percent since the start of the year.
OUTLOOK OVERSHADOWS RESULTS
The company posted a 42 percent rise in first half group EBITDA to 3.97 billion euros and pre-tax, pre-exceptional profit up 51 percent to 1.42 billion euros.
Net profit was 22 million euros, after hefty goodwill amortization, losses in equity affiliates and minority interests. Comparative figures for 2000 were not provided.
Analysts were more focused on the outlook than the first half figures, however, as Vivendi had already published EBITDA and revenue results for the first half.
Confirmation of the profit and revenue targets cheered some investors, who had worried about Vivendi’s prospects after profit warnings from two major peers.
On Monday, Vivendi peer AOL Time Warner said it would miss its earnings and revenue targets for this year due to a drop in advertising and costs associated with the attacks.
And British music giant EMI Group Plc said on Tuesday it had observed a “marked deterioration” in conditions, with recorded music sales particularly hard hit by the downturn in the United States.
Vivendi said its business was more secure than its competitors due to its limited exposure to advertising, huge proportion of subscription revenues, non-cyclical content activities and restructuring benefits.
Vivendi also said on Tuesday it had secured an agreement with a financial partner to transfer its stake in BSkyB in a move to comply with European Commission demands to divest the holding as part of its takeover of Seagram.
The accord means Vivendi Universal will retain the financial exposure from its 23 percent stake in the British satellite group until September 2005 at the latest, Vivendi said in a statement.
Vivendi also denied reports it was planning massive job cuts at Vizzavi, its Internet portal venture with Vodafone, saying it was committed to the project and predicting it would break even by the end of 2003.
“We expect to break even at the EBITDA (earnings before interest, tax, depreciation and amortization) level or be slightly positive by the end of 2003,” said Philippe Germond, head of Vivendi’s telecoms and Internet operations.