Vivendi SE (VIV) Earnings Call Transcript & Summary

Good evening, everyone, and welcome to Vivendi Q3 2022 Revenues Presentation. This conference call will be hosted by Mr. Francois Laroze, Member of Management Board and CFO. As a reminder, this call is being recorded. [Operator Instructions] I'd now like to turn the call over to your host today, Mr. Francois Laroze. Please go ahead, sir. Your line is open.

Hello, everyone. Welcome, and thank you for joining us for the Vivendi Q3 revenue call. One year ago, Vivendi entered in a new era after the spin-off of UMG. The new Vivendi is now well on track, as you will see. And we are all focused on our strategic project based on transformation, international development and the integration of our different businesses. For the first 9 months of 2022, we are very satisfied to report revenues amounting to EUR 7.5 billion, representing an 8.5% growth figure. Now we'll walk you through the different slides of the presentation, starting by the scope of consolidation. You see that in this page that Vivendi has posted a 0.6% organic growth for the third quarter; 4.1% in actual figures, including consolidation and FX impact. This is a slowdown compared with Q1 and Q2 performances, which were at 7.9% and 3.1% inorganic but still growing. In cumulative figures, we have 3.7% of organic growth, to which is added a consolidation impact, mainly coming from Prisma, SPI and Canal+ and several acquisitions within Havas and a 1.6% of FX impact, mainly coming from the euro-dollar conversion rate. Including these 2 impacts, the gross figures of organic -- of gross 2022 amounts to 8.5%. If we move by business units, you see that in the cumulative figures 9 months with this 3.7%, we have Havas still delivering very strong organic growth at 8.7%. Canal+ is quite stable. Editis at minus 7.6%. All the other businesses being in a quite strong growth, including Gameloft, Vivendi Village, New Initiatives with Dailymotion. On the third quarter, the organic growth, as I said, is at 0.6%. Canal+ is negative by 4.9% for different technical reason we'll elaborate on later. Havas is still very -- growing fast at 3.2% even at a lower pace than the previous quarter. Editis at 7.8% negative growth. Prisma, 6.3% organic growth. Gameloft, it has a very high level of organic growth at 45%, mainly due to the success of the new game released early September called Disney Dreamlight Valley with a very high performance. And New Initiatives growing also with a good performance of Dailymotion, Vivendi Village being supported by the comeback to normality on the Vivendi Ticketing operation, which are delivering very sound performances. On Canal+, you see that the figures for the first quarter -- third quarter is minus 4.9%, mainly coming from Studiocanal performance on which we'll come back. For the international TV, we are still delivering very sound figures. We have a 1.5% organic growth on this quarter. On France, we have a minus 3.5% organic, but we have to remind that the subscriber base is still growing at a good pace. And this negative organic is mainly due to technical effects, including the end of the sublicensing of English Premier League to the group Altice. The performance of the quarter is hit by Studiocanal, minus 38.1%, but this is due to the comp base with a very high performance on the third quarter 2021 to some postponement of major films to 2023. And we have to point out the fact that including this negative organic growth, Studiocanal is delivering sound figures in terms of results and has no variance at all compared with our forecast. In cumulative figures, the organic growth is at minus 0.2% with still this impact of Studiocanal, mainly for technical reasons. In Havas, the organic of the quarter at 3.9%, cumulative 8.7%. As you see in cumulative, all the geographies of the group are doing very well, including the top 2 of them: Europe, 8.4%, 6.1%. And all the businesses -- the business unit of Havas, Creative, Health and Media, delivering very sound figures. Asia Pacific and Latin America, the 2 smaller regions, are also growing at double-digit growth. On Editis, the performance of the quarter is at roughly at the same level, the performance of the cumulative 7.8%. First of all, we have to remind that the market of publishing has been hit by a strong reduction during this first 9 months. So it's a market impact, first of all. And second, we also have to remind that if we compare the performance of 2022, not with 2021, which has been an exceptional year post COVID, with 2019 figures, we have 8% increase of the revenue and even 14% if we restate from the prescribed textbook, which have done a very high performance in 2019. So that's the performance of our revenue in a nutshell. To conclude, just to say that this solid and resilient performances confirm the validity of Vivendi's strategy. We are now looking forward to the remainder of the year with confidence despite the macroeconomic and geopolitical turbulence. I thank you for your attention, and now we are all ready to answer your question in the coming minutes. Thank you.

[Operator Instructions] Today's first question is coming from Mr. Omar Sheikh calling from Morgan Stanley.

So my 3 questions, maybe I start with Canal. Could you maybe just give us an update on the status of the VAT issue that you have with the tax authorities in France? When do you expect to hear back from them? And how are you thinking about potentially mitigating any impact on your profit next year should the ruling go against you? That's the first question. And then secondly, perhaps also on Canal, if you could just update us on where exactly you are on the subscriber growth in France. You mentioned the subscribers grew in the third quarter. Maybe if you could just quantify that. And then finally on Havas. Could you maybe give us a sense of how the Creative and Media revenues developed in Q3 on an organic basis? And perhaps, how the Healthcare business did in the quarter? Just -- and how is that comparing to how you did in the first half of the year?

Okay. Thank you. First of all, on Canal, on VAT, we are still in the process of negotiation with the French authority. Today, we consider that the Vivendi Canal position is very strong. We remind that more than 90% of the program are all seen on linear TV. So we consider that we can prove our operation in Canal+ are really closer to linear TV than to SVOD. So we try to convince that this VAT should remain at the level it is today. To answer the question on the agenda, we consider that we should have an answer in the coming weeks, months. And in case we would be obliged to change the VAT rate, obviously, we will adapt our pricing to our customer, and we will be able to mitigate the impact. But today, we are still convinced that today's position and today's level is a good one. On the subscriber base in France, we do not disclose precise figures, but we monitor that month after month. And we confirm that all the indicators show this increase of our subscriber base for France, including the pay-TV in France. For Havas, here again, we do not disclose the Creative, Media and Health & You, but I can confirm that the 3 business units of Havas have done very well over the last 9 months, including the Q3. It's true that there has been a slowdown of the growth during this Q3 compared with Q1 and Q2. But it's due to the global market, which some have slowdown itself. But the 3 business units have done very well, all of them during the first 9 months.

We'll now go to the next question coming from Lisa Yang calling from Goldman Sachs.

I have 3 questions, please. Firstly, in TV Mainland France, could you quantify the impact of the nonrenewal of the sublicensing of EPL? Was that the full 3.5% decline? Or any sort of color on that would be great. Second question is on Havas. Are you seeing any change in trends so far? Could you maybe update us in terms of the conversations you're having with advertisers currently about end of the year and maybe early next year? Any change of tone, any major trends by sector? Any update would be helpful. And third question on Lagardere Editis. Could you give us an update on the time line? When did you send the notification to the EU? And when should we be getting an update? What's the time frame we should be thinking about?

Okay. On the impact of English Premier League, we'll come back on you because I have not the precise figures to tell you the impact out of the 3.5%. On Havas, as you know, the performances of all the communication companies have been quite good during this first month of 2022. So today, we still -- all the companies are very prudent because we consider that there should be a strong slowdown in the coming months. But to date, it has not come yet. And we have seen the performances of our peers, which is quite good. And in cumulative figures, Havas is roughly at the level of the 2 peers who have already announced their figures for the third quarter and cumulative 9 months. So today, I think the market is still anticipating some slowdown, which has not come yet. So we are prudent enough in terms of cost control, in terms of hiring to be able to face such a slowdown if it should come in the coming months. For Editis, the full project has been now sent to the antitrust commission. We should receive the completeness in the coming days, weeks, and we still have the project to fulfill the listing of the company during the first half of 2023.

We'll now move to Silvia Cuneo calling from Deutsche Bank.

I have first a question on the strategic vision for the book publishing business. Obviously, it's still early days since the Lagardere acquisition is yet to be closed. But just curious about your thoughts around Amazon's recent addition of access to audiobooks for its end subscribers. And do you think that moving from a unit model to unlimited access is good for the industry? Or are there any risk of cannibalization since you have signed an agreement with Editis? Just wanted to hear your thoughts on that. Then second question is about your latest views on shareholder returns. Can you please talk about how you're thinking about future buybacks since you've only resumed the buyback slightly in Q3? And can you remind us of any factor or reasons why you had to slow the pace? I would stop at 2.

Okay. On the book publishing, I'm not 100% sure to have got your question. But concerning on the Amazon deal, I think today, all the Editis management is focused on delivering the sound figures. And the agreement to which we'll share has no main impact on the business of Editis. Nevertheless, as you said, we certainly have a good perspective in audiobooks, but it remains quite tiny for Editis today. On the buyback, you -- we have stopped the buyback for a few weeks. Today, we have 80 million, 84 million of shares which has been bought in the past months. We still have some shares, more than 26 million to buy depending on the agreement of the Management Board. Today, the program of buyback has been stopped. It should resume in the coming weeks or months. But at the moment, we have decided to stop this program of buybacks.

The next question is coming from Julien Roch calling from Barclays.

On 2 questions on the buyback. Why have you decided to stop? Is it because you're focusing on M&A? So if you could explain the rationale behind stopping the buyback. That's my first question on the buyback. And my second question on the buyback is the AMF recommends to cancel shares that have been bought for cancellation within 24 months. It's a recommendation. So will you abide by this? And when do you need to cancel more shares based on the 24 months? That's my second question. And then on Editis, you said the full project has been sent to the antitrust and you intend to list the company in the first half of 2023. But if you could be a bit more precise on the agenda or the calendar in terms of both Editis and consolidated Lagardere?