Profit Slides at Slim-Line Vivendi

PARIS-- Vivendi SA, the French media conglomerate that has gone on a radical diet, gave a glimpse of its new slim-line look Thursday though a fall in first-quarter sales and profit indicated how the makeover is far from complete.

Vivendi reported its first quarterly results excluding SFR, the French mobile telecom business that contributed to around half of its sales and profits before Vivendi agreed to sell an 80% stake in the business for EUR13.5 billion last month.

The Paris-based company, whose multimedia assets once stretched from Hollywood to Morocco, has drastically restructured in the past year, selling most of its stake in videogame maker Activision Blizzard Inc. as well as SFR and its stake in Maroc Telecom, as it seeks to pay down debt and become a smaller company focused on media and entertainment.

"Our transformation into a media and content [company] is coming to an end," Jean-Francois Dubos, Vivendi's outgoing chief executive said. "We have good reason to be optimistic and believe in our strategy."

Vivendi said it will focus on completing the sale of SFR this year, after which it will look at new ways to grow. "Vivendi's restored financial situation leaves some margins for maneuver for acquisitions," Mr. Dubos told reporters.

Mr. Dubos--scheduled to be replaced by former Hearst Corp. executive Arnaud de Puyfontaine later this year--said Vivendi aims to expand its presence in emerging markets and digital entertainment, declining to be more specific.

Vivendi is expected to be more forthcoming about its strategy after French industrialist Vincent Bolloré takes over as new chairman to replace company veteran Jean-René Fourtou at a shareholder meeting in June.

Analysts said that until Vivendi, which has said it plans to plow the proceeds of asset sales into EUR4.84 billion worth of dividends and share buybacks this year and next, makes its future plans clearer there is little reason to get excited about the stock.

"The problem in the short-term is that the majority of Vivendi's equity value is represented either by cash or assets held for sale," said Citigroup analyst Thomas Singlehurst in a note to investors.

Vivendi now has two core activities: pay TV in France and other countries and a global recorded music business. The group also owns Brazilian telecom operator GVT.

Under the group's smaller scope, net profit in the three months to March 31 fell 19% to EUR431 million on a 3.7% drop in revenue to EUR2.72 billion. Growth at its Canal Plus pay TV unit couldn't offset a decline at Universal Music group and GVT, where the weaker local currency weighed on revenue, as well as the impact of a tax charge related to the sale of SFR.

At Canal Plus--which now makes up around half of Vivendi's business, revenue rose 2.4% to EUR1.32 billion, driven by growth in subscribers in Africa and Vietnam while revenues in France were flat. Vivendi's Chief Financial Officer Hervé Philippe said Vivendi sees a strong growth potential for Canal Plus in Africa, in particular in French-speaking countries.

Revenues at Universal Music, the world's largest recorded-music company, fell 9.8%, weighed down by the sale of the Parlophone music label and a decline in physical musical sales.

SFR, which is no longer included in the company's revenues, continued to suffer from the tough competition in the French telecom market, even though sales fell less sharply in the latest quarter.

Write to Ruth Bender at [e-mail]

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