Morningstar | Vivendi Starts 2019 With Stronger-Than-Expected Revenue; Universal Music Remains the Key Driver
Vivendi posted first-quarter revenue that came in slightly ahead of consensus expectations as Universal Music Group benefited from continued growth in streaming usage. Despite the beat, Canal+ continues to struggle in France. Recall that beginning in 2018, the firm switched to reporting only revenue results for the first and third quarters. We are maintaining our no-moat rating and EUR 20 fair value estimate. With shares trading in 2-star territory, investors should wait for a pullback before investing.Revenue for the first quarter came in at EUR 3.5 billion, up 11.0% year over year but only improved by 6% after taking into account currency fluctuations and the acquisition of Editas in the quarter. UMG improved 19% organically as streaming revenue growth (+28%) continues to offset the ongoing decline in download (negative 18%) recorded music sales. Surprisingly, physical sales posted strong growth of 21%, which we believe was driven in part by the strong release slate in Japan, one of the few major markets where CD sales remain strong. The sale process for up to 50% of UMG’s share capital continues to move forward, albeit at a very deliberate pace, as management has still not picked its partner banks for the process.
Canal+ saw overall revenue fall 4% organically as the growth in TV International was more than offset by the decline at Studiocanal and the continued fall in TV France revenue. The overall subscriber base grew by 419,000 subs year over year to 15.8 million subscribers, driven by expansion outside of France. The subscriber base in France dropped by over 280,000, leading to a 5% decline in revenue. Revenue at Havas was flat organically, as revenue in North America (+2%) was offset by decreases in Asia-Pacific (negative 2%) and Latin America (negative 7%).
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