Vivendi Universal has announced better than expected Q2 results.
French media group Vivendi Universal has announced better than expected Q2 results. The company’s EBITDA rose 57% from E830 million in Q2 2000 to E1.31 billion, against predictions of 40%. Revenues were up from E5.79 billion to E6.59 billion, with the 2000 figures calculated assuming the merger with Seagram had already been completed.
The results look promising for the company, which expects to meet its targets of 10% revenue growth and a 35% rise in EBITDA for 2001. Vivendi also seems to be realizing cost savings from the merger, saving nearly E200 million in the first half of the year.
Much of Vivendi’s success over its media rivals is down to its limited dependence on advertising, which accounted for just 5% of revenues compared with AOL’s 25%. This has sheltered the group from the current slowdown in the advertising market, which has hit online and offline media companies alike.
However, the lack of advertising dependence also highlights Vivendi’s major problem. The biggest profit center for the group, generating over 50% of EBITDA, was its Cegetel telecoms operation. The Vivendi Environnement waste management business, in which Vivendi has a 72% stake, was another major money-spinner.
In other words, Vivendi has escaped the troubles of other international media groups by not just being an international media group. While this is good news for the bottom line right now, it brings the company’s strategy into question – the telecoms and waste operations were what Vivendi had before it started to reinvent itself as a media company.
To be fair to Vivendi, the media business is also seeing growth. The TV and film unit saw an 84% profit rise, while music profits grew 17%, despite widespread suffering throughout the media industry. But margins are still far lower than in the original core businesses. It’s far too early to write the merger off as a bad idea – but the temptation to say it’s a proven success should also be resisted.
