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Vivendi SA ADR (NASDAQOTH: VIVHY) released an update on its third-quarter sales on Nov. 15, reporting a modest 5.5% increase in revenue. Universal Music Group -- better known as UMG, the gorilla in the music industry that accounts for very nearly half of Vivendi's total revenue -- saw its sales increase 13.5%, while its other major segments, Canal+ Group and Havas, reported slight revenue declines in the period.
Since the French-based company only reports its full operating results at the midpoint and end of the fiscal year, there's not a lot of information we can glean from its quarterly release about the state of its business. But Vivendi has a lot of things happening right now, including its pending sale of the remaining stake it holds in Ubisoft, its recently announced -- but also pending -- deal to acquire major French publishing house Editis, and its intention to sell a big part of its stake in UMG, potentially within the next year.
Vivendi's collection of musical talent continues to drive the results. Image source: Getty Images.
Let's take a closer look at Vivendi's update, as well as what management said about all the moving parts with the various deals in the works.
How Vivendi's operating segments are doing
Vivendi reports its results across six business units: UMG, Canal+ Group, Havas, Gameloft, Vivendi Village, and New Initiatives. However, UMG, Canal+ Group, and Havas generate more than 97% of all revenue. Here's how those segments did last quarter.
| Segment/Business Unit | Q3 2017 | Q3 2018 | Change |
|---|---|---|---|
| Universal Music Group | 1,319 | 1,495 | 13.5% |
| Canal+ Group | 1,252 | 1,247 | (0.5%) |
| Havas | 539 | 535 | (0.6%) |
| Other business and inter-company eliminations | 97 | 107 | 10.3% |
| Vivendi total | 3,207 | 3,384 | 5.5% |
Data source: Dividend. Amounts in millions of euros.
Of those segments, the one with the most concerned investors is Havas, the international advertising and communications giant. To be specific, Arnold, one of the subsidiaries within Havas, has lost a a number of major clients over the past year, significantly affecting Havas' top and bottom line. On the earnings call, CFO Herve Philippe said Havas' organic revenue increased 2.5% excluding Arnold.
Philippe also said Arnold has undergone major leadership changes, with a new CEO, CFO, and chief strategy officer all having come on board in recent months.
Canal+ also continues to face a challenging environment, in large part as more people cut the cable cord in its markets. But at the same time, management continues to prioritize development and investment in content. A recent example is winning the rights to broadcast the English Premier League 2019-2020 free period in France and Poland.