Vivendi: 2017 Half-Year Results

Regulatory News:

Vivendi (Paris:VIV):

This press release contains unaudited consolidated results established under IFRS, which were approved by Vivendi’s Management Board on August 28, 2017, reviewed by the Vivendi Audit Committee on August 29, 2017, and by Vivendi’s Supervisory Board on August 31, 2017. All footnotes can be found on page 7 of this press release.

Vivendi's Supervisory Board met today under the chairmanship of Vincent Bolloré and reviewed the Group’s Condensed Financial Statements for the half-year ended June 30, 2017, which were approved by the Management Board on August 28, 2017.

For the first half of 2017, revenues amounted to €5.437 billion (+7.8% and +4.8% at constant currency and perimeter), confirming the upward trend started in the first quarter of 2017. The increase was mainly due to Universal Music Group’s growth (+14.0%) while Canal+ Group’s situation is improving slightly. Canal+ Group’s revenues declined by 2.4% during the first half of 2017 compared to the same period in 2016, while revenues were down 5.5% for second half 2016. This positive trend was reinforced in the second quarter of 2017 (-1.3% compared to the second quarter of 2016, vs. -3.5% for the first quarter of 2017 compared to the first quarter of 2016).

EBITA amounted to €352 million, down 9.2% (-11.0% at constant currency and perimeter). The trend was reversed in the second quarter of 2017, with an EBITA of €203 million, up 16.0% (+17.1% at constant currency and perimeter). This positive change was primarily due to Universal Music Group’s growth. Canal+ Group’s situation is improving (EBITA was down 5.5% for the second quarter of 2017 compared to the same period in 2016, while it had declined by 67.5% for the first quarter of 2017 compared to the same period in 2016; EBITA doubled in the second quarter of 2017 compared to the first quarter of 2017).

EBIT⁴ amounted to €362 million, down 31.5% for first half 2017, impacted by an unfavorable accounting comparison with the first half of 2016, which period reflected the reversal of reserve (representing a net profit of €240 million) related to the settlement of the Liberty Media litigation in the U.S. in February 2016. Vivendi’s share of Telecom Italia’s net earnings represented an income of €44 million for the first half of 2017 (€23 million for the first half of 2016). Vivendi’s EBIT for the second quarter of 2017 alone amounted to €177 million, up 22.7%.

Earnings attributable to Vivendi SA shareowners (IFRS) amounted to a profit of €176 million, down 80.7%. This decrease primarily resulted from the favorable impact of certain non-recurring items during the first half of 2016 including the reversal of reserve related to the Liberty Media litigation and the net capital gain on the sale of Vivendi’s remaining interest in Activision Blizzard in January 2016 (€576 million, before taxes). Earnings attributable to Vivendi SA shareowners for the second quarter of 2017 alone grew by 50.0% to €75 million.

Adjusted net income, which is not affected by these non-recurring items, amounted to a profit of €320 million, up 12.0%.

As of June 30, 2017, Vivendi’s Net Cash Position amounted to €500 million, compared to €473 million as of March 31, 2017, and €1,068 million as of December 31, 2016. Taking into account the €2,324 million payment (including the financial transaction tax) to Bolloré Group for the purchase of its 59.2% interest in Havas on July 3, 2017, at a price of €9.25 per share, Vivendi’s proforma financial net debt would approximately amount to €1.8 billion.

Vivendi confirms its previously-announced 2017 outlook. Revenues should increase by more than 5% (excluding Havas) and, thanks to the measures taken in 2016, EBITA should increase by around 25% (excluding Havas). In particular, for the full-year 2017, Canal+ Group confirms that its EBITA target of approximately €350 million, compared to €240 million in 2016.

Havas takeover

On July 3, 2017, Vivendi acquired the 59.2% interest in Havas held by the Bolloré Group.

This strategic transaction comes as Vivendi, after having consolidated its foundations, enters a new phase in its development. It allows it to accelerate the building of a leading world-class content, media and communications group and gives Vivendi a unique positioning in an environment in which content, distribution and communications are converging. It provides a new dimension to the Group to compete against powerful global players.

This acquisition was made at a price consistent with industry multiples and should be accretive to Vivendi’s net earnings per share. Havas has been fully consolidated in Vivendi’s financial statements since July 3, 2017. The integration is expected to have a positive impact on the Group’s earnings for the second half of 2017.

In accordance with market regulations, Vivendi will launch a simplified tender offer in the coming weeks for the remaining interest in Havas, without seeking a delisting of Havas shares. On August 29, 2017, Vivendi filed a draft offer document relating to the tender offer with the French Autorité des marchés financiers (the "AMF”).

Management and coordination activities at Telecom Italia

Vivendi, as the largest shareholder of the Italian operator, intends to promote a long-term strategy of developing the convergence between telecommunications and content.

Vivendi confirmed that it considers that it does not exercise any de facto control of Telecom Italia under Article 93 of the Consolidated Law on Finance and Article 2359 of the Italian Civil Code given that Vivendi’s interest in Telecom Italia is not sufficient to allow it to exercise, on a stable basis, a dominant influence at Telecom Italia shareholders’ meetings. All empirical data unequivocally reveal that Vivendi is not in a position to control Telecom Italia ordinary shareholders’ meetings.

The commencement of the exercise by Vivendi of "management and coordination activities” of Telecom Italia, within the meaning of Article 2497-bis of the Italian Civil Code, was acknowledged by Telecom Italia’s Board of Directors with reference to the factual and specific circumstances referred to in its press release issued on August 4, 2017.

Regarding the existence of a position of control pursuant to international accounting principles for consolidated financial statements, Vivendi confirms that, at present, it does not have the power to govern Telecom Italia's financial and operating policies, according to IFRS 10.

Appointments

At a meeting held today, Vivendi’s Supervisory Board appointed as members of Vivendi’s Management Board, Gilles Alix, Chief Executive Officer of Bolloré Group, and Cédric de Bailliencourt, Vice-Chairman and Chief Financial Officer of Bolloré Group.

Comments on Business Key Financials

Universal Music Group: double-digit revenues growth and strong increase of operational results

Universal Music Group’s (UMG) revenues amounted to €2,666 million, up 14.0% at constant currency and perimeter compared to the first half of 2016 (+15.2% on an actual basis), driven by growth across all divisions.

Recorded music revenues grew by 15.6% at constant currency and perimeter as growth in subscription and streaming revenues (+45.1%) more than offset the continued decline in both download and physical sales.

Music publishing revenues grew by 9.2% at constant currency and perimeter also driven by growth in subscription and streaming revenues, as well as growth in synchronization and performance revenues. Merchandising and other revenues were up 2.2% at constant currency and perimeter, driven by stronger retail sales.

Recorded music best sellers for the first half of 2017 included new releases from Drake and Kendrick Lamar, the 50^th Anniversary edition of Sgt. Pepper’s Lonely Hearts Club Band by The Beatles, carryover sales from The Weeknd and soundtrack releases from the movies Moana and La La Land.

Luis Fonsi’s "Despacito”, featuring Daddy Yankee and Justin Bieber, has become the most-streamed song of all time with over five billion streams across all streaming platforms. The song is the first non-English U.S. No. 1 in more than two decades and in the U.K., it has become the longest-running foreign language No. 1 in history.

UMG’s income from operations amounted to €311 million, up 40.8% at constant currency and perimeter compared to the first half of 2016 (+43.3% on an actual basis) as a result of higher revenues.

UMG’s EBITA amounted to €286 million, up 58.4% at constant currency and perimeter compared to the first half of 2016 (+61.6% on an actual basis). EBITA included lower restructuring charges compared to the first half of 2016.

Similar trends in sales and operating results from the first half of the year have continued into the summer.

In April 2017, UMG and Spotify announced a new, multi-year global license agreement. The deal advances their partnership to ensure that streaming realizes its full transformational potential for artists, labels and fans by delivering a comprehensive range of music experiences, providing more flexibility for new releases, and collaborating on innovative marketing campaigns across Spotify’s platform. It also provides UMG with unprecedented access to data.

In May 2017, UMG announced a strategic licensing agreement with Tencent Music Entertainment Group, a leading digital music distribution platform in China, providing vast multi-platform distribution and marketing opportunities across China. UMG and Tencent will also develop Abbey Road Studios China, a recording studio inspired by the legendary London studio.

Canal+ Group: tangible signs of improvement in revenues and EBITA seen in the second quarter

Canal+ Group’s revenues amounted to €2,568 million, down 2.7% compared to the first half of 2016. At constant currency and perimeter, Canal+ Group’s situation slightly improved (a 2.4% decrease in the first half of 2017, compared to a 5.5% decrease in the second half of 2016).

At the end of June 2017, Canal+ Group’s individual subscriber base reached 14.0 million, up 2.8 million year-on-year, thanks to growth in international operations and the wholesale agreements with Orange and Free.

Revenues from international pay-TV operations grew by 6.2% compared to the first half of 2016 (+6.6% at constant currency and perimeter), driven by a net increase in the subscriber base of 309,000 year-on-year.

Revenues from pay-TV operations in mainland France were down 5.3% compared to the first half of 2016, due to a reduction of the free-to-air window on the Canal+ channel and a drop in subscriber revenue due to a decrease in the individual subscriber base, partially offset by revenues generated from partnerships with internet service providers.

Advertising revenues from free-to-air channels in mainland France decreased year-on-year, notably due to loss of revenues at C8 resulting from the sanction imposed by the French Broadcasting Authority (Conseil Supérieur de l’Audiovisuel), on June 7, 2017, and despite a greater attraction toward the channel.

Studiocanal’s revenues were down compared to the first half of 2016, due to a better performing film line-up in 2016.

Canal+ Group’s income from operations amounted to €186 million, compared to €297 million for the first half of 2016.

EBITA amounted to €171 million, compared to €288 million for the first half of 2016.

Canal+ Group recorded a strong performance for the second quarter of 2017 with an EBITA of €114 million (-5.5% compared to the second quarter of 2016), a doubling compared to the EBITA of €57 million recorded in the first quarter of 2017 (-67.5% compared to the first quarter of 2016).

Following in the footsteps of Orange and Free, on August 21, 2017, Canal+ France announced a partnership with Bouygues Telecom which will offer its subscribers an entry-level family-oriented package including popular theme channels and unlimited access to video-on-demand with Canalplay.

In August 2017, Canal+ doubled the number of recruitments (compared to August 2016) with the resumption of the French Ligue 1 football championship.

For the full year, Canal+ Group confirms its EBITA target of approximately €350 million, compared to €240 million in 2016.

Gameloft: six new games and strong performance of the back catalog

Gameloft’s revenues amounted to €130 million. The breakdown of revenues by geographical market is as follows: 33% in the EMEA region (Europe, the Middle East and Africa), 28% in Asia Pacific, 27% in North America, and 12% in Latin America.

Gameloft is benefiting in particular from the strong performance of its back catalog, thanks to changes implemented in the teams responsible for game updates and to an improvement in the effectiveness of the customer acquisition policy since the beginning of the year. Flagship games such as Dragon Mania Legends, Disney Magic Kingdoms, March of Empires, Modern Combat 5 : Blackout, Asphalt 8 : Airborne and Sniper Fury experienced strong sales growth.

Gameloft announced that its game, Asphalt 8 : Airborne, has exceeded the threshold of 300 million downloads, becoming one of the most downloaded games in the history of mobile video games.

Gameloft’s performance was also driven by its mobile advertising agency Gameloft Advertising Solutions, whose sales increased to €17 million, representing 13.1% of total revenues during the first half of 2017.

Gameloft released six new games on smartphone during the first half of 2017: Gangstar New Orleans, N.O.V.A. Legacy, City Mania, Blitz Brigade Rival Tactics, Iron Blade and Asphalt Street Storm Racing which registered 43 million downloads as of June 30, 2017.

Thanks to an increase in revenues and a slight decrease in operating costs, Gameloft’s income from operations reached €2 million for the first half of 2017. EBITA amounted to a loss of €1 million.

During the first half of 2017, Gameloft's daily active users (DAU) reached an average of 16 million and the number of monthly active users (MAU) reached an average of 134 million.

Vivendi Village: strong dynamic of Vivendi Ticketing and accelerated deployment of CanalOlympia venues

Vivendi Village’s revenues amounted to €56 million for the first half of 2017, a 3.9% increase compared to the first half of 2016 (+7.9% at constant currency and +3.3% at constant currency and perimeter). Over the same period, Vivendi Village’s income from operations amounted to a loss of €7 million (-€8 million for the first half of 2016) and EBITA amounted to a loss of €9 million (-€4 million for the first half of 2016) due to investment costs.

Benefitting from the flexible organization of small structures, Vivendi Village is ground to experimentation and the launch of new projects for the Group. For example, since its creation in 2016, Olympia Production has produced or coproduced more than 600 shows with a dozen artists in France, including headliners such as Slimane and M Pokora.

In Africa, CanalOlympia accelerated the deployment of its network, opening its sixth movie and entertainment venue in Senegal in May 2017, with two more to be inaugurated (in Togo and Benin) in September.

Vivendi Ticketing continues its dynamic performance with revenues of €27 million for the first half of 2017 (+16.5% at constant currency and perimeter) and a strong growth in income from operations.

New Initiatives: Dailymotion’s overhaul

New Initiatives, which groups together projects being launched or developed including Dailymotion, Vivendi Content and GVA (Group Vivendi Africa), had revenues and income from operations amounting to €23 million and a loss of €38 million for the first half of 2017, respectively. Dailymotion’s revenues amounted to €22 million, down 40.7% compared to the first half of 2016.

Dailymotion, the leading French website in terms of traffic with 300 million unique users per month globally, launched a new interface on mobile and desktop in July 2017 with a premium content offer focused on four main themes (news, sports, music, and entertainment) that meets the expectations of 18 to 49 year-olds, its new prime target audience. This new content offer is made possible by partnerships concluded with hundreds of media groups and first-class global brands.

Dailymotion has been wholly-owned by Vivendi since July 26, 2017 following the exercise by Orange of the put option on its remaining 10% interest in Dailymotion.

Studio+, an innovative premium short-form series offer, now has 800,000 subscribers with the prospect for very strong growth in the subscriber base by the end of the year.

For additional information, please refer to the "Financial Report and unaudited Condensed Financial Statements for the half year ended June 30, 2017” released online today on Vivendi’s website (www.vivendi.com).

Notes

1. Constant perimeter reflects the impacts of the acquisition of Thema America by Canal+ Group (April 7, 2016), Gameloft (June 29, 2016) and Paddington Bear which has been integrated into Vivendi Village (June 30, 2016).
2. Non GAAP measures.
3. Reconciliations of EBIT to EBITA and to income from operations, as well as a reconciliation of earnings attributable to Vivendi SA shareowners to adjusted net income, are presented in Appendix I.
4. Vivendi made changes in the presentation of its Consolidated Statement of Earnings as from January 1, 2017: please refer to Appendix IV to this press release for a detailed description of these changes in presentation and the reconciliations to the previously published financial data.

About Vivendi

Vivendi is an integrated content, media and communications group. The company operates businesses throughout the media value chain, from talent discovery to the creation, production and distribution of content. Universal Music Group is the world leader in music, engaged in recorded music, music publishing and merchandising. It owns more than 50 labels covering all music genres. Canal+ Group is the leading pay-TV operator in France, also engaged in Africa, Poland and Vietnam. Its subsidiary Studiocanal is the leading European player in production, sales and distribution of movies and TV series. Havas Group is one of the world’s largest global communications group. It is organized in three main business segments covering all the communications disciplines: creativity, media expertise and healthcare/wellness. Gameloft is a worldwide leader in mobile games, with 2 million games downloaded per day. Vivendi Village brings together the Paddington brand’s licensing activities, Vivendi Ticketing (in the United Kingdom, the United States and France), MyBestPro (expert counseling), Watchever (subscription streaming services), the venues L’Olympia and Theâtre de L‘Œuvre in Paris, and CanalOlympia in Africa, as well as Olympia Production. With 300 million unique users per month, Dailymotion is one of the biggest video content aggregation and distribution platforms in the world. www.vivendi.com, www.cultureswithvivendi.com

Important Disclaimers

Cautionary Note Regarding Forward-Looking Statements. This press release contains forward-looking statements with respect to the financial condition, results of operations, business, strategy, plans and outlook of Vivendi, including the impact of certain transactions, the payment of dividends and distributions, as well as share repurchases. Although Vivendi believes that such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including, but not limited to, the risks related to antitrust and other regulatory approvals as well as any other approvals which may be required in connection with certain transactions and the risks described in the documents of the Group filed by Vivendi with the Autorité des marchés financiers (the French securities regulator), which are also available in English on Vivendi's website (www.vivendi.com). Investors and security holders may obtain a free copy of documents filed by Vivendi with the Autorité des marchés financiers at www.amf-france.org, or directly from Vivendi. In addition, Havas’s specific risk factors are described in its 2016 Annual Report available on the Havas website (www.havas.com). Accordingly, we caution readers against relying on such forward looking statements. These forward-looking statements are made as of the date of this press release. Vivendi disclaims any intention or obligation to provide, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Unsponsored ADRs. Vivendi does not sponsor any American Depositary Receipt (ADR) facility in respect of its shares. Any ADR facility currently in existence is "unsponsored” and has no ties whatsoever to Vivendi. Vivendi disclaims any liability in respect of any such facility.

ANALYST CONFERENCE CALL

Speakers:
Arnaud de Puyfontaine
Chief Executive Officer
Hervé Philippe
Member of the Management Board and Chief Financial Officer

Date: August 31, 2017

6:00pm Paris time – 5:00pm London time – 12:00pm New York time

Media invited on a listen-only basis.
The conference will be held in English.
Internet: The conference can be followed on the Internet at: www.vivendi.com (audiocast)

Numbers to dial:
France: +33 1 76 77 22 74
United Kingdom: +44 330 336 9105
USA: +1 719 325 2213
Confirmation code: 2908591 (English) and 5610005 (French)

On our website www.vivendi.com will be available dial-in numbers for the conference call and for replay (14 days), an audio webcast and the slides of the presentation.

APPENDIX I
VIVENDI
STATEMENT OF EARNINGS
(IFRS, unaudited)

Second quarter

In millions of euros, except per share amounts.
* Non-GAAP measures.

NOTA: Vivendi made changes in presentation of its Consolidated Statement of Earnings as from January 1, 2017. Please refer to Appendix IV for a detailed description of these changes in presentation and the reconciliations to previously published financial data. Taking into account these reclassifications, EBIT for the second quarter of 2016 amounted to €144 million (compared to €94 million as published in 2016) and EBIT for the first half of 2016 amounted to €529 million (compared to €1,062 million as published in 2016).

"Income from operations”, "adjusted earnings before interest and income taxes (EBITA)” and "adjusted net income”, all non-GAAP measures, should be considered in addition to, and not as a substitute for, other GAAP measures of operating and financial performance. Vivendi considers these to be relevant indicators of the group’s operating and financial performance. Vivendi Management uses income from operations, EBITA and adjusted net income for reporting, management and planning purposes because they exclude most non-recurring and non-operating items from the measurement of the business segments’ performances.

For any additional information, please refer to the "2017 Half-Year Financial Report", which will be released online later on Vivendi’s website (www.vivendi.com).

APPENDIX I
(Cont’d)
VIVENDI
STATEMENT OF EARNINGS
(IFRS, unaudited)

Half-Year

In millions of euros, except per share amounts.
* Non-GAAP measures.

APPENDIX I
(Cont’d)
VIVENDI
STATEMENT OF EARNINGS
(IFRS, unaudited)

Reconciliation of earnings attributable to Vivendi SA shareowners to adjusted net income

a. As reported in the Consolidated Statement of Earnings.

Adjusted Statement of Earnings

APPENDIX II
VIVENDI
REVENUES, INCOME FROM OPERATIONS AND EBITA
BY BUSINESS SEGMENT
(IFRS, unaudited)

Second quarter

na: not applicable.

a. Constant perimeter reflects the impacts of the acquisitions of Gameloft (June 29, 2016) and Paddington Bear (June 30, 2016) integrated into Vivendi Village.

APPENDIX II
(Cont’d)
VIVENDI
REVENUES, INCOME FROM OPERATIONS AND EBITA
BY BUSINESS SEGMENT
(IFRS, unaudited)

Half-Year

na: not applicable.

• Constant perimeter reflects the impacts of the acquisitions of Thema America (April 7, 2016) by Canal+ Group, Gameloft (June 29, 2016) and Paddington Bear (June 30, 2016) integrated into Vivendi Village.

APPENDIX III
VIVENDI
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IFRS, unaudited)

APPENDIX IV
VIVENDI
CHANGES IN PRESENTATION OF THE CONSOLIDATED STATEMENT OF EARNINGS
(IFRS, unaudited)

To ensure the consistency of the presentation of the Consolidated Statement of Earnings with the one prepared by Bolloré Group, which decided to fully consolidate Vivendi in its Consolidated Financial Statements as from April 26, 2017, Vivendi made the following changes in presentation of its Consolidated Statement of Earnings as from January 1, 2017:

• income from equity affiliates is reclassified to "Earnings Before Interest and Income Taxes” (EBIT), given that the companies over which Vivendi exercises a significant influence engage in operations that are similar in nature to the group’s operations. For the first half of 2016, this reclassification applies to a €12 million income; and
• the impacts related to financial investment operations, which were previously reported in "other operating charges and income” in EBIT, are reclassified to "other financial charges and income”. They include capital gains or losses on the divestiture or depreciation of equity affiliates and other financial investments. For the first half of 2016, the reclassification applies to a net income of €545 million.

Moreover, the impacts related to transactions with shareowners (except when directly recognized in equity), in particular the €240 million reversal of reserve recorded as of March 31, 2016 related to the Liberty Media litigation in the United States, are maintained in EBIT.

In accordance with IAS 1, Vivendi has applied these changes in presentation to all periods previously published:

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