Europe's largest entertainment group Vivendi posted better-than-expected sales and operating profit for 2009, boosted by a buoyant performance at its games and telecoms divisions.
But the owner of Universal Music Group, the world's biggest record company that competes with EMI and Sony, said net profit was hit by a surprise provision for possible damages in a US class-action lawsuit.
Vivendi CEO Jean-Bernard Levy said that the group would post "slight growth" on an adjusted operating profit basis in 2010, a change from the "strong growth" it achieved last year.
Shares in Vivendi, which has telecom units in France, Morocco and Brazil, rose 3.7 per cent to €19.18 euros by 8.30am, outperforming a 1.4 per cent rise by the broader index. Vivendi posted revenues up 6.9 per cent to €27.13 billion for 2009. Its earnings, before interest, tax, and amortisation (Ebita) increased 8.8 per cent to €5.39 billion.
Yet the shadow of the US class-action lawsuit, in which shareholders won a case alleging Vivendi misled them about the state of the group's finances from 2000-2002 under previous CEO Jean-Marie Messier, caused fourth quarter net results to swing to a loss of €839 million.
"To the extent that Vivendi was found guilty by a jury -- whatever we think of that verdict -- we must be prudent from an accounting point of view so we have made the provision," Mr Levy said on a conference call with reporters
"But the legal case will be long and complex and we have the strong hope that at the end of it all we will have nothing to pay out at all," he said.
Uncertainty about the case, and its eventual cost for Vivendi have weighed on the shares.
"We won't know an estimate of the damages for many months and perhaps not until 2011," said Mr Levy.
Vivendi's telecom businesses - it controls Morocco's dominant telecom operator Maroc Telecom and SFR, France's second-largest mobile operator -- performed well, with higher revenues than a year earlier and steady profits.
Revenues at SFR , which competes with France Telecom, were up 7.6 per cent to €12.43 billion, while Ebita was roughly flat at €2.53 billion.
Mr Levy predicted that SFR's EBITDA in mobile would decrease slightly this year while its fixed and broadband business would increase slightly.
Video games were also a bright spot, as in past years, as sales were up almost 50 per cent to €3 billion at Vivendi's video game company Activision Blizzard. It owns 57 per cent of Activision, which runs the blockbuster multi-player on-line game World of Warcraft.
In contrast, Universal Music had a tough year, with sales down 6 per cent to €4.36 billion and Ebita down about 16 per cent to €580 million. Levy predicted that Universal Music would achieve double-digit EBITA margin this year, compared with last year's 13 per cent Ebita margin.
Vivendi's pay-TV group Canal Plus France, which it now owns at 80 per cent, posted steady sales of €4.55 billion in 2009, while Ebita grew 15 per cent to €652 million.
Reuters