France's Vivendi (>> Vivendi) said it expects Canal Plus' turnaround efforts to bear fruit in 2017, after the pay-TV unit's French channels lost thousands of subscribers last year, resulting in a sharp fall in the media group's profits.
Losses at Canal Plus' channels in France alone cut 399 million euros ($422 million) from the group's core operating profit for 2016, as close to 500,000 individual subscribers in France rescinded their contract, Vivendi said in a statement on Thursday.
As a result, the Vivendi group's earnings before interest, tax and amortisation (EBITA) fell by 23 percent to 724 million euros, missing a Reuters poll average of 820 million.
The problems at Canal Plus have made some investors nervous about the group's longer-term strategy.
This year, however, the media giant, led by billionaire Vincent Bollore, said it targeted a 25 percent rebound in core operating profit, as it bets that cost cutting measures, the reshuffling of Canal Plus' commercial offers and new distribution partnerships sealed in France with telecom operators Orange (>> ORANGE SA) and Iliad (>> Iliad), will generate more revenue and earnings. It expects group revenues to rise by more than 5 percent, it said.
Universal Music Group (UMG), Vivendi's biggest business unit by revenue, adjusted to new consumer habits in favour of streaming and paid subscriptions, and saw its profitability grow over the last year.
Bollore has pledged to transform Vivendi, which used to be managed as a holding company, into a southern European powerhouse able to compete with the likes of Time Warner (>> Time Warner Inc) and Rupert Murdoch.
To achieve that aim, he launched a spree of acquisitions, spending 3.4 billion euros in 2016 alone to buy stakes in Italian broadcaster Mediaset (>> Mediaset SpA) and France's biggest video games maker Ubisoft (>> Ubisoft Entertainment), while strengthening its position in Telecom Italia (>> Telecom Italia SpA) as its biggest shareholder.
All did not go smoothly: Vivendi and Mediaset have been at legal loggerheads since July, when the French group antagonised the Berlusconi family, which controls the broadcaster, by pulling out of a deal to take over Premium TV.
Rumours about a possible tie-up between Vivendi and advertising group Havas (>> Havas), headed by Bollore's son Yannick, have also surfaced, as Bollore repeatedly said the two groups should work closer together.
Havas is 60 percent-controlled by the Bollore group and Yannick Bollore joined the media group's board last year.
There are no formal plans being discussed by the two groups "as we speak," Vivendi's Chief Executive Arnaud de Puyfontaine said in analyst conference call on Thursday.
($1 = 0.9450 euros)
(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Andrew Callus and Susan Fenton)
By Mathieu Rosemain and Gwénaëlle Barzic