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Vivendi SA (VIVHY 0.18%)
Q4 2019 Earnings Call
Feb 14, 2020, 1:30 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good evening, everyone, and welcome to the Vivendi full-year 2019 results presentation. This conference call will be hosted by Mr. Arnaud de Puyfontaine, chairman of the management board and CEO; and Mr. Herve Philippe, a member of the management board and CFO.

As a reminder, this call is being recorded. [Operator instructions] I would now like to turn the call over to Mr. Arnaud de Puyfontaine. Please go ahead, sir.

Your line is open.

Arnaud de Puyfontaine -- Chief Executive Officer

Thank you very much. And welcome to everybody and thank you for joining us today. Before I start, please make sure you read the forward-looking statement disclaimer as it concerns important legal matters.  12 months ago, I said that 2019 would be a hugely eventful year and that Vivendi was on the right track to building a unique content, media and communications group. 2019 marks an important milestone in this ambition.

If I dare say, I would call it a year in 3D, no doubt. D for delivering strong financial results. Herve Philippe will discuss this further. D for developing our activities through major operations such as the UMG Tencent deal.

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And D for deepening cooperation between our businesses.  2019 was a year of value creation, a great one indeed. On a like-for-like basis, our 2019 organic revenue and EBITA grew, respectively, by 5.6% and 10.8%. This is our best achievement since 2015, the year we repositioned Vivendi in content and media. Our main businesses proved our ability to transform ourselves in very challenging environments.

Let's have a quick glance at the key highlights for each of them.  To quote Sir Lucian Charles Grainge, 2019 was an astonishing year for Universal Music Group. For the third year running, the group achieved double-digit revenue growth, thanks to its talented people and its iconic artists. UMG is today the most creative music company in the world. It is taking advantage of the streaming boom by continuously investing in technology and A&R, artist and repertoire.

In 2019, UMG had an artist at the top of each of the five biggest platforms-- Amazon, Apple, Deezer, Spotify and YouTube. And for each platform, a different top artist respectively Taylor Swift, Billie Eilish, J Balvin, Post Malone, Daddy Yankee. Let me take the opportunity to congratulate all the Universal Music Group artists recently rewarded at the Grammys including the remarkable, Billie Eilish. She is the youngest star to sweep four awards in Grammy history.  On the TV side, Canal+ Group is back on track.

Outside France, pay TV activities keep developing fast and the acquisition of M7 is definitely a growth accelerator. On the domestic front, significant announcements were made in the fourth quarter of 2019 in both areas, sports and TV content distribution. The Champions League broadcasting rights won for 2020, 2024 period needs to be emphasized.  On another note, Canal signed two major agreements to distribute Netflix and exclusive distribution for Disney+ in France end of March. It's been increasingly recognized as both a content editor and a key aggregator, too.

These partnerships are a great illustration of how Canal+ is evolving from a traditional TV player to a digital content platform.  That said, this transformation process is not over yet. In the face of increasing competition, Canal+ Group needs to pursue its reorganization in France and to keep moving forward.  Havas Group is also successfully pursuing its transformation. It's new positioning, based on the meaningful approach of communications, is bearing fruit. In 2019, Havas Group gained many clients locally and globally.

You can find more details in the appendix of the press release.  And once again, the creativity of its agencies was rewarded. As an example, BETC was named International Agency of the Year by Adweek. The whole Havas Group was rewarded as the Most Sustainable Company in the Communication Industry by World Finance magazine. We are very proud of this recognition because we have no other choice but being socially and environmentally responsible.

It is true of all the Vivendi entities.  Coming back to Havas Group, many acquisition of strategic importance were made in 2019, enriching its expertise and extending its global footprint. The group has demonstrated the robustness of its business model despite the challenging advertising environment. Havas, combined with Vivendi, is the only player in the market to offer such a value proposition in the creative industry.  One of the key highlights of 2019 was the process of opening up Universal Music Group's share capital. Last December on the 31st, Vivendi signed an agreement with a consortium led by Tencent for a strategic investment of 10% in Universal Music Group at an equity valuation of EUR 30 billion on a 100% basis.

This consortium which includes the participation of Tencent Music Entertainment and international financial investors, has been offered the possibility to acquire an additional amount of up to 10% at the same price until January 2021. As you have probably noticed, this agreement will be soon completed by a second agreement allowing Tencent Music Entertainment to acquire a minority stake in the share capital of Universal Music Group subsidiary in China. We are all excited by the strategic rationale behind this move. It will enable Universal Music Group to increase its presence on this high potential market by promoting global artists in China and accelerating the development of local repertoire.  The merger control approvals to which this transaction was subject have been obtained from the relevant regulatory authorities.

We are confident about closing the deal by the end of the first half of 2020.  As already stated in July 2018, the proceeds from these different operations could be used for significant share repurchase program and for acquisitions. In parallel, Vivendi is pursuing the process of potentially selling an additional minority stake in Universal Music Group to other partners. Eight banks have been mandated by Vivendi to assist it in this matter. An initial public offering is currently planned for early 2023 at the latest.  The successful acquisition and integration of Editis is another highlight of 2019.

Indeed, we have just celebrated the first anniversary of Editis within the Vivendi Group. I'm happy to say that the company delivered a good performance in 2019, mainly fueled by the growth of the education and literature segments. An education, the French reform of high school curricula significantly boosted the sales of textbooks, consolidating the leading position of our publishing houses, Nathan and Bordas on the market. In literature, Editis had six of the 10 best-selling offers in France including Michel Bussi, Marc Levy and Raphaelle Giordano.  In 2019, Editis also continued to enrich its catalog through acquisitions in literature and essays, as well as in graphic novels and comic book.

As I often say, all good stories start with a book. Books can easily be extended to other creative universe. As a result, many joint projects have been already put in place between Editis and other entity of the group. With these kind of initiatives, Vivendi is bringing back an appetite for reading and boosting the publishing market which has started to rebound.  As good things always come in pairs, we also completed the acquisition of pay TV company, M7, last September.

With a turnover of more than EUR 400 million, M7 is one of the largest pay TV companies in Europe, operating in Benelux and Central Europe. Its core business is to aggregate and distribute local and international channels via satellite and OTT platforms.  Thanks to this operation, the Canal+ Group subscriber base now stands at 20 million subscribers worldwide, including 12 million outside France. It has almost doubled in five years. Beyond this number, this acquisition will allow Canal+ to strengthen its distribution capacity and leverage its content.  Looking about audiovisual companies, Vivendi which holds the 31.4% stake in Banijay Group, is fully supported of the merger to come between Banijay Group and Endemol Shine.

As you know, Banijay entered into a definitive agreement to acquire 100% of the equity of Endemol Shine Group last October. The operation will create largest TV production player with almost 200 production companies in Europe and in the US, as well as the rights for close to 100,000 hours of content.  Regarding our investment in Telecom Italia, we have built more constructive relationship within the board, and we are truly supportive of the positive development under Luigi Gubitosi's leadership. We are happy to be perceived today by all parties as a committed long-term industrial shareholder.  While developing its activities, Vivendi is fully committed to ensuring an attractive return for its shareholders. Since last April, EUR 3.5 billion have been returned to our shareholders versus EUR 568 million in 2018.

The breakdown is as follows, EUR 2.9 billion through share buyback and EUR 636 million through dividends. Please note that the current share buyback program will continue until April 17th for the remainder of its authorization.  Let me conclude by saying a few words on our shareholders' meeting which will take place in two months on April the 20th. Our shareholders will be asked to vote on two resolution related to share repurchase. The first one focuses on the renewal of the authorization to repurchase Vivendi shares within the limit of 10% of the share capital.

And the second one concerns the authorization to purchase shares by the way of a public share buyback offer, OPRA. Vivendi also proposes to distribute an ordinary dividend of EUR 0.60 per share, representing an increase of 20% over the dividend distributed with respect to 2018 and a yield of 2.4%.  To sum up, 2019 was marked by many key achievements and confirmed Vivendi's excellent momentum. None of this would have been possible without the commitment of all our teams and talents around the world. A lot was achieved in 2019.

There is still a lot to do. However, we have an advantage that many other groups don't.  Time. We are not interested in short-term strategies. With the support of our main shareholder, the Bollore Group and the supervisory board, we all share the same vision.

Building an integrated industrial group over the long term. As we like to repeat, the Vivendi project is a marathon, not a sprint. The good thing is that we have all the skills needed to run the full marathon, focus, stamina and vision.  Thank you for your attention. I will now hand over to my friend, Herve.

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Thank you very much, Arnaud. Good evening to everyone. It's my pleasure to present to you our financial results for 2019.  Let's begin on Slide 13 with the impacts of consolidation scope changes and currency fluctuation on our growth rates as shown in the first table of this slide. The main changes in the scope of consolidation were the consolidation of Editis since February and the integration of M7 at the Canal+ Group level since mid-September.  Regarding the change in currencies, the US dollar was up 3.6% against the euro.

Therefore this year, FX had a positive impact of 200 basis points on revenues mostly at the UMG and Havas levels.  Let me remind you that 2019 results reflected the initial application of IFRS 16 related to lease contracts, and that the comparative period have not been restated.  Before going through the performances of different businesses in detail, let's begin with the P&L on Slide 14. As you can see, Vivendi's 2019 performance was very strong with revenues reaching almost 16 billion, up 14%, and EBITA of 1.5 billion, up 18.5%. The strong performance was supported by the continued growth of Universal Music and significant operating leverage. EBIT increased on par with EBITDA.

But let me highlight the two main changes in the P&L compared to 2018.  First, other financial income and charges in 2019 primarily included the revaluation of our stakes in Spotify and Tencent Music. Last year, this item included the writedown of the investments in Telecom Italia for EUR 1,066 million, offset by the net revaluation of our equity portfolio, for an aggregate amount of EUR 365 million.  Next, in 2019, Vivendi also benefited from a favorable onetime tax item of EUR 473 million, resulting from a favorable decision from the [Inaudible], the French Council of State, regarding the use of foreign tax credit upon exit from the benefits from consolidated global profit tax system. Excluding this impact, the effective tax rate reported to adjusted net income remained stable at 20%.  So 2019 earnings attributable to Vivendi shareowners amounted to around 1.6 billion, a 12 and a half-fold increase. As a reminder, 2018 was impacted by the writedown of our Telecom Italia shares and did not benefit from the recognition of the EUR 1.1 billion capitol gain on our Ubisoft interest sale which was directly accounted through shareholders' equity under IFRS rules.  Finally, adjusted net income which better reflects the group's operating performance amounted to 1.7 billion an increase of more than 50%.  On Slide 15, we can see the evolution of our cash position during the year which mainly reflects the return to shareholders for a total amount of 3.3 billion, including dividends and share buybacks, the acquisition of Editis and M7 and the cash received from the sale of the remaining Ubisoft stake in March.

The business unit generated operating cash flow of 903 million, and interest and taxes paid amounted to 336 million.  At the end of the year, net debt was EUR 4.1 billion, and in the first half of 2020, we will likely receive cash proceeds of around EUR 3 billion from the sale of the 10% stake in Universal Music share capital to the Tencent-led consortium. On a pro forma basis, the net debt appears to be slightly above 1 billion.  Vivendi has still available credit lines of 2.9 billion as of February the 10th, and the market value of the listed equity portfolio was 3.9 billion at year-end 2019. Details on the debt and the maturity of our bonds are given in the appendices of our slides. Moving to balance sheet on Slide 16, the most notable change, compared to the opening balance sheet as of January the first 2019 is an unfavorable change in the consolidated equity mainly related to the dividend paid and the share buybacks carried out since May.

It's worth noting that the net debt represented only 25% of equity.  Regarding assets, our financial investments decreased slightly due to the sale of the remaining stake in Ubisoft, partially offset by the revaluation of the interest in Spotify and Tencent Music. The increase in the other assets on the balance sheet, especially goodwill, is mainly attributable to the acquisition of Editis and M7. But in a nutshell, we have a very sound balance sheet.  Going to Slide 18 and performances by business unit which highlights the outstanding performance delivered by Universal Music. In 2019, Vivendi's revenues amounted to over 15.9 billion, an increase of EUR 2 billion, mainly thanks to Universal Music, as well as to the consolidation of Editis since February.

In organic terms, Vivendi's revenues increased by 5.6%, mainly due to Universal Music's organic revenue growth, up 14%.  The second table shows the EBITA growth. We ended the year with an EBITA of more than EUR 1.5 billion. UMG's profitability significantly improved in 2019, driven by operating leverage at Universal Music.  Now let's dive deeper into the key performance of metrics for each business unit, starting with Universal Music on Slide 20. Universal Music experienced unprecedented commercial and creative success in 2019.

As you can see, Universal Music's revenues continued to grow at a robust pace, up 14% over the year after a 10% increase in both 2017 and 2018. Universal Music annual revenues are now above 7 billion. This continued strong progression comes in particular from the recorded music segment, driven by the strong performance of the team in a context where growth of streaming and subscription remained very dynamic, with an impressive 21.5% jump in 2019 benefiting from the success of Billie Eilish, Post Malone, Ariana Grande among many other artists listed by Arnaud. This record year is also more impressive considering the increase in comparison basis and the 37% growth rate achieved in 2018.  As you can see on the right-hand of the slide, along with the streaming and subscription, all of its other activities contributed to this growth in a market that has been in structural decline for several years.

Physical sales were strong in 2019 due to the soundtrack from A Star is Born, multiple albums from Queen, the anniversary release of Abbey Road from the Beatles, as well as releases in Japan. Publishing achieved 9% growth, driven by streaming and subscription. And merchandising performed exceptionally well this year, jumping, 73%, driven by higher trading activity, as well as better direct-to-consumer income and also the acquisition of Epic Rights at the end of 2018.  On the next Slide, 21, we will focus on Universal Music profitability. Universal Music generated EBITA of EUR 1.1 billion in 2019 which is a 22.3% organic growth.

Since 2016, substantial operating leverage on the sustained expansion of streaming and subscription led to the EBITA improvement.  On the right-hand of the slide, you can see that as the scale of our subscription and streaming revenues continues to rise, growth in absolute figures accelerated, picking up more than EUR 700 million of actual revenues in 2019.  On the left-hand of the slide, you can see that the growth of EBITA continued to accelerate, reaching plus 22.3% in 2019. A significant portion of this growth came in the first part of the year, the second part being more in line with last year.  Going to Slide 22. You can see all of Universal Music key financial figures for the year which we have already gone through. To complete the overview of Universal Music performance, let me comment on its cash flow generation.

UMG's CFFO reached EUR 704 million in 2019, a decrease of 16% year on year, but this is mainly due to several important artists' catalog acquisitions. These strategic investments enhance Univeral Music's portfolio of talent and content and will generate future revenues. Excluding these items, the cash conversion rate which is CFFO over EBITA ratio, was in line with 2017 and 2018 at almost 90%. You can find all the details regarding business unit's CFFO in the appendix of these slides.  Moving to Canal+ Group starting with the overall subscriber base on Slide 24.

As already communicated at the time of our Q3 earnings release, we have adapted the subscriber base metrics to better reflect the Canal+ business model. Canal+ has been evolving from an aggregator of content to an aggregator of apps, notably by entering into numerous distribution agreements. These deals will establish Canal+ as the best gateway to the content most desire by French customers. The subscriber base includes individual, wholesale and collective contracts in all territories.

As shown in the chart, total subscribers to Canal+ offers worldwide exceeded 20 million at year-end 2019. And international subscribers now represent more than the half of the subscriber base.  On the right-hand of the slide, you can see the subscriber base growth trend with an acceleration of international operations thanks to the integration of M7 subscribers on the organic growth in Africa. In the meantime, the decrease in the French subscriber base was reduced to less than 200,000 in 2019. In aggregate, Canal+ Group gained more than 3.1 million subscribers in 2019.  Let's look in more detail at the evolution of the international subscriber base on Slide 25.

This international subscriber base continued to post sustained growth with 3.3 million new subscribers including individual, wholesale and collective subscribers. As you can see from the graph, Canal+ Group is gaining subscribers in all territories: Africa, Europe and Asia.  Moving to the Canal+ subscriber base in France on Slide 26. In mainland France, the total subscriber portfolio, including subscribers resulting from partnerships with telco operators on collective contracts, reached 8.4 million at year-end 2019, compared to 8.6 million at year-end 2018. This evolution is notably due to the end of the two-year commitment period for the first cohort of clients who subscribed to the new offers launched at the end of 2016.

This negative effect mostly impacted the subscriber base in Q1 2019. However, since the second half of this year, the commercial trends have been improving with better recruitments and the deceleration of cancellations. As a result, the number of subscribers to Canal+ which is a nucleus of our business, recorded a net increase of 72,000 in 2019.  Turning to Canal+ Group's key figures on Slide 27. In 2019, Canal+ Group's revenues were 5.3 billion, up 2%, compared to 2018.

Revenues from the international operations saw strong organic growth of 6.1% thanks to good performances of the individual and wholesale subscriber base. Revenues in mainland France fell slightly, down 2.8% at constant currency and perimeter due to the decline of the sales distributed individual subscriber base. Studiocanal's revenue were 434 million, down 12.8% year on year, due to fewer theatrical releases, compared to 2018. The Canal+ Group's EBITA before restructuring charges was EUR 435 million in 2019, including the positive impact of the M7 acquisition.  In the context of tough situation in France, as announced in July 2019, Canal+ Group continued its cost optimization efforts with the transformation plan in France.

The new organization includes the allocation of the teams to a single new building in 2021 instead of the three current sites, and a voluntary redundancy plan involving up to 492 employees which represents a large part of the EUR 92 million restructuring charges booked in 2019.  The Canal+ Group CFFO decreased by 35% to EUR 167 million due to higher investment in content, as well as in set top boxes. The new high definition G9 set top box is a key driver for new equipments and leads to a much better user experience, as well as a decrease in the churn rates.  Going to Slide 29 and Havas Group performances. Havas Group reported solid performances in 2019. Net revenues increased by 2.8% to more than 2.2 billion.

Acquisition contributed plus 1.3% revenue growth, and exchange rates had a positive impact of 2.5%. Net revenue organic growth for the full-year 2019 was down 1%, compared to 2018, a satisfactory performance in the current contrasting sector environment and against the high comparison basis in Q4 2018. We had plus 4.8%. This performance was sustained by the media businesses and strong performance from creative pure players like BETC and Rosapark, like marketing at Havas Edge, as well as healthcare communication.  Regarding profitability, EBITA before restructuring charges was EUR 260 million in 2019, compared to EUR 245 million in 2018.

In 2019, figures included the positive impact of the initial application of IFRS 16 for EUR 15 million. However, it's important to emphasize Havas' very good cost control.  Moving to Slide 30 and Havas' strategic investments. In 2019 Havas acquisition, we are focused in three areas. In creativity first with the acquisition of Buzzman in France.

Buzzman is acclaimed for its creativity and its bus ads, with leading brands like Burger King,  EKR, L'Oreal, [Inaudible], among many others.  Next, consultancy with the acquisition of one of the UK's leading management consultancies in business transformation called Gate One. And finally in India, where Havas has tripled its position in India with the acquisition of three leading agencies in 2019-- Think Design, Langoor and Shobiz. Thus, Havas will be in a good position to benefit from the economic dynamism of this region.  For the record, every year Havas makes targeted bolt-on acquisition for a limited amount of cash representing less than EUR 40 million in 2019. These acquisitions can either expand our geographical presence of the network or strengthens Havas' expertise in specific fields.  Moving to Slide 31, focus on net revenue, organic growth by geographical region in 2019.

The North American agencies reported positive organic growth, thanks to the media business Havas Media, performance marketing Havas Edge, and also healthcare communication with Havas Health and You.  In Europe, United Kingdom, Germany, Italy and Portugal reported strong performances, while business in other countries have slowed down or decreased. Latin America continued to benefit from positive organic growth, driven mainly by Mexico, Peru and Argentina.  To conclude on Havas' 2019 key figures, net revenues increased by 2.8% to more than EUR 2.2 billion. EBITA after restructuring charges were EUR 225 million, up 4.5%.  CFFO reached an impressive EUR 239 million, an increase of 3.8% year on year, thanks, notably, to the improvement of the working capital. The CFFO over EBITA ratio was above 100%, showing the strong cash flow generation and the solidity of the Havas business model.  Going to Slide 33 and Editis.

Vivendi has fully consolidated Editis since February 1, 2019. Editis revenues were EUR 687 million for 11 months, up 6.3% pro forma. In a difficult market environment, literature grew 2%, thanks to best-selling offers such as Michel Bussi and Marc Levy. Education revenues rose sharply, up 16.8%, thanks to the reform in the high school curricula.

And distribution revenues related to third-party publishers are increasing as well, up 4.2%. EBITA was 52 million for 11 months, a pro forma increase of 47% year on year, due to the rise in revenues, and good cost control.  The other businesses in Slide 35 generated an aggregated revenues of EUR 400 million. Including corporate costs, EBITA for these businesses represented a loss of EUR 218 million. More precisely, Gameloft's activities were impacted by the postponement to 2020 of three major smartphone games initially planned for the second half of 2019 and the current situation of the mobile gaming market with the new games.

Vivendi Village performed well in 2019 with live activities and ticketing sales continuing to increase. EBITA was impacted by the development in Africa of networks of venues under the Cana lOlympia bond. Finally, new initiatives which comprises activities in the launch phase such as Dailymotion and Group Vivendi Africa recorded revenues of EUR 71 million, compared to 66 million in 2018.  This concludes our presentation of 2019 results. Thank you very much for your attention.

We are now ready to take your question.

Questions & Answers:


[Operator Instructions] And the first question comes from the line Omar Sheikh from Morgan Stanley.  Please go ahead.

Omar Sheikh -- Morgan Stanley -- Analyst

Good evening, everyone. I have a couple of questions, if I could. Firstly, Arnaud, you put in a line in the press release and the presentation about the potential for an IPO. But it would be helpful if perhaps you could give us a little bit more detail on exactly what you mean and what you plan.

So for example, can you just tell us what exactly would the IPO constitute? Is these shares that the buyers, the Tencent consortium are buying that have the option to IPO, or is this additional shares that are currently owned by Vivendi that you plan to sell in future? Some more color on that would be very helpful.  And then, secondly, following on from, I guess, conversations we've been having for most of the last two and a half years, Arnaud, I wonder if you could just update us on your plans for selling for the proceeds from the sale of the stake in UMG and future proceeds. You've said in the past that you want to return a substantial proportion via share buyback. I wonder whether for example, you could clarify what proportion of that is. Is that around half? Or is that less than that?  And then, thirdly, Herve, you mentioned that there were some one off costs or expenses for catalog investment at UMG in the fourth quarter in relation to artists' catalogs.

I wonder whether you could just highlight whether they will -- those kind of investments might be repeated in 2020 or whether as a oneoff?

Arnaud de Puyfontaine -- Chief Executive Officer

Hi, Omar. Good evening.  So on your first question for the announcement of IPO, well, terms and condition of the IPO will be defined in due course and will depend on many different factor at that time. So I'm not going to dwell any more on that subject.  On your question number two, we have already indicated that we plan to use the majority of the proceeds for share buybacks. We don't have any proportion because as for the potential use for M&A, that would be cited when we get the proceeds based on the opportunities available to us at that time.

So I repeat, the proceeds would be used for significant share buyback and program and acquisitions. Herve?

Herve Philippe -- Member of the Management Board and Chief Financial Officer

OK, maybe to answer the question on the acquisitions of catalog in 2019, I just can say that Universal Music has taken opportunities of acquisition of catalogs in 2019 for significant amount, I would say, and very limited number of acquisition of catalog. So this is why we can say that it has impacted the CFFO of 2019. So there is no specific plan today for 2020 to acquire such catalog. But if there are some other opportunities, we'll probably consider to do that because we believe that it is in the interest of Universal Music and all the group to make such acquisition which can lead to further additional revenues and profit in the future.

Omar Sheikh -- Morgan Stanley -- Analyst

Thank you. If I may then follow up, Arnaud. Just on the IPO, in past, you've ruled this out for various reasons. I wondered what you might say has changed, that has changed your opinion on the appropriateness of an IPO for UMG.

Arnaud de Puyfontaine -- Chief Executive Officer

Well, thank you, Omar. And you gave me the opportunity to say that we're not going to take double-staged questions. So please ask your question, and then after you will report back to our IR team if you need further explanation. But I will make an exception for you because you've been the first one, Omar.  So in July 2018 when we ruled out the IPO options because the complexity of the existing corporate structure at the time, and besides the market could have been skeptical on the reliability of our business model in emerging markets.

We thus at the time considered that in five years' time, we will have a better vision and prospects for our model. So that's the reason why compared to the position we took and -- in July 2018 and compared to the progress that we have made and the current situation we're in, what was ruled out at the time now is obviously not anymore the situation as of to date.  Thank you, Omar.

Omar Sheikh -- Morgan Stanley -- Analyst

Merci beaucop.

Arnaud de Puyfontaine -- Chief Executive Officer



Thank you. The next question comes from the line of William Packer from Exane BNP Paribas.  Please go ahead.

William Packer -- Exane BNP Paribas -- Analyst

Hi, Arnaud. Hi, Herve. Thanks for taking my question. No follow-ups, I promise.

Firstly, streaming growth has slowed a little bit in Q4. I know there's lots of moving parts within that number. Could you help us think out 2020, can that number reaccelerate? What factors are at play there? That's the first question.  Secondly, you made very healthy margin progress at UMG in 2019. Could you talk through the key drivers there and whether margins could push on, let's say, in the medium-term toward 20%? Is that a realistic goal?  And then, finally, there's been trade press reports that ByteDance, the owner of TikTok, have been signing contracts with your peers.

Are you in talks, if a deal is successfully signed in the context of the huge user engagement, could that be a meaningful boost for music streaming growth going forward?  Thank you.

Herve Philippe -- Member of the Management Board and Chief Financial Officer

But first, To answer on the question of the growth especially at Universal Music, we -- you know that we have some seasonality in the sales. And we had a very good first half of 2019. In second half, we had a business which has continued to grow, but it's inevitable that we can have in percentage some deceleration in the growth. That's why I have shown in the chart that expressed in real terms, the growth in the revenues at Universal Music having increased a lot in 2019 in comparison to the growth we have had before.

We are optimistic for 2020, and we know that we have a good release schedule for 2020 with different new releases. We have recently Eminem, Slay, Lil Wayne, Selena Gomez. And we will have later in in the year releases from Justin Bieber, Five Seconds of Summer, and Pearl Jam among many, many, many other. So that's -- we are confident.

And from the margin perspective, we do not give any guidance on that, but we are also confident in the increase in the margin of Universal Music.

Arnaud de Puyfontaine -- Chief Executive Officer

Hi, William, and thank you for your discipline. So in fact, as regard to your third question, we have a licensing arrangement with TikTok and its parent company,  ByteDance. We're also working to collaborate with new entrants, like TikTok, to bring innovation and growth to the industry. And as always, we can't comment beyond that.  Thank you.


Thank you. The next question comes from the line of Adrien de Saint Hilaire from Bank of America.  Please go ahead.

Adrien de Saint Hilaire -- Bank of America Merrill Lynch -- Analyst

Yeah, Good evening, everyone, and thanks for taking these questions. So first of all, to come back on the buyback propositions that you're making at the AGM, you're proposing a ceiling at EUR 26. Can you discuss that number, please? Because if UMG is worth EUR 30 billion, then I think it implies that the other assets within the group are worth about zero at about 26. So why did you go for that number? And if by the moment you get the proceeds from Tencent, if the shares are above EUR 26, should we assume that the balance of the proceeds won't be used for buybacks, but rather for M&A? And if that's the case, then can you lay out which areas you would favor in terms of investments?  And then, lastly, a question on Canal, so there are many moving parts for 2020, changes in portfolio, cost savings, etc.

So are you in a position today to give us a bit of an EBITA range for that business in 2020?  That'd be fantastic.

Arnaud de Puyfontaine -- Chief Executive Officer

Well, to answer the question on the price of the share buyback. We had EUR 25 as the price for share buyback last year, so we decided to increase it to EUR 26. First point, we believe that the purchase price is fair, considering the current market situation and the uncertainties which can happen on this market. Second is first, there is our new developments in the future.

We will not hesitate to use the maximum purchase price. And if needed we will convene a new extraordinary [Inaudible] meeting. It's a necessity.


Thank you. The next question comes from the line of Richard Eary from UBS.

Arnaud de Puyfontaine -- Chief Executive Officer

No, no. Sorry, sorry, sorry, sorry, sorry. We are going to --



Arnaud de Puyfontaine -- Chief Executive Officer

Take other, Herve. Because I said no double-staged, but that we will comprehensively take all the question asked at the first round.

Herve Philippe -- Member of the Management Board and Chief Financial Officer

OK. The question was regarding the expectation on Canal+ and the EBITA before restructuring in 2020. We do not -- any specific guidance is on the profitability at Canal+ level. But clearly, we can say that Canal+ will continue to benefit from its investments in new program and commercial initiative and also of the integration of M7 which is a good integration for the revenues and for the EBITA at Canal+.


May I introduce the next question?

Arnaud de Puyfontaine -- Chief Executive Officer

So sorry, sorry. As we get -- sorry, Adrien, as regard to your third question which is as regards to the balance between the way we're going to use the proceed, I'm going to repeat myself. Again, as I said last time during our last conference and as I repeated some minutes ago, the proceeds will be used for significant share buyback program and acquisition. When we're going to get there, we'll decide what's going to be the split.

But as far as we're concerned this evening, this is the only comment I can make. Next.


Thank you. The next question comes from the line of Richard Eary from UBS.  Please go ahead.

Richard Eary -- UBS -- Analyst

Evening. Just a couple of questions for myself. Just you talked about the one off investments in the UMG cash flow. Can you clarify what the magnitude was in the fourth quarter, and whether there are any other one offs that occurred in the year or in the half for UMG? I mean, last year, there were some one off positive gains in publishing and licensing.

So I'm just trying to clarify whether there was any other issues.  The second question is just looking at Canal. Obviously, you mentioned there was a step-up in restructuring charges. I didn't quite hear you because I think I was put on hold. Are we expecting the restructuring charges that come out of Canal will be done as we go into 2020? Or are we expecting basically further restructuring of that business?  And lastly, I don't know whether there's any commentary about outlook statements for Havas organic growth as we go into 2020.

Herve Philippe -- Member of the Management Board and Chief Financial Officer

To answer the question on the figures for Universal Music, I just want to highlight two things. There are no specific one offs in the revenues of Universal Music in in the fourth quarter of 2019. So the case last year, but this year, we can say that there is no one off.  On the question of the magnitude of the acquisition of catalog, I cannot comment too much on that. But I have said that the conversion ratio between EBITA and cash would have been at the same level that in the 2017 and 2018 which was at almost 90%.

So it's this gives you the magnitude of what we wanted to say concerning those specific acquisition.  So the question on Canal+ and restructuring charges, we have booked the restructuring charges at EUR 92 million in 2019. This is something which is an expectation of what can be the restructuring on a certain level of people leaving the company in the voluntary redundancy plan. If there are more than the expectation, probably there would be some additional restructuring charges. But there is -- today, we believe that what has been booked is a good forecast, I would say, what will be the restructuring effective charges in 2020.

And we expect in 2020 and later to have a payback of those restructuring charges in the organization of the French part of Canal+.  There was a question regarding Havas and the organic growth, you know that if we compare the performance of Havas with the peers, we are let's say, satisfied of the comparison with the other, with -- the other in North America performed a little better than Havas, but Havas has performed better than other more European peers, I would say.  For 2020, do -- we do not give some specific guidance, but I can highlight that we are confident for 2020, especially because the business model at Havas is very, very solid. We have very good client portfolio. We have also, I believe, strong cost control and management of the operating costs.  And thirdly, but this is also very, very important for us. We have very good cash generation at Havas as you have seen in 2019.

So we are confident for the future at Havas


Thank you. The next question comes from the line of Lisa Yang from Goldman Sachs.  Please go ahead.

Lisa Yang -- Goldman Sachs -- Analyst

Good evening. I have three questions, please. So firstly, on the EBIT margin of UMG, could you maybe explain why the margin was down 50 bps in H2 after being very strong in H1? Was it just phasing? And going forward, apart from the gross margin improvement from the shift from physical to streaming, are there any other cost levers you could pull to drive an improvement?  Second question is related to Canal+. I saw that your French TV revenue improved to flat in Q4.

What was the driver, main driver of that improvement? Do you think that can continue into 2020?  And thirdly, Comcast recently said they might be interested in entering French picking market. I'm just wondering how you think about the idea of a potential tie-up with Sky. In general, how do you think about the perspective of pan-European consolidation?

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Well, to answer the question on the margins at Universal Music, you have to consider that we had a very important growth in the margins in the first half of 2019. It has been less in the second part, but this is largely due to the mix of products. And as you have seen, we had a very big improvement in merchandising, and in fact merchandising in the part of our business in which the margins are much lower but for recorded music. So this mix of product explain largely the level of margins in the second part of 2019 at Universal Music.  For the question, your second question which is regarding Canal+ trends in France, well, I have said that if even we have a decrease globally speaking for 2019, we saw good signs at the end of the year in terms of both recruitment and on churn, thanks to the unreached, I would say, package of sports, the return of the European -- the English Premier League which is a good news.

The deals which have been also announced with Netflix, the agreement with these for the Champions League which will come back to Canal+ in 2021 and the agreement on different sports sustained, I would say, the good trends for the commercial part of our business at Canal+ in France.  So we are optimistic. We know that the competition environment in France is still tough with many, many different offers. But what we can say also is outside of France, we are very, very confident in the growth of the subscriber base in our different geographies, as you have seen in 2019 where the number of subscribers is now more important outside of France than in mainland France.

Arnaud de Puyfontaine -- Chief Executive Officer

And as regard to the further question, I mean, we are very confident about the quality and the unique selling proposition of Canal as regards to all what is currently happening internationally. We can see a future as regards to the company. And obviously we see the evolution of our competitive environment and new entrants in the market. But we don't have -- currently, we don't have any project as regards an opening of the share capital of any of our other businesses.


Thank you. The next question comes from the line of Julien Roch from Barclays. Please go ahead.

Julien Roch -- Barclays -- Analyst

[Inaudible] three questions, if I may. On the UMG IPO, 10% to Tencent with another 10% option, negotiating with other minorities, then the IPO, so that's four tranches you're selling. How much of Music will you keep? You want to keep at least 51%? Or will you be happy to go below 50%? That is my first question.  The second one is there were several questions on buyback versus M&A and you said we'll do it -- we'll decide when we'll decide. But if we assume that you have equal financial opportunities, so it's not about financial, it's about strategy, would you invest in music, games publishing, pay TV or agency? And that's so five choices.  And then, the last question is, if you want to answer agency, will you be happy to have a smaller buyback and by Publicis?

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Thank you. Well, to answer your first question on UMG IPO. We have wanted to give an idea of time schedule for an IPO. It's not yet decided whether it will be through an additional sale of shares or the exit of some of our partners.

This is absolutely not decided yet. We'll see. And we have time to see what will be the final situation at the time of this IPO. But we wanted to say that this is a goal to go to the market and to go through an IPO in 2023 at the latest.  For the buybacks, I can say that we have said that we will make a substantial part of buyback as the return of proceeds to shareholders.

We'll see there are opportunities of growth, I would say, we'll look to different opportunities in our different businesses. It's always difficult to say that we want to invest specifically in such business. It's a better way to make price increase. So we'll see.

We are open-minded in terms of possible external acquisition which can be in different areas to create and to develop our integrated media group within France and Europe and the world.

Arnaud de Puyfontaine -- Chief Executive Officer

As strategically speaking and as we proved in the past, our acquisitions are going to be based on obviously opportunities that are going to arise which are going to be based on financial discipline and the capacity to add the value to the strategic vision that we have developed since 2015. So you define different range of operations, a different operation, be it the publishing operation, the TV operation, the music operation, the video games operations are segments which all have a part within the Vivendi strategy.  And as regard to what we shall be doing in due time, that is going to be decided on the combination of a rigorous approach to the opportunities in the context of availability of those opportunities. So there is no choice based on the different situation which we are going to be faced with.  On your specific questions as regards to the advertising market. Well, as you have seen, Havas has made a bolt-on acquisition to be able to keep on the momentum in terms of growth and successfully beat Buzzman last year in France, or the latest one described by Herve in the UK or in India.

So we're very keen to be able to take the opportunity that are going to feed the rationale of the strategic vision we're having for Havas within the Vivendi Group.  More specifically your question on Publicis, well, we have no discussion at all. And we are for the time, very, very happy with the others' scale which has proved in 2019 in the results, both its agility and has the right scale to be able to be faced with the evolution of the market and the capacity to keep on demonstrating the validity and the strength of our strategic vision.


Thank you. The next question comes from the line of Matthew Walker from Credit Suisse.  Please go ahead.

Matthew Walker -- Credit Suisse -- Analyst

Thanks a lot, and thank you to the team for letting me ask the questions. First thing is could you just refresh us on what the strategy is going to be post the sale of part of UMG? I mean, initially, part of the strategy was to be a southern European powerhouse. There hasn't really been much movement on that. So the first question is can you refresh us on that and explain why it doesn't make sense to just get rid of Mediaset and Telecom Italia and narrow the conglomerate discount?  The second question is on UMG margin.

As other people have mentioned, the increase in the full year was lower than it was in the first half, and you put that down to the mix. But could you just help us here because in theory, streaming should be streaming -- it was resilient and strong, and that should have a higher margin. And physical in the fourth quarter was weak, and in theory, that should have a lower margin unless you have a Beatles album or something. So if you could help us with your comment on the mix and how that impacted margins, that will be fantastic.  Third question is you mentioned that this will help you -- the UMG deal with Tencent will help you in Asia.

Can you just explain exactly how that is going to be helpful in practical terms?

Arnaud de Puyfontaine -- Chief Executive Officer

Well, thank you. Let's make a kind of remind what is the Vivendi strategy. Vivendi strategy is to build a European-based group in media content and entertainment which has a global ambition. And to do that, we focus our vision on the music and TV and games and book publishing.

The bit you're referring to, which is the south European type of vision and project is only a part of this global strategic vision. And we have had some initiatives in Spain and in Italy. We do believe that there is still a very strong strength in this strategic vision. And we said Rome was not built in one day.

We've got time, and we want to be able to make progress step by step.  As regards to your specific question and scenario as regard to the position in Italy, the situation on Telecom Italia is very different from the situation of Mediaset and the story is very different from one to the other situation. As regard to Telecom Italia, after a period of a certain kind of a turmoil, again we do think that, number one, Telecom Italia is on the right track. We do think that Telecom Italia is a player in the convergence we can see in media and telecom. Distribution is key when you're thinking about our position relative to the competitive environment.

And we expect that the industry or the shareholder we are is going to add value to the results of Telecom Italia. And because we do think that there is a kind of a very strong validity our strong relationship in the media sector between Italy and France, this prerequisite is still valid, and maybe today even more valid than it used to be four years ago. So to leave Telecom Italia and Italy is far from being on the agenda. We're there for the long term.  As regard to the Mediaset situation, it's a different story.

Our position is based on the different sequence of events, but I'm not going to dwell anymore on the situation as regards to the circumstances.  So again, the strategy of Vivendi is clear. The results that we have provided over the past few years is illustrating the kind of momentum that we are creating. We're happy for the progress, and the best is yet to come.  Over to you, Herve.

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Well, to come back on the question on Universal Music margins in second half of 2019, maybe I can give you some more information on the mix of product chain, especially the fact that merchandising was higher, much higher in the second part of the year than previously due to the touring activity, but also thanks to the integration of a company we bought a few months ago, which is called Epic Rights, which has developed the turnover, but not so much the margin, I would say, on the revenues for the merchandising. To say a word on the recorded music, we can say that the situation in streaming and subscription is very resilient. So there is no subject on that. There are also probably an increased part of the distribution deals in the second part of 2019 which can have also a little bit limited increase in margins.

So this is the explanation of the mix of products which can be more merchandising, more distribution deals in 2019 without any specific relation to streaming and subscription, I can say.

Arnaud de Puyfontaine -- Chief Executive Officer

As regard to your third question, sorry, as I said, I mean, obviously, Tencent as a shareholder is a strategic partner which is going to accelerate our capacity to develop business in Asia and in Greater China. It will enhance the cooperation between the two groups and will help Universal Music Group to capitalize on growth opportunities offered by digitalization and the opening of the new market. It will increase the monetization of music in China, and the Chinese market barely exists due to piracy. And will also better -- help the better promotion of UMG's artists with UMG has created the greatest catalog of recordings and songs of all time.

So all those factors and more to be detailed in due time, will create a kind of a combination which will help to feed the growth of Universal Music Group. And clearly, this strategic partnership would create value for both Tencent and UMG. And as I said in my introduction, there is kind of a plan to get Tencent Music as a shareholder of the UMG China operation which, again, will be disclosed in due time. So that's what we do expect about the combination of two partners which are going to open a new chapter, which we have great appeal for.


Thank you. The next question comes from the line of Laurie Davison from Deutsche Bank.  Please go ahead.

Lauri Davison -- Deutsche Bank -- Analyst

Hi, there. Thanks for taking the questions. First question is just on the 10% sale of UMG to Tencent, when do you expect to receive the cash there? And in terms of return of that you said the majority back, what type of buyback level would you be setting for that in terms of price per share?  Second question is with Warner Music already having filed for IPO last week, why should investors wait for UMG to come to market? Or do you expect that actually you could file ahead of -- or you've come to market ahead of Warner?  Third question is just to come back to the UMG margins. Perhaps I can ask it in a different or address this in a different way.

The concern has been for the major labels that there's upwards pressure on royalties coming from artists and songwriters and more distribution deals which are lower margin. Are you seeing this?

Arnaud de Puyfontaine -- Chief Executive Officer

I would take the question on Warner. Well, and taking this question, I will answer that. I'm not going to comment specifically on another company's regulatory filing. But broadly speaking, a significant interest in UMG has created enormous momentum in the market, where investors recognize the value of it combined with the significant growth opportunity for music.

And that said, I would argue that given its size and proven management team, UMG is in a class of its own.  As regard to the sequence of events, we made it clear what would be the kind of a time frame, and we'll stick to this time frame. Herve?

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Maybe to -- I think we have already answered the question on the 10% at Universal Music. And the cash we expect of the cash before the end of this this semester, I would say, so -- and we will use our authorization to buy back shares on the market.  To come back to the question on Universal Music, you have it on a different way. I would say, there is always discussion with artists and the way we have deals which vary from one artist to the others. And we have been always flexible and taking the individual approach to the artists.

We have a very good relationship with them.  There is no global, I would say, discussion with the artists. And from this point of view, I can say that we cannot say that in 2019 as the discussion with artists were specifically more difficult in the second half than they were in the first half and in 2018. So this is the general business, and you cannot say that there is a change from that perspective in the second half of 2019. So the difference in the margins in the second part of the year is directly, I'm sorry if I repeat myself, but it's directly linked to the mix of products and not from a deterioration of the position of Universal Music, I would say.


The next question comes from the line of Conor O'Shea from Kepler Cheuvreux. Please go ahead.

Conor O'Shea -- Kepler Cheuvreux -- Analyst

Three quick questions, please. Firstly, just on Editis, obviously a strong year for education in 2019. Just wondering, were there any specific integration costs that were weighing on your operating profits in 2019, or is the number a good base from which to forecast in 2020? First question. Second question on Gameloft which you had a severe operating losses due to the delayed releases of three games into 2020.

Are you expecting that to reverse sharply in 2020, so a sharp reversal in operating profit numbers for Gameloft?  And then, the last question, could you just remind us in relation to your own buyback authorization and so on, what is your maximum level of debt that you would -- debt ratio that you'd contemplate in order to keep your current credit rating?

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Well first on Editis, we are satisfied with the first year of Editis in Vivendi Group. Obviously, we have to look carefully to the future. And as you probably know, we have a new CEO, Madam Michel Bennbunan, who has joined Editis recently. So she is in charge of developing Editis Group and also to look to all the possibility to improve the profitability of Editis in that perspective.

She will join during 2020. She will work on the medium-term plan to improve the profitability and develop our business at Editis.  To answer Gameloft, we can say that there is in 2019 a top line problem at Gameloft which has been obliged to postpone the launch of several important games which were expected at the end of 2019 which will be launched later this year, at the end of the first-quarter 2020. so this will be important to look at its revenues at the end of the first half of this year. We are in the process to see the success of those, again in a market which is complicated due to the very high level of new games each day in mobile application.  And well, the question of the buybacks is that under the French law, you can buy back on the market at 10% during one year.

And we'll see the maximum of debt in the group is something which is -- you have to compare with both the equity of the company. And today, we have 25% of equity as debt. But we have also, I would say, shortly in the pocket, 3 billion coming from the sale of 10% of Universal Music. So more or less, this is something in which the level of the debt is much lower than was seen at the end of 2019.

So we are confident with the -- and we are satisfied with the level of the debt we have today. Thank you.


Thank you. There are no further questions in the queue. Please go ahead.

Arnaud de Puyfontaine -- Chief Executive Officer

So thank you very much, indeed, to all. I wish you a very good evening, and see you next time. Bye bye. Thank you, good evening, bye. 


[Operator si

Duration: 78 minutes

Call participants:

Arnaud de Puyfontaine -- Chief Executive Officer

Herve Philippe -- Member of the Management Board and Chief Financial Officer

Omar Sheikh -- Morgan Stanley -- Analyst

William Packer -- Exane BNP Paribas -- Analyst

Adrien de Saint Hilaire -- Bank of America Merrill Lynch -- Analyst

Richard Eary -- UBS -- Analyst

Lisa Yang -- Goldman Sachs -- Analyst

Julien Roch -- Barclays -- Analyst

Matthew Walker -- Credit Suisse -- Analyst

Lauri Davison -- Deutsche Bank -- Analyst

Conor O'Shea -- Kepler Cheuvreux -- Analyst

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