On the surface, you might not see a lot of synergy to hip-hop music, digital orcs, cell phone service, and pay TV. Nevertheless, it's all come to together as a respectably profitable whole for French media company Vivendi
The company's second-quarter results prove that good profits are the best way to get back into investors' good graces. Revenue climbed more than 8%, operating profit rose 37%, and adjusted net income more than doubled from the year-ago period. What's more, the company posted a slight increase in comparable first-half operating cash flow and was free-cash-flow positive.
Most of Vivendi's operating units had a good quarter after adjusting for divestitures. Music revenue climbed by 5% and operating profit rose 91%, with the company holding nearly one-third of the U.S. music market share at quarter's end. Telecom continues to be a powerful driver; the company's mobile phone operations -- co-owned with Vodafone
The only real laggard was the Canal+ pay-TV business. Revenue declined by about 2%, and operating profit was cut nearly in half despite a double-digit increase in subscribers. The good news is that the problem with Canal+ mostly comes down to timing. The launch of French soccer programming should help results in the second half.
While Vivendi bought itself a lot of trouble with excessive acquisitions and debt, well-run media companies can throw off copious cash flow. In the case of Vivendi, the company already offers a roughly 2.5% dividend yield, and management reiterated its intention to pay out half of adjusted net income in the form of dividends. Consequently, if management continues to succeed in growing the business and enhancing margins, shareholders will see a direct tangible benefit.
There really aren't any companies exactly like Vivendi, though it's certainly fair to look at the likes of Motley Fool Stock Advisor recommendation Time Warner
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).