Page 333 - 2012 Annual Report

333
VIVENDI l 2012 l Annual Report
FINANCIAL REPORT – CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE
CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS –
STATUTORY FINANCIAL STATEMENTS 4
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IV - VIVENDI SA 2012 STATUTORY FINANCIAL STATEMENTS
3. NOTES TO THE 2012 STATUTORY FINANCIAL STATEMENTS
Note 3 Net Financial Income/(Loss)
Note 3. Net Financial Income/(Loss)
The increase in the net financing costs to -€130.4 million in 2012 from
-€73.2 million in 2011 is due to:
✱ the increase in external financing net costs from -€336.7 million in
2011 to -€457.7 million in 2012, primarily as a result of an increase
in the average external net debt from €7.7 billion in 2011 to
€14.1 billion in 2012, mainly reflecting the impact of the financing of
the acquisitions of a 44% interest in SFR in June 2011 (€7.8 billion in
financing) and EMI Recorded Music in September 2012 (€1.4 billion in
financing), partially offset by a decrease in the average interest rate
on borrowings from 3.9% in 2011 to 3.3% in 2012; and
✱ conversely, an increase in internal net financing income (Group) from
€263.5 million in 2011 to €327.3 million in 2012.
Within income from affiliates, dividends recorded totaled €975.8 million in
2012 (including a dividend received from SFR of €968.4 million), compared
to €275.3 million in 2011 (which included an interim dividend received
from SFR of €254.0 million with respect to fiscal year 2011).
In 2012, the foreign exchange gain of €24.4 million included realized gains
of €25.9 million on currency swaps not qualifying for hedge accounting
(please refer to Note 25, Instruments Used to Manage Borrowings) that
were put in place to cover the acquisition of EMI Recorded Music by the
Group and commitments that were given to sell certain music assets
(see Major Events and Note 23, Financial Commitments and Contingent
Liabilities).
The changes to financial provisions and impairments resulted in a net
charge of €6,241.9 million including a €6,187.7 million impairment on
long-term investments in affiliates (see Major Events and Note 7, Long
Term Investment):
✱ The value in use of SFR’s telecommunication activities in France
was determined through the usual valuation methods (in particular,
the DCF method) for which Vivendi required the assistance of an
independent appraiser. The most recent cash flow forecasts and
financial assumptions, approved by Vivendi’s Management, were used
and were updated to take into account (i) the expected impact of the
new pricing policies established by SFR during the second half of 2012
and in early 2013, due to a change in the competitive environment, (ii)
the decrease in the perpetual growth rate assumption (0.50% at year-
end 2012, compared to 1% at year-end 2011) and (iii) the acceleration
of investments in superfast broadband. The value in use of the 51.9%
stake in Maroc Telecom held indirectly by SFR was determined on the
basis of the change in the market price of Maroc Telecom shares. As a
result, Vivendi’s Management decided to record an impairment loss of
€5,875 million on its interest as of December 31, 2012.
✱ Groupe Canal+ value in use and, in particular, the value in use of
its pay-TV activities in France, was determined through the usual
methods of valuation (in particular, the DCF method), using the most
recent cash flow forecasts approved by the management of the group,
as well as financial assumptions consistent with previous years. As
a result, primarily due to the expected impact of the increase in the
VAT rate from 7% to 10% (effective January 1, 2014 in Metropolitan
France) on revenues of Canal+ France, and to a lesser extent, to the
adverse changes in the macro-economic and competitive environments
since the second half of 2012, Vivendi’s Management determined
that Groupe Canal+ value in use was below its carrying value as of
December 31, 2012, and consequently recorded an impairment loss of
€310 million (compared to an impairment loss of €350 million recorded
for fiscal year 2011).
Net financial income/(loss) is broken down as follows:
(in millions of euros) 2012 2011
Net financing costs (130.4) (73.2)
Income from subsidiaries and affiliates 975.9 276.4
Foreign exchange gains & losses 24.4 68.8
Other financial income and expenses (15.7) (12.7)
Movements in financial provisions (6,241.9) 739.4
TOTAL (5,387.7) 998.7