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Section 2 - Earnings analysis
Financial Report
| Statutory Auditors’ Report on the Consolidated Financial Statements | Consolidated
Financial Statements | Statutory Auditors’ Report on the Financial Statements | Statutory Financial Statements
Restructuring charges and other operating charges and income amounted
to a net charge of €158 million (compared to a net charge of €192 million
in 2013). They notably included restructuring charges for €104 million,
a €12 million decrease compared to 2013; the decrease in UMG’s
restructuring charges for €64 million was offset by the €44 million
provision recorded as of June 30, 2014 with respect to Watchever’s
transformation plan in Germany, reduced by €18 million.
EBIT
was €736 million, compared to €637 million in 2013, a €99 million
increase (+15.6%). This amount included:
p
p
amortization of intangible assets acquired through business
combinations for €344 million, compared to €350 million in 2013, a
€6 million decrease;
p
p
impairment losses on intangible assets acquired through business
combinations for €92 million, compared to €6 million in 2013. In
2014, they related to goodwill attributable to Digitick (€43 million)
and Wengo (€48 million); and
p
p
other charges and income for €173 million of net income and
primarily included the capital gain on the sale of UMG’s interest in
Beats (€179 million). In 2013, other charges and income were a net
income of €38 million and included the gain related to the dilution of
Universal Music Group’s interest dilution in Vevo (€18 million).
Income from equity affiliates
amounted to €18 million, compared to
€21 million in 2013.
Interest
was an expense of €96 million, compared to €266 million in
2013, a €170 million decrease (-64.1%).
In 2014, interest expense on borrowings amounted to €283 million,
compared to €494 million in 2013. This €211 million decrease was
attributable for (i) €167 million, to the decrease in the average
outstanding borrowings to €9.7 billion in 2014 (compared to €15.3 billion
in 2013) and (ii) €44 million, to the decrease in the average interest rate
on borrowings to 2.94% in 2014 (compared to 3.22% in 2013). The early
redemption of bonds for an aggregate amount of €3 billion carried out in
October and November 2013 following the sale of 88% of the interest
in Activision Blizzard, as well as the redemption, at maturity, of other
bonds for €700 million in October 2013 and €894 million in January 2014,
resulted in a €191 million reduction in interest compared to 2013. The
bond redemptions for €4.7 billion in December 2014 following to the sale
of SFR will only have an impact in 2015; interest expense on remaining
bonds (€1,950 million as of December 31, 2014) amounted to €61 million
in 2014, similar to 2013.
Moreover, as a result of the application of IFRS 5 to GVT and SFR, interest
expense was reported net of interests received by Vivendi SA on the
financings granted to SFR and GVT, at market conditions, for €172 million
in 2014 (compared to €222 million in 2013).
Interest income earned on cash and cash equivalents amounted to
€15 million in 2014, compared to €6 million in 2013. This change
was related to the increase in average cash and cash equivalents to
€2.1 billion in 2014 (compared to €0.6 billion in 2013), which reflected the
impact of the sales of businesses.
For a breakdown of the impact of the sales carried out in 2014 on
Vivendi’s treasury, please refer to Section 5 of this Financial Report.
Income from investments
amounted to €3 million, compared to
€66 million in 2013. It included interest income and dividends received
from unconsolidated companies. In 2013, it included interest income
paid by PLG for €10 million and the dividend paid by Beats to UMG for
€54 million.
Other financial charges and income
were a net charge of
€732 million, compared to a net charge of €287 million in 2013, a
€445 million increase. In 2014, they mainly included the premium
paid (€642 million) with respect to the early redemption of the bonds
following the sale of SFR. In 2013, they mainly included the premium paid
(€182 million) with respect to the early redemption of bonds following the
sale of 88% of the interest in Activision Blizzard. Please refer to Note 5 to
the Consolidated Financial Statements for the year ended December 31,
2014.
Earnings from continuing operations before provision for income
taxes
amounted to a €107 million loss, compared to a €129 million gain
in 2013, an unfavorable change of €236 million.
Income taxes reported to adjusted net income
was a net charge of
€200 million, compared to €170 million in 2013, a €30 million increase
(+17.7%). In 2013, income tax expense included certain non-recurring
items (+€149 million), which reflected the change, during 2013, to the
assessment of risks related to previous years’ income taxes. The effective
tax rate reported to adjusted net income was at 22.0% in 2014 (compared
to 22.5% in 2013).
In addition,
provision for income taxes
was a net charge of
€130 million, compared to a net gain of €17 million in 2013. In addition
to the non-recurring items, which explain the increase in income taxes
reported to adjusted net income, this €147 million unfavorable impact
reflected the change in tax savings related to Vivendi SA’s Tax Group
System, which was a €110 million income in 2014, compared to a
€254 million income in 2013. This change was notably attributable to
the entry of Canal+ France in Vivendi SA’s Tax Group System in 2013
(an income of €258 million, of which €129 million related to current tax
savings realized in 2013 and €129 million related to deferred tax savings
expected in 2014). The exit of SFR from Vivendi SA’s Tax Group System
was anticipated at the end of 2013, hence had no impact on tax savings
for 2014.
Earnings from discontinued operations
(before non-controlling
interests) amounted to €5,262 million, compared to €2,633 million in
2013. They primarily included:
p
p
with respect to SFR, the capital gain on its sale on November 27,
2014 (€2,378 million, after taxes) as well as net earnings until the
effective divestiture date (€1,299 million, before non-controlling
interests), which comprised the discontinuation
(1)
of the
amortization of tangible and intangible assets since April 1, 2014
(impact of +€1,088 million for the period from April 1 to November 27,
2014). In 2013, SFR’s net earnings were -€2,004 million, after a
-€2,431 million loss related to the goodwill impairment;
(1)
When an operation is discontinued, IFRS 5 requires the discontinuation of the amortization of the operation’s tangible and intangible assets. Therefore, for SFR, reported as
a discontinued operation since March 31, 2014, Vivendi discontinued the amortization of tangible and intangible assets as from the second quarter of 2014.
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