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Huge questions over Canal+ targets

Canal Plus has been though some choppy waters just lately, losing some very senior managers in the process and major shareholder Vivendi’s Vincent Bolloré issuing some stark warnings at the end of last week over the broadcaster’s future.

“[Vivendi] cannot on a long term basis continue to finance the losses of Canal+ channels in France.”  Vivendi said that the pay TV unit posted negative EBITA of €264 million last year, an increase in its losses of €76 million year-on-year. It says it has invested over €1.5 billion in Canal+, as we reported on February 19th.

Now the equity analysts have calculated their own examination of Canal’s numbers and are equally doubtful. For example, Laurie Davison at Deutsche Bank says that Vivendi’s targets for Canal Plus are “bold” and comments that Canal’s Q4 results were “dreadful”.

Davison adds: “The target of breakeven on Canal+ channels in Fr by 2018 implies a €264 million swing in EBITA; a 60% step-up from 2015 for C+ and 27% at Group level. Realistic? Implied margin of 13% EBITA is still below Sky UK at 19% and 21% pre-triple play launch in 2007.”

He cites the massive extra non-programming costs at Canal+ and compares these expenses with those at Sky UK, saying: “Sky UK non-programming costs are 44% of sales vs 49% for C+. But measures cited, like [Canal’s] ‘anti-churn plan’, ‘overhauling set-top box strategy’, ‘digitization of customer path’ and ‘harmonization of infrastructure’ are not quick wins. Witness the push-backs in Sky Deustchland profitability and the failures at D+. Bollore has form with Havas; raising margins 9.5% in 2006 to 14.1% in 2014, but this took 8yrs, not 3 as for C+.”

Analysts at Exane-BNP/Paribas take the same view, saying that Canal’s targets “if achieved this would mean a major rebound in Canal profits by 2018 but it requires great faith in the absence of any other concrete targets, no Canal+ Group target and no indication of how much profits will decline in the meantime.”

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