Bloomberg News

Lagardere Shares Fall on Lowered Forecast, Declining Profit

September 01, 2011

(Updates with analyst comment in fourth paragraph.)

Sept. 1 (Bloomberg) -- Lagardere SCA fell the most in more than two years in Paris trading after France’s biggest publisher said recurring media earnings will drop as much as 7 percent this year on revised expectations for its sport unit.

First-half net income adjusted for some items declined 41 percent from a year earlier to 57 million euros ($82 million) as tax charges tripled to 66 million euros, the Paris-based company said yesterday in a statement after market close. The stock fell as much as 16 percent to 20 euros today, the biggest intraday drop since March 2009, and was down 9.5 percent as of 11:28 a.m. The shares have plunged 30 percent this year.

Chief Executive Officer Arnaud Lagardere is focusing on the core domestic publishing business while also pushing into sports management. Lagardere sold its international magazines unit, which includes the non-French editions of Elle, to Hearst Corp. in May for 651 million euros. The sale caused much of the higher tax burden, and will contribute to a projected 5 to 7 percent drop in recurring media earnings for the year, Chief Financial Officer Dominique D’Hinnin said on a conference call yesterday.

“The main disappointment is the performance of the sports division, which causes questions for the future,” Simon Wallis, an analyst at ING Groep NV, said in a phone interview. “The cut in the outlook is mainly due to the sport unit.”

Cricket Dispute

Without the sale of the international magazines unit and a revised forecast for the company’s sports unit, recurring media earnings before interest and taxes for 2011 would have risen slightly, instead of falling 5 to 7 percent, on a constant exchange basis, Lagardere said in the statement.

Net sales at the Lagardere Unlimited unit, which focuses on sport and entertainment, grew 6.3 percent on a comparable basis in the first half, thanks to the inclusion of World Sport Group’s revenue from the Asian Football Cup event, it said.

The performance of the sport division was “weak” and below expectations, Wallis said. UBS AG analyst Alastair Reid said the “key miss” came from the sport division, which was hurt by a dispute about media rights for Indian Premier League cricket.

Revenue has been placed in an escrow account by an Indian court until there is a resolution of litigation between Lagardere’s World Sport Group unit and the Board of Control for Cricket in India about revenue from the 2011 Indian Premier League, the company said in the statement.

Canal Plus

Lagardere decided in March to delay the initial public offering of its 20 percent stake in pay-TV operator Canal Plus France, citing market volatility following the earthquake in Japan that month. The IPO was planned after Lagardere failed to reach a deal to sell the stake to Vivendi SA, which owns the rest of Canal Plus. D’Hinnin said yesterday it still plans to sell its stake when conditions permit, “whether it’s the market or Vivendi” were it to be interested.

Arnaud Lagardere has also pledged to eventually dispose of the publisher’s 7.5 percent stake in European Aeronautic Defense & Space Co., the parent company of planemaker Airbus, a legacy of its past as a defense contractor. The CEO has said any exit will have to be discussed first with the French government, and will await a clear delivery timeline for the A350 wide-body jet.

--Editors: Simon Thiel, Robert Valpuesta.

To contact the reporter on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Chiara Remondini at cremondini@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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