Hello. Good evening, everyone, and welcome to the Vivendi Half Year 2020 Results presentation. This conference call will be hosted by Mr. Arnaud de Puyfontaine, Chairman of the Management Board and CEO, and Mr. Hervé Philippe, a member of the Management Board and CFO. As a reminder, this call is being recorded. During the call, you'll be on listen only. Later on the call, during the Q&A session, analysts will have the opportunity to ask questions without any follow-up questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. I will now like to turn the call over to Mr. Arnaud de Puyfontaine. Please go ahead, sir. Your line is open.
Thank you very much, and hello. Good evening, everyone. Welcome, and thank you for joining us today. First of all, I hope that you are all keeping healthy. I would like to invite you to read carefully after the call the disclaimer on slide two and on slide three, the information notice related to the impact of COVID-19 on our activities. Thank you in advance. Like any company, we have been facing an unprecedented situation in the past few months. We have had to adapt to the unknown because nothing prepares you for this. However, one thing we do have is a resilient business model, which has enabled us to announce today good financial results for the six months of 2020, six first months of 2020. Hervé will share more details in a few minutes.
It is no surprise that the lockdown has significantly affected our businesses related to advertising, publishing, or live events. Yet, we have delivered a solid performance, mainly driven by Universal Music Group, UMG, thanks to its subscription-based activities and by Canal+ Group, which achieved strong growth in its international operations. As a group, we succeeded in increasing our revenue, +3% compared to the first half of 2019. Our adjusted net income grew by 5.4%, reaching nearly EUR 600 million. This increase doesn't include the capital gain of EUR 2.4 billion resulting from our decision to begin opening the UMG share capital. The last six months have also enabled Vivendi to strengthen our financial position. Our net debt decreased from EUR 4.1 billion at the end of 2019 to EUR 3.1 billion at the end of June 2020.
The first half of 2020 is a great illustration of how Vivendi has kept moving forward in challenging times. Let me give you two examples. The first one is the opening of UMG's capital. At the end of March, Vivendi concluded an agreement with a Tencent-led consortium for strategic investment of 10% in UMG at a total equity valuation of EUR 30 billion. We are very pleased to welcome Tencent as a great new partner and are looking forward to the tremendous growth opportunities offered by this cooperation. The transaction completed in March is only a first step. Following our previous announcements, we are pursuing the process of potentially selling additional minority interest in UMG. As you know, an IPO is scheduled for early 2023 at the latest, or even before, if possible. The second example is the closing of the Endemol Shine Group acquisition by Banijay.
This acquisition has created the largest international player in audiovisual content production and distribution. We are very happy to now own 32.9% of the new combined group. This investment perfectly fits our ambition to build a world-class leader in the content industry. While progressing along our strategic roadmap, we have continued to deliver value to our shareholders. From January to end of June, EUR 1.4 billion were returned to the Vivendi shareholders. The breakdown is as follows, EUR 690 million through the payments of the EUR 0.06 dividend per share approved at the last shareholders meeting, and EUR 719 million through our share buyback scheme. The current share buyback program runs until the end of October. It covers a maximum of 10% of the share capital at a maximum purchase price of EUR 26 per share.
Coming back to my introduction, let me share with you how we are preparing for the weeks and months to come. Of course, there are uncertainties about the evolution of the health crisis as well as about the global economic context. We need to be cautious. That being said, we are already seeing some tentative recovery signs on our most impacted markets. For example, as soon as bookshops reopened in France, consumers were back. Editis revenue grew by 38% in June compared to June 2019. More generally speaking, we remain confident. Vivendi has unique assets to succeed. First, we can rely on a coherent and diversified model, which is a real strength in the current context. Being well established in many entertainment segments and in many countries makes it possible to offset difficulties in one market with a strong performance of another.
Second, most of our activities were already strongly digitized before the crisis, which has limited the impact of the lockdown. In addition, we are less exposed in the vagaries of the economic situation, thanks to the strength of our subscription-based activities. They help guarantee regular income over a sustained period of time. It is particularly true in music and TV. Third, we are driven by a culture of agility. Our group is made of entrepreneurial teams who stay very close to their business and can make the right decision accordingly. The crisis has demonstrated our ability to quickly adapt to changing environments and specific situations. To conclude, I would like to take this opportunity to thank once again the 45,000 employees of our group for their commitment, courage, and solidarity. Thank you for your attention, and it's my great pleasure to now hand over to my friend, Hervé.
Over to you, Hervé.
Thank you very much, Arnaud, and good evening to everyone. It's my pleasure to present to you our financial results for the first half of 2020. Just before beginning with impacts of changes in the consolidation scope and currency fluctuation on our growth rates, let me say a few words on the impact of the COVID-19 crisis on our businesses. As Arnaud recommended, please read the disclaimer on slide three. In a nutshell, we first say that the health crisis is having a limited impact on our main activities. Second, that it is still difficult to assess how it will impact the rest of the year. Third, that we did not identify any indications of a decrease in the recoverable amount of our assets with an indefinite life. Four, that our balance sheet is very healthy.
Back to the first table of this slide, you can see that this half, the scope effect is much more important than the currency effect. The main changes in the scope of consolidation were the acquisition of Editis since February 2019, and the integration of M7 at the Canal+ Group level since mid-September 2019. Regarding the change in currencies, the U.S. dollar was up 4% against the EUR. Therefore, this half, FX had a positive impact of 80 basis points on our revenues, mostly at the UMG level. However, the trends have reversed in the recent weeks, and should the U.S. dollar decline continue, the FX impact could be reversed in the next quarters. On slide 12, we have a summary of the key financial metrics for H1 2020.
As announced by Arnaud, Vivendi's financial results are good, with a good resilience of our revenues driven by the subscriptions activities of UMG's and Canal+ Group. A 2.4 increase in EBITDA, and adjusted net income growing by more than 5%. The IFRS results show the same positive trends, with a 2.3% increase in EBIT and a net profit that reached EUR 757 million. Cash flow generation was also strong in H1 with a CFFO of EUR 338 million, an increase of EUR 302 million compared to the same period of 2019. I will comment on this variation later. Finally, our balance sheet indicators are solid, with equity amounting to more than EUR 17 billion after the recognition of the capital gain of the sale of 10% of UMG for EUR 2.4 billion.
For the same reason, net debt was reduced to EUR 3.1 billion at the end of June 2020 compared to EUR 4.1 billion at the year-end of 2019. Going to slide 13 and the P&L. Revenues, EBITDA, and EBIT will be commented later in the section related to the performances by business units. Below EBIT, let me highlight the two main changes in the P&L compared to H1 2019. First, income from equity affiliate amounted to EUR 76 million and notably included Vivendi's share of the capital gain recognized by Telecom Italia on the INWIT transaction. Next, other financial income and charges this half primarily included the reevaluation of our stakes in Spotify and Tencent Music. Earnings attributable to Vivendi shareholders amounted to EUR 757 million, an increase of 45%.
At this stage, it's also worth noting that the P&L did not benefit from the recognition of the EUR 2.4 billion capital gain on the sale of 10% of UMG, which was directly accounted for through shareholders' equity in accordance with IFRS rules. You can see the impact of this sale on the non-controlling interest, which increased to minus EUR 84 million, reflecting the entry of Tencent into UMG's share capital. Adjusted net income, which better reflects the group's operating performance, amounted to EUR 583 million, an increase of 5.4%. Moving to our balance sheet on Slide 14. In short, our balance sheet is in very good shape. The most notable changes compared to the 2019 year-end balance sheet relate to the impact of the sale of 10% of UMG, as already mentioned. This positive item was partially offset by the dividends paid in Apple on the share buybacks.
Consolidated equity increased to EUR 17.4 billion, and net debt decreased to EUR 3.1 billion. Consequently, the net debt to equity ratio decreased to less than 18%. As for assets, our financial investments increased mainly thanks to the revelation of the interest in Spotify and Tencent Music. On Slide 15, we can see the evolution of our debt position during this half, which mainly reflects the cash received from the sale of 10% of UMG in March. The return to shareholders for a total amount of EUR 1.4 billion including dividends and share buybacks, which amounts were already recalled by Arnaud. Third, the acquisition of a stake in Lagardère. As of July 10, we owned 21% of Lagardère's share capital. Finally, the business unit generated operating cash flows of EUR 338 million, and at the end of the year, net debt was EUR 3.1 million.
The analysis of this amount can be found on the next slide. Out of the EUR 3.1 billion in net debt, Vivendi's gross cash position amounted to EUR 2.6 billion, and gross debt was EUR 5.5 billion. As shown by the chart at the middle of the page, the maturities of the bonds are spread over time until 2028, and the debt average maturity is quite long, five years. Also, at the end of June 2020, Vivendi has available credit lines of EUR 3.7 billion, and the market value of our listed equity portfolio was EUR 4 billion. In total, Vivendi's liquidity position is solid, as confirmed by the credit rating agencies with stable outlooks. Going to Slide 18 on the performances by business unit, which highlights the good performances delivered by UMG and Canal+ Group.
In H1 2020, Vivendi's revenues amounted to over EUR 7.6 billion, an increase of more than EUR 200 million, mainly thanks to UMG and the consolidation of M7. In organic terms, Vivendi's revenues decreased by 2%, mainly due to the impact of the pandemic on Havas, Editis, and Vivendi Village. The second table shows the increase in EBITDA of EUR 29 million. UMG grew 16.6% organically, and Canal+ Group's EBITDA before restructuring charges also grew 16%, excluding the M7 contribution. The growth of Universal Music and Canal+ was partially offset by the slowdown of the other businesses. Going to Slide 19 on organic growth by quarter. The second row of figure shows the impact of the pandemic on our businesses. After a positive first quarter, you can see that UMG and Canal+ Group were quite resilient in the second quarter.
As anticipated, there was a decline in the revenues of Havas and some of the other businesses, which were strongly impacted by COVID-19. However, it is worth noting that the Gameloft revenues increased sharply during the lockdown of the second quarter with a +6.5% increase. We also saw a significant rebound in Editis revenues in June with a +38% increase following the end of the lockdown in France. Going to Slide 20 with the operating cash flow generation. In H1 2020, Vivendi's CFFO increased of more than EUR 300 million, mainly thanks to the performance of Canal+ Group, which benefited from the postponement of content investments, notably at StudioCanal, linked to the pandemic. Let me also remind you that the cash flow generation at Vivendi is highly seasonal for almost all our businesses.
Cash flow generation in H1 at Universal Music Group, Havas, and Editis is usually much lower than in H2 due to the seasonality of the businesses themselves. Let's move to the next slide to have a more in-depth look to the breakdown of this cash flow, and because this slide provides the details of our cash flow conversion from the EBITDA level. The EBITDA increase reflects the good operating performances we already saw in the previous slides. As you can see, the bridge from EBITDA to CFFO. Our CFFO calculation includes the content investments paid. At Vivendi, we continuously invest in artists, content, and rights to fuel our future growth. Especially at Universal Music, we pay advances to artists that are recouped over time after the albums are released. We also buy catalogs when the right opportunities arise.
Taking into account these investments and also a favorable change in working capital, notably at Canal+ Group level, CFFO in H1 to 2020 amounted to EUR 338 million. Now, let's take a closer look at the key performance metrics for each business unit, starting with Universal Music on slide 24. As already mentioned, UMG's revenues continued to increase this half, up 3.5% organically, thanks to the growth in streaming and subscription, which generated an additional EUR 250 million in revenues in H1 2020. New releases from The Weeknd, Justin Bieber, King & Prince, Eminem, and Lil Baby, as well as continued sales from Billie Eilish and Post Malone, drove the digital music consumption on platforms. This half year, streaming and subscription represented more than 65% of recorded music revenues, compared to 60% in H1 2019.
As you can see on the left arm of the slide, physical sales and merchandising were more affected by COVID-19. We focus on the impact of the pandemic on Q2 figures on the next slide. On the right arm slide, we focus on UMG's profitability, which improved by 160 points, driven by revenue growth and cost control. On this slide, you have the detail in the Q2 revenues and the pandemic's impact of the different revenue lines for UMG. Streaming and subscription revenues were up 8.5% in Q2. The decrease in the growth rate compared to Q1 is due to the impact of COVID-19 on the ad-funded streaming business. The subscription business is inherently more stable and resilient. Other digital sales included the receipt of a digital royalty claim in Q1 that accounted for a little more than 1% of recorded music growth in H1.
As expected, physical sales declined 22% in H1 2020, of which 39% in Q2. Licensing revenues include synchronization income as well as third-party compilation license income and other revenue diversification opportunities. The result may vary from quarter to quarter. Publishing was up 24% in Q2, driven by subscription and streaming, as well as the receipt of another digital royalty claim. Excluding this settlement amount, publishing revenue grew over 6% in Q2 2020. Finally, merchandising revenue declined by almost 62% in Q2 due to the COVID-19 pandemic's impact on touring and retail. Going to slide 25. You can see all UMG key financial figures for the period, which we all have already gone through. Regarding EBITDA, let me just add that the two one-time items I just mentioned accounted for less than the half of the margin improvement, meaning that EBITDA grew 9.1% excluding these items.
To complete the overview of Universal Music performance, let me comment on its cash flow generation. UMG's CFFO reached EUR 60 million in H1, an apparent decrease mainly due to content investment and the timing of artist payments. These strategic investments enhance UMG's portfolio of talent and content and will generate future revenues. Excluding these investments, the CFFO amounted to EUR 449 million, representing an increase of almost 21% compared to last year, on par with the increase of EBITDA. Moving to Canal+ Group, starting with the overall subscriber base on slide 27. On the left arm of the slide, you can see that total subscribers to Canal+ offers worldwide exceeds 20 million. The international subscriber base growth notably accelerated, thanks to the integration of M7 subscribers and the organic growth with more than half a million additional clients in Africa.
Now, international subscribers represent more than half of the subscriber base. Meanwhile, the French subscriber base stabilized, as we will see in the next slide. In aggregate, Canal+ Group gained more than 3.2 million subscribers compared to June 2019. On the right, you have the evolution of the EBITDA before structuring charges, which was EUR 329 million. The EUR 93 million increase reflects the positive impact of the M7 acquisition and of the efforts made over the last four years. As a reminder, since Canal+ has initiated its cost optimization plan, it has generated around EUR 1 billion cumulative savings in four years from its 2015 cost base. Moving to the Canal+ subscriber base in mainland France on slide 28. The subscriber portfolio, including subscribers resulting from partnership with telco and collective contracts, reached 8.5 million at the end of June 2020, representing a slight increase year-on-year.
Since the second half of 2019, even during the lockdown, the commercial trends have been improving with a deceleration of cancellations and better recruitments, helped by the launch of Disney+ in April, the return of Premier League, and the distribution deal with beIN Sports. On slide 29, you can see the details of Canal+ Q2 revenues and the contrasted situation. In mainland France, revenues decreased 3.5% in a context marked by a downturn in the advertising market due to the COVID-19 pandemic. StudioCanal revenues were down 41% in Q2 due to the closing of cinemas over the entire period. However, the total lack of income from fresh film was partially offset by sales of films and series from the catalog. Meanwhile, international operations continued to increase. Excluding the M7 acquisition, revenue grew 1.7% in Q2 2020. Turning to Canal+ Group's key figures on slide 30.
The Canal+ Group EBITDA was EUR 300 million in H1 2020 after restructuring charges. The EUR 92 million of restructuring charges booked last year in the context of the transformation plan were augmented by EUR 29 million in the first half of this year. Finally, bear in mind that the sharp increase in CFFO already mentioned is mainly linked to temporary effects linked to the pandemic in Q2 that may reverse in the coming months. Moving to slide 32 on Havas key figures. As anticipated, the second quarter of 2020 was significantly impacted by the COVID-19 pandemic. This unprecedented crisis has affected the entire communications industry as some advertisers were forced to postpone or cancel a number of campaigns. At Havas, all divisions felt the impact except for Havas Health & You, which continues to deliver a positive performance thanks to the gains in market share achieved last year.
Net revenues were EUR 977 million, down 11% organically. In terms of regions, at the end of June, North America delivered a satisfactory performance thanks to a resilient market and growth in health communications. Europe was severely affected by the pandemic. The agencies in U.K. and Germany have proven more resistant than others. Both Asia-Pacific and Latin America recorded sharp declines. For the first half of 2020, EBITDA was EUR 46 million compared to EUR 108 million for the same period of 2019. This change was due to the sharp downturns in activity reported by both the media and creative divisions. A cost reduction plan was implemented as we'll see in a few moments. Slide 33 presents Havas organic growth quarter by quarter and by geographical area.
Focusing on the second quarter on Havas' two most significant geographic areas, we can say that North America was down 8% organically, and Europe was down almost 23%. Those two areas represent almost 90% of the net revenues at the end of June 2020 and perform in line with many European competitors. The next slide, which is 34, focused on the bridge to explain the EBITDA variation between June 2019 and June 2020. EBITDA was EUR 108 million at the end of 2019. You can see the impact of the organic decrease in the net revenues for EUR 123 million. It has been partially compensated by the positive impact of the cost reduction plan for EUR 58 million in this semester. This cost reduction plan was implemented in both the media and the creative division in the early weeks of the crisis.
By the end of June, Havas Group has already absorbed nearly half the decline in revenues before restructuring costs. Accordingly, EBITDA came at EUR 46 million at the end of June 2020. To finish on Havas, let's look at slide 35 with the different breakdowns of net revenues. You can see on the left that Havas has a well-balanced sectorial portfolio. Health and wellness reached 27% compared to 19% at the end of December 2019. The other categories are represented equally. On the right, you have the breakdown by geographical areas. We can note that the increasing weight of North America, which stands at 42%, bringing it closer to the level of Europe, which stands at 46%. To conclude on Havas, we can say that the group quickly reacted and adapted thanks to its agility and flexibility.
As the economic context is still complicated, Havas remains cautious about the evolution of its businesses for the second part of the year 2020. On the profitability side, its EBITDA should be supported by the full benefit of the cost reduction program. Going to slide 37 on Editis. Vivendi has fully consolidated Editis since February 2019. Editis revenues were EUR 262 million in H1 2020, down 15% pro forma. The COVID-19 pandemic impacted all of Editis' activities with the shutdown of the book retailers. However, after the lockdown, Editis enjoyed a strong recovery with revenue increase of 38% in June. You can see the curve on the right of the slide. This positive trend continued in early July.
Finally, let me remind you that Editis is structurally and heavily weighted to the second half of the year with the final part of the high school curriculum reform, the impact of which should be observed in Q3. Summer sales that could be higher than usual since people will stay in France for their vacation, and novel sales being strongly linked to the new releases in the autumn, as well as Christmas sales. Let me now give you the main facts regarding the other businesses. Together, they generated revenues of EUR 162 million. For the second quarter of 2020, Gameloft's revenues were EUR 69 million, up 6.5% year-on-year, with sales on OTT platforms up 16.3% thanks to the stay-at-home measures. On the contrary, the lockdown measures imposed in Europe and Africa during the first half of 2020 had a significant impact on Vivendi Village ticketing and live activities.
For the conclusion, this concludes the presentation of our half-year 2020 result with the good results driven by UMG and Canal+. During this half, we also finalized the first step in the opening of Universal Music Share Capital. Please note that we will release our Q3 2020 revenues on October 20 after market close, and our shareholders meeting next year will be convened on June the 22nd. Thank you very much for your attention, and we are now ready to take your questions.
A reminder to our analysts, please press star one on your keypad to register for questions. A reminder, we are not doing follow-ups. Our first question comes from the line of William Packer of Exane BNP Paribas. William, when you're ready, please go ahead.
Hi, Hervé. Hi, Arnaud. Many thanks for taking my questions. Three for me, please. Firstly, could you talk us through how streaming is trading in June and July? You've helpfully provided details on the second quarter, but clearly, we're all quite focused on how things are emerging out of the lockdown period. Secondly, we have a H1 margin, which has been impacted by the digital royalty claim. Could you just help us think about underlying operating cost inflation and how we should think about that developing in the second half of the year? Finally, you recently announced the deal with Spotify. Congratulations. Could you talk us through the implications for your business beyond the core streaming business? There's flagged areas of cooperation. Perhaps you reduce your marketing spend intensity as a result of the deal? Could you just help us think about the implications? Thank you.
Hi, William. Thank you for your questions. Arnaud speaking. I will start by the third question while Hervé is preparing himself for the first and the second. Well, as you know, we're not commenting on terms of the agreement. Obviously, we are very happy about having come to an agreement with Spotify. Since the very beginning of our relationship, Universal Music Group and Spotify have worked very closely on developing innovative marketing campaigns and tools to help artists to reach the biggest possible audience on Spotify's platform. As Spotify mentioned on its Q2 call, big artists such as Lady Gaga have already adopted these tools. Obviously, that relationship will not only continue, but our teams will work more closely than ever before. UMG will additionally provide feedback on early-stage features, playing a leading role in shaping the development of the marketing platform.
We like to position Universal Music Group not only as the most creative music company in its competitive environment, but also as a very marketing and innovation-driven company. We expect this agreement to provide us with the possibility to again prove it.
Thank you. To answer your first question, second one, just maybe for the reason of consumption of music after the COVID crisis, we can refer to what Spotify said very recently, saying that the music consumption has recovered to pre-COVID levels in June, which is a trend. We'll see what will be the future in the year, especially on the ad-funded part of the business. To answer your second question on the H1 margin, there was some impact indeed of some one-time item, and you have the precise impact of those H1 one-time item in our slides, in the slide 25, which is very precise. We can say that the growth of the EBITDA was around 9%, excluding the one-time item, and the profitability increased in this first part of the year.
This increase is both linked to the growth of the business, but also to the strict cost control at UMG level, which is implemented.
Thank you.
Our next question comes from the line of Lisa Yang of Goldman Sachs. Lisa, when you're ready, please go ahead.
Vivendi, I have a follow-up question on the streaming number. Would it be possible to give us the trends within Q2 between the subscription and the advertising business? As I understand, advertising was severely impacted. Could you maybe give us a sense of the exit rate for both sub-segments? That would be really helpful. The second question is on Canal+. I understand their DTT license is up for renewal. I'm just wondering if you could talk about the pros and cons of having this DTT license and what could be the financial implications if you decide not to renew it. The third one is on the UMG sales process. Could you give us maybe an update on the sale process with other buyers? When should we expect a decision?
Is it fair to assume the valuation could be higher than EUR 30 billion, given where Warner and Spotify are trading currently? Thank you.
Maybe to answer your first question on the split between subscription and streaming, we do not disclose this difference between the two parts of the business, which can have some different rhythm, especially during the COVID-19 crisis. I can just refer to the industry mix, which is disclosed by the IFPI, which was generally for all the businesses, 25% in advertising and 75% in subscription in 2019.
Thank you, Lisa. Your question on Canal+ and the TNT renewal, digital terrestrial TV renewal. Well, as a matter of fact, all options regarding the TNT license for Canal are still opened, including that the license not to be renewed. The license terms under the current agreement ends in December 2020. Whatever the final decision is, there will be no impact on the 2020 financials. Today, digital terrestrial TV represents for Canal+ around 400,000 subscribers, then less than 2% of our subscriber base. This frequency, as a matter of fact, involved high cost and very restrictive obligations. I'm not going to dwell any more on that subject. Yes, there are pros and cons. As we have been saying, and you've seen the numbers, the growth from Canal+ Group for our international operation is very compelling.
France is still at a crossroads, and that's the reason why we needed to manage the company on a very tight basis. As regard to this renewal process, we need to keep every option opened and to see what would be the condition under which we could renew, taking into account those pros and cons, as you are mentioning in your question. That's the situation for that very specific issue.
All right. Our next question comes from the line of.
Okay. No. Sorry.
Oh, pardon me.
There was a debate between Hervé and I on who is going to answer the third question. Well, as we said, we are pursuing discussion with potential new partner within Universal Music Group. We have been approached by many different interests, and the process is currently happening. As regard to the condition and the different aspects, we are not going to comment on them at this stage. What I can say as regard to the question of this UMG process, and the current situation, no need to say that we're extremely happy about having Tencent as a partner. We're expecting this partnership to be able to go from strength to strength. I must say that all the early developments are very encouraging. More to come in due time. Thank you, Lisa.
Excellent. Our next question comes from Omar Sheikh of Morgan Stanley. Omar, when you're ready, please go ahead.
Thank you. Good evening, everyone. I have three questions as well. First of all, maybe if I could return to the question on streaming revenues. You mentioned the comment that Spotify had made on their call about consumption returning to pre-COVID levels. I wonder whether you could give us a sense of whether you think that the growth in your streaming revenues will also return to pre-COVID levels, and if so, whether you expect that to happen later this year or into next? That's the first question. Secondly, a question for Arnaud, I suppose, just on the share buyback.
In previous press releases, Arnaud, you've put in a phrase which talks about the intention to return, I think I quote, "Substantial portion of the proceeds from the UMG sale to shareholders via a share buyback or tender offer." I notice, unless I missed it is not included in the press release today. I wonder whether you could confirm that that's still your intention, and, if not, perhaps what you're thinking or how your thinking has developed on that point. Thirdly, I just have a question about the Lagardère transaction. You spent EUR 400 million, which is a relatively small amount of money on a 21% stake in Lagardère. I just wondered whether, Arnaud, you could just set out the rationale for that transaction and which benefits essentially you're hoping you'll be able to generate for Vivendi shareholders as a result of the investment.
Thank you very much.
I can take the first one on the streaming revenues, which is another way to ask the question on speed between streaming and subscription to say that, in Q2, obviously, the part which has been affected is ad-funded streaming revenues, that we will see a recovery in that part of the business, thanks to the development of the business itself on the level of advertising indeed. The trends in consumption remain very good. More generally, the trend in streaming, in subscription is continuing to grow as Spotify has always said recently also. We can say that if you compare from one quarter to the quarter, you have always the base effect which is important that it's inevitable in the long term that you will have some decline in the rate of growth of this business. It's very simple mathematics.
That's why what I can say on the streaming and subscription system, we are very confident for the development of the business in the rest of the year indeed.
On the proceeds, your question on the proceeds, well, as I mentioned, in H1 2020, Vivendi paid EUR 1.4 billion to shareholders, 50% in dividends and 50% in buybacks. Well, regarding to the current situation, our position is to remain cautious and to keep a strong liquidity position, to face the uncertainty as regard to the foreseeable future. The current buyback program will continue until October 2020 and a further 35 million shares could be bought back, representing 3.65% of the share capital, depending on market conditions. To your second question, our intention is still to give back to the shareholders part of the proceeds, while assessing opportunities to develop our interest in specific situations. As we speak, we have a share buyback program on air, if I can say so.
Obviously we keep a very cautious attention as regard to the solidity of our liquidity position. Second question as regard to Lagardère and the rationale. As you rightly so mentioned, currently the level of investment represents 1% of the value of Universal valuation. We have built a position within Lagardère with the consideration that it's a good investment. We consider that the level of the share price, this is a good investment for a Vivendi shareholder. The group, Lagardère, is going through a difficult period, and we wanted to be able to make this financial investment, being seen as an amicable investment as regards to the relationship between the two groups.
We said that when we started the investment, we would keep the option open to be able to continue our stake building, to be able to diminish the average cost of our investment, and this is what we did. Some events, end of May, has created an evolution of the governance of the company with the arrival of Groupe Arnault at the level of the commandite. We see that as a common view from Groupe Arnault and Vivendi as regards to the potential of this group on the foreseeable future. We are happy to see them also investing. Let me remind that the principals are a good relationship, and we also have had in the past, common initiative between the two groups, like the Mediaset acquisition more recently.
Last but not least, we have also said that this investment, which is a long-term financial investment, doesn't prevent us from building industrial agreement. If some opportunities arise, then that we will consider in the future. That's the current position as regard to the stake that we now own in Lagardère with a clear statement, which has been made on the 15th of July at the AMF, the French Market Authority.
Our next question comes from the line of Adrien de Saint Hilaire of Bank of America. Adrien, when you're ready, please go ahead.
I'm sorry. Could you start from the beginning? Because the line was.
How's that? Okay.
Thank you.
Okay. I hope you can hear.
No, sorry. I'm sorry. We can't hear you. I don't know if you're calling from a mobile or something. We can't hear you.
No? Arnaud, can you hear me?
It's not working. Maybe we can try to get a better line and move to the next question.
Okay. Certainly.
We'll come back to you, obviously.
All right. Our next question comes from Julien Roch of Barclays. Julien, when you're ready, please go ahead.
My first question is on Canal+. In France, you've been extremely busy doing a lot of great deals on sports, with the Ligue 1, the UEFA Champions League, the UEFA Europa League. You sign a deal with Disney, you sign a deal with Netflix, you sign a deal with beIN, you have some cost-cutting. There's a lot of movement, which makes forecasting operating profit almost impossible. I was hoping you could give us some color on the overall impact of those at least five big things on cost. When you put all of that together, how much will cost increase or decrease? That's my first question. The second question is on page 21, the net payment to artists and catalog acquisition by UMG more than doubled.
Some of it will be net payment to artists. If it goes up more than revenue, people will consider that kind of negative working capital, which is not good. If you buy catalog, that's M&A, and it's probably a good thing. I was hoping you could split the EUR 352 between, or give us the amount of catalog acquisition in EUR 352. That's my second question. On the buyback, I got your answer, but you've published two press releases on your website. On the 19th of June, you said that you'd increase the buyback to 23.25 million shares from 825. That was supposed to happen, those shares were supposed to be bought back by the 30th of July.
On the 26th of June, you moved those 23.25 to 43.25. Now it's supposed to happen from the 31st of July to 20th of October. My first question is why you did not do the first part of the buyback, which you communicated on. I guess depending on your answer, what guarantee we can have that the second part will happen? [Foreign language].
Maybe I can answer the two first question, on the first one being on Canal+ on the fact that we have many new deals and contracts which have been announced and you want to know what could be the impact on the cost. I cannot obviously disclose any figures regarding the different costs of those. Contracts are confidential, but indeed, as you can imagine, the Canal+ management is very keen to keep a very good financial condition to those contracts. If Canal+, and with the Vivendi support, decide to enter in such contracts, it's because we believe that they are at the right price. Another way to explain this thing is to see what has happened last year when there was an auction for the Ligue 1.
When Canal+ considered that the price to be paid to get the Ligue 1 in France was too high, we didn't enter in this deal and negotiations. That's why you can be confident in the ability of the Canal+ management to be able to negotiate and to have the best possible price for the content. Sometimes it's good to have, I would say, some niche content to add to our portfolio to develop businesses, which has been the case also in some very good deals which have been done for some sports event like Formula 1 or for Moto Grand Prix. The last one for Moto Grand Prix, which is not expensive, but with the success of the French motorbiker, it's a very good impact on our business and our subscribers are very happy. The last figure for that were very impressive for the last Moto Grand Prix.
For your question regarding the advances on catalog, and you want to have the split. First, let me say that we are given a global figure, which is for the first time, and this is very important, and this was something which was, I believe, expected by the investors and shareholders. So we have made an important step. I would say from our view, this is the same basket. When we are investing in catalogs and when we are investing in advances to artists, it's investment in content. That's why we do believe that at this stage of the market, this is very good thing to invest in content, to preserve the artists we have or to develop the new artist and to gain market share. So this is a very good opportunity.
We wanted to show that the decline in the CFFO at Universal Music was only apparent because in fact, it's hidden. There is a hidden part, which is the development of investments under the CFFO. On the third question, Julien. Well, we say what we want to do, and we do what we say we would do. As a matter of fact, no need to say that the first half of 2020 has been impacted by a substantial event called COVID. As I mentioned, we paid huge attention in managing the financial management of our situation, of our company. It may have had an impact on the sequence of events on that specific matter that you are raising. It's a question of timing and capacity to cope with an unknown situation linked to an extraordinary event.
As regard to the details and the consequences and what we will do, we have announced, and we have, as I said, we have a current share buyback plan, which is opened. For the sequence and the consequence, I will ask you to make contact with our team at Vivendi, just to be able to provide you with any other details you may need. Thank you.
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Our next question comes from the line of Richard Eary of UBS. Richard, when you're ready, please go ahead.
Thank you. Good evening, everyone. Three hopefully quick questions from myself. I may have missed something earlier on the call, but I didn't know whether you'd made any comments with regard to the UMG IPO process on the back of the successful Warner float, and whether that had changed your potential timing of that IPO. That's the first question. The second question, you talked about within the capital management process. You talked obviously about investments, but it'd be interesting just to try and update on the process in terms of what is the M&A criteria, particularly after the Lagardère investment. Just lastly, with regard to UMG's stake in Spotify, whether there's any development or thought process what you do with that stake post the share price increase.
Thank you. I will take the question on the IPO. As we said, our intention, A, we are welcoming the good results of the Warner Music Group IPO. We said in previous statements that in the different stages as regards to the opening of the UMG capital, our intention was to plan for an IPO no later than early 2023.
As mentioned during the call, we could consider an earlier IPO, if it is possible. Options are opened, and will depend on different factors that we are currently reviewing. That's on the IPO subject. Hervé?
I can maybe answer the question on Spotify and the state we have in Spotify. As you have seen, we have very good relationship with Spotify. We have renewed the contract with them, and we are very happy with the share price of Spotify, which has increased a lot in the recent weeks, and we are well satisfied with that. We have no intention to sell our stake in Spotify, which is a very good partner for us. We are a shareholder, and we are a happy shareholder of Spotify.
We have a very well-defined process within the group. We're having M&A Committee. The M&A Committee are reviewing every potential opportunity of M&A transaction. The financial criteria in terms of economics, A&R, and so on, are well defined within the group. Depending on the different stage of investment, it goes to the Management Board or it goes to the Supervisory Board. Point number one. Point number two, we are reviewing bolt-on acquisition. It's important to reinforce the momentum of our growth of our different businesses to be able to accelerate the development of our industrial strategic vision. If I can take an example, as you have seen in our numbers, M7 has been a very good acquisition, has been accretive for the group, and is delivering on our expectations. We've got, on another aspect, different other opportunities.
One of them, and you mentioned it, is a group, Lagardère. I answered previously the question as regard to Lagardère, and the reason why we have built a stake in the situation. Shall I remind you that in the development of the equity story of Vivendi and what we are delivering step-by-step, we have also the possibility to rely on and to build this strategy and the development of the group with also in specific situation on a kind of a long-term vision. That's important for us to be able to, from time to time, take some position when we do think that it's going to add value and create value in our equity story.
There are certain situation where we take some options. I guess that in the capacity for us to cope with the unexpected events while being in a position to deliver improvement in our results on a regular basis. We play with this kind of a two different level and situation in terms of investment, with a very strictly monitored process within the group. I hope that I have covered the question you raised. Thank you.
Thank you.
All right. Our next question.
Sorry. Maybe we can try to see whether we can find somewhere in the telco world, Adrien de Saint Hilaire.
I've got his question by mail.
Okay. We are going to show how Vivendi is an agile company ready to bring innovation to this analyst call, because for the first time since I took my job, I'm going to have the question from Adrien on a mobile. Adrien, your question: Do you include the EUR 1.4 billion in dividend and buyback to be already included in the return of proceed of UMG to shareholders? I will hand over to Hervé. Second question: Do you expect the new partnerships with Spotify will drive market share gains versus other labels? That's question number two. Question number three. It seems to be that this evening we are in a kind of a rolling three questions. Let's stick to that rule. What are you trying to gain through board representation at Lagardère?
Let me take the third question, and I will hand over to the two previous one to Hervé. Are you agree?
Perfect.
Do you agree?
Yes.
The second is about, do we think that the deal with Spotify is going to drive market share for Universal against its competitor? Adrien, good evening, first. Even if you can't answer me. We made a communication on the 15th of July when we reach a certain threshold, and we made a declaration of intent at the AMF. While we say that we could envisage to get representation at the board of Lagardère, and why did we mention that? It is because there's been some changes in the governance of the company with what has been announced on the 25th of May. As regard to the situation, we thought that if the circumstances were to be so, we will ask for board representation just to be able to get the share of voice based on our stake within the company. It's very pragmatic.
We're not going to try to gain, but we keep the option open if the circumstances create the need for us to be represented very pragmatically. Maybe, Hervé, on the first question.
Maybe the first question is linked to the fact that on our slide, we see very clearly that we have returned to shareholders roughly the half of the proceeds of the first 10% of the sale of Universal Music. This is a timing issue, I would say, because we have paid the dividend the month after we get the EUR 2.8 billion, and we have made the EUR 700 million of buybacks. We're beginning in January, February, and so this is roughly at the same time. There is no direct link between the two figures. We can say on buyback is that at the beginning of the COVID crisis, we have been much more cautious in terms of buyback, considering that we have to keep our very strong liquidity and to be prudent.
As you have seen, we have decided in June, in fact, to relaunch our buyback program and with the possibilities that we have to do it considering this important liquidity. There is no direct link, but you can see that we have decided to relaunch the buyback in June. For the agreement with Spotify, we are very satisfied with this new agreement. As I have said previously, we are very good partners with Spotify. Since the beginning of our relationship, we work very closely on developing initiatives, technologies, and so, we are very happy with that. I don't know if it will lead to an increase of our market share towards our competitors, but I hope so indeed.
Shall we move on to the next question? All right. Our next caller is Matthew Walker of Credit Suisse. Matthew, when you're ready, please go ahead.
Thanks a lot. Good afternoon. I've got three questions, please. The first is just on the one-off in the music business. It seems to be a bit in publishing, and some in another area. Sorry, I missed it. Maybe it was already explained. If you could just go through that and say, was there any impact of the one-off on the streaming number? If so, how much it was? Second question is on the two-sided marketplace. Spotify said on their call that you were very enthusiastic about the two-sided marketplace, much more so than the other labels. Can you tell us how much are you investing actually in the two-sided marketplace, and what do you expect to get in return?
Finally, if you could say anything on market share gain or loss so far this year versus the other labels, is it the case that we should expect a market share gain, for example, from the Taylor Swift album, in the second half of the year?
Take the first one on the one-off because it's a pure financial question. We have the impact chart given on the slide 24. This is very clear and very precise for that, both in Q1 and in Q2. There was no impact on the streaming and subscription lines. The impact were in other digital sales for the Q1 and in music publishing for the Q2. This being said, that I want to highlight is that we have some items this half year. It's been the truth that we didn't have in the first half of last year. Generally speaking, it's very frequent that we have such sort of one-time item. Why?
It comes from discussion with platforms, with labels, with partners, and we have always discussion regarding the past and the current contracts, and we have some possibilities to look to the files, to the data which have been used to pay royalties and so. In the future, I am sure that we will have other positive impact on the accounts of Universal Music, thanks to such discussion and claims sometimes. Universal Music always look to be paid properly by the partners, which is completely logical, I would say.
On the question on Spotify, we don't get into specific details, as you are aware. I'm repeating my position, which is the relationship between UMG and Spotify
Has been based on working very closely on developing innovative marketing campaigns and tools to help artists to reach the biggest possible audience on Spotify's platform. We're expecting that this agreement will provide us with the possibility to bring innovation and creating innovation in a way to make the great quality of our Universal Music Group artists available to the highest possible proportion of listeners. That's kind of the main driver between all what we have done, and under the flag of innovative capacity to make that work, and to develop from strength to strength.
All right. Shall we move on to the next question?
Yes.
Excellent. Our next caller is Conor O'Shea of Kepler Cheuvreux. Conor, when you're ready, please go ahead.
Yes. Thank you for taking my questions. Three questions. First two questions on UMG. If I think I follow what you said, Hervé, you said, I think for the first half, there was about EUR 50 million of one-time items on revenue, split between other digital and music publishing. Can you give us the impact on operating profit in the first half of the year from those two items? Does that drop through almost 100%? Secondly, on the other digital sales, I appreciate the detail on slide 24. It seems that there were no one-time items in Q2, but I think until recently, we've been used to 25%-30% declines in digital downloads as a switch into streaming continues. Has that changed materially? I think in Q2, you're on a single-digit decline, which looks like a lot better than we expect.
The third question just on Havas. You have a 500 basis point margin decline in the first half of the year, which is bigger than the peer group in the agency sector. It looks like there's been some tactical cost savings, but maybe not a lot of restructuring costs. Can you give us some help about what we could expect in the second half of the year? Are the adjustments enough in a slightly better environment to get to, let's say, a flat operating profit in H2 versus H2 2019? Thank you.
Well, thank you for your question. The first one on the impact of the one-time item, I think that you have all the details in the slide 25 or 24 in terms both on revenues and on EBITDA. I let you make the mathematics on such figures that you have both the impact at the revenue and the EBITDA level. The decline in downloads, this is something which is roughly in the same trend on all the quarter after quarter. I have no specific reason to explain from one quarter can be the difference. The trend is always the same. There is no specific differences. Havas, I could say that the decline in the EBITDA ratio at Havas has to be considered with a mix of the geographies at Havas.
Probably the decline in Europe has been bigger than in the U.S. This is true for all the competitors of Havas. If you consider that Havas is more exposed to Europe, it's logical to have a global figure which can be under some competitors, if the competitors are more exposed to the U.S. activities. If you look to region by region, I would say the performance of Havas is more or less in line with the competitor. It's important to highlight. Secondly, I believe that when you make a cost reduction program in advertising businesses, you have never the full effect of the cost reduction immediately. You have some timing effect when you are having a decrease in the staff, for example. It takes some weeks or some months to get the full effect of the savings.
That's why I do believe that the cost reduction plan will have a more important effect in the second half of 2020 than the first half, indeed. Thank you.
Okay. Fair enough. Thank you.
All right. Our final question today comes from Thomas Singlehurst of Citi. Tom, when you're ready, please go ahead.
Thank you for taking the question. It's Tom here from Citigroup. I had a couple of questions. The first one on, I suppose, cash usage in the second quarter. I suppose one thing that doesn't really add up is that you're saying you didn't want to buy back shares for liquidity reasons, but you were perfectly happy to buy Lagardère shares. I suppose a couple of questions on the back of this, one of which is, can you go over again what is so attractive about the Lagardère opportunity. Is it travel retail that you're interested in? Is it the publishing assets? Just some more insights on why that was such a burning opportunity that it needed to be activated in advance of buying back your own shares.
I suppose, the second linked question is, when you talk about the October 20th deadline and you could buy back shares, is it just a could or is it a will, or how should we think about that in that context? That was the first question. The second question, very briefly on Spotify. I got the message loud and clear that you're not going to sell stake anytime soon, but it has performed very well. It's now obviously a very meaningful chunk of money. Yet, obviously, we've all read some comments in the press around the Taylor Swift deal that you've made a commitment to share the proceeds with artists.
Can you just give a bit more detail if you ever did get to a point where you're selling that stake, just how that sort of sharing of the proceeds would work now that it's clearly performed so well for you? Thank you.
Well, to answer the second question on the share buyback on the timing of it, we have no specific It's not a deadline. We can decide in the coming months after this program, if it is not completed by the end of October, we can obviously decide to launch a new buyback program, depending obviously on the level of the stock price in the market at that time. As you have seen, we have decided to launch several buyback programs, and we will adapt to the market conditions to decide whether to launch it, or relaunch it, or to change some details in this buyback program.
As regards to the decision, we're trying to compare things which have only as a common, the way we're using our liquidity. On the one hand, we do compare a tool, which is a tool that we're using to give back proceeds to shareholders. We've got length to be able to make a duration to make it happen. On the other side, we've got a situation, which was the situation of the Lagardère Group, which has occurred. Again, I repeat myself. Number one, in terms of allocation, it's less than 1% of Universal valuation. Number two, at the price we did it, we do consider that as a long-term financial investment.
As we said, this investment from Vivendi demonstrates our confidence in the outlook of this group, which has strong international leadership positions in its main businesses, and which like many others, is currently going through a difficult period. In the future, joint project between the two groups could be developed. We shall see. We keep options open. Again, this stake is the possibility in a specific situation to have a stake and to build optionality, and to consider that as a long-term financial investment. On the other terms, it's an ongoing vehicle that we're using in specific circumstances to make a buyback and to use part of our liquidity availability to give back money to the shareholders. We manage the situation depending on the events, depending on the opportunities, and depending on what we are aiming at achieving.
Just finally, to answer the question on Taylor Swift, on the possibility to share a part of the capital gain on Spotify, I just can say that we do not disclose the details of the contract with the artist. I remember what has been written at that time. To come back to Spotify, we are very satisfied as we are today with the stake in Spotify, and we have no intention to sell our stake in Spotify. We do consider that the long-term relationship with Spotify is in the best interest of both our shareholders and our artists, and that to develop the market through such relationship with Spotify is very good for the future of Universal Music and its main stakeholders. Thank you very much.
Thank you very much.
We have one final question that's come through, if you would like to take it. All right. The caller is Matti Littunen of Bernstein. When you're ready, please go ahead.
Good evening. Thank you for your patience. Only two questions. One, how should we expect the l
evel of A&R investment at UMG to develop in the future? Two, on that African growth for Canal+. Is there a material contribution from English-speaking markets in Africa, or was it mainly the French-speaking countries driving that growth? Thank you.
Thank you.
Thank you for your questions. On the African, it's mainly driven by French-speaking territories in terms of growth.
The first question was on the IRR for Universal Music. Indeed, it's very difficult to predict anything because it depends on opportunities, and each time there are good opportunities to develop or to increase investment in content. I think Universal Music will consider it under the supervision of Vivendi and will decide in the best interest of the artist, indeed, on the business and the future revenues of profitability of Universal Music.
No need to say that Universal Music Group, under the fantastic leadership of Sir Lucian Grainge, has made a very strong reputation on being the very best company in terms of spotting talents and providing our music company with the very best of the best. When you see as a result, let me take the example of 2019. We had the eight of the 10 first results worldwide. Being able to maintain a level of investment, which is like an R&D investment for talent scouting and building what has enabled the company to be a worldwide leader in the industry, managing what is very unique to creative industries, which is a business, but based on talent.
I must say that I'm always extraordinarily excited, but also very impressed by the quality of all our people at UMG, which is the result of the fantastic know-how and talent of Sir Lucian. Obviously, this is a momentum and an investment that we are discussing with Universal Music Group. We do put at the center of the UMG DNA this capacity to spot those who are going to be the big talent for the future. That's very important to maintain what is very unique to UMG.
Many thanks.
All right. This concludes our question session.
You are taking the words out of my mouth. Thank you all for this session, and very much looking forward to getting back with you.
In October.
In October.
October. Bye bye.
Bye bye.
Everybody, have a nice vacation. Bye.
Thank you. Yes. Great summer. Bye bye.
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