PRESS RELEASE
TECHNICOLOR: FIRST HALF 2020
RESULTS
Paris (France), 30
July 2020 – Technicolor (Euronext Paris: TCH;
OTCQX: TCLRY) announces today its results for the first half of
2020.
Richard Moat, Chief Executive Officer of
Technicolor, stated:
“This first half of 2020 has been a period of
intense activity for Technicolor. On the one hand, our teams have
been working hard to face the Covid-19 crisis, and to adapt quickly
in order to ensure the continuity of our operations and the ongoing
delivery of our high value added services to our customers. On
the other hand we have successfully structured a comprehensive
financial restructuring plan, which will provide a much stronger
framework for the long-term sustainability of the Company. The
implementation of the restructuring plan is going according to
schedule, with the first €240 million tranche of the New Money
already received, the second €180 million tranche on its way
following the approval of the Commercial Court of Paris on July
28th, and the two capital increases to be launched in the coming
weeks. I am proud of the work done and I would like to warmly thank
all of our teams, both internal and external, for their commitment
and our shareholders for their support. In the first half, the
Group’s activities have demonstrated resilience to the Covid-19
pandemic. Our business units are well positioned to take advantage
of the increased demand for original content, the strong increase
in digital media consumption, and the significant growth in
residential broadband access. We continue to have valuable assets
and global leadership positions in each of our business units. We
intend to become a stronger company for our employees and a
stronger partner for our suppliers and customers. I am confident
that there is a bright future ahead for Technicolor”
First half 2020
results:
After a strong first quarter, the
Group’s activities have demonstrated resilience to the Covid-19
crisis in the second quarter:
- Production Services activities were most affected due
to the halting of live action shooting, impacting Film and Episodic
Visual Effects and Post Production. Increased demand in Animation
and resilience in Advertising helped mitigate the impact of
Covid-19;
- DVD Services were hit by the lack of new film releases
following cinema closures, partly compensated by strong back
catalog demand;
- After facing supply shortages, Connected Home’s Asian
activities are now back to normal. Consumer demand for better
broadband and wifi helped drive strong demand in the United
States.
Consolidated revenues for the Group were
down 19% at current rates to €1,433 million, as the impact of
Covid-19 on Production Services and DVD Services was partially
compensated by an outperformance in Broadband, particularly in
North America (+15% compared to the first half of
2019).
The Group maintained a strong focus on
the delivery of previously announced cost savings through the
Strategic Plan, and is well on track to achieve total savings
in excess of €160 million this year and €300 million by 2022. To
date, €67 million of cost savings related to the Strategic Plan
announced in 2020 have been achieved, whilst detailed plans are in
place to achieve the remainder.
The financial restructuring plan
approved by the Group’s creditors, shareholders and the Commercial
Court, provides a framework for Technicolor`s long-term
sustainability. The first tranche (c. €240 million) of the “New
Money” facility under the financial restructuring plan has been
received, and the second tranche (c. €180 million) of the "New
Money" facility should be received at the end of August by the
Group.
The updated outlook is broadly in line
with the base case presented in the press release issued on June
22nd .
First Half Year 2020 Key indicators from
continuing operations:
|
First Half (IFRS) |
|
|
In €
million |
2019 |
2020 |
At current rate |
At constant rate |
|
|
|
|
Revenues from continuing operations |
1,764 |
1,433 |
(18.8)% |
(19.3)% |
|
|
Adjusted EBITDA from
continuing operations |
104 |
53 |
(49.6)% |
(49.2)% |
|
|
As a % of revenues |
5.9% |
3.7% |
|
|
|
|
Adjusted EBITA from
continuing operations |
(44) |
(67) |
(53.5)% |
(50.4)% |
|
|
EBIT from continuing
operations |
(88) |
(194) |
n.a. |
n.a. |
|
|
Free Cash Flow from continuing operations before
net interest expenses |
(230) |
(252) |
(9.4)% |
(6.5)% |
|
|
Net interest expenses |
(32) |
(35) |
(8.7)% |
(8.3)% |
|
|
Free Cash Flow from continuing operations after
net interest expenses |
(262) |
(286) |
(9.3)% |
(6.7)% |
|
|
Figures at current rate, including IFRS 16
H1 2020 Group update
- Sales of €1,433 million were impacted by Covid-19. Decline in
demand in Connected Home linked to a slowdown in Eurasia, volume
decline in DVD Services and lower activity in Film & Episodic
Visual Effects were partially mitigated by a strong performance in
Broadband, driven by higher demand in North America, as well as by
Animation, which reported double digit revenue growth.
- Adjusted EBITDA of €53 million, down 49% at constant rates, was
impacted by lower business volumes in Film & Episodic Visual
Effects and in DVD Services related to Covid-19 activities
interruption, partly compensated by operational and financial
improvements across all divisions, particularly visible in
Connected Home where Adjusted EBITDA grew 126% to €54 million at
current rate.
- Adjusted EBITA of €(67) million was lower by €(23) million at
current rates, mitigated by lower D&A and reserves.
- A €68 million impairment charge was booked, mainly related to
DVD Services due to Covid-19 revised assumptions.
- Restructuring costs accounted for €(41) million at current
rate, including €(17) million in Production Services on cost
streamlining actions, €(15) million in DVD Services, mainly
resulting from distribution sites optimization, €(5) million in
Connected Home, pursuant to the three-year transformation plan, and
€(4) million for Corporate and Other.
- Free cash flow1 of €(286) million was lower by €(24) million at
current rate.
- Net debt at nominal value amounts to €1,607 million, and will
be reduced significantly by the debt restructuring planned under
the terms of the Accelerated Financial Safeguard (SFA) plan (see
below).
- The Group is targeting €300 million in additional run-rate cost
savings by 2022. At the end of June 2020 the group had already
realized €67 million of these cost savings.
Outlook
- The trading environment remains highly uncertain – Covid-19
induced businesses disruptions are still affecting Production
Services activities, in particular in North America and India. The
outlook provided below relies solely on currently available market
forecasts, and remains subject to changes in case of further
evolution of the pandemic.
- Also, the financial restructuring undergone by
Technicolor, and the very significant strengthening of its
financial capabilities as a consequence, remain to be fully took
into account by its stakeholders. This should improve, following
the successful conclusion of the SFA process, which closed on July
28th. The outlook below does not not take into
account any improvements coming from the restructuring. Conversely
it does include some of the negative impacts associated with the
entry into an accelerated financial safeguard procedure.
- After a strong first quarter and a second quarter demonstrating
a better than expected resilience, Technicolor expects:
- Adjusted continuing EBITDA of €169 million and Adjusted EBITA
of €(64) million in 2020;
- Adjusted continuing EBITDA of €425 million and Adjusted EBITA
of €202 million in 2022;
- It should be noted that more than €15 million of Covid-19
related cost will be included in the Group’s EBITDA in 2020.
- Continuing free cashflow (before financial results and tax) is
anticipated to be in a range between €(115) to €(150) million in
2020 and will improve to €259 million in 2022. Following the entry
into the SFA procedure, a faster than expected shortening of
payment terms was requested by suppliers, which will lead to early
payments in 2020 vs. the following year. This should impact 2020
and 2021, but mitigating factors will help 2021 to remain in line
with strategic plan. The positive side of these changes is that the
Group’s ambition to very significantly reduce payment terms by 2022
will be achieved as early as beginning of 2021. As these are timing
adjustments, the Group’s liquidity needs remain unchanged
overall.
Continuing Operations – post
IFRS 16 |
|
|
|
|
|
€m, FYE Dec post
IFRS-16 |
2019a |
2020e |
2022e |
|
|
|
|
Adjusted EBITDA from
continuing operations |
324 |
169 |
425 |
|
|
Adjusted EBITA from continuing operations |
42 |
(64) |
202 |
|
|
Continuing FCF before financial results and
tax |
(8) |
(115)-(150) |
259 |
|
|
|
|
|
|
|
|
Update on the announced financial
restructuring plan
- Over the last few weeks, the Group has successfully
accomplished the required steps to implement the announced
financial restructuring plan:
- 22 June: opening of the SFA;
- 5 July: approval of the draft safeguard plan by the creditor’s
committee;
- 20 July: approval of the financial restructuring plan by a
large majority of shareholders;
- 28 July: approval of the SFA plan by the Commercial Court;
- As a consequence, the Group is preparing the partial debt
equitization (up to €660 million) which, as announced, will
include:
- a rights issue of the Company, with shareholders’ preferential
subscription rights, for a total amount of €330 million, at a
subscription price of €2.98 per share, fully backstopped by the
Term Loan B and RCF lenders by way of set-off of their claims at
par under the existing credit facilities; Bpifrance Participations
will subscribe to the rights issue in cash pro rata its current
shareholding (c. 7.56%) on a non-reductible basis (souscription à
titre irréductible) for an aggregate amount of circa €25 million;
any cash proceeds of the rights issue will be used in full to repay
the Term Loan B and RCF lenders, at par value;
- a reserved capital increase of the Company, for a total amount
of €330 million, at a subscription price of €3.58 per share,
reserved for the Term Loan B and RCF lenders and which will be
fully subscribed by way of set-off against their claims at par
under the existing credit facilities;
- free warrants granted to New Money lenders (« New Money
Warrants »), exercisable during 3 months, with an exercise price of
€0.01 with a strike price equal to the nominal value of the shares
and representing 7.5% of the share capital of the Company (after
the capital increases and New Money Warrants exercise, but before
dilution from the shareholders’ free warrants).
- shareholders' free warrants,to be allocated to all shareholders
providing proof of a book entry of their shares on the date
retained for the detachment of the shareholders’ preferential
subscription rights under the right issue, with a 4-year term, at
the same price as the reserved capital increase (3.58 euros per
share) and representing 5% of the share capital of the Group after
all capital issuances (i.e. after capital increases, New Money
Warrants exercise and shareholders’ free call options). Each
existing share will be granted with 1 free warrant, and 5 free
warrants will give right to subscribe to 4 new shares.
These issuances have been approved today by the
Board of Directors of the Company and will be subscribed according
to the conditions detailed in the prospectus dated July, 10, 2020
approved by the French market authority (l”AMF”)
under number 20-343 related to equity issuances as part of the
Group Accelerated Safeguard Plan (the
“Prospectus”). The Prospectus is composed of the
Company's 2019 Universal Registration Document filed with the AMF
on April 20, 2020 under number D.20-0317 (“The
Universal Registration Document”), of the
Amendment to the 2019 Universal Registration Document filed with
the AMF on July 10, 2020 under number D.20-0317-A01 (“The
Amendment to the Universal Registration Document”) and a
securities note (“the Securities Note”) (including
the summary of the Prospectus).
Due to, inter alia, the publication of the
half-year financial report, the Prospectus will be updated and
completed by a supplement, to be approved and published on August
4, 2020, according to current schedule (“the
Supplement”).
Copies of the Prospectus and the Supplement are
and will be available free of charge at Technicolor's registered
office, -10 rue du Renard - 75004 Paris, on the Company's website
(https://www.technicolor.com) as well as on the AMF website
(www.amf-france.org).
Segment Review – First half 2020 Result
Highlights
|
First Half |
Change HoH |
Production
Services |
2019 |
2020 |
Reported |
At constant rate |
In €
million |
Revenues |
428 |
279 |
(34.8)% |
(35.3)% |
Adj. EBITDA* |
81 |
2 |
n.a. |
n.a. |
As a % of revenues |
+18.8% |
+0.8% |
|
|
Adj. EBITA* |
19 |
(51) |
n.a. |
n.a. |
As a % of revenues |
+4.3% |
(18.4)% |
|
|
(*) Figures at current rate, including IFRS
16
- Production Services revenues totaled €279
million, down 35.3% year-on-year at constant rate and down 34.8% at
current rate, driven by the previously anticipated (pre-Covid-19)
delays in awards coming from one key client, and mostly by the
subsequent pandemic-related impacts on production around the world:
- Film & Episodic Visual Effects: revenues were significantly
lower year-on-year, mainly due to the anticipated reduction in
studio tentpole volume in MPC Film referred to above, which was
further amplified by the pandemic. VFX teams worked on
approximately 20 theatrical films from the major studios, including
projects like Cruella (Disney), Ghostbusters: Afterlife (Sony),
Godzilla vs. Kong (Warner Bros./Legendary), Top Gun: Maverick
(Paramount), and West Side Story (Fox/Amblin); and over 30 Episodic
and/or Non-Theatrical (i.e., Streaming/OTT) projects, including The
Alienist season 2 (TNT/Paramount), American Gods season 3
(Starz/Fremantle), Cursed (Netflix), Eurovision Song Contest: The
Story of Fire Saga (Netflix), The Old Guard (Netflix). During the
second quarter, Mr. X and Mill Film were merged under the Mr. X
banner in order to consolidate resources and sales efforts.
- Advertising: lower revenue compared to the prior year due to
the impact of Covid-19 on client spend and live-action production
shoots, despite a strong first quarter driven by high Super Bowl
demand (Technicolor contributed to over 40 commercials, including
the two-minute opening film for the NFL). Technicolor’s Advertising
businesses received numerous industry accolades during the latest
quarter, including MPC winning VFX Company of the Year at the Ad
Age Creativity Awards. In Televisual’s Commercials 30 annual survey
voted on by Ad Producers in the UK, four of the Best Colourists Top
10 come from MPC or The Mill, including the top two colourists;
while The Mill ranked #1 in the ‘Rated Highest’ and ‘Used Most’
categories in the Best Post Houses Top 10. Highlight projects
delivered during the second quarter include EA Sports ‘Feel Next
Level’, Heineken ‘Solar Power’, McDonald’s ‘Lights On’,
Mercedes-Benz GLA ‘Surfer’, and PlayStation ‘The Last of Us Part
II’.
- Animation & Games: double-digit revenue growth compared to
prior year, due to higher volume in feature work-for-hire animation
services, more than offsetting the Q2 temporary closure of the
studio in Bangalore due to the lockdown in India. In the second
quarter Mikros Animation delivered Paramount’s The SpongeBob Movie:
Sponge on the Run and continues in production on Spin Master’s PAW
Patrol: The Movie, while beginning production on two other animated
features. In episodic animation, Technicolor completed delivery of
Disney/Wild Canary’s Mira, Royal Detective and the latest orders
from DreamWorks Animation on The Boss Baby: Back in Business and
Fast & Furious Spy Racers; and maintains a strong pipeline from
key clients;
- Post Production: lower revenues compared to the prior year,
driven primarily by declines in the North American facilities.
Compared with the other service lines, Post Production was
immediately impacted during the semester by Covid-19 from the
sudden shutdown of productions globally, due to its reliance on
receiving live-action footage (e.g., over 50 sets of dailies
stopped overnight in March). During the second quarter, Post
Production worked on projects like NOS4A2 (AMC), Private Eyes
(Entertainment One), The SpongeBob Movie: Sponge on the Run
(Paramount), Tiny Pretty Things (Netflix), and The Twilight Zone
(CBS All Access).
Covid-19 situation update:
- Starting from March 2020, Production Services Film and Episodic
VFX took a major hit as all live-action film shoots were suspended
and movie theaters closed. As a result, new projects were put on
hold with a negative impact on the order book;
- Advertising activity weakened during the second quarter due to
the global macro-economic situation, causing major advertisers to
delay campaigns and reduce marketing budgets;
- Animation and Games activity, with the ability to efficiently
continue production from home and without the dependency of
live-action film shooting, had a strong topline performance in the
first half versus the year-ago period despite the temporary
shutdown of the Bangalore studio;
- Post Production was also significantly impacted by the
live-action production stoppages, but is expected to ramp-up to
normal operations more quickly than Film and Episodic VFX once key
clients re-start production;
- Production Services organized itself to be able to deliver on
existing contracts and take new ones with as much as possible of
its workforce working remotely. Main impediments came from the
strict lockdown in India and progressive ramp-up of work from home
capacity. This resulted in idle labour costs and related fixed
costs, as many Technicolor artists were either not able to work or
had no work. On the other hand, the Group benefitted from
government support for furloughed employees in Australia, France,
Canada, US and the UK;
- As key industry participants anticipate productions to restart
filming in the third quarter (some smaller productions have already
restarted; while major studio pictures are relaunching productions
in locations that have been successful in their Covid-19 responses—
e.g., the Avatar films in New Zealand) and theaters to reopen
progressively over the second half of 2020, Technicolor has adapted
its workforce to the reduction of the market and therefore
increased its efforts in restructuring its cost base.
Adjusted EBITDA amounted to €2
million, or 0.8% of revenue, down €79 million year-on-year. The
Adjusted EBITDA reduction was mainly driven by Film & Episodic
VFX. This negative evolution has fully impacted Adjusted EBITA
compared to prior year.
|
First Half |
Change HoH |
DVD Services |
2019 |
2020 |
Reported |
At constant rate |
In €
million |
Revenues |
374 |
302 |
(19.3)% |
(20.3)% |
Adj. EBITDA* |
9 |
1 |
n.a. |
n.a. |
As a % of revenues |
+2.5% |
+0.5% |
|
|
Adj. EBITA* |
(31) |
(29) |
+7.2% |
+8.4% |
As a % of revenues |
(8.4)% |
(9.7)% |
|
|
(*) Figures at current rate, including IFRS
16
- DVD Services revenues totaled €302 million at
current rate in the first half 2020, down 20.3% at constant rate
and 19.3% at current rate compared to 2019, primarily due to lower
volumes across all formats driven by year on year secular decline
and the impact of Covid-19, which impacted the second quarter 2020.
Total combined replication volumes reached 326 million discs, down
27% year-on-year. Nevertheless, back catalog volumes were
considerably higher than antipated during the Covid-19 crisis,
which partially mitigated the loss of the new release
volumes.
- Standard Definition DVD volumes were down 26% in the first half
year-on-year driven by overall expected demand reductions for the
format, compounded by a comparatively weaker release slate for
selected major studio customers as compared to first half of
2019;
- Blu-rayTM volumes were down 25% year-on-year on similar drivers
as DVD;
- Ultra HD Blu-rayTM volumes were down 24% year-on-year;
- CD volumes were down 39% year-on-year.
As a result of ongoing industry-wide pressures,
DVD Services continued its structural division-wide initiatives to
adapt distribution and replication operations, and related customer
contract agreements in response to continued volume
reductions. Multiple successful contract renegotiations were
announced in 2019, and similar efforts with other customers are
ongoing.
Volume data for DVD
Services
|
First Half |
In million units |
2019 |
2020 |
% Change |
Total Combined Volumes |
445.9 |
326.2 |
(26.8)% |
By
Format |
SD-DVD |
299.2 |
220.1 |
(26.4)% |
|
Blu-ray™ |
117.6 |
88.4 |
(24.8)% |
|
CD |
29.1 |
17.6 |
(39.4)% |
By Segment |
Studio/Video |
402.4 |
297.4 |
(26.1)% |
|
Games |
9.2 |
6.3 |
(31.3)% |
|
Music & Software |
34.2 |
22.5 |
(34.3)% |
Covid-19 situation update:
- The impact of the stay-at-home orders varied by region (i.e. by
country, state, and city) and in timing/duration. The level of
retailer shutdowns varied by country / region, but where retailers
were open, catalog sales were relatively robust. Online sales were
strong after a brief slowdown in demand as e-tailers temporarily
adjusted their supply chain for increased activity for
essentials;
- Some production facilities were impacted by short term closures
and temporary staffing shortages, but the overall impact was
low;
- The level of ongoing impact throughout 2020 and beyond will be
dependent on the extent and duration of ongoing restrictions
(driven by rate of new Covid-19 case growth). The specific timing
and extent of the reopening of movie theaters will impact the level
of new release activity on disc. DVD services has accelerated
certain aspects of its future restructuring plans in an effort to
adapt to these impacts.
Adjusted EBITDA amounted to €1
million at current rate, or 0.5% of revenue, broadly in line with
expectations given the anticipated volume reduction and normal
seasonal weakness in the first half. Margin was bolstered by
ongoing cost savings and a positive impact from contracts
renegotiated in 2019.
###
|
First Half |
Change HoH |
Connected Home |
2019 |
2020 |
Reported |
At constant rate |
In €
million |
Revenues |
953 |
839 |
(12.0)% |
(12.3)% |
Adj. EBITDA* |
24 |
54 |
n.a. |
n.a. |
As a % of revenues |
+2.5% |
+6.4% |
|
|
Adj. EBITA* |
(17) |
20 |
n.a. |
n.a. |
As a % of revenues |
(1.7)% |
+2.4% |
|
|
(*) Figures at current rate, including IFRS
16
·Connected Home revenues
totaled €839 million in the first half of 2020, down 12.3%
year-on-year at constant rate and 12.0% at current rate, but in
line with expectations. The division is maintaining its market
leadership in the Broadband segment and in the video Android based
segment; both segments are expected to keep gaining importance over
the foreseeable future.
Business highlights:
North America: revenues
remained strong, driven by a very strong Broadband business with
the top 6 cable operators in the region, and higher video sales to
these customers fueled by the new solutions they are launching.
Revenues were up compared to the first half 2019.
Latin
America: The difficult macroeconomic situation in the
region continued driving demand down. Despite an increase in
Mexican video sales, the region was down overall due to a
significant reduction in Brazil resulting largely from weakness in
exchange rates. Broadband revenues were down across the region
mainly driven by delayed investments linked to Covid-19.
Europe, Middle East & Africa and
Asia-Pacific:
- Lower revenue compared to the prior year primarily explained by
headwinds in video demand in Europe;
- The video satellite business experienced weakness especially in
Central Europe and India due to lower demand from some large
customers. In addition, lower demand for 4K content in Japan and
Android TV devices in Korea has also impacted revenues in the
Eurasia region;
- For Broadband, APAC is relatively stable with slightly lower
demand in Australia. Europe is down significantly with Covid-19
negatively impacting sales in Southern Europe, partially
compensated with sales from new customer wins to a pan European
account.
The
division continues to focus on selective investments in key
customers and specific parts of the portfolio that will lead to
improved margins over the
year.
Revenue Breakdown for Connected
Home
|
First Half |
In € million |
2019 |
2020 |
% Change* |
Total revenues |
953 |
839 |
(12.3)% |
By
region |
North America |
398 |
463 |
+14.6% |
|
Europe, Middle East and Africa |
260 |
154 |
(42.0)% |
|
Latin America |
162 |
112 |
(26.0)% |
Asia-Pacific |
133 |
110 |
(17.8)% |
By
product |
Video |
376 |
318 |
(14.7)% |
|
Broadband |
577 |
521 |
(10.7)% |
(*) Variation at constant rates
Covid-19 situation update:
- The Covid-19 main impacts on the Connected Home activity are
related to the disruption of manufacturing, provoking shortages of
components and disruption in logistics in China and then in
South-East Asia at the beginning of the year. Despite Connected
Home’s efforts to mitigate these disruptions, the Group will have
some backlog unserved at the end of the first half, which will be
partially recovered during the second half;
- The lockdown measures have exposed consumers to the need for a
high quality broadband and wifi service in the home for
remote working and digital entertainment. As a result, demand for
broadband gateways was very resilient during this period. The
US market is showing an increase of demand and very low churn, and
due to our market position we are experiencing a significant
increase in demand;
- In addition to the consequences of Covid-19, Latin American
countries are suffering a significant currency crisis due to the
drastic oil price decline. This is affecting the plans of all
companies in the region, including the service providers, who are
adjusting their demand accordingly;
- The lockdown impact on operations besides supply chain and
R&D activities was minimal as teams organized work in
accordance with safety rules and guidelines with continued access
to key labs.
Adjusted EBITDA amounted to €54
million, or 6.4% of revenue. Adjusted EBITA of €20 million improved
by €37 million compared to prior year at current rate. This good
evolution in profitability is the result of the transformation plan
launched 2 years ago, increasing the division’s performance and
drastically improving productivity.
###
|
First Half |
Change HoH |
Corporate &
Other |
2019 |
2020 |
Reported |
At constant rate |
In €
million |
Revenues |
9 |
13 |
+40.2% |
+40.2% |
Adj. EBITDA* |
(10) |
(5) |
+48.9% |
+49.4% |
As a % of revenues |
n.a. |
n.a. |
|
|
Adj. EBITA* |
(15) |
(7) |
+51.9% |
+52.3% |
As a % of revenues |
n.a. |
n.a. |
|
|
(*) Figures at current rate, including IFRS
16
·Corporate & Other
includes the Trademark Licensing business.
Corporate &
Other recorded revenues of €13 million in the first half of 2020,
increasing compared to last year. Adjusted EBITDA amounted to €(5)
million and Adjusted EBITA €(7) million.
Summary of consolidated results for the
first half of 2020
|
First Half (IFRS) |
In € million |
2019 |
2020 |
Change |
Revenues
from continuing operations |
1,764 |
1,433 |
(18.8)% |
Change at constant currency (%) |
|
|
(19.3)% |
o/w |
Production Services |
428 |
279 |
(34.8)% |
|
DVD
Services |
374 |
302 |
(19.3)% |
|
Connected Home |
953 |
839 |
(12.0)% |
|
Corporate & Other |
9 |
13 |
+40.2% |
Adjusted EBITDA from continuing operations |
104 |
53 |
(49.6)% |
Change at
constant currency (%) |
|
|
(49.2)% |
As a % of revenues |
+5.9% |
+3.7% |
(220)bps |
o/w |
Production Services |
81 |
2 |
n.a. |
|
DVD
Services |
9 |
1 |
n.a. |
|
Connected Home |
24 |
54 |
n.a. |
|
Corporate & Other |
(10) |
(5) |
+48.9% |
Adjusted EBITA from continuing operations |
(44) |
(67) |
(53.5)% |
Change at
constant currency (%) |
|
|
(50.4)% |
As a % of revenues |
(2.5)% |
(4.7)% |
(220)bps |
Adjusted
EBIT from continuing operations |
(71) |
(89) |
(24.6)% |
Change at
constant currency (%) |
|
|
(22.1)% |
As a % of revenues |
(4.0)% |
(6.2)% |
(220)bps |
EBIT from continuing
operations |
(88) |
(194) |
n.a. |
Change at
constant currency (%) |
|
|
n.a. |
As a % of revenues |
(5.0)% |
(13.6)% |
(860)bps |
Financial
result |
(48) |
(67) |
- |
Income tax |
(7) |
(3) |
- |
Share of profit/(loss) from associates |
(1) |
0 |
- |
Profit/(loss) from continuing operations |
(143) |
(264) |
- |
Profit/(loss)
from discontinued operations |
4 |
(1) |
- |
Net income |
(139) |
(265) |
- |
Restructuring costs accounted for €(41) million
at current rate and related to savings initiatives across all
divisions.
A €72 million impairment charge has been booked,
mainly at the DVD Services division level due to Covid-19 revised
assumptions.
The EBIT from continuing operations amounts to a
loss of €(194) million in 2020.
The financial result totaled €(67) million
in the first half 2020 compared to €(48) million in the first half
2019, reflecting:
- Net interest costs of €(40) million, slightly up from last year
(at €(32) million) primarily due to the bridge interest rates.
- Other financial charges amounted to €(28) million in the
first half 2020 compared to €(16) million in the first half 2019
explained by the expenses related to the debt restructuring
process.
Income tax amounted to €(3) million, compared to
€(7) million in the first half 2019.
Group net income therefore amounted to €(265)
million at current rate in the first half 2020 compared to the
€(139) million loss in the first half 2019.
Reconciliation of adjusted indicators
(unaudited)
Technicolor is presenting, in addition to
published results and with the aim to provide a more comparable
view of the evolution of its operating performance in the first
half 2020 compared to the first half 2019, a set of adjusted
indicators which exclude the following items as per the statement
of operations of the Group’s consolidated financial statements:
- Restructuring costs, net;
- Net impairment charges;
- Other income and expenses (other non-current items).
These adjustments, the reconciliation of which
is detailed in the following table, amounted to an impact on EBIT
from continuing operations of €(106) million in the first half 2020
compared to €(17) million in the first half of 2019 (including
IFRS 16).
|
First Half (IFRS) |
In € million |
2019 |
2020 |
Change* |
EBIT from continuing operations |
(88) |
(194) |
(106) |
Restructuring charges, net |
(12) |
(41) |
(30) |
Net
impairment losses on non-current operating assets |
(1) |
(72) |
(71) |
Other income/(expense) |
(4) |
8 |
12 |
Adjusted EBIT from continuing operations |
(71) |
(89) |
(18) |
As a % of revenues |
(4.0)% |
(6.2)% |
(220)bps |
Depreciation and amortization (“D&A”) * |
159 |
139 |
(21) |
IT capacity use for rendering in Production S. |
16 |
2 |
(14) |
Adjusted EBITDA from continuing operations |
104 |
53 |
(52) |
As a % of
revenues |
+5.9% |
+3.7% |
(220)bps |
(*) Variation at current rates
Free Cash Flow Reconciliation and
Summarized financial structure (unaudited)
Technicolor defines “Free Cash Flow” as net cash
from operating activities (continuing and discontinued) plus
proceeds from sales of property, plant and equipment (“PPE”) and
intangible assets, minus purchases of PPE and purchases of
intangible assets including capitalization of development
costs.
|
Full Year (IFRS) |
|
In € million |
June 30, |
June 30, |
|
2019 |
2020 |
|
|
|
|
Adjusted EBITDA from continuing operations |
104 |
53 |
|
Changes in working capital and other
assets and liabilities |
(175) |
(197) |
|
IT capacity use for rendering in
Production Services |
(16) |
(2) |
|
Pension cash usage of the period |
(12) |
(12) |
|
Restructuring provisions – cash usage
of the period |
(15) |
(23) |
|
Interest paid |
(33) |
(35) |
|
Interest received |
1 |
- |
|
Income tax paid |
(10) |
(1) |
|
Other items |
(16) |
(13) |
|
Net operating cash generated from continuing
activities |
(172) |
(230) |
|
Purchases of property, plant and
equipment (PPE) |
(43) |
(17) |
|
Proceeds from sale of PPE and
intangible assets |
1 |
- |
|
Purchases of intangible assets
including capitalization |
(47) |
(39) |
|
of development costs |
|
Net operating cash used in discontinued
activities |
(6) |
(8) |
|
Free cash-flow |
(269) |
(294) |
|
Nominal gross debt |
1,403 |
1,670 |
|
Cash position |
65 |
63 |
|
Net financial debt at nominal value (non
IFRS) |
1,338 |
1,607 |
|
IFRS
adjustment |
(5) |
(6) |
|
Net financial debt (IFRS) |
1,333 |
1,601 |
|
- The change in working capital & other assets and
liabilities was negative by €197 million in the first half 2020
mostly driven by unfavorable changes in supplier payment terms at
Connected Home and DVD Services, and reduced milestone payments at
Film & Episodic Visual Effects due to Covid-19.
- Cash outflow for restructuring totaled €23 million in the first
half of 2020, up by €8 million year-on-year, mainly resulting from
accelerated implementation cost savings related to the Strategic
Plan;
- Capital expenditures amounted to €56 million, down by €34
million year-on-year, reflecting a strict control of investment
expenses.
- Cash position at €63 million end of first half 2020, compared
to €65 million end of December 2019.
The Board of
Directors approved today these consolidated financial statements,
which have been reviewed by our statutory auditors,
who are in the process of issuing an unqualified
opinion.
Financial calendar
Q3 2020 results |
28 October 2020 |
FY 2020 results |
3 March 2021 |
###
Prospectus
The Prospectus is composed of (i) the Company's
2019 Universal Registration Document filed with the AMF on 20 April
2020 under number D.20-0317, (ii) the Amendment to the 2019
Universal Registration Document filed with the AMF on 10 July 2020
under number D.20-0317-A01 and a securities note (including the
summary of the Prospectus). Copies of the Prospectus are available
free of charge at Technicolor's registered office, -10 rue du
Renard - 75004 Paris, on the Company's website
(www.technicolor.com) as well as on the AMF website
(www.amf-france.org).
Warning: Forward Looking
Statements
This press release contains certain statements
that constitute "forward-looking statements", including but not
limited to statements that are predictions of or indicate future
events, trends, plans or objectives, based on certain assumptions
or which do not directly relate to historical or current facts.
Such forward-looking statements are based on management's current
expectations and beliefs and are subject to a number of risks and
uncertainties that could cause actual results to differ materially
from the future results expressed, forecasted or implied by such
forward-looking statements. For a more complete list and
description of such risks and uncertainties, refer to Technicolor’s
filings with the French Autorité des marchés financiers.
Disclaimer
This press release does not constitute an offer
to sell or the solicitation of an offer to buy, nor shall there be
any sale of securities, in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No communication and no information in respect of this transaction
may be distributed to the public in any jurisdiction where a
registration or approval is required. The issue, the subscription
for or the purchase of Technicolor’s shares may be subject to
specific legal or regulatory restrictions in certain jurisdictions.
Technicolor assumes no responsibility for any violation of any such
restrictions by any person.
This press release and the information it
includes do not constitute an offer to sell or subscribe for, or a
solicitation of an order to buy or subscribe for Technicolor
securities in Australia, Canada, Japan, or the United States of
America or in any other country in which such offer or solicitation
would be unlawful.
The release, publication or distribution of this
press release may, in certain jurisdictions, constitute a breach of
the applicable local laws and regulations. Consequently, persons
physically present in such jurisdictions in which this press
release is released, published or distributed must be aware of and
comply with any such local restrictions. This press release must
not be released, published or distributed, directly or indirectly,
in Australia, Canada, Japan or the United States of America.
This announcement is not an advertisement and
not a prospectus within the meaning of Regulation (EU) No 2017/1129
of the European Parliament and of the Council of 14 June 2017 on
the prospectus to be published when securities are offered to the
public or admitted to trading on a regulated market, and repealing
the Prospectus Directive 2003/71/EC (the "Prospectus
Regulation").
With respect to the Member States of the
European Economic Area other than France, no action has been
undertaken or will be undertaken to make an offer to the public of
the securities referred to herein requiring a publication of a
prospectus in any relevant Member State. Accordingly, any offer of
Technicolor's securities may only be made in any Member State (i)
to qualified investors as defined in the Prospectus Regulation, or
(ii) in any other case exempting Technicolor from having to issue a
prospectus in accordance with Article 1(4) of the Prospectus
Regulation.
This document does not constitute or form a part
of any offer or solicitation to purchase or subscribe for
securities in the United States. With respect to the United States,
Technicolor's securities have not been, and will not be, registered
under the Securities Act of the United States of America, as
amended (U.S. Securities Act of 1933, as amended, hereinafter
referred to as the "U.S. Securities Act") and
Technicolor does not intend to make a public offer of its
securities in the United States. The securities of Technicolor may
not be offered, sold, exercised or delivered within the territory
of the United States of America, as defined by Regulation S of the
U.S. Securities Act, except pursuant to an exemption from the
registration or in a transaction not subject to the registration
requirements thereof and any applicable states securities laws.
###About
Technicolor:
www.technicolor.com
Technicolor shares are on the Euronext
Paris exchange (TCH) and traded in the USA in the form of American
Depositary Receipts on the OTCQX marketplace
(OTCQX: TCLRY).
Investor Relations
Christophe le Mignan: +33 1 88 24 32 83
Christophe.lemignan@technicolor.com
CONSOLIDATED STATEMENT OF
OPERATIONS
|
June 30, |
(€ in million) |
2020 |
|
2019 |
|
|
|
|
CONTINUING OPERATIONS |
|
|
|
Revenues |
1,433 |
|
1,764 |
Cost of
sales |
(1,323) |
|
(1,613) |
Gross Margin |
110 |
|
151 |
|
|
|
|
Selling and
administrative expenses |
(149) |
|
(163) |
Research and
development expenses |
(49) |
|
(60) |
Restructuring
costs |
(41) |
|
(12) |
Net impairment
gains (losses) on non-current operating assets |
(72) |
|
(1) |
Other income (expense) |
8 |
|
(4) |
Earnings before Interest & Tax from continuing
operations |
(194) |
|
(88) |
|
|
|
|
Interest
income |
- |
|
1 |
Interest
expense |
(40) |
|
(33) |
Other financial
income (expense) |
(28) |
|
(16) |
Net financial income (expense) |
(67) |
|
(48) |
|
|
|
|
Share of gain
(loss) from associates |
- |
|
(1) |
Income tax |
(3) |
|
(7) |
Profit (loss) from continuing operations |
(264) |
|
(143) |
|
|
|
|
DISCONTINUING OPERATIONS |
|
|
|
Net profit
(loss) from discontinuing operations |
(1) |
|
4 |
|
|
|
|
Net income (loss) |
(265) |
|
(139) |
Attributable
to: |
|
|
|
- Equity
holders of the parent |
(265) |
|
(139) |
-
Non-controlling interest |
0 |
|
0 |
|
|
|
|
EARNINGS PER SHARE |
June 30, |
(in euro, except number of shares) |
2020 |
|
2019 |
Weighted average number of shares outstanding (basic net of
treasury shares held) |
15,356,992 |
|
15,310,599 |
Earnings (losses) per share from continuing
operations |
|
|
|
- basic |
(17.22) |
|
(9.35) |
- diluted |
(17.22) |
|
(9.35) |
Earnings (losses) per share from discontinuing
operations |
|
|
|
- basic |
(0.04) |
|
0.26 |
- diluted |
(0.04) |
|
0.26 |
Total
earnings (losses) per share |
|
|
|
- basic |
(17.26) |
|
(9.09) |
- diluted |
(17.26) |
|
(9.09) |
|
|
|
|
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
|
(€ in million) |
June 30, 2020 |
|
December 31, 2019 |
|
|
|
|
|
ASSETS |
|
|
|
|
Goodwill |
777 |
|
851 |
|
Intangible
assets |
607 |
|
632 |
|
Property,
plant & equipment |
168 |
|
191 |
|
Right-of-use
assets |
248 |
|
285 |
|
Other operating non-current assets |
30 |
|
32 |
TOTAL OPERATING NON-CURRENT ASSETS |
1,830 |
|
1,991 |
|
|
|
|
|
|
Investments
and available-for-sale financial assets |
16 |
|
17 |
|
Other non-current financial assets |
43 |
|
22 |
TOTAL FINANCIAL NON-CURRENT ASSETS |
58 |
|
39 |
|
|
|
|
|
|
Investments in
associates and joint-ventures |
1 |
|
1 |
|
Deferred tax assets |
45 |
|
52 |
TOTAL NON-CURRENT ASSETS |
1,935 |
|
2,082 |
|
|
|
|
|
|
Inventories |
197 |
|
243 |
|
Trade accounts
and notes receivable |
486 |
|
507 |
|
Contract
Assets |
78 |
|
79 |
|
Other operating current assets |
230 |
|
184 |
TOTAL OPERATING CURRENT ASSETS |
991 |
|
1,013 |
|
|
|
|
|
|
Income tax
receivable |
34 |
|
36 |
|
Other
financial current assets |
16 |
|
13 |
|
Cash and cash
equivalents |
63 |
|
65 |
|
Assets classified as held for sale |
1 |
|
- |
TOTAL CURRENT ASSETS |
1,105 |
|
1,127 |
|
|
|
|
|
TOTAL ASSETS |
3,040 |
|
3,210 |
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
|
(€ in million) |
June 30, 2020 |
|
December 31, 2019 |
|
|
|
|
|
EQUITY & LIABILITIES |
|
|
|
|
Common stock
(15,407,114 shares at June 30, 2020 with nominal value of 0.01 euro
per share) |
- |
|
414 |
|
Subordinated
Perpetual Notes |
500 |
|
500 |
|
Additional
paid-in capital & reserves |
(409) |
|
(540) |
|
Cumulative translation adjustment |
(366) |
|
(339) |
Shareholders' equity attributable to owners of the
parent |
(275) |
|
36 |
|
Non-controlling interest |
0 |
|
0 |
TOTAL EQUITY |
(275) |
|
36 |
|
|
|
|
|
|
Retirement
benefits obligations |
345 |
|
342 |
|
Provisions |
37 |
|
30 |
|
Contract
Liabilities |
3 |
|
3 |
|
Other operating non-current liabilities |
26 |
|
25 |
TOTAL OPERATING NON-CURRENT LIABILITIES |
410 |
|
400 |
|
|
|
|
|
|
Borrowings |
1 |
|
979 |
|
Lease
liabilities |
201 |
|
224 |
|
Other
non-current liabilities |
1 |
|
1 |
|
Deferred tax
liabilities |
22 |
|
27 |
TOTAL NON-CURRENT LIABILITIES |
635 |
|
1,631 |
|
|
|
|
|
|
Retirement
benefits obligations |
33 |
|
33 |
|
Provisions |
59 |
|
70 |
|
Trade accounts
and notes payable |
678 |
|
825 |
|
Accrued
employee expenses |
139 |
|
134 |
|
Contract
Liabilities |
29 |
|
40 |
|
Other current
operating liabilities |
236 |
|
302 |
TOTAL OPERATING CURRENT LIABILITIES |
1,174 |
|
1,404 |
|
|
|
|
|
|
Borrowings |
1,382 |
|
8 |
|
Lease
liabilities |
80 |
|
87 |
|
Income tax
payable |
44 |
|
41 |
|
Other current
financial liabilities |
- |
|
2 |
TOTAL CURRENT LIABILITIES |
2,679 |
|
1,542 |
|
|
|
|
|
TOTAL LIABILITIES |
3,314 |
|
3,173 |
|
|
|
|
|
TOTAL EQUITY & LIABILITIES |
3,040 |
|
3,210 |
CONSOLIDATED STATEMENT OF CASH
FLOWS
|
June 30, |
(€ in million) |
2020 |
|
2019 |
Net income (loss) |
(265) |
|
(139) |
Income (loss) from discontinuing activities |
(1) |
|
4 |
Profit (loss) from continuing activities |
(264) |
|
(143) |
Summary adjustments to reconcile profit from continuing activities
to cash generated from continuing operations |
|
|
|
Depreciation and amortization |
144 |
|
158 |
Impairment of assets |
75 |
|
(1) |
Net changes in provisions |
4 |
|
(14) |
Gain (loss) on asset disposals |
(4) |
|
8 |
Interest (income) and expense |
40 |
|
32 |
Other non-cash items (including tax) |
7 |
|
6 |
Changes in working capital and other assets and liabilities |
(197) |
|
(175) |
Cash generated from continuing activities |
(195) |
|
(131) |
Interest paid on lease debt |
(10) |
|
(12) |
Interest paid |
(25) |
|
(21) |
Interest received |
- |
|
1 |
Income tax paid |
(1) |
|
(10) |
NET OPERATING CASH GENERATED FROM CONTINUING ACTIVITIES
(I) |
(230) |
|
(173) |
Acquisition of subsidiaries associates and investments, net of cash
acquired |
(2) |
|
(1) |
Proceeds from sale of investments, net of cash |
(1) |
|
(1) |
Purchases of property, plant and equipment (PPE) |
(17) |
|
(43) |
Proceeds from sale of PPE and intangible assets |
- |
|
1 |
Purchases of intangible assets including capitalization of
development costs |
(39) |
|
(47) |
Cash
collateral and security deposits granted to third parties |
(26) |
|
(4) |
Cash
collateral and security deposits reimbursed by third parties |
- |
|
3 |
NET INVESTING CASH USED IN CONTINUING ACTIVITIES
(II) |
(84) |
|
(92) |
Proceeds from borrowings |
394 |
|
101 |
Repayments of lease debt |
(42) |
|
(35) |
Repayments of borrowings |
(2) |
|
(17) |
Fees paid linked to the debt |
(21) |
|
(1) |
Other |
4 |
|
- |
NET FINANCING CASH USED IN CONTINUING ACTIVITIES
(III) |
333 |
|
49 |
|
|
|
|
NET CASH FROM DISCONTINUED ACTIVITIES (IV) |
(8) |
|
(10) |
|
|
|
|
CASH AND CASH EQUIVALENTS AT THE BEGINING OF THE
YEAR |
65 |
|
291 |
Net decrease in cash and cash equivalents
(I+II+III+IV) |
10 |
|
(225) |
Exchange gains/(losses) on cash and cash equivalents |
(11) |
|
(1) |
CASH AND CASH EQUIVALENTS AT THE END OF THE
YEAR |
63 |
|
65 |
1 Free cash flow defined as: Adj. EBITDA – (net
capex + restructuring cash expenses + change in pension reserves +
change in working capital and other assets & liabilities + cash
impact of other non-current result + net financial interests +
exchange result + other financial results and income tax)
- 07_30_2020_H12020_Press_Release_VUS