CORPORATE PRESS RELEASE
Technicolor Creative Studios
Business Update
and First Half 2023
Financial Results
PARIS
(FRANCE),
OCTOBER 2,
2023 – Technicolor Creative
Studios (Euronext Paris: TCHCS) (the “Company”) today provided
business update and announced its first half 2023 financial
results1.
- Acceleration of the
transformation plan to drive the
recovery of the business
- Impact of
strikes in Hollywood and
unfavourable macroeconomic environment led
to reduction of activity
with lower financial and
operational performance for the
first half 2023
- Renewed confidence from
majority shareholders and lenders with:
- An
additional €30 million
of new money injection to address
liquidity needs
- A proposed
tender offer (“offre publique
d’achat simplifiée”) at a price
of 1,63 euro per share, dividends
included, to be initiated by
a large majority
of shareholders and lenders
(holding 94,82% of the capital)
acting in concert in view of proceeding to
a mandatory squeeze out to achieve
delisting of Technicolor Creative Studios
S.A. from Euronext
Paris.
Caroline Parot, Chief Executive Officer
of Technicolor Creative Studios, said: “Throughout the
first half of 2023, we have undertaken significant efforts to
reshape our organization and enhance our capabilities to better
serve our clients. Despite progress in our transformation journey,
we are facing broader industry challenges, which have been
exacerbated by the historic five-month-long writers and actors
strike in Hollywood and are delaying our path to recovery. In
this troubled environment, we stand alongside our clients to
continue delivering world-class quality of work as they are gearing
up for production restart once the still ongoing actors strike is
settled. In this context, I am truly grateful for the
continued support of our creditors and shareholders who have
provided new financing. This will allow us to accelerate the
implementation of our transformation program with greater agility
and help us successfully seize business opportunities as soon as
the market picks up.All of us at Technicolor Creative Studios are
committed to steer the Company towards further creative excellence
and financial robustness, to reinforce its leading position in the
market”.
Anne Bouverot, Chairperson of
Technicolor Creative Studios, said “On behalf of
the Board of Directors, I welcome the
strategic move of delisting the company from
Euronext Paris, as it will allow Technicolor Creative
Studios to focus fully on its operational priorities and
execution of its strategy. To ensure the best
interest of all shareholders, we are establishing a dedicated
Ad Hoc Committee composed of experienced and
independent Board Members, that will work closely with an
Independent Expert in charge of assessing the financial
terms and fairness of the offer.”
FURTHER PROGRESS ON THE
TRANSFORMATION PLAN
The transformation of Technicolor Creative
Studios continues at pace as the business transitions back to
growth. The highlights include:
- Better client and operational
support:
- Simplification of business processes to reduce waste,
inefficiency, and duplication.
- Improved operational procedures by documenting and training
Standard Operating Procedures (SOP).
- Structural measures of cost
adaptation:
- Governance controls and authority
levels updated and actively managed to ensure greater scrutiny of
capital preservation and capital allocation.
- Substantive progress being made in
the reduction of the real estate liabilities with lease exits
having been achieved and sublet opportunity identified.
- Finalization of the technical
separation process of Technicolor Creative Studios from Vantiva
(termination of the transitional services agreement) by the end of
the year.
FIRST HALF
RESULTS
ANALYSIS
Technicolor Creative Studios revenues amounted
to €302.7 million for the first half 2023, down -25.9% at current
rate (down -24.3% at constant rate) compared to the same period in
2022. This decrease mainly includes the reduction of the pipeline
compared to the first half 2022 (post covid recovery year).
In first half 2023, adjusted EBITDA after lease2
decreased by €58.9 million to €-15.7 million (down to €-14.5
million at constant rate), with margin down from 11% to -5%. This
decrease resulted from the reduction of activity, that was partly
offset by the cost actions taken as part of the Re*Imagined
program, for both variable and fix costs.
In first half 2023, restructuring costs amounted
to €13.5 million, compared to €1.3 million in first half 2022. This
increase mainly resulted from the implementation of the Re*Imagined
transformation plan. EBIT was a €53.6 million loss compared to a
€19 million profit in first half 2022. This decrease resulted from
both lower activity and higher restructuring costs than previous
year.
The financial result amounted to €72.2 million
compared to a €8.9 million loss in first half 2022. This profit
mainly resulted from the net fair value gain on debt and equity
instruments arising from the refinancing. Income tax amounted to
€6.4 million in first half 2023 compared to an expense of €14.7
million in first half 2022. This decline mainly results from
Technicolor Creative Studios reduced profitability. The Group net
result therefore amounted to €13.0 million in first half 2023,
compared to a loss of €4.4 million in the same period last
year.
Simplified P&L
|
|
|
|
|
|
In € million |
2023 |
2022 |
Var |
Revenues |
302.7 |
408.7 |
(106.0) |
Adjusted EBITDA
after lease |
(15.7) |
43.2 |
(58.9) |
As a
% of revenues |
-5% |
11% |
-600 bps |
D&A |
(21.8) |
(20.1) |
(1.7) |
Adjusted EBITA
after lease |
(37.5) |
23.1 |
(60.6) |
As a
% of revenues |
-12% |
6% |
-600 bps |
PPA amortization |
(4.3) |
(4.3) |
- |
IFRS16 impact |
5.3 |
5.1 |
0.2 |
Restructuring |
(13.5) |
(1.3) |
(12.2) |
Other non-current |
(3.6) |
(3.6) |
- |
EBIT |
(53.6) |
19.0 |
(72.6) |
Financial result |
72.2 |
(8.9) |
81.1 |
Taxes |
(6.4) |
(14.7) |
8.3 |
Profits from Discontinued operations |
0.8 |
0.4 |
0.4 |
Non-Controlling Interest |
0.0 |
(0.1) |
0.1 |
Net Result |
13.0 |
(4.4) |
17.4 |
Adjusted Operating Free Cash Flow after
lease
In first half 2023, Adjusted Operating Free Cash
Flow after lease amounted to €(80.5) million, compared to €(23.1)
million for first half 2022. This €57.4 million deterioration is
explained by:
- €(58.9) million adjusted EBITDA
after lease decrease
- €(6.8) million higher restructuring
costs cash out due to implementation of the Re*Imagined
program
- €(1.8) million Capex increase from
€17.0 million to €18.8 million
These negative impacts are partly offset by:
- €3.6 million working capital
improvement from €(30.0) million to € (26.4) million
- €0.5 million decrease of capital
leases.
- €5.9 million of lower other
non-current cash out.
First Half |
In € million |
2023 |
2022 |
Adjusted EBITDA
after lease |
(15.7) |
43.2 |
Capex |
(18.8) |
(17.0) |
Capital
leases |
(6.1) |
(6.6) |
Restructuring |
(12.4) |
(5.6) |
Change in working
capital and other assets and liabilities |
(26.4) |
(30.0) |
Other
non-current |
(1.1) |
(7.0) |
Adjusted Operating Free Cash
Flow after lease |
(80.5) |
(23.1) |
|
Standalone cash and debt
Cash and cash equivalents at the end of June
2023 amounted to €59 million compared to €38 million at the end of
December 2022. Net financial debt at nominal value amounted to
€5773 million at the end of June 2023, compared with €650 million
at the end of December 2022. IFRS net debt amounted to €613 million
as of June 30, 2023, compared with €739 million as of December 31,
2022.
Liquidity as of June 30, 2023, amounted to €99
million, consisting of the above €59 million of cash and cash
equivalent and of the undrawn €40 million Revolving Credit
Facility.
RENEWED CONFIDENCE OF
SHAREHOLDERS
Additional €30
million new money
injection to address liquidity
needs, and proposed tender offer
to be initiated by a number of shareholders and creditors to
achieve delisting of the company
from Euronext Paris
Since early May 2023, the Company has been
experiencing the direct effects of the double writers and actors
strike – a first for Hollywood in over 60 years – with significant
impacts on the pipeline of projects of MPC. Combined with the
slowdown of the advertising VFX market affecting The Mill, this
challenging environment is impacting the pace of the Company’s
business recovery. Therefore, Technicolor Creative Studios expects
its rebound to be postponed by one year.
Consequently, the Company has reassessed its
future liquidity needs and engaged discussions with some of its
shareholders and lenders, and, as part of the process, shared with
them forward looking assumptions. The figures given for 2023 to
2025 were established in the context of the discussions; in no case
they should constitute a guidance, nor forecasts of any kind.
As a consequence of the above, the Company is
publishing the following forward-looking assumptions:
- For 2023: revenue contraction and
adjusted EBITDA after lease to decrease by c.€40m compared to first
half 2023.
- For 2024: transition year with
progressive recovery of the business in H1, to be materialized in
H2 revenues, and adjusted EBITDA after lease to remain
negative.
- For 2025: sharp rebound in revenues
and return to normalized profitability with adjusted EBITDA after
lease not to exceed €100 million.
In this challenging context, shareholders and
lenders have decided to demonstrate their support and have renewed
their confidence in the future prospects of Technicolor Creative
Studios.
- The main shareholders and lenders
of the Company agreed to inject an extra €30 million cash by
October 31st, 2023, in accordance with the existing financial
agreements.
- Cash interests on all debt
instruments (New Money and Reinstated debt) will be turned into PIK
interests until end of 2024, for c.€48 million.
- In addition, 23 of the main
shareholders of the Company (holding 94,82%4 of the capital) ,
announced their intent to acquire the Technicolor Creative Studios
S.A. shares the concert does not already own and to file a public
tender offer (“offre publique d’achat simplifiée”) with the
Autorité des Marchés Financiers (AMF). The tender offer, for a cash
consideration of 1,63 euro per Technicolor Creative Studios share,
dividends included, will be subject to the AMF’s approval and will
be followed, the required conditions of capital and voting rights
being already met, by a mandatory squeeze-out.
The projected delisting of the Company along
with these new financing arrangements attest to the strength of
Technicolor Creative Studios’ shareholder support.
In addition to this first €30 million cash
injection, Technicolor Creative Studios intends to seek, in the
short term, further financing options from various sources to
address its future liquidity needs The Company intends to deepen
and accelerate its strategic review announced in March and June
2023. The roll-out of the transformation program will also allow to
further optimize working capital and monitor the cash expenditures
to ensure the relevant level of cash to operate the Company.
TECHNICOLOR
CREATIVE
STUDIOS BOARD
OF DIRECTORS WELCOMES FAVORABLY
THE CONTEMPLATED DELISTING
Technicolor Creative Studios’ Board of Directors
which met today favorably welcomed the proposed tender offer
announced today and the subsequent potential delisting of the
Company. The Company signed today a tender offer agreement with the
main parties initiating the draft tender offer. The Board of
Directors will release an informed opinion on the terms of the
Offer in due course, in light of the work of an independent expert
appointed to opine on the financial terms of the Offer and, as the
case may be, the mandatory squeeze-out.
This delisting project also seems consistent
with the low trading volumes of the Company shares on Euronext
Paris and will enable the Company to minimize the costs and
administrative requirements related to the regulatory framework of
a listed Company on Euronext Paris. The contemplated delisting
would allow Technicolor Creative Studios to place its focus on the
execution of its long-term strategy and to prioritize its resources
to operational objectives, including strengthening current client
relationships along with developing new business opportunities.
To ensure transparent and fair assessment of the
offer as 90% of the share capital and voting rights of the Company
are already held by the concerted shareholders intending to proceed
to a squeeze-out, the Board of Directors has decided to appoint an
ad-hoc committee in charge of proposing the appointment of an
independent expert in charge of providing a report on the financial
terms of the offer.
The ad-hoc committee is comprised of three
independent members: Anne Bouverot, Chairperson, Christine Laurens,
Independent director, and Katherine Hays, Independent Director.
The board of directors decided to appoint, upon
recommendation of the ad-hoc committee, A2EF represented by Mrs.
Sonia Bonnet-Bernard as independent expert pursuant to Article
261-1, I and II of the AMF General Regulations.
The contemplated delisting would have no impact
on Technicolor Creative Studios’ day-to-day operations. The company
remains committed to achieve its ambition to be the first-choice
digital services production partner for the world’s most creative
companies.Further information regarding the contemplated delisting
process will be provided in due course.
***
The limited review of the company's financial information by its
statutory auditors is ongoing5.
***
The Company announces that it has requested
Euronext Paris to resume the trading of its shares on Euronext
Paris.
***
ABOUT TECHNICOLOR CREATIVE STUDIOS
Technicolor Creative Studios shares are admitted
to trading on the regulated market of Euronext Paris (TCHCS)
Technicolor Creative Studios is a creative
technology company providing world-class production expertise
driven by one purpose: The realization of ambitious and
extraordinary ideas. Home to a network of award-winning studios,
MPC, The Mill, Mikros Animation and Technicolor Games, we inspire
creative companies across the world to produce their most iconic
work. Our global teams of artists and technologists partner
with the creative community across film, television, animation,
gaming, brand experience and advertising to bring the universal art
of storytelling to audiences everywhere.
www.technicolorcreative.com
***
Investor Relations
Contact:investor.relations@technicolor.com
Corporate press:Teneo: tcs@teneo.com
1 H1 unaudited financial statements, similar to figures released
on the Business Update published on July 26th, 2023
2 As part of the spin-off, the
Group has reviewed its key performance indicators, with the goal of
becoming more comparable with its peers and market practices,
whilst being more aligned with the way the business is managed. For
more information, please refer to the adjusted indicators section
in the Universal registration document 2022.
3 Excluding 170 M€ of subordinated debt
4 On October 2, 2023, based on a total of
25,511,822 Technicolor Creative Studios shares and theoretical
voting rights, as communicated by the Company on July 31, 2023.
Taking into account the dilution resulting from the conversion of
all the convertible bonds into shares and the exercise of all the
share warrants issued on June 8, 2023, by Technicolor Creative
Studios and held by the members of the Concert, the Concert holds
97.10% of the share capital and voting rights, on a fully diluted
basis.5 The financial statements and the opinion of the auditors on
the limited review will be published on the company’s corporate
website by the end of the week.
- TCS_First Half 2023 Financial Results_ENG
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