Editoria e Media
Technicolor - Full Year 2020 results
PRESS RELEASE
Full Year 2020 results
Technicolor exceeds its 2020 guidance and remains on track to meet its 2022 guidance
Paris (France), 11 March 2021 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) is today announcing its results for the full year 2020.
Richard Moat, Chief Executive Officer of Technicolor, stated:
“ Technicolor has re-engineered its operations, balance sheet and global footprint and has exceeded its guidance for 2020. Connected Home beat the targets originally set before the crisis began, but Production Services and DVD Services were hit by the halting of activity in the film industry, and associated cinema closures. However, overall the Group showed good resiliency in the face of the pandemic. During 2020, significant structural changes were implemented across all divisions, which saw a more than €165 million reduction in our cost base, combined with further investment to improve our efficiency. In particular, Production Services strengthened its capacity to serve its clients through state of the art technologies and artistic expertise. Despite persistent uncertainty relating to the pandemic, we are looking to the future with confidence, and will continue to execute our transformation program to deliver improved operational and financial performance. In consequence, the Group issuing guidance towards strong figures for 2021, and is maintaining previously issued 2022 guidance.”
Full year 2020 results and forward outlook – key highlights:
In 2020 Technicolor successfully achieved a major balance sheet financial restructuring, and the implementation of a significant business transformation:
As a result, and despite the successive waves of the pandemic crisis which were not anticipated at the time of the financial restructuring, Full Year 2020 results are ahead of previously communicated guidance:
The Group's businesses demonstrated operating resilience to the Covid-19 crisis. Nonetheless, revenue generation in some of our activities has been significantly impaired as a result of sanitary restrictions around the world:
While uncertainty linked to the pandemic remains, the Group is focused on continuing the execution of its transformation program, which has gained significant momentum in 2020. 2021 and 2022 will be years of substantial financial improvement. Taking into account the impact of foreign exchange fluctuations and the change in Group perimeter as a result of the sale of Post Production , the Group is today adapting its 2022 guidance, and providing 2021 guidance of:
Full Year 2020 key indicators from continuing operations
Outlook
Perimeter Change
·Technicolor announced on January 14, 2021 the disposal of its Post Production business (part of Production Services) for €30 million. Closing is expected during the first half of 2021. The sale of Post Production simplifies Production Services' portfolio of activities, and allows management to increasingly focus on Production Services' remaining core CGI activities.
Management update in 2020
Board composition
Segment Review – Full Year 2020 Results Highlights
2021 so far seems to be witnessing a restart of activity in the VFX market. The work already secured for 2021 is in line with our more successful years, pre-pandemic, as the expanding demand for streaming content matches or exceeds the continuing robust tentpole market. Production Services has been awarded numerous new projects, securing more than 75% of its expected 2021 sales pipeline for Film & Episodic Visual Effects, and is in negotiations for several more. Confirmed projects for 2021 include Disney's live-action adaptations of ' The Little Mermaid' and 'Pinocchio' , and their recently announced ' The Lion King' prequel. Focus has been placed on achieving framework agreements with the major Hollywood studios and significant streaming players, bringing more predictability of revenues in the coming years, and establishing a presence in locations such as Berlin so that we can service the need for development of local content.
To drive the transformation of Production Services into an efficient creative production platform through a relentless focus on improving profitability and streamlining operations, the following actions have been launched:
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· Connected Home revenues totaled €1,764 million in 2020, down (7.6)% year-on-year at constant rate and (11.0)% at current rate. The division experienced demand slowdown and supply constraints in Eurasia and Latin America, which were partially offset by increased demand from the North American cable division. The division is maintaining its market leadership in the Broadband segment and in the video Android based segment.
The division successfully completed the bulk of the transformation plan launched in 2018. Selective investments in key customers, and a platform-based products approach focused on broadband and Android TV segments, combined with strategic partnerships with key suppliers and aggressive investment in process re-engineering, have generated a significant increase in the productivity and competitiveness of Connected Home in the market place. Connected Home has improved its margins and its market share over the last years, despite facing many market, industry and global challenges.
We anticipate that, overall, demand will remain strong throughout 2021. However, the Covid global pandemic has created distortions in our industry. World logistics were severely disrupted in recent months, and they will remain difficult for some time to come. The semiconductor crisis which started in the second half of 2020 will continue to impact 2021 supply. Connected Home will continue to work with its partners and customers to minimize supply disruptions. Connected Home has been awarded the next generation DOCSIS gateway for the leading cable operator in the US which will reinforce our leading position with the top 6 cable operators in the US, and our global leadership in the broadband segment in the coming years.
The division continues to focus on selective investments in key customers, platform-based products and partnerships that will lead to improved margins over the year.
Limited supply coupled with high demand for semiconductors is creating potential cost increases and production constraints which could delay sales during the first half 2021. To address this, Technicolor has engaged in commercial discussions in order to pass surcharges through to customers.
· Revenue Breakdown for Connected Home (at current rate)
(*) Change at constant rate
· Covid-19 situation update
Connected Home has remained fully operational throughout the Covid crisis due to the early adoption of a remote work model that successfully moved half of all employees off site to ensure key engineering facilities remained safe and open.
The Covid-19 impact is now limited for its Asian-based manufacturing, but is still affecting capacity in Latin America for manufacturing and back-end operations.
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· DVD Services revenues totaled €706 million in 2020, down (18.6)% at constant rate and (20.0)% at current rate compared to 2019, due predominately to lower replication & packaging disc volumes across all formats, and lower distribution activity as a result of the negative impact of Covid-19, which exacerbated the structural decline trend. Total combined replication volumes reached 817.1 million discs in 2020, down (22.9)% year-on-year. However, this reduction was much lower than originally anticipated as demand for back catalog grew to compensate somewhat for loss of revenue from new film releases.
David Holliday, the newly appointed President of the DVD Services Business Division, has been tasked with further in-depth transformation of the business, driving efficiencies across the worldwide footprint, streamlining internal processes and centralizing cost management, while accelerating revenue and profitability from non-disc activities.
All formats showed an easing in the rate of decline in the fourth quarter with strong retail demand activity during the holiday season, particularly in the games segment.
The Disney/Fox contract successfully closed, as did the Lionsgate contract. Paramount (PHE) replication will expire in mid-2021 and will not be renewed; the effect of this will be mitigated by an acceleration of DVD Services' business transformation plans. Technicolor will continue to service PHE for distribution services.
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· Corporate & Other includes the Trademark Licensing business.
Corporate & Other recorded revenues of €23 million in 2020, decreasing compared to last year. In 2019, the Group benefited from €20 million of retained patent licensing revenues versus only €5 million in 2020. Adjusted EBITDA amounted to €(14) million and Adjusted EBITA was €(18) million.
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· Debt and leverage details
As part of the financial restructuring transaction completed in 2020, debt maturities have been extended and new financings executed, reinforcing the Group's liquidity.
Summary of consolidated results for 2020
(*) Change at current rate
Reconciliation of adjusted indicators (unaudited)
In addition to published results, and with the aim of providing a more comparable view of the evolution of its operating performance in 2020 compared to 2019, Technicolor is presenting a set of adjusted indicators which exclude the following items as per the statement of operations of the Group's consolidated financial statements:
These adjustments, the reconciliation of which is detailed in the following table, amounted to an impact on EBIT from continuing operations of €(168) million in 2020 compared to €(109) million in 2019 (including IFRS 16).
(*) Variation at current rates
(**) including reserves (Risk, litigation and warranty reserves)
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.
Cash position at end of 2020 was €330 million, compared to €65 million at the end of December 2019.
An analyst audio webcast hosted by Richard Moat, CEO and Laurent Carozzi, CFO will be held today, 11 March 2021 at 7:30pm CET.
Financial calendar
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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
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Audited financial information
The auditors have performed their procedures on the consolidated financial statements. The audit report will be issued after verification of the management report and the presentation of the format required by the ESEF regulation on the financial statements intended to be included in the annual financial report.
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About Technicolor:
www.technicolor.com
Technicolor shares are admitted to trading on the regulated market of Euronext Paris (TCH) and are tradable in the form of American Depositary Receipts (ADR) in the United States on the OTCQX market (TCLRY).
Investor Relations Media
Christophe le Mignan: +33 1 88 24 32 83 Stephanie Varlotta
Christophe.lemignan@technicolor.com Stephanie.varlotta@technicolor.com
Nathalie Feld : +33 1 53 70 94 23 nfeld@image7.fr
CONSOLIDATED STATEMENT OF OPERATIONS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
In 2022, the cumulated impacts of foreign exchange fluctuations and change in Group perimeter as a result of the sale of Post Production are €(40) million on Adjusted EBITDA and €(23) million on Adjusted EBITA.
“ Adjusted EBITDA” corresponds to the profit (loss) from continuing operations before tax and net financial income (expense), net of other income (expense), depreciation and amortization (including impact of provision for risks, litigation and warranties).
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).
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