Editoria e Media
Technicolor: First Half 2020 Results
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 28 , 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:
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 22 .
First Half Year 2020 Key indicators from continuing operations:
Figures at current rate, including IFRS 16
H1 2020 Group update
Outlook
Update on the announced financial restructuring plan
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
(*) Figures at current rate, including IFRS 16
Covid-19 situation update:
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.
(*) Figures at current rate, including IFRS 16
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
Covid-19 situation update:
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.
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(*) 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:
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
(*) Variation at constant rates
Covid-19 situation update:
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.
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(*) 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
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:
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:
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).
(*) 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.
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
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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.
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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
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
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)
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