Strong operational performance and integration of acquisitions ahead 2016 objectives confirmed and accelerated deleveraging
Paris (France), 27 July 2016 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) announces today its results for the first half of 2016.
Frederic Rose, Chief Executive Officer of Technicolor, stated:
“The integration of our 2015 acquisitions is progressing very well and our second half will see material operating margin improvement in Entertainment Services and further improvement of the operating margin in Connected Home.”
Key points
2016 objectives confirmed
Technicolor confirms its 2016 objectives of a free cash flow in excess of €240 million, and an Adjusted EBITDA in the range of €600 million to €630 million.
The Adjusted EBITDA objective consisting of:
Leverage ratio inferior to 1.4x at end December 2016 compared to a ratio of 1.74x at end December 2015.
Summary of consolidated results for the first half of 2016 (unaudited)
Key financial indicators
First Half |
Change YoY |
||||
In € million |
2015 |
2016 |
Reported |
At constant rate |
|
Group revenues from continuing operations |
1,621 |
2,420 |
+49.3% |
+51.6% |
|
1,561 |
2,418 |
+54.9% |
+57.3% |
|
|
Adjusted EBITDA from continuing operations |
250 |
265 |
+6.1% |
+8.4% |
|
As a % of revenues |
15.4% |
11.0% |
(4.4)pts |
|
|
159 |
171 |
+7.5% |
+10.4% |
|
|
As a % of revenues |
9.8% |
7.1% |
(2.7)pts |
|
|
Adjusted EBIT from continuing operations |
159 |
154 |
(3.5)% |
(0.8)% |
|
As a % of revenues |
9.8% |
6.4% |
(3.4)pts |
|
|
EBIT from continuing operations |
132 |
95 |
(27.8)% |
(25.2)% |
|
As a % of revenues |
8.1% |
3.9% |
(4.2)pts |
|
|
Financial result |
(44) |
(73) |
(29) |
|
|
Income tax |
(29) |
(30) |
(1) |
|
|
Share of profit/(loss) from associates |
1 |
0 |
(1) |
|
|
Profit/(loss) from continuing operations |
60 |
(8) |
(68) |
|
|
Profit/(loss) from discontinued operations |
(12) |
(44) |
(32) |
|
|
Net income |
48 |
(52) |
(100) |
|
|
Group free cash flow |
117 |
98 |
(19) |
|
|
Net financial debt at nominal value (non-IFRS) |
628 |
896 |
+268 |
|
|
Net financial debt (IFRS) |
563 |
829 |
+266 |
|
|
Group revenues from continuing operations totaled €2,420 million in the first half of 2016, up by more than 50% at constant currency compared to the first half of 2015, resulting from the strong performance of the Operating businesses, namely Connected Home and Entertainment Services. This performance reflected the contribution of the acquisitions and customer wins in DVD Services completed in 2015, as well as solid organic growth in Connected Home and double-digit organic growth in Production Services. In Licensing, the sharp decline of the MPEG LA contribution, which was higher than anticipated, was partially offset by a 58% revenue growth across other Licensing activities.
Adjusted EBITDA from continuing operations amounted to €265 million in the first half of 2016, up 8.4% at constant currency compared to the first half of 2015. The Operating businesses generated €177 million of Adjusted EBITDA, up by €95 million year-on-year at constant currency, and represented 67% of the Group’s Adjusted EBITDA. The strong increase in Adjusted EBITDA for the Connected Home segment, driven by its change of scale and associated synergies, fully offset the €79 million decline recorded by the Technology segment. In the Entertainment Services segment, the significant growth in Adjusted EBITDA of Production Services was in part offset by an adverse performance in DVD Services as the North American assets of Cinram, acquired end 2015, were not breakeven in the first half. Technicolor launched significant cost cutting measures to bring these assets to its profitability standards in the second half of 2016 and recorded some improvement at the end of the first half. In Production Services, Adjusted EBITDA grew as fast as revenues, with margin starting to benefit from synergies in the second quarter of 2016.
Adjusted EBIT from continuing operations reached €154 million in the first half of 2016, relatively stable at constant currency compared to the first half of 2015. During the first half of 2016, Technicolor performed the purchase price allocations (“PPA”) of the acquisitions made in the second half of 2015 and recorded a €18 million of amortization in the first half of 2016. Excluding this impact, Adjusted EBIT was up 7.5% year-on-year. Technicolor estimates the amortization of the purchase price allocations at around €40 million in 2016.
EBIT from continuing operations totaled €95 million in the first half of 2016, down 27.8% compared to the first half of 2015. This decrease was mostly due to €20 million of non-current items, out of which €8 million of research and development write-offs and €8 million of integration costs related to the acquisition of Cisco Connected Devices, that both impacted the Connected Home segment. In addition, restructuring costs were €8 million higher year-on-year, resulting principally from cost initiatives executed in the first half in the Technology segment, including the shutdown of the Hannover facility.
The Group’s financial result amounted to €(73) million in the first half of 2016 compared to €(44) million in the first half of 2015, reflecting:
Income tax increased slightly as a result of the Group’s Operating businesses getting stronger, in particular outside France.
As of the end of June 2016, Technicolor has settled with all plaintiffs in the Cathode-Ray Tube (“CRT”) litigation case in the US, except Sharp and a second group of plaintiffs with smaller claims. Technicolor recognized a non-current expense amounting to €50 million in the first half of 2016 corresponding to the amount of these settlements and to an accrual for the remaining claims. The cash impact will be €46 million in 2016, up by €10 million compared to the amount of €36 million previously announced in February 2016.
Net income was a loss of €52 million in the first half of 2016 compared to a profit of €48 million in the first half of 2015.
Statement of financial position and cash position
First Half |
Change YoY |
||
In € million |
2015 |
2016 |
Reported |
Operating cash flow from continuing operations |
208 |
224 |
+7.3% |
Group free cash flow |
117 |
98 |
(16.2)% |
Nominal gross debt |
1,330 |
(40) |
|
Cash position |
3854 |
434 |
+49 |
Net financial debt at nominal value (non IFRS) |
9854 |
896 |
(89) |
IFRS adjustment |
(77)4 |
(67) |
+10 |
Net financial debt (IFRS) |
9084 |
829 |
(79) |
Operating cash flow from continuing operations, which is defined as Adjusted EBITDA less net capital expenditures, restructuring cash out and working capital & other assets and liabilities variation to facilitate reconciliation with the IFRS statement of cash flow, amounted to €224 million in the first half of 2016, up by €16 million compared to first half of 2015, including:
Group free cash flow amounted to €98 million in the first half of 2016, including:
Nominal gross debt totaled €1,330 million at end June 2016, down €40 million versus end December 2015, after a Term Loan debt repayment of €34 million and other debt reimbursement for €6 million.
The Group’s cash position amounted to €434 million at end June 2016, up by €49 million compared to end December 2015, due primarily to the solid free cash flow generation.
Net debt at nominal value amounted to €896 million at end June 2016, down by €89 million compared to end December 2015.
Financial calendar
Q3 2016 revenues | 21 October 2016 |
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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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About Technicolor
Technicolor, a worldwide technology leader in the media and entertainment sector, is at the forefront of digital innovation. Our world class research and innovation laboratories enable us to lead the market in delivering advanced video services to content creators and distributors. We also benefit from an extensive intellectual property portfolio focused on imaging and sound technologies. Our commitment: supporting the delivery of exciting new experiences for consumers in theaters, homes and on-the-go. For more information visit: www.technicolor.com.
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