July 23, 2015

Technicolor: Strong First Half 2015 Results

Adj. EBITDA of €250 million, up 17.3% YoY - Net income of €50 million, up €21 million YoY - EPS up 71.8% YoY - Full year 2015 objectives confirmed

Paris (France), 23 July 2015 Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) announces today its results for the first half of 2015.

 

Frederic Rose, Chief Executive Officer of Technicolor, stated:

“Our first half results put us in good stead to deliver on our full year guidance, while continuing to focus on the implementation of our Drive 2020 strategic plan. I am particularly proud of the work done by our teams as evidenced by new customer wins across our businesses in the first half and our continued innovation in key technologies such as UHD, HDR and virtual reality.”

 

Key points

  • Strong performance in Licensing; continuing development of new Technology business initiatives, and announcement of the royalty rate schedule for the HEVC Advance patent pool.
  • Sustained revenue growth and improved profitability for Production Services; successful integration of Mr. X and OuiDO, and completion of Mikros Image acquisition.
  • DVD volumes down due to an unfavorable comparison base; improvement in volume trends expected in the second half, supported by a strong upcoming slate of major new Theatrical and Games titles.
  • Solid performance for Connected Home, with further improvement in overall product mix in all regions; on track for full year revenue growth and ongoing material year-on-year improvement in profitability.
  • Successful debt repricing transaction; further improved financial flexibility and reduced borrowing costs.

 

2015 objectives confirmed

  • Adjusted EBITDA between €560 million and €590 million;
  • Free Cash Flow of at least €230 million;
  • Leverage ratio (Net Debt/Adj. EBITDA) of around 0.75x at end December 2015.

 

Summary of consolidated results for the first half of 2015 (unaudited)

 

Key financial indicators

 

 First Half

 Change YoY

In € million

2014

2015

Reported

At constant rate

Group revenues

1,505

1,621

+7.7%

(1.9)%

Group revenues (excl. legacy activities)

1,495

1,620

+8.4%

(1.3)%

Adjusted EBITDA

213

250

+17.3%

+16.8%

As a % of revenues

14.2%

15.4%

+1.2pt

 

Adjusted EBIT

127

159

+25.5%

+33.4%

As a % of revenues

8.4%

9.8%

+1.4pt

 

EBIT from continuing operations

122

132

+8.2%

+19.3%

As a % of revenues

8.1%

8.1%

+0.0pt

 

Financial result

(74)

(44)

+30

 

Share of profit/(loss) from associates

1

1

+0

 

Income tax

(22)

(29)

(7)

 

Profit/(loss) from continuing operations

27

60

+33

 

Profit (loss) from discontinued operations

0

(12)

(12)

 

Net income

27

48

+21

 

Net income (Group share)

29

50

+21

 

EPS (in €)

€0.09

€0.15

+71.8%

 

Free cash flow

129

117

(12)

 

Net financial debt at nominal value (non IFRS)

671

628

(43)

 

 

 

Revenues from continuing operations (excluding legacy activities) reached €1,620 million in the first half of 2015, up 8.4% at current currency compared to the first half of 2014. At constant currency, revenues were down 1.3% year-on-year. A strong increase in Licensing revenues, as a result of higher contribution of the MPEG LA pool and sustained revenues across other licensing programs, and double-digit growth across Production Services, led by Visual Effect (“VFX”) and Animation activities, helped to mitigate lower DVD revenues and a softer performance in Connected Home revenues.

Adjusted EBITDA from continuing operations was €250 million in the first half of 2015, up 17.3% at current currency compared to the first half of 2014. Adjusted EBITDA margin amounted to 15.4%, up by 1.2 points year-on-year, driven by stronger Licensing revenues and improved Production Services performance, reflecting healthy top-line growth and the exit from low margin Media Services activities, which offset lower DVD volumes and continued investments in new Technology business initiatives. Connected Home contribution was almost stable, despite lower revenues, due to solid execution and better product mix.

 

In the first half of 2015, Technicolor continued to optimize its cost base and to generate efficiencies across its businesses as well as at corporate level.

Adjusted EBIT from continuing operations totaled €159 million in the first half of 2015, up 25.5% at current currency compared to the first half of 2014, with margin of 9.8%, up 1.4 point year-over-year, as a result of higher Adjusted EBITDA, partially offset by increased D&A expenses.

EBIT from continuing operations reached €132 million in the first half of 2015, up 8.2% at current currency compared to the first half of 2014, with margin of 8.1%, stable year-on-year, resulting from higher Adjusted EBIT, offset principally by restructuring costs related to the exit from Media Services activities.

The Group’s financial result totaled €(44) million in the first half of 2015 compared to €(74) million in the first half of 2014, reflecting the following:

  • Net interest costs amounted to €27 million in the first half of 2015, a significant reduction compared to €39 million in the first half of 2014, driven by reduced interest rates stemming from the 2014 and 2015 repricing transactions.
  • Other financial charges amounted to €17 million in the first half of 2015 compared to €35 million in the first half of 2014.

Group net income was a profit of €50 million in the first half of 2015, a significant increase compared to the €29 million achieved in the first half of 2014.

 

Statement of financial position and cash position

 

 First Half

Change YoY

In € million

2014

2015

Reported

Operating cash flow from continuing operations

141

179

+38

Group free cash flow

129

117

(12)

Nominal gross debt

973*

1,009

+36

Cash position

328*

381

+53

Net financial debt at nominal value (non IFRS)

645*

628

(17)

 

  *As of 31 December 2014.

 

Operating cash flow from continuing operations, which is defined as the Adjusted EBITDA less net capital expenditures and restructuring cash out, was €179 million in the first half of 2015, up by €38 million year-on-year. Operating cash flow represented 11% of total revenues, up by 1.7 points year-on-year, reflecting increased Adjusted EBITDA and a reduction in capital expenditures, partially offset by slightly higher cash outflow for restructuring. Capital expenditures totaled €43 million, down by €4 million year-on-year, as the Group continued to carefully manage spending and focus investments on growth areas, including capacity expansion in Production Services. Cash outflow for restructuring totaled €28 million, up by €2 million year-on-year, due to ongoing cost optimization actions across the Group’s businesses and at corporate level.

Group free cash flow totaled €117 million in the first half of 2015, down by €12 million year-on-year. Cash financial charges amounted to €41 million, stable year-over-year, as the positive impact of the repricing transactions on borrowing costs was offset by an increase in other financial charges. Working capital variation was positive €29 million, mainly as a result of a favorable phasing of Licensing programs and improved working capital in the DVD Services division. Other cash charges, mainly related to tax and pensions, amounted to €41 million.

Nominal gross debt amounted to €1,009 million at end June 2015, an increase of €36 million compared to €973 million at end December 2014, after mandatory senior debt repayments of €26 million, which were fully offset by a negative currency impact of €55 million resulting from the appreciation of the US dollar against the euro.

The Group’s cash position was €381 million at end June 2015 compared to €328 million at end December 2014, an increase of €53 million, due to sustained free cash flow generation and positive currency impact, partly offset by cash used for Mikros acquisition, dividend payment and mandatory senior debt repayment.

Net debt at nominal value amounted to €628 million at end June 2015 compared to €645 million at end December 2014, a reduction of €17 million.

 

 

An analyst conference call hosted by Frederic Rose, CEO, and Esther Gaide, CFO, will be held on Thursday, 23 July 2015 at 9:30 am CEST.

 

Financial Calendar

Q3 2015 Revenues

21 October 2015

FY 2015 Results

19 February 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, based on a thriving licensing business. Our commitment: supporting the delivery of exciting new experiences for consumers in theaters, homes and on-the-go. www.technicolor.com

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Technicolor shares are on the NYSE Euronext Paris exchange (TCH) and traded in the USA on the OTCQX marketplace (OTCQX: TCLRY).

 

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