Strong recovery from the pandemic slowdown; Improving delivery capacity to boost second half and 2022 performance; Technicolor on track to meet its 2021 and 2022 guidance
Paris (France), July 29, 2021 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) is today announcing its results for the first half of 2021.
Richard Moat, Chief Executive Officer of Technicolor, stated:
“Technicolor’s first half of 2021 results are positive and in line with expectations. The Group is experiencing growing demand across all of its businesses, and is benefiting from improved profitability as a result of our disciplined operational focus. Demand for creative VFX artistry and technology continues to improve across media and entertainment, in combination with the progressive return of live action production. In particular, we are pleased by the fact that we have secured our target VFX sales pipeline for 2021 and a material part of 2022, a milestone which clearly demonstrates the tangible recovery of the Media and Entertainment industry. The creation of Technicolor Creative Studios was well timed in the light of the upcoming surge in content. The division is led by a strong new leadership team focused on redefining content experiences across film, episodic, gaming, marketing, and advertising through a powerful combination of storytelling and innovation. In Connected Home, despite very strong demand in North America and in Eurasia, revenue has been impacted by component shortages leading to sales being pushed into the second half of the year. In DVD Services we saw a 4% increase in total replicated disc activity, showing the attractiveness of back catalog and the resiliency of packaged media. Based on business activity for the first half and the continued successful optimization of its businesses, the Group is confident of achieving its outlook for 2021 and 2022.”
Despite the continuing challenging environment, Technicolor delivered a positive first half 2021, with results in line with expectations and delivering significant improvement in profitability:
All Technicolor activities are benefiting from sustained market demand:
The Group is on track to achieve the c. €115 million cost savings planned for calendar year 2021, with €42 million cost savings realized in the first half, en route to delivering a cumulative €325 million by the end of 2022.
Based on business activity for the first half, the Group is confident of achieving the outlook presented in its FY 2020 results press release issued on March 11, 2021.
First Half year 2021 results and forward outlook – key highlights
|
First Half |
|
|||
In € million |
2021 |
2020 |
At |
At |
|
Revenues from continuing operations |
1,359 |
1,433 |
(5.2)% |
+1.2% |
|
Adjusted EBITDA from continuing operations |
100 |
53 |
+90.6% |
+101.6% |
|
As a % of revenues |
7.4% |
3.7% |
|
||
Adjusted EBITA from continuing operations |
15 |
(67) |
+123.0% |
+124.1% |
|
Free Cash Flow from continuing before Tax & Financial |
(208) |
(243) |
+14.3% |
+7.4% |
First Half 2021 key indicators for continuing operations
Outlook
Continuing Operations – post IFRS 16 |
|
|
|
|
€ million, FYE Dec post IFRS-16 |
2020 |
2021e |
2022e |
|
|
||||
Adjusted EBITDA from continuing operations |
167 |
270 |
385 |
|
Adjusted EBITA from continuing operations |
(56) |
60 |
180 |
|
Continuing FCF before financial results and tax |
(124) |
c.0 |
230 |
Perimeter Change
Segment Review – First Half 2021 Results Highlights
First Half |
Change YoY |
|||
Technicolor Creative Studios* |
2021 |
2020 |
Reported |
At constant rate |
In € million |
||||
Revenues |
295 |
279 |
+5.8% |
+9.9% |
Adj. EBITDA |
40 |
2 |
ns |
ns |
As a % of revenues |
+13.7% |
+0.8% |
||
Adj. EBITA |
6 |
(51) |
ns |
ns |
As a % of revenues |
+1.9% |
(18.4)% |
(*) including Post Production
###
First Half |
Change YoY |
|||
Connected Home |
2021 |
2020 |
Reported |
At constant rate |
In € million |
||||
Revenues |
770 |
839 |
(8.2)% |
(1.0)% |
Adj. EBITDA |
56 |
54 |
+4.5% |
+11.8% |
As a % of revenues |
+7.3% |
+6.4% |
|
|
Adj. EBITA |
29 |
20 |
+43.1% |
+51.9% |
As a % of revenues |
+3.8% |
+2.4% |
|
|
The overall worldwide market situation has multiple consequences for the Connected Home business:
Connected Home will continue to work with its partners and customers to minimize supply disruptions.
The Connected Home division has strengthened its leadership in key market segments:
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.
First Half |
||||
In € million |
2021 |
2020 |
% Change(*) |
|
Total revenues |
770 |
839 |
(1.0)% |
|
By region |
Americas: |
517 |
575 |
(3.1)% |
- North America |
449 |
463 |
+3.5% |
|
- Latin America |
69 |
112 |
(30.0)% |
|
Eurasia: |
253 |
264 |
+3.7% |
|
- Europe, Middle East and Africa |
155 |
154 |
+9.9% |
|
- Asia-Pacific |
98 |
110 |
(4.9)% |
|
By product |
Video |
278 |
318 |
(5.7)% |
Broadband |
492 |
521 |
+2.0% |
(*) Change at constant rate
###
First Half |
Change YoY |
|||
DVD Services |
2021 |
2020 |
Reported |
At constant rate |
In € million |
||||
Revenues |
283 |
302 |
(6.4)% |
(0.3)% |
Adj. EBITDA |
11 |
1 |
ns |
ns |
As a % of revenues |
+3.7% |
+0.5% |
||
Adj. EBITA |
(10) |
(29) |
+65.7% |
+62.2% |
As a % of revenues |
(3.5)% |
(9.7)% |
DVD Services continued to progress previously announced structural division-wide initiatives to adapt distribution and replication operations, and related customer contract agreements, in response to continued volume reductions. Two significant North American facility closures were effected in the first half of 2021 as part the ongoing transformation plan. Executive and management teams have been implementing multiple cost reduction and business improvement and efficiency programs, and these are ahead of plan at first half, and expected to deliver the full-year savings and efficiencies projected.
First Half |
||||
In million units |
2021 |
2020 |
% Change |
|
Total Combined Volumes |
338.9 |
326.3 |
+3.9% |
|
By Format |
SD-DVD |
245.8 |
220.1 |
+11.7% |
Blu-ray™ |
77.4 |
88.6 |
(12.5)% |
|
CD |
15.6 |
17.6 |
(11.3)% |
|
By Segment |
Studio/Video |
315.4 |
297.4 |
+6.1% |
Games |
4.8 |
6.3 |
(23.7)% |
|
Music & Software |
18.7 |
22.5 |
(17.0)% |
###
First Half |
Change YoY |
|||
Corporate & |
2021 |
2020 |
Reported |
At constant rate |
In € million |
||||
Revenues |
11 |
13 |
(12.5)% |
(12.5)% |
Adj. EBITDA |
(7) |
(5) |
(43.5)% |
(48.4)% |
As a % of revenues |
(67.0)% |
(40.9)% |
||
Adj. EBITA |
(9) |
(7) |
(34.0)% |
(38.4)% |
As a % of revenues |
(85.9)% |
(56.1)% |
Corporate & Other recorded revenues of €11 million in the first half 2021, decreasing compared to last year as a result of the decrease of the retained patent revenue. Adjusted EBITDA amounted to €(7) million and Adjusted EBITA was €(9) million.
##
As part of the financial restructuring transaction completed in 2020, debt maturities were extended and new financings executed, reinforcing the Group’s liquidity.
In million currency |
Currency |
Nominal Amount |
IFRS Amount |
Type of rate |
Nominal rate (1) |
Repayment Type |
Final maturity |
Moodys / S&P rating |
|
||||||
New Money Notes |
EUR |
350 |
361 |
Floating |
12.00%(2) |
Bullet |
Jun. 30, 2024 |
Caa1/B |
|
||||||
New Money Term Loans |
USD |
104 |
107 |
Floating |
12.23%(3) |
Bullet |
Jun. 30, 2024 |
Caa1/B |
|
||||||
Reinstated Term Loans |
EUR |
453 |
380 |
Floating |
6.00%(4) |
Bullet |
Dec. 31, 2024 |
Ca/CCC |
|
||||||
Reinstated Term Loans |
USD |
119 |
100 |
Floating |
5.95%(5) |
Bullet |
Dec. 31, 2024 |
Ca/CCC |
|
||||||
Subtotal |
EUR |
1,026 |
948 |
|
8.67% |
|
|
|
|
||||||
Lease Liabilities(6) |
Various |
160 |
160 |
Fixed |
8.68% |
|
|
|
|
||||||
Accrued PIK Interest |
EUR+USD |
35 |
35 |
NA |
0% |
|
|
|
|
||||||
Accrued Interest |
Various |
16 |
16 |
NA |
0% |
|
|
|
|
||||||
Wells Fargo Line |
USD |
35 |
35 |
Floating |
5.25% |
Revolving |
Dec.31, |
|
|
||||||
Other Debt |
Various |
1 |
1 |
NA |
0% |
|
|
|
|
||||||
Total Gross Debt |
|
1,273 |
1,195 |
|
8.23% |
|
|
|
|
||||||
Cash & Cash equivalents |
Various |
99 |
99 |
|
|
|
|
|
|
||||||
Total Net Debt |
|
1,174 |
1,096 |
|
|
|
|
|
|
||||||
(1) Rates as of June 30, 2021. |
|||||||||||||||
(2) Cash interest of 6-month EURIBOR with a floor of 0% +6.00% and PIK interest of 6.00%. |
|||||||||||||||
(3) Cash interest of 6-month USD LIBOR with a floor of 0% +6.00% and PIK interest of 6.00%. |
|||||||||||||||
(4) Cash interest of 6-month EURIBOR with a floor of 0% + 3.00% and PIK interest of 3.00%. |
|||||||||||||||
(5) Cash interest of 6-month USD LIBOR with a floor of 0% + 2.75% and PIK interest of 3.00% |
|||||||||||||||
(6) Of which €11 million are capital leases and €149 million is operating lease debt under IFRS 16 |
|||||||||||||||
Summary of consolidated results for the first half
|
First Half |
|||
In € million |
2021 |
2020 |
Change* |
|
Revenues from continuing operations |
1,359 |
1,433 |
(5.2)% |
|
Change at constant currency (%) |
- |
- |
+1.2% |
|
o/w |
Technicolor Creative Studios |
295 |
279 |
+5.8% |
DVD Services |
283 |
302 |
(6.4)% |
|
Connected Home |
770 |
839 |
(8.2)% |
|
Corporate & Other |
11 |
13 |
(12.5)% |
|
Adjusted EBITDA from continuing operations |
100 |
53 |
+90.6% |
|
Change at constant currency (%) |
- |
- |
+101.6% |
|
As a % of revenues |
+7.4% |
+3.7% |
370bps |
|
o/w |
Technicolor Creative Studios |
40 |
2 |
n.a. |
DVD Services |
11 |
1 |
n.a. |
|
Connected Home |
56 |
54 |
+4.5% |
|
Corporate & Other |
(7) |
(5) |
(43.5)% |
|
Adjusted EBITA from continuing operations |
15 |
(67) |
+123.0% |
|
Change at constant currency (%) |
- |
- |
+124.1% |
|
As a % of revenues |
+1.1% |
(4.7)% |
583bps |
|
Adjusted EBIT from continuing operations |
(3) |
(89) |
+96.5% |
|
Change at constant currency (%) |
- |
- |
+95.7% |
|
As a % of revenues |
(0.2)% |
(6.2)% |
597bps |
|
EBIT from continuing operations |
(4) |
(194) |
+97.7% |
|
Change at constant currency (%) |
- |
- |
+96.2% |
|
As a % of revenues |
(0.3)% |
(13.6)% |
n.a. |
|
Financial result |
(62) |
(67) |
- |
|
Income tax |
(11) |
(3) |
- |
|
Share of profit/(loss) from associates |
0 |
0 |
- |
|
Profit/(loss) from continuing operations |
(78) |
(264) |
- |
|
Profit/(loss) from discontinued operations |
(1) |
(1) |
- |
|
Net income |
(79) |
(265) |
- |
(*) Change at current rate
Reconciliation of adjusted indicators
In addition to published results, and with the aim of providing a more comparable view of the evolution of its operating performance in 2021 compared to 2020, 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 €(1) million in 2021 compared to €(105) million in 2020 (including IFRS 16).
|
First Half |
||
In € million |
2021 |
2020 |
Change (*) |
EBIT from continuing operations |
(4) |
(194) |
190 |
Restructuring charges, net |
(26) |
(41) |
16 |
Net impairment losses on non-current operating assets |
- |
(72) |
72 |
Other income/(expense) |
24 |
8 |
16 |
Adjusted EBIT from continuing operations |
(3) |
(89) |
86 |
As a % of revenues |
(0.2)% |
(6.2)% |
597bps |
Depreciation and amortization (“D&A”) (**) |
103 |
139 |
(36) |
IT capacity use for rendering in Technicolor Creative Studios |
- |
2 |
(2) |
Adjusted EBITDA from continuing operations |
100 |
53 |
48 |
As a % of revenues |
7.4% |
3.7% |
370bps |
(*) Variation at current rates
(**) including reserves (Risk, litigation and warranty reserves)
Free Cash Flow Reconciliation and Summarized Financial Structure
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.
First half period (IFRS) |
|
||
In € million |
June 30, |
June 30, |
|
2021 |
2020 |
|
|
|
|||
Adjusted EBITDA from continuing operations |
100 |
53 |
|
Changes in working capital and other assets and liabilities |
(210) |
(197) |
|
IT capacity use for rendering in Creative Studios |
- |
(2) |
|
Pension cash usage of the period |
(13) |
(12) |
|
Restructuring provisions – cash usage of the period |
(46) |
(23) |
|
Interest paid |
(32) |
(35) |
|
Interest received |
- |
- |
|
Income tax paid |
(9) |
(1) |
|
Other items |
- |
(13) |
|
Net operating cash generated from continuing activities |
(209) |
(230) |
|
Purchases of property, plant and equipment (PPE) |
(20) |
(17) |
|
Proceeds from sale of PPE and intangible assets |
2 |
- |
|
Purchases of intangible assets including capitalization |
(24) |
(39) |
|
of development costs |
|
||
Net operating cash used in discontinued activities |
(14) |
(8) |
|
Free cash-flow |
(265) |
(294) |
|
Nominal gross debt (including Lease debt) |
1,273 |
1,670 |
|
Cash position |
99 |
63 |
|
Net financial debt at nominal value (non IFRS) |
1,174 |
1,607 |
|
IFRS adjustment |
(78) |
(6) |
|
Net financial debt (IFRS) |
1,096 |
1,601 |
An analyst audio webcast hosted by Richard Moat, CEO and Laurent Carozzi, CFO will be held today, July 29, 2021 at 6:30pm CEST.
Financial calendar
Q3 2021 results |
4 November 2021 |
###
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
###
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
INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
First Half ended June 30, |
|||
(€ in million) |
2021 |
|
2020 |
CONTINUING OPERATIONS |
|||
Revenues |
1,359 |
1,433 |
|
Cost of sales |
(1,191) |
(1,323) |
|
Gross margin |
168 |
|
110 |
|
|||
Selling and administrative expenses |
(128) |
|
(149) |
Research and development expenses |
(43) |
|
(49) |
Restructuring costs |
(26) |
|
(41) |
Net impairment gains (losses) on non-current operating assets |
- |
|
(72) |
Other income (expense) |
24 |
|
8 |
Earnings before Interest & Tax (EBIT) from continuing operations |
(4) |
|
(194) |
|
|||
Interest income |
- |
|
- |
Interest expense |
(61) |
|
(40) |
Other financial income (expense) |
(2) |
|
(28) |
Net financial income (expense) |
(62) |
|
(67) |
|
|||
Share of gain (loss) from associates |
0 |
|
- |
Income tax |
(11) |
|
(3) |
Profit (loss) from continuing operations |
(78) |
|
(264) |
|
|||
DISCONTINUED OPERATIONS |
|
||
Net gain (loss) from discontinued operations |
(1) |
|
(1) |
|
|||
Net income (loss) |
(79) |
|
(265) |
|
|||
Attribuable to: |
|||
- Equity holders |
(79) |
(265) |
|
- Non-controlling interest |
0 |
0 |
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(€ in million) |
June 30, 2021 |
December 31, 2020 |
||
ASSETS |
||||
Goodwill |
741 |
716 |
||
Intangible assets |
522 |
535 |
||
Property, plant and equipment |
136 |
140 |
||
Right-of-use assets |
135 |
148 |
||
|
Other operating non-current assets |
26 |
27 |
|
TOTAL OPERATING NON-CURRENT ASSETS |
1,560 |
1,566 |
||
Non-consolidated investments |
17 |
14 |
||
|
Other non-current financial assets |
35 |
47 |
|
TOTAL FINANCIAL NON-CURRENT ASSETS |
52 |
61 |
||
Investments in associates and joint-ventures |
1 |
1 |
||
|
Deferred tax assets |
53 |
45 |
|
TOTAL NON-CURRENT ASSETS |
1,666 |
1,674 |
||
Inventories |
168 |
195 |
||
Trade accounts and notes receivable |
360 |
425 |
||
Contract assets |
79 |
63 |
||
|
Other operating current assets |
224 |
224 |
|
TOTAL OPERATING CURRENT ASSETS |
832 |
907 |
||
Income tax receivable |
6 |
14 |
||
Other financial current assets |
24 |
17 |
||
Cash and cash equivalents |
99 |
330 |
||
|
Assets classified as held for sale |
2 |
76 |
|
TOTAL CURRENT ASSETS |
963 |
1,344 |
||
TOTAL ASSETS |
2,629 |
3,018 |
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(€ in million) |
June 30, 2021 |
December 31, 2020 |
||
EQUITY AND LIABILITIES |
||||
Common stock (235,819,875 shares at June 30, 2021 with nominal value of 0.01 euro per share) |
2 |
2 |
||
Subordinated Perpetual Notes |
500 |
500 |
||
Additional paid-in capital & reserves |
84 |
126 |
||
|
Cumulative translation adjustment |
(440) |
(456) |
|
Shareholders equity attributable to owners of the parent |
146 |
173 |
||
|
Non-controlling interests |
0 |
0 |
|
TOTAL EQUITY |
147 |
173 |
||
Retirement benefits obligations |
287 |
325 |
||
Provisions |
25 |
33 |
||
Contract liabilities |
2 |
2 |
||
|
Other operating non-current liabilities |
22 |
21 |
|
TOTAL OPERATING NON-CURRENT LIABILITIES |
336 |
381 |
||
Borrowings |
983 |
948 |
||
Lease liabilities |
97 |
122 |
||
Other non-current liabilities |
1 |
- |
||
|
Deferred tax liabilities |
18 |
15 |
|
TOTAL NON-CURRENT LIABILITIES |
1,435 |
1,466 |
||
Retirement benefits obligations |
31 |
30 |
||
Provisions |
67 |
90 |
||
Trade accounts and notes payable |
455 |
710 |
||
Accrued employee expenses |
116 |
142 |
||
Contract liabilities |
53 |
41 |
||
Other current operating liabilities |
191 |
215 |
||
TOTAL OPERATING CURRENT LIABILITIES |
913 |
1,228 |
||
Borrowings |
52 |
16 |
||
Lease liabilities |
63 |
|
56 |
|
Income tax payable |
18 |
|
21 |
|
|
Other current financial liabilities |
1 |
|
2 |
Liabilities classified as held for sale |
- |
|
56 |
|
TOTAL CURRENT LIABILITIES |
1,047 |
1,379 |
||
|
|
|
||
TOTAL LIABILITIES |
2,482 |
2,845 |
||
TOTAL EQUITY & LIABILITIES |
2,629 |
3,018 |
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Half year ended |
|||
(€ in million) |
2021 |
2020 |
|
Net income (loss) |
(79) |
(265) |
|
Income (loss) from discontinuing activities |
(1) |
(1) |
|
Profit (loss) from continuing activities |
(78) |
(264) |
|
Summary adjustments to reconcile profit from continuing activities to cash generated from continuing operations |
|||
Depreciation and amortization |
108 |
144 |
|
Impairment of assets |
- |
75 |
|
Net changes in provisions |
(33) |
4 |
|
Gain (loss) on asset disposals |
(29) |
(4) |
|
Interest (income) and expense |
61 |
40 |
|
Other items (including tax) |
13 |
|
7 |
Changes in working capital and other assets and liabilities |
(210) |
(197) |
|
Cash generated from continuing activities |
(168) |
(195) |
|
Interest paid on lease debt |
(7) |
(10) |
|
Interest paid |
(24) |
(25) |
|
Interest received |
- |
- |
|
Income tax paid |
(9) |
(1) |
|
NET OPERATING CASH GENERATED FROM CONTINUING ACTIVITIES (I) |
(209) |
(230) |
|
Acquisition of subsidiaries, associates and investments, net of cash acquired |
- |
(2) |
|
Proceeds from sale of investments, net of cash |
27 |
(1) |
|
Purchases of property, plant and equipment (PPE) |
(20) |
(17) |
|
Proceeds from sale of PPE and intangible assets |
2 |
- |
|
Purchases of intangible assets including capitalization of development costs |
(24) |
(39) |
|
Cash collateral and security deposits granted to third parties |
(3) |
(26) |
|
Cash collateral and security deposits reimbursed by third parties |
8 |
- |
|
NET INVESTING CASH USED IN CONTINUING ACTIVITIES (II) |
(10) |
(84) |
|
Increase of Capital |
- |
|
- |
Proceeds from borrowings |
35 |
394 |
|
Repayments of lease debt |
(36) |
(42) |
|
Repayments of borrowings |
- |
(2) |
|
Fees paid linked to the debt and capital operations |
(1) |
(21) |
|
Other |
(2) |
4 |
|
NET FINANCING CASH USED IN CONTINUING ACTIVITIES (III) |
(4) |
333 |
|
NET CASH FROM DISCONTINUED ACTIVITIES (IV) |
(16) |
(8) |
|
CASH AND CASH EQUIVALENTS AT THE BEGINING OF THE PERIOD |
330 |
65 |
|
Net increase (decrease) in cash and cash equivalents (I+II+III+IV) |
(239) |
10 |
|
Exchange gains / (losses) on cash and cash equivalents |
8 |
(11) |
|
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD |
99 |
63 |
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).