Technicolor SA announced financial and production results for the first half of 2014.
According to the statement, Technicolor’s revenues were €1.505 billion (US $2.02 billion) in the half, down 5.3% compared to H1 2013.
On the optical disc replication front, Technicolor reports that “DVD Services revenues decreased year-on-year, mainly driven by the decline by 6.7% in combined Standard Definition DVD and Blu-ray volumes compared with the second quarter of 2013. Volumes in the quarter were impacted by an overall weaker slate of new release titles compared with the second quarter of 2013, further impacted by the delay of a key new release title into the third quarter of 2014. These trends had a significant impact on Blu-ray volumes, which are primarily driven by new release activity. The growth trend in Games volumes continued in the period, expanding by 8.5% as compared to the second quarter of 2013. Selected titles produced in the second quarter of 2014 included Muppets Most Wanted (Disney), The Lego Movie (Warner), Lone Survivor (Universal) and Noah (Paramount).”
Disc Replication Services (by format)
| Millions of units | Q2 2013 | Q2 2014 | Change (%) |
| DVD | 234.3 | 218.7 | -6.6% |
| Blu-ray Disc (BD) | 44.9 | 41.8 | 6.9% |
| Total | 279.2 | 260.5 | -6.7% |
Disc Replication Services (by segment)
| Millions of units | Q2 2013 | Q2 2014 | Change (%) |
| Studio/Video | 266.3 | 246.2 | -7.5% |
| Games | 8.0 | 8.6 | 8.5% |
| Software & Kiosk | 4.9 | 5.7 | 15.1% |
| Total | 279.2 | 260.5 | -6.7% |
Currency conversion as of July 25, 2014.
For more information visit: www.technicolor.com
Unedited press release follows:
H1 2014 results: improved profitability and strong cash generation
Technicolor today announces its results for the first half of 2014.
H1 2014 results: improved profitability and strong cash generation
• Revenues:€1,505 million, +1.7% at constant rate and scope [1] and excl. legacy
• Adjusted EBITDA:€213 million, +6.3% at constant rate and scope
• Group free cash flow: €129 million, up €105 million versus H1 2013
• Strong deleveraging: netnominal debt at €671 million, down €166 million versus H1 2013
Paris (France), 25 July 2014 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) today announces its results for the firsthalf of 2014.
Frederic Rose, Chief Executive Officer of Technicolor, stated:
“We are well on track to achieve our 2014 objectives and to exceed our prior guidance on free cash flow generation. Our performance continues to be fueled by profitable growth in Connected Home, the signature of new license agreements and the very strong growth in visual effects.”
Key points
• Improved profitability:Adjusted EBITDA margin at 14.2% (up 1.2 point)and Adjusted EBITat 8.4% (up 1.4 point).
• Strong cash generation with Group free cash flow of €129 million, driven by improvement in profitability and financial charges and a particularly strong working capital performance.
• Positive net income of €27 million, despite €19 million negative impact related to accelerated debt repayments.
• Progress in innovation,in particulararound immersive technologiesacross the Group.
• Strengthening market positions by sustained organic growth in Connected Home and Production Services. Connected Home expanded again much faster than the market and Visual Effects activities grew double-digit across facilities.
• Seizing selected external growth opportunities with the announced acquisition of Mr. X, expected to be completed in the third quarter, following the acquisition of Thales display IP portfolio in February 2014.
2014 guidance
• Technicolor confirms its objective to reach an Adjusted EBITDA between €550 million and €575 million;
• Expects to exceed the upper range of its free cash flow objective of €180 million to €200 million, despitethe impact of higher cash restructuring charges compared with 2013;
• Expects a positive net income;
• Confirms its objective to reach a Net Debt to Adjusted EBITDA ratio below 1.2x at end December 2014.
Innovation
• In the first half of 2014, Technicolor reinforced its IP portfolio both organically and through selected IP acquisitions. The Group continued to expand its offering of patents related to standards, specifically in Blu-rayTM and HDMI standards. Technicolor participates in patent pools for both of these standards and in the first half 2014 added 52 essential patents to the Premier BD patent pool and 4 essential patents to the HDMI pool. To complement its organic development efforts, Technicolor also completed the acquisition of more than 120 patents and applications relevant to the LTE standard, which further reinforced the added value for the industry of its mobile devices licensing programs.
• Technicolor continued to be active around immersive technologies including those designed to upscale images and to help create an immersive Hollywood grade experience at home, through the development and deployment of the latest advancements in HDR, 4K and Wide Color Gamut, across its businesses. With an eye on providing the best image quality to consumers, the Technology segment embedded its research algorithms in content producing the best viewing experience regardless of hardware limitations. Technicolor signed with HP a Color Certification program to offer by the third quarter of 2014 HP Envy and HP Pavilion monitors ensuring that consumers are getting color accuracy online. Operating businesses also reached important milestones in immersive technologies.The 4K streaming service offered by M-GO in partnership with Samsung will be available in the third quarter of 2014. Production Services started work on a number of Ultra HD TV shows to be delivered by the end of 2014 and the Connected Home segment has been selected to deliver 4K set-top boxes in volume to Tata Sky from early 2015.
• The Connected Home segment had a particularly strong pace of innovation that resulted in several contract wins in Europe, Middle East & Africa with Telecom and Cable operators. It is also developing additional software features on top of Qeo and its own middleware, and is rolling out its roadmap to ensure the widespread use of Qeo on connected devices.
Summary of consolidated results for the first half of 2014 (unaudited)
Key financial indicators and analysis at constant scope[2]
|
First Half |
Change YoY |
|||
| In € million |
2013 |
2014 |
Reported |
At constant rate |
| Group revenues |
1,589 |
1,505 |
(5.3)% |
(0.9)% |
| Group revenues (excl. legacy activities) |
1,537 |
1,495 |
(2.7)% |
+1.7% |
| Adjusted EBITDA |
207 |
213 |
+3.1% |
+6.3% |
| As a % of revenues |
13.0% |
14.2% |
+1.2pt |
|
| Adjusted EBIT |
111 |
127 |
+14.2% |
+17.3% |
| As a % of revenues |
7.0% |
8.4% |
+1.4pt |
|
| EBIT from continuing operations |
89 |
122 |
+35.8% |
+38.5% |
| Financial result |
(72) |
(74) |
(2) |
|
| Share of profit/(loss) from associates |
(5) |
1 |
+6 |
|
| Income tax |
(20) |
(22) |
(2) |
|
| Profit/(loss) from continuing operations |
(10) |
27 |
+37 |
|
| Profit (loss) from discontinued operations |
16 |
0 |
(16) |
|
| Net income |
6 |
27 |
+21 |
|
| Net income excl. costs due to debt prepayments |
6 |
46 |
+40 |
|
| Group Free cash flow |
24 |
129 |
+105 |
|
| Net financial debt at nominal value (non IFRS) |
837 |
671 |
(166) |
|
Revenues from continuing operations amounted to €1,505 million in first half of 2014, including a negative forex impact of €69 million. Revenue growth was 1.7% at constant rate and scope (excl. legacy activities), reflecting solid performances in Production Services, particularly Visual Effects, and in the Connected Home segment, which reinforced its market leadership and benefited from a number of customer wins and new awards, as well as continued resiliency in DVD Services, despite a challenging year-on-year comparison. In the Technology segment, the revenue decrease reflected weaker contribution from MPEG LA, due to a one-off adjustment in the first quarter and ongoing softness in optical disc drive demand from PC makers, partly offset by double-digit growth in revenues generated by direct licensing programs, driven by a good level of new contracts and renewals, with notably the contribution of an LG smartphone licensing agreement and successful renewals with two major US digital TV providers during the period.
Adjusted EBITDA from continuing operations amounted to €213 million in the first half of 2014, including a negative forex impact of €7 million compared to the first half of 2013. Adjusted EBITDA margin was 14.2%, up by 1.2 points year-on-year, reflecting significant margin improvement in Connected Home, driven by higher shipments and better mix, stable margin in Entertainment Services, due to strong performance in Production Services and continued operating efficiencies in DVD Services, and lower corporate costs, mostly related to transversal functions.
Technicolor remained focused during the first half on optimizing its cost base and generating efficiencies across its businesses and at corporate level. Total operating expenses decreased year-on-year, driven by a sharp reduction in the Entertainment Services segment, with operating expenses down 17% at constant rate, and material declines for the Connected Home segment and at corporate level.
Adjusted EBIT from continuing operations amounted to €127 million in the first half of 2014, up 17.3% at constant currency compared to the first half of 2013, with margin of 8.4%, up by 1.4 points year-on-year, resulting from the growth in Adjusted EBITDA and lower D&A expenses.
EBIT from continuing operations totaled €122 million in the first half of 2014, up 42% at constant currency compared to the first half of 2013, with margin of 8.1%, up by 2.6 points year-on-year, due to the increase in Adjusted EBIT, lower restructuring costs and a gain on disposal of available-for-sale financial assets.
The Group’s financial result amounted to €(74) million, broadly stable year-on-year, reflecting the following:
• Net interest costs amounted to €39 million in the first half of 2014, a significant reduction compared to €63 million in the first half of 2013, reflecting reduced borrowing costs stemming from the refinancing and repricing transactions and from the material decrease in gross debt during the period.
• Other financial charges amounted to €35 million in the first half of 2014, including costs related to the refinancing and repricing transactions for €25 million, including an IFRS reversal recognized as a non-cash charge for €19 million due to the debt prepayments done in 2014 and repricing transaction costs.
Net income was a profit of €27 million in the first half of 2014, increasing from a profit of €6 million in the first half of 2013. Restated from refinancing and repricing charges, net income was a profit of €46 million.
An analyst conference call hosted by Frederic Rose, CEO, and Stéphane Rougeot, CFO, will be held on Friday, 25 July 2014 at 3:00pm CEST.
Financial Calendar
Q3 2014 revenues 22 October 2014
FY 2014 results 19 February 2015
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
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).