30 July 2020 technicolor.com contains certain statements that are - - PowerPoint PPT Presentation

technicolor.com 30 July 2020

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. 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. and description of such risks and uncertainties, refer to Technicolor’s filings with the French Autorité des marchés financiers.

4

A NEW FINANCIAL FRAMEWORK FOR LONG-TERM SUSTAINABILITY

JULY 5:

SAFEGUARD PLAN APPROVED BY THE MAJORITY OF ALL VOTING CREDITORS

►

€ 420m new financing and deleveraging through € 660m of debt reimbursement and/or equitization

►

Addressing the liquidity needs of the group and providing a new framework for long-term sustainability for all Technicolor stakeholders

JULY 20:

ALL RESOLUTIONS APPROVED AT THE SHAREHOLDER GENERAL MEETING

►

Restructuring plan, including €330m rights issue and €330m reserved capital increase, approved by the EGM

►

Existing shareholders will receive free warrants enhancing their

• pportunity to participate in

Technicolor’s recovery and long- term value creation

►

Lenders will receive free warrants in consideration of the lending of the €420m new financing

JULY 20:

RECEIPT OF THE FIRST TRANCHE OF ~€240 MILLION OF THE NEW MONEY

JULY 28:

APPROVAL OF THE ACCELERATED FINANCIAL SAFEGUARD BY THE PARIS COMMERCIAL COURT

TECHNICOLOR’S LEADERSHIP POSITIONS are key and valuable assets and we have a great story to build for the future TECHNICOLOR IS NOW ON TRACK to implement its financial restructuring plan, providing a framework for long-term sustainability for the company’s businesses, employees, customers and suppliers

5

H1 2020 KEY FIGURES FROM CONTINUING OPERATIONS

REVENUES of €1,433 million, after a strong first quarter,

activities have demonstrated good resilience to the Covid- 19 crisis in the second quarter

ADJUSTED EBITA of €(67) million was lower by €(23) million, mitigated by lower D&A and reserves ADJUSTED EBITDA of €53 million, down 49% at constant rates, was impacted by lower business volumes in Film & Episodic Visual Effects and in DVD Services related to Covid-19 business interruption, partly compensated by operational and financial improvements across all divisions, particularly visible in Connected Home where EBITDA grew 126% compared to H1 2019 FCF* of €(286) million was lower by €(24) million at current rate

(*) 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 + foreign exchange result + other financial results and income tax) Post IFRS 16

81 2

H1 2019 H1 2020

6

428 279

H1 2019 H1 2020

Series 1

Revenues (in € million)

@ Current rate

Film & TV VFX Advertising Post Production Animation & Games

►

Approximately 20 theatrical film projects

►

30+ TV and non- theatrical film projects

►

1,350+ commercials

►

MPC won VFX Company of the Year (Ad Age Creativity Awards 2020)

►

Contributed to over 40 commercials for Super Bowl

►

178 TV/OTT series, mini- series and/or pilots (of which 66 are streaming

• nly)

►

70+ theatrical projects

►

Over 1,800 minutes of animation delivered for TV and Film

PRODUCTION SERVICES

REVENUE HIGHLIGHTS:



DOWN 35.3% YOY AT CONSTANT RATE 

Driven primarily by the previously anticipated (pre-COVID-19) delays in awards coming from one key client, and by the subsequent pandemic- related impacts on production around the world

ADJUSTED EBITDA REDUCTION MAINLY DRIVEN BY FILM & EPISODIC VFX ANIMATION & GAMES: double-digit revenue growth compared to prior year, due to higher volume in feature work-for-hire animation services. A&G maintains a strong pipeline from key clients

Adjusted EBITDA (in € million)

@ Current rate

7

DVD SERVICES

(in million units)

H1 2019 H1 2020

YoY Change

DVD

299 220 (26)%

Blu-ray™

118 88 (25)%

374 302

H1 2019 H1 2020

Series 1

Revenues (in € million)

@ Current rate

REVENUE HIGHLIGHTS:



VOLUME DOWN 27% YOY 

Limited amount of new releases due to Covid-19 impacting volumes; existing catalog showed resilience 

H1 REVENUE DECLINE OF 20% AT CONSTANT RATE

• ADJ. EBITDA HIGHLIGHTS:



AMOUNTED TO €1 MILLION AT CURRENT RATE 

Broadly in line with expectations given the anticipated volume reduction and normal seasonal weakness in the first half

DIVISION-WIDE INITIATIVES: 

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

9 1

H1 2019 H1 2020

Adjusted EBITDA (in € million)

@ Current rate

8

CONNECTED HOME

376 318 577 521

H1 2019 H1 2020

Title 24 54

H1 2019 H1 2020

Adjusted EBITDA (in € million) @ Current rate

953 839

Video Broadband

Revenues (in € million) @ Current rate

REVENUE HIGHLIGHTS:



H1 REVENUE DECLINE OF 12.3% YOY AT CONSTANT RATE



H1 REVENUES REMAINED STRONG IN NORTH AMERICA DRIVEN BY THE BROADBAND BUSINESS

• ADJ. EBITDA HIGHLIGHTS:



YOY IMPROVEMENTS: 

Adjusted EBITDA more than doubled mainly as a consequence of the significant cost efficiencies achieved



Adjusted EBITA of €20 million improved by €37 million compared to prior year at current rate

CONNECTED HOME IS MAINTAINING ITS MARKET LEADERSHIP IN BROADBAND AND ANDROID TV- BASED SOLUTIONS PROFITABILITY IMPROVEMENTS: 

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

10

KEY TRANSACTION PRINCIPLES

Notes: (1) Bpifrance Participations will subscribe to the rights issue in cash pro rata its current shareholding (~7.5%) for an aggregate amount of ~€ 25.5m (2) Rounded figure based on EUR/USD of 1.13. The amount of nominal debt in the current situation was estimated as of 22-Jun-20, assuming a 100% drawdown of the Wells Fargo facility

Gross debt evolution

1 2

Wells Fargo Term Loan B RCF Bridge € 1,440m(2) € 1,140m(2) $125m € 982m(2) € 250m $ 110m Reinstated TLB/RCF New financing € 572m(2) € 457m 22-Jun-2020 Pro forma situation $125m repaid

NEW MONEY CASH INJECTION OF €420M, UNDER A DEBT FORMAT, TO FUND THE COMPANY’S OPERATIONAL NEEDS AND REPAY THE $110M BRIDGE LOAN SET UP IN MARCH 2020 BY JULY 31ST, 2020

►

€400m fully underwritten by a group of lenders under the existing Term Loan B and RCF creditors and € 20m provided by Bpifrance Participations(1)

►

Maturity of this new financing will be June 2024 DEBT REDUCTION OF €660M ACROSS THE TERM LOAN B AND THE RCF ON A PARI PASSU BASIS

►

Debt reduction to be implemented through (i) a €330m rights issue backstopped by TLB/RCF creditors with commitment by Bpifrance Participations(1) to participate pro rata its current shareholding and (ii) a €330m reserved capital increase to TLB/RCF creditors REINSTATED TLB/RCF DEBT OF € 572M(2) EXTENDED TO DECEMBER 2024 WITH A BULLET REPAYMENT REPAYMENT OF THE $110M BRIDGE FACILITY MATURITY EXTENSION OF THE $125M WELLS FARGO FACILITY TO DECEMBER 2023

CAPITAL INCREASE – KEY TERMS

► Total capital increase of € 660m in 2 tranches

RIGHTS ISSUE TRANCHE

Amount

► € 330m (i.e. 50% of total capital increase)

Price

► € 2.98 per share

Underwriting

► Term Loan B and RCF lenders by way of set-off of claims

Use of proceeds

► Cash proceeds to be used to repay Term Loan B and RCF at par RESERVED CAPITAL INCREASE

Amount

► € 330m (i.e. 50% of total capital increase)

Price

► € 3.58 per share

Subscribers

► Term Loan B and RCF lenders pro rata by way of set-off of claims at par

Use of proceeds

► No cash proceeds (by way of set-off of claims only)

Participation Undertaking

► Commitment by Bpifrance Participations to participate in the rights issue pro rata its current shareholding ► Bpi France participations to maintain 1 board seat

11

RECENT PROGRESS & KEY NEXT STEPS (INDICATIVE TIMETABLE)

22 June 2020

► Opening of the SFA

5 July 2020

► Financial Creditors Committee votes on the SFA plan

20 July 2020

► First drawdown of the New Money facility (USD and First EUR tranches) for an amount of ~€ 240m to repay the $ 110m Bridge Loan and address the short term liquidity needs of the Group ► Extraordinary shareholders’ meeting approved the capital increases, the allocation of free warrants, and the Fiducie implemented for the Balance FR New Money

28 July 2020

► The Commercial Court of Paris approved the SFA plan

Late August

► Second drawdown of the New Money facility for the remainder, i.e. ~€ 180m

Mid-August

► Opening of the subscription period of the right issue tranche

12

4 August 2020

► Expected approval of the Autorité des Marchés Financiers of the supplement to the prospectus

Early September

► Closing of the subscription period of the right issue tranche

Late September

► Settlement and delivery of the capital increases and delivery of the warrants

SHORT AND MEDIUM-TERM OUTLOOK

13

• Adj. Continuing EBITDA
• Adj. Continuing EBITA

Continuing FCF2

(1) In the June 22nd press release, forecast costs related to Covid-19 were accounted as non-recurring (therefore not part of EBITDA & EBITA). Going forward these costs will be reintegrated in the EBITDA and EBITA of the Group. Despite this reintegration, Technicolor confirms the outlook for EBITDA & EBITA previously provided (2) Before financial results and tax. 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 + foreign exchange result + other financial results and income tax)

2020e

In €m, post IFRS 16 Continuing Operations

2022e 2019a 324 169 425 42 (64) 202 (8) (115)-(150) 259

After a strong first quarter and a second quarter demonstrating a better than expected resilience, Technicolor expects:

►

Adjusted EBITDA to €169 million and Adjusted EBITA to €(64) million in 2020

►

Adjusted EBITDA to €425 million and Adjusted EBITA to €202 million in 2022 Technicolor expects 2020e continuing FCF within a range of €(115)m to €(150)m and €259m in 2022 To be noted that positive impacts of the financial restructuring being implemented by Technicolor have not been included in our outlook Following the entry in SFA procedure, a faster than expected shortening of payment terms has been asked by suppliers, potentially leading to an acceleration of early payments in 2020 and 2021 but mitigating factors will help 2021 to remain on target

►

The group’s liquidity needs overall remain unchanged

Outlook1

15

KEY FIGURES – GROUP

(*) Risk, litigation and warranty reserves

Forex impact (b) (in € million) Current rate LY rate LY rate Revenues 1,433 1,423 1,764 (331) (18.8)% (9) (341) (19.3)% Adjusted EBITDA 53 53 104 (52) (49.6)% +0 (51) (49.2)% in % of Revenues 3.7% 3.7% 5.9% D&A & Reserves (*) w/o PPA amortization (120) (119) (148) +28 +19.1% +1 +29 +19.8% Adjusted EBITA (67) (66) (44) (23) (53.5)% +1 (22) (50.4)% PPA amortization (22) (21) (27) +6 +21.5% +0 +6 +23.0% Non-recurring EBIT (106) (104) (17) (89) ns +2 (87) ns EBIT (194) (191) (88) (106) ns +3 (103) ns Net Result Continuing (264) (260) (143) (121) (84.6)% +4 (117) (81.6)% Net Result Discontinued (1) (0) 4 (5) na +0 (4) na Net Result Group (Group share) (265) (261) (139) (126) (90.4)% +4 (121) (87.2)% FCF Continuing (286) (280) (262) (24) (9.3)% +7 (18) (6.7)% Net Debt (IFRS) (1,601) (1,595) (1,333) (267) (20.1)%

H1

Current rate LY rate

2020 2019

• vs. LY
• vs. LY

at constant rate (a) (c=a+b)

16

ADJUSTED EBITDA BRIDGE VS. LY

(49.2)%

17

PRODUCTION SERVICES H1 2020 PROFITABILITY

(*) Risk, litigation and warranty reserves

Production Services in € million Revenues 279 277 428 (149) (34.8)% (2) (151) (35.3)% Ajusted EBITDA 2 2 81 (78) (97.3)% +0 (78) (97.1)% in % of Revenues 0.8% 0.8% 18.8% D&A & Reserves (*) w/o PPA amortization (54) (54) (62) +8 +13.6% +0 +8 +13.7% Adjusted EBITA (51) (51) 19 (70) ns +0 (70) ns PPA amortization (4) (4) (4) (0) (1.1)% +0 +0 +0.0% Non-recurring EBIT (5) (5) (9) +4 +44.6% +0 +4 +46.4% EBIT (61) (60) 4 (65) ns +0 (65) ns

H1

Forex impact (b)

• vs. LY

at constant rate (c=a+b) LY rate

2019

• vs. LY

(a) LY rate LY rate Current rate Current rate

2020

18

DVD SERVICES H1 2020 PROFITABILITY

(*) Risk, litigation and warranty reserves

DVD Services in € million Revenues 302 298 374 (72) (19.3)% (4) (76) (20.3)% Ajusted EBITDA 1 1 9 (8) (84.5)% (0) (8) (85.5)% in % of Revenues 0.5% 0.5% 2.5% D&A & Reserves (*) w/o PPA amortization (31) (30) (41) +10 +25.1% +0 +11 +26.3% Adjusted EBITA (29) (29) (31) +2 +7.2% +0 +3 +8.4% PPA amortization (4) (4) (5) +1 +11.4% +0 +1 +13.2% Non-recurring EBIT (86) (85) (4) (82) ns +1 (81) ns EBIT (120) (118) (39) (81) ns +2 (79) ns

H1

Forex impact (b)

• vs. LY

at constant rate (c=a+b) LY rate

2019

• vs. LY

(a) LY rate LY rate Current rate Current rate

2020

19

CONNECTED HOME H1 2020 PROFITABILITY

(*) Risk, litigation and warranty reserves

Connected Home in € million Revenues 839 836 953 (114) (12.0)% (3) (117) (12.3)% Ajusted EBITDA 54 54 24 +30 ns +0 +30 ns in % of Revenues 6.4% 6.5% 2.5% D&A & Reserves (*) w/o PPA amortization (34) (33) (40) +7 +17.1% +0 +7 +18.1% Adjusted EBITA 20 21 (17) +37 ns +1 +38 ns PPA amortization (13) (13) (18) +5 +29.3% +0 +6 +30.7% Non-recurring EBIT (10) (10) (2) (8) ns +0 (8) ns EBIT (2) (1) (37) +35 +93.4% +1 +36 +96.0% Current rate LY rate

2020

LY rate

H1

Forex impact (b)

• vs. LY

at constant rate (c=a+b)

2019

• vs. LY

(a) LY rate Current rate

20

FROM ADJUSTED EBITDA TO EBIT IN SUMMARY

(*) Risk, litigation and warranty reserves

in € million

Current rate LY rate LY rate Current rate LY rate Adjusted EBITDA 53 53 104 (52) +0 (51) D&A & Reserves (*) w/o PPA amortization (120) (119) (148) +28 +1 +29 Adjusted EBITA (67) (66) (44) (23) +1 (22) PPA amortization (22) (21) (27) +6 +0 +6 Impairments & write-off (72) (71) (1) (71) +1 (70) Restructuring (41) (41) (12) (30) +0 (30) Other Non Current 8 8 (4) +12 +0 +12 EBIT Continuing (194) (191) (88) (106) +3 (103)

H1

2019

Forex impact (b)

• vs. LY

at constant rate (c=a+b)

• vs. LY

(a)

2020

21

FROM EBIT TO NET RESULT GROUP

in € million

Current rate LY rate LY rate Current rate LY rate EBIT Continuing (194) (191) (88) (106) +3 (103) Net Interest Expense (40) (39) (32) (7) +1 (7) Others Financial (28) (28) (16) (12) (0) (12) Profit before Tax (261) (257) (136) (125) +4 (121) Tax (3) (3) (7) +3 +0 +3 Net Result Continuing (264) (260) (143) (121) +4 (117) Net Result Discontinued (1) (0) 4 (5) +0 (4) Net Result Group (Group share) (265) (261) (139) (126) +4 (121)

H1

2020 2019

• vs. LY

(a) Forex impact (b)

• vs. LY

at constant rate (c=a+b)

22

FREE CASH FLOW FROM CONTINUING OPERATIONS H1 20 VS. H1 19

€(18)m

23

NET NOMINAL DEBT/CASH EVOLUTION

1 302 1 670 417 (50)

65

(286)

63

(9) 353 (61) In m€

1237 1607

Net Debt at Nominal value Gross Nominal Debt

January 1st 2020 June 30st 2020 Increase Decrease

+368 Cash position In m€

January 1st 2020 June 30st 2020 FCF Continuing CF Disco Others New cash from Debt

(2)

24

LIQUIDITY

LIQUIDITY AT JUNE 30, 2020 AVAILABLE AMOUNT (IN € MILLION)

Cash on hand at June 30, 2020 63 Committed credit facilities: Technicolor SA Revolving Credit Facility (€250m matures Dec 2021) Wells Fargo credit line ($125m matures December 2023) 65*

LIQUIDITY €128m

CASH ON HAND OF €63 MILLION

* The availability of this credit line varies depending on the amount of receivables.

25

DETAILS OF DEBT AT JUNE 30, 2020

Nominal IFRS

• Int. Rate

June 30, 2020 December 31, 2019 Issuer Type Curr. Rate Formula Maturity* Rate** Rate** Hedging? Nominal IFRS Nominal IFRS Technicolor SA Term Loan USD

Libor w/ floor of 0% + 2.75%

n.a. 0% 0% Yes 259 258 259 258 Technicolor SA Term Loan EUR

Euribor w/ floor of 0% + 3.00%

n.a. 0% 0% Yes 275 274 275 274 Technicolor SA Term Loan EUR

Euribor w/ floor of 0% + 3.50%

n.a. 0% 0% No 450 448 450 448 RCF Credit Line EUR

Euribor + 3.00%

n.a. 0% 0% No 250 250

• Bridge loan

Credit Line USD

Base rate + 2.00%

Jul-20 10.25% 24.59% No 98 96

• Wells Fargo

Credit Line USD

Libor w/ floor of 1% + 2%

Sep-21 3.00% 3.00% No 47 47

• Lease liabilities***

7.11% 7.11% No 281 281 312 312 Other debt and accrued interest 0.03% 0.03% No 10 10 6 6

* In Sept. 2020 the Term Loans and RCF will be partially swapped to equity and restated for the remaining amount with maturity Dec. 2024

Total Debt: €1670m €1664m €1302m €1298m

** Under the "sauvegarde" the interest on the Term Loans and the RCF is suspended

Cash: 63 63 65 65

*** €256m of operating lease debt and €25m of capital lease debt

Net Debt: €1607m €1601m €1237m €1233m Average interest rate: 1.88% 2.70% 4.34% 4.42% Average rate (with hedging): 1.91% 2.74% 4.38% 4.46%

27

GROUP PROFILE – REVENUE

28

IFRS 16, LEASES

IFRS 16 MECHANICS:

All leases are booked as finance leases with the following consequences:

• Lease expenses are replaced by an amortization

expense and an interest expense

• Interest expense higher at the beginning of the

lease and decreases over time (no impact on total duration of the lease)

• An asset, a Right of Use (leased asset) is

recognized at the present value of the future lease payments

• Lease payments are now classified in financing

flow

New debt due to operating leases not included in financial covenant calculation

H1 20 at CR (€m) EBITDA EBITA Net Income Net Debt Connected Home 4 1 Production Services 15 2

• 7

Home Entertainment Services 15 1

• 1

Corporate & Other 2 1 Total Group 36 5

• 8

(256) Impacts by business division

Transition method in the financial statements:

Simplified (w/o retrospective adjustment). All leases are assumed to start as of 01/19. Increased interest expense in Year 1 & 2

Low value & short-term lease exemption:

Rentals lasting less than one year and items such as PCs are scoped out to diminish the burden on finance teams

Former finance leases are fully kept on the BS

€300M OF TOTAL COST SAVINGS TARGETED, MORE THAN €160M EXPECTED TO BE REALIZED IN 2020

€160m €150m €150m €300m 2020E 2022E Cost Savings Target Panorama 1 Further additional initiatives

STRONG FOCUS ON THE DELIVERY OF PREVIOUSLY ANNOUNCED COST SAVINGS THROUGH THE STRATEGIC PLAN

►

Well on track to achieve total cost savings in excess of €160m this year and €300m by 2022

Cost Savings Initiatives

TO DATE, €67M COST SAVINGS RELATED TO THE STRATEGIC PLAN ANNOUNCED IN 2020 HAVE BEEN ACHIEVED

►

Detailed plans are in place to achieve the remainder RESTRUCTURING COSTS ACCOUNTED FOR €41M AT CURRENT RATE