Technicolor’s Q121 figures show (constant currency) revenue up 3.6% on prior year, buoyed by continued strong demand in Connected Home. The outlook for Production Services is considerably improved as filming gets underway and projects are greenlit. Full year and FY22 earnings guidance is maintained, with margins set to improve after earlier streamlining and ongoing cost control. Following FY20’s financial restructure, the equity proportion of Technicolor’s enterprise value is no longer greatly o
Companies: Technicolor (TCH:EPA)Technicolor SA (TCH:PAR)
Technicolor’s FY20 results show it is on track to meet FY22 guidance, now adjusted for forex and the disposal of the post-production business. FY21 trading prospects are improved, with 75% of Production Services’ pipeline in place. Strong domestic broadband demand continues to buoy Connected Home, although the FY21 result may be dampened by delays from semiconductor shortages. Our forecasts align with guidance, which is for a marked margin uplift as revenues rebuild and the cost saving programme
Technicolor has announced the disposal of the post-production house of Production Services for €30m, for completion in H121. This leaves the segment focused on VFX (visual special effects) and animation, where growth and margin prospects are higher. FY21 has a good project pipeline, with around two-thirds of the year’s expected film and episodic VFX sales in place. No group level update was given, although Connected Home recently passed the milestone of shipping 20m DOCSIS 3.1 boxes. We have mad
With the financial reconstruction complete and the group’s credit ratings upgraded as of end-September, Technicolor is now focused on improving its underlying profit and cash generation. The Q3 narrative was in line with earlier updates: Connected Home benefiting from the strong demand for reliable home broadband and Wi-Fi; Production Services seeing a partial resumption of live action filming; and DVD Services held back by the lack of new releases. Run-rate targeted cost savings have been edged
With its complex financial restructuring complete, Technicolor can now move forward secure in the knowledge of a supportive equity- and debt-holder base. With US Chapter 15 proceedings now closed, both S&P and Moody’s have lifted their ratings, the former to CCC+ with stable outlook (B for the new debt), the latter to Caa2 (Caa1 for new debt), which should help improve commercial terms of trade. The rights issue was taken up by 18.1% of equity holders, at €2.98, above the prevailing market price
Technicolor’s H120 results are consistent with management’s base level guidance given ahead of the EGM to approve the refinancing. Our model reflects this scenario. The proposed rights issue and debt-to-equity swap are now set to proceed, launching in August, closing in September. The share price has been rebounding towards the €2.98 rights price for equity shareholders, underwritten by the debt holders, who will pay €3.58/share. With firm steps now taken along the route to a much-strengthened b
Technicolor has negotiated a refinancing with its lenders, to be put to shareholders at an EGM on 20 July. This involves an initial injection of €420m of additional debt, in part to repay a bridge loan expiring at the end of July, to be followed by a €660m debt-to-equity swap. Shareholders will have the chance to participate in this element through a rights issue priced at €2.98. Management has outlined trading scenarios for a base case and a high case through to FY22e, both of which reflect the
The impact of the COVID-19 pandemic on equity markets has interfered with Technicolor’s plans to refinance the group in part through a €300m rights issue, as was announced in February 2020. Management is now seeking an alternate solution to enable it to move ahead with the strategic plan unveiled at that time. It is seeking a conciliation with its creditors to facilitate negotiations with a third-party investor and one of its existing lenders that will inject €400m into the business, to be follo
Technicolor’s Q1 results reflect limited COVID-19 impact, which will show more markedly in Q2. Q1 disruption to Connected Home’s Chinese supply chain is now broadly resolved, while lower activity in Production Services’ Film and Episodic visual special effects (VFX) had been flagged previously. Connected Home is seeing good US broadband demand, while Production Services is being hit by the industry’s cessation of live action filming. The group is on track to achieve run-rate cost savings of €100
Technicolor has issued a further update on how COVID-19 is affecting the group, having withdrawn guidance at the time of the AGM in March. With studios and advertisers halting all live action filming, Production Services is the most affected segment. DVD services has fair demand for its back catalogue, with production continuing for now, while Connected Home is building back up to speed as its Asian supply chains recover. We have withdrawn our forecasts while the economic picture clarifies. The
Technicolor’s new CEO, Richard Moat, appointed in November 2019, has completed his review of the group. He has now set out his strategy to play to the group’s commercial strengths and put it on a firmer financial footing. More detail will be added at a capital markets day scheduled for 19 February. Cost savings of €150m have been identified (an additional €110m to those already being implemented, and at an implementation cost of €90m over three years) and an underwritten rights issue of €300m is
Technicolor has announced the appointment of Richard Moat as CEO, taking over from Frédéric Rose, who had been in situ for 11 years. He is a turnaround specialist, with a telecoms background, and is tasked with accelerating growth, value creation and financial sustainability. The Q3 trading update indicated improvements in adjusted EBITDA and free cash flow, as anticipated. We have made minor downward adjustments to our full year and FY20 forecasts to reflect the shift in mix. The valuation rema
Technicolor’s H1 results were in line with management expectations and we have made only minor adjustments to underlying forecasts (numbers now reflect implementation of IFRS 16). Work on The Lion King contributed to a very busy H1 for Production Services, which also has a good H2 pipeline. Connected Home has market leadership in broadband gateway access and has made good progress with its cost saving plan. We expect working capital to swing back to the group’s advantage in H2 and operating marg
Technicolor is a leading global player in each of its three core businesses: Production Services, DVD Services and Connected Home, all of which have challenges and opportunities. Our view is that management has a strategy to mitigate the former and take advantage of the latter. H119 will likely prove the earnings nadir, with capacity constraints in Production Services and component pricing pressure – now unwinding – in Connected Home, which will also be reflected in the cash flow. We expect cash
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Vodafone released this morning a solid Q1 in terms of revenue, a good performance that is quite logical however as there is partial recovery compared to Q2 20.
Remember, the key point which had worried the market three months ago with the annual release was that free cash flow would be only €5.2bn for 2021/22 vs €5bn in 2020/21 but vs €5.7bn in 2019/20. Vodafone has confirmed this number this morning.
We maintain our Buy opinion on the stock.
Companies: Vodafone Group Plc
What a difference a year makes - 12 months ago, the focus, quite understandably, was on the course of the pandemic and the lifting of the Lockdown (1) measures. For investors, it was the sustainability of the rally in markets seen since March 2020. Today, while we are still thinking about the lifting of lockdown measures, we are also concerned about two “old favourites” from previous decades. Inflation and the parlous state of public finances. The BoE has said that although CPI inflation rose to
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The UK market showed a continued recovery in the first quarter albeit the indices are still well short of their all-time peaks, unlike many of their international peers. The FTSE 100 has risen by 1,186 points (21.4%) since the end of October and the FTSE 250 by 4,304 points (25.0%). The comparable performance since the start of the year is less spectacular- the FTSE 100 has risen by 253 points (3.9%) and the FTSE 250 has risen by 1,070 points (5.0%). The factors behind the sustained rally are fa
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At first sight a reassuring release with a correct EBITDAaL outlook… if there was not a worrying detail: capex will be higher than expected. The stock was indeed down by 5% this morning.
Capex should indeed grow by 6% yoy in 2021/22 but, as for most telcos, this is for a good cause. Certainly the dividend should remain flat for 2021/22 but, given its current 7.5% dividend yield, we maintain our Buy recommendation on this stock with increasingly solid German fundamentals.
Gamma’s trading update for H1 2021E notes another good performance, with growth in line with market expectations for that of the full year. Management expects that the full year results will be in the upper half of the range of market consensus estimates and we upgrade our numbers accordingly for FY 2021E with knock-on increases for the subsequent two years of our forecast horizon. Despite the restrictions associated with the pandemic, the Group continues to show the financial resilience that co
Companies: Gamma Communications PLC
Globally, no surprise about Elisa’s Q2 results but the group remains a solid and reassuring slight growth story in the telecom sector.
Elisa’s stock is just about to return to its pre-pandemic level. It means for us that it is now again at its fair price, very expensive in terms of EV/EBITDA (>13x) and offering a best-in-class 3.8% dividend yield. We have been for a week at Reduce on the stock with no downside.
Companies: Elisa Oyj Class A