BENGALURU: Technicolor revenues increased 12 per cent at current currency and 4.7 per cent at constant currency for the year ended 31 December, 2015 (current year, FY-2015). The company says that its growth reflects growth across the Entertainment Services and Technology segments and broadly stable Connected Home revenues. Technicolor revenue for the current year was €3,652 million as compared to €3,332 million in FY-2014.
Technicolor CEO Frederic Rose stated, “In 2015, our teams closed successfully, and in parallel, a number of large acquisitions, while remaining focused on delivering a very strong free cash flow. Moving forward, Technicolor is a much more balanced company built on three leading Operating businesses and a core Licensing business underpinning our material upgrade of Drive 2020 objectives.”
Adjusted EBITDA from continuing operations reached €565 million in FY-2015, up 3.1 per cent at constant currency compared to 2014, representing a margin of 15.5 per cent, down by 1 point year-on-year (YoY). Technicolor says that the Adjusted EBITDA increase reflected a solid Licensing revenue performance, combined with strong organic growth in Production Services, partially offset by a weak DVD Services performance in the first half, the impact of unfavourable € versus US $ exchange rate fluctuations on procurements for Connected Home in the second half, as well as a lower contribution from exited activities.
Segment performance
Connected Homes
Connected Homes segment revenues totalled €1,451 million in FY-2015, up 5.0 per cent at current currency and, and up 0.3 per cent as compared to the reported €1,382 million in FY-2014. Excluding Cisco Connected Devices (CCD), revenue declined 1.2 per cent as reported and declined 5.7 per cent at constant currency in FY-2015 to €1,3,65 million as compared to $1,382 million in the previous fiscal.
Technicolor says that even without the contribution of CCD, Connected Home continued to outpace the global CPE market despite adverse business conditions experienced in some regions, driven by a number of new awards and customer wins, including high-end products. The segment achieved in particular a sustained performance in Europe, Middle-East & Africa and Asia-Pacific, both regions reporting a double digit YoY growth in revenues, benefiting notably from a mix improvement associated with the introduction of new products and a further ramp up in the value chain. Connected Home faced however lower levels of activity in both North and Latin America, primarily reflecting cautious customer approach towards product orders and inventory management, due to pending industry consolidation in the US and unfavourable macroeconomic conditions in Brazil.
Adjusted EBITDA reached €76 million in FY-2015 compared to €77 million in FY-2014, with a negative forex impact of €6 million. At constant currency, Adjusted EBITDA was €82 million, up by 5.8 per cent compared to 2014, with a margin of 5.9 per cent, up by 0.3 point YoY.
Entertainment Services
Entertainment Services revenue, excluding exited activities, was €1,639 million, up 10 per cent YoY in FY-2015 at constant currency, resulting from strong organic growth, the contribution from recent acquisitions in Production Services and solid revenues recorded by DVD Services.
Production Services recorded a strong double-digit increase in revenues in FY-2015 compared to FY-2014 says Technicolor. Revenues expanded by almost 40 per cent YoY at constant currency, as a result of a strong double digit organic revenue growth, mostly due to a record level of activity in Visual Effects for feature films, and the additions of Mr. X, OuiDo Productions, Mikros Images and The Mill.
The company says that VFX for commercials and Animation activities also recorded higher revenues, resulting from increased levels of activity across facilities, while post production revenues improved year-on-year.
Technicolor says that it provided VFX and/or post production services to 10 of the top-16 grossing films of the year worldwide, including some of the best box office performers such as Furious 7 (Universal), Avengers: Age of Ultron (Disney), Spectre (Sony) and The Hunger Games: Mockingjay – Part 2 (Lionsgate).
DVD Services revenues were generally stable at constant currency in FY-2015 compared to FY-2014, driven by resilient total Standard Definition DVD, Blu-ray and CD disc volumes, which were down less than 1 per cent YoY, reflecting a marked improvement compared to the 11 per cent volume decline recorded in FY-2014. Blu-ray disc volumes were up by c.8 per cent in FY-2015 compared to FY-2014, supported by the aforementioned factors and the ongoing growth in Xbox One games volumes, while Standard-Definition discs declined by c.5 per cent YoY. Overall FY-2015 volume trends in Europe continued to be generally better than in North America, mostly due to regionally specific promotional activity for selected studio customers, as well as to the ongoing adoption of Blu-ray in this region (as compared to the more mature and stable U.S. Blu-ray market).
Total Games volumes declined by c.11 per cent YoY, with ongoing erosion in prior generation video game console demand outpacing growth for the current generation Xbox One platform. Going forward, prior generation video games volumes have now reached an immaterial level and should not influence future trends to the same degree.
Excluding exited activities, Adjusted EBITDA was €190 million, down 2.1 per cent at constant currency YoY, as the stronger Production Services contribution was almost fully offset by lower DVD Services performance. However, the free cash flow generation in DVD Services was stable year-over-year notwithstanding the adjusted EBITDA decline says the company.
Technology
Technology revenues excluding M-GO, which was sold in early January 2016 to Fandango, a business unit of NBC Universal, amounted to €490 million, up 3.3 per cent year-over-year at constant currency, primarily driven by higher revenues from the MPEG LA pool, which represented 59 per cent of total Licensing revenues in FY-2015 compared to 45 per cent in FY-2014. The Group’s direct licensing programs recorded a solid performance in the first half, particularly for Digital TV, which benefited from the strong level of new contracts and contract renewals in the course of 2014. In the second half, direct licensing programs posted a lower performance as the Group did not sign any major contract renewal or new contract as some ongoing discussions with manufacturers were delayed to leverage the joint licensing program with Sony in Digital TV (DTV) and Computer Display Monitor (CDM) that was announced in September.
Excluding M-GO, Adjusted EBITDA reached €389 million, up 3.4 per cent at constant currency year-on-year, driven by the strong contribution of the MPEG LA patent pool.