Technicolor is a worldwide technology leader operating in the media and entertainment industry. Its activities are organised in three business segments, Production Services, DVD Services and Connected Home.
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 benefits kick in. FY20’s financial restructuring, coupled with the anticipated business improvements, should support cash flow generation and may act as a catalyst for an equity re-rating. The next update will be with the Q1 figures on 11 May.
COVID-19 has highlighted the importance of reliable domestic broadband and high-quality wi-fi as homes increasingly act as devolved workplaces alongside greater content consumption. This is unlikely to change as the global economy reopens. In Production Services, the live content industry continues to re-emerge, while animation demand is still strong. Fresh, high-quality content will be crucial to reinforce the attractiveness of VoD platforms to subscribers and advertisers.