Technicolor

EU: TCH

€330.1m market cap

€0.8 last close

Technicolor is a worldwide technology leader operating in the media and entertainment industry. Its activities are organised in two business segments, Entertainment Services (the combined Production and DVD Services businesses) and Connected Home.

Investment summary

Technicolor’s H1 results were in line with management expectations and we 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 margins to start to rebuild. The share price has recovered from recent weakness but remains well below peer based and DCF valuations.

Y/E Dec
Revenue (€m)
EBITDA (€m)
PBT (€m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2017A 4253.0 341.0 7.0 1.9 41.9 N/A
2018A 3988.0 266.0 (3.0) (1.0) N/A N/A
2019E 3846.0 319.0 (44.0) (14.6) N/A N/A
2020E 3836.0 363.0 15.0 2.0 39.8 N/A
Last updated on 19/09/2019
Industry outlook

Connected Home operates in a large (FY18: $16.4bn) but tough market, with little growth, thin margins and limited visibility. Scale is key, giving access to cheaper components and leveraging platform development costs. The DVD market continues to decline, although increased market share has allowed some offset. The broad customer spread in Production Services ensures a high base workload, bolstered by the appetite for high-end content from VoD platforms and growth in VFX-heavy movies. Studios increasingly outsource animation and the strength of the gaming market is driving enhanced user experiences.

Last updated on 19/09/2019
Sector
TMT
Share price graph
Balance sheet
Forecast net debt (€m) 1060
Forecast gearing ratio (%) 362
Price performance
%
1m
3m
12m
Actual 7.2 (5.6) (22.6)
Relative* 2.0 (7.9) (25.0)
52-week high/low €1.3/€0.7
*% relative to local index
Key management
Bruce Hack Chairman
Frederic Rose CEO
Laurent Carozzi CFO
Emilie Megel VP Investor Relations