(Boursier.com) — Technicolor is organizing its Investor Day today in London. It began with the presentation of Vantiva (new name for Technicolor outside of TCS), then of Technicolor Creative Studios (TCS or the “Group”). Christian Roberton (future Managing Director of TCS), Laurent Carozzi (future Chief Financial Officer of TCS) and the TCS management team detailed the strategic direction and growth roadmap of the future new company, as well as its financial objectives.
TCS aims to become the partner of choice in collaborative visual effects for the most creative companies in the world. The company considers itself ideally positioned to benefit from strong structural growth in a booming market.
TCS confirmed the forward-looking assumptions published on June 6. The Group is now guiding the market with new key performance indicators (KPIs) with in particular an adjusted Ebitda after rents of between 120 and 130 million euros in 2022 and 140 to 160 ME in 2023.
Richard Moat, Managing Director of Technicolor SA and future President of Vantiva, said: “Over the past two years, we have implemented a transformation process that has made TCS a more efficient and agile company by facilitating collaboration , integrating technology and mobilizing talent”. Christian Roberton, current President of TCS and future Managing Director of TCS, added: “I am excited that Technicolor Creative Studios is embarking on a new chapter as an independent company. Technicolor Creative Studios is ideally positioned to benefit from the structural growth of its broad underlying addressable markets, and to become the premier visual effects partner for the world’s most creative companies.”
TCS, a first choice visual partner
TCS’ ambition is to become the partner of choice in collaborative visual effects for the most creative companies in the world. TCS’ focus on technology, creativity and talent development, combined with rigorous and efficient cost management will enable the company to operate as an international studio focused on its customers and delivering high quality projects. quality. TCS’ mission is to drive growth and improve margins across all of its divisions by facilitating collaboration between the group’s various creative and production capabilities, and by adapting its services to its customers in a post Covid-19 context. .
The main strategic pillars of TCS are:
– increase its capacities to meet strong demand and invest in new markets;
– develop the Technicolor Creative Studios brand to be recognized as an employer of choice by talent;
– continue to invest in research and development as well as in technology;
– rely on existing assets to seize the opportunities presented by the metaverse.
Take advantage of strong structural growth
TCS benefits from an excellent position in its key markets, which are all growing.
Thus, MPC, which represents 40% of the combined turnover of TCS in 2021, is a leader in the field of feature films and episodic. In 2021, the value of the global motion picture and broadcast visual effects market was estimated to be around $4.6 billion. By 2025, this market is expected to reach $7.3 billion, representing a combined average annual growth rate (CAGR or CAGR) of approximately 12% from 2021, as the industry returns to full production as the content race continues.
Additionally, The Mill, which accounts for 44% of TCS’ combined revenue in 2021, produces breakthrough advertising, branded content and interactive marketing solutions. In 2021, the global advertising production and brand experience market was estimated to be worth around $30 billion, and is expected to reach $39 billion by 2025, representing a CAGR of around 7% from 2021, expanding beyond traditional media. Advertising spending is, however, sensitive to the macroeconomic environment and GDP growth. In the event of a recession, the recession-adjusted forecast (excluding the creation of virtual assets in the Metaverse) could result in a decline of around 10% in the estimated market size by 2025, according to FTI Consulting estimates.
For its part, Mikros Animation is the CGI (‘Computer-Generated Imagery’) animation studio of TCS, dedicated to feature films and short and long-form episodic content serving various clients around the world. In 2021, it represented 14% of TCS’ combined 2021 revenue. The global CGI animation services market was estimated to be worth around $2.3 billion in 2021, and is expected to reach $2.9 billion in by 2025, representing a CAGR of around 6% from 2021, thanks to the increase in the volume of digital episodic content;
Finally, Technicolor Games is a leading art services studio for the games industry. It represents 2% of TCS’ combined revenue in 2021. from $3.3 billion in 2021 to $5.7 billion in 2025, representing a CAGR of 15%.
Financial statements and performance indicators
During the Investor Day, Laurent Carozzi, current Chief Financial Officer of Technicolor SA and future Chief Financial Officer of TCS, presented the combined financial accounts as well as the new key performance indicators (KPIs), updated as part of the introduction on the stock exchange of TCS… One of TCS’ goals is to improve comparability with peers and market practices, and bring them more in line with the way the business is run.
Specifically, TCS intends to track three KPIs:
– Adjusted EBITDA after rents;
– Adjusted EBITA after rents;
– Free cash flow
Outlook
TCS confirms the forward-looking assumptions published on June 6, while providing additional elements related to the introduction of new KPIs. Overall, demand for Technicolor Creative Studios’ high-quality visual effects (VFX) and cutting-edge technology is expected to continue to grow significantly throughout 2022 and 2023.
TCS will continue to invest significantly in the recruitment, retention and training of artists (with in particular the TCS Academy programs). The main difficulty for 2022 is to be able to deliver all the projects in progress in the context of a shortage of talent on the market. As of March 31, TCS had approximately 11,700 employees in 11 countries.
These market trends lead management to aim for the following objectives…
– an adjusted EBITDA of between 165-175 ME in 2022 and 185-205 ME in 2023, as announced on June 6, 2022;
– an adjusted Ebitda after rents of between 120-130 ME in 2022 and 140-160 ME in 2023. As part of its new KPIs policy, TCS will now guide the market on adjusted EBITDA after rents.
The results of TCS are sensitive to the valuations of its main currencies used – in particular the American dollar, the Canadian dollar and the pound sterling – which have evolved favorably since the beginning of the year. Hedging agreements are in place to deal with foreign exchange risks.
The normalized level of TCS capital expenditure (excluding usage-based IT costs) is expected to be between 4% and 5% of revenue, while showing a downward trend in the medium term in the context of operational efficiency gains; cash outflows are estimated at around 10 ME per year. Cash outflows related to financial lease debts should return to a normalized level of between 15 and 25 ME per year, in line with 2019 levels before the impact of the pandemic on the sector.
Medium term, the Group aims to improve its margin profile through multiple sources combined with the benefits of the global integrated model, notably with the expansion of capacity in India. The workforce in India should represent around 70% of the direct workforce (63% in 2021 and 55% in 2019).
What is TCS’ financial policy?
As part of the refinancing process, Technicolor SA has entered into discussions with Barclays and Angelo Gordon who have agreed to grant Vantiva a debt package for an amount of €375 million, subject to conditions and approvals. usual.
Accordingly, TCS is now considering a term loan of approximately M600 and a revolving credit facility of M40.
The Group’s priority is to focus on deleveraging over the next 2 years to bring its financial leverage in line with that of its listed peers (and with a net financial leverage of around 3.5x in the medium term).
TCS does not plan to propose a dividend in the short or medium term.
All presentation material, as well as the webcast (live and delayed), will be available on the Investor Relations page of the Technicolor website.
In session, the action Technicolor, which will become Vantiva, is wedged around 3 euros.