TECHNICOLOR

TRADING UPDATE ON FULL YEAR 2016 PERFORMANCE - Seite 2

Focus on 2016 business lines

In 2016 the Group successfully integrated Cisco Connected Devices and is ahead of schedule in its realization of the targeted synergies. Connected Home will generate an Adjusted EBITDA of approximately €215 million, below Group expectations as a result of lower than anticipated revenues, despite a material margin improvement in the second half of 2016. This will represent approximately a 19% increase compared to 2015 on a Pro forma basis.

Entertainment Services benefited from a very strong second half in 2016 both in terms of revenues and profitability. It will achieve around €235 million of Adjusted EBITDA, in line with Group expectations, notwithstanding a negative forex impact of around €10 million mainly for Production Services related to the depreciation of the GBP.

The Technology segment will record an Adjusted EBITDA of around €190 million, thus almost entirely compensating the much lower than initially expected MPEG LA contribution in 2016 and the bankruptcy of one major trademark licensee in the third quarter. Patent Licensing generated revenues above €70 million in the fourth quarter through the signing of several new licensing agreements.

Corporate and Other will have a negative contribution to the adjusted EBITDA around €(75) million.

Connected Home 2016 performance

The Connected Home segment will record revenues around €2.6 billion in 2016:

• The improvement of the revenue performance in the fourth quarter will be limited compared to the third quarter of 2016 with revenues around €650 million in the fourth quarter.
• The fourth quarter revenue performance was affected by two main drivers:
  • The devaluation of the Latin American currencies versus the US dollar accelerated in November, particularly in Mexico, resulting in substantial capex reductions in the region.
  • A reduction of capex decided by two large US customers. 
• The component shortages mentioned in the third quarter of 2016 were only resolved late in the fourth quarter, thus the Group did not catch up on any missed revenues.
• Overall Connected Home will record revenues for the full year of 2016 down approximately 12% compared to 2015 on a Pro forma basis.

Moving forward Technicolor will benefit from Connected Home's change in scale and stronger presence in North America following a record year in terms of new contract wins, particularly with US customers. While the new wins are expected to contribute to the top line late 2017/early 2018, the Group does not expect to catch up this revenue miss in 2017 because of capex restrictions announced by a large US cable customer and the absence of recovery in the Latin American markets.