Full Year 2013 Results February 2014 Frederic Rose , CEO Stéphane Rougeot , CFO
Agenda 1. FY2013 Key Highlights 2 2. FY2013 Financial Performance 3-11 3. Halfway through Amplify 2015 strategic roadmap 12-24 4. Inventing the future 25-30 5. Objectives and key take-aways 31-34 1
FY 2013 Key Highlights Revenue: +5.2% core growth (excl. legacy) at constant rate Strong operating Adj. EBITDA: € 537m, +10.4% at constant rate execution Net Income (excl. costs related to the refinancing transaction): € 69m Group Free Cash flow: € 153m,+45% Cash conversion rate: 28% of Adj. EBITDA, +7 points vs. 2012 Reinforced financial profile Gross nominal debt: down € 145m vs. 2012 Leverage ratio: 1.46x vs. 1.64x at end 2012 Complete refinancing* of debt reinstated in 2010 Strong pipeline of strategic achievements On track for Amplify 2015 Well on track to deliver 2015 financial goals delivery Foundations to deliver further value beyond 2015 *including transaction announced early February 2014 with expected closing by end of April 2014 2
FY 2013 – Financial Performance Highlights Revenues* ( € m) Adj. EBITDA( € m) Adj. EBIT ( € m) & Margin (%) & Margin (%) Forex impact Forex impact 338 Forex impact 3,362 537 € (119)m € (13)m € (7)m 3,308 10% 498 16% Change at Change at Change at 14% 287 constant rate constant rate constant rate 8% +5.2% +10.4% +20.2% 2012 2013 2012 2013 2012 2013 Group FCF ( € m) Nominal Net Net Debt/ 1.64x 1.46x Debt ( € m) Adj. EBITDA 39 EU antitrust fine € (55)m +45% 839 784 153 106 2012 2013 2012 2013 *Revenues excluding legacy activities (Film services, tape duplication): € 88 m of revenues in 2013 4
Technology – FY 2013: steady contribution Revenues, € m Adj. EBITDA, € m Key Business Achievements Change at constant rates & Margin 400 Sustained renewals and new 78% contracts in existing licensing 355 +14% -5% 346 73% programs , in particular Digital TV 76% 515 485 Significant progress in smartphone 456 Licensing program Sony IP collaboration signed in July 2013 2011 2012 2013 LG licensing agreement signed in 2011 2012 2013 February 2014 MPEG-LA (MPEG2) in % of revenue Adj. EBITDA at € 355m, a decrease vs. Market deployment of Technology 2012 reflecting lower licensing licensing and other new initiatives revenues and incremental expenses (color certification, 4K upscaling, HDR, 56% for development and market launch: Wide Color Gamut…) 54% 53% Increased OPEX related to M-GO and other new initiatives Commercial roll-out of M-GO , now also integrated on Roku boxes since Licensing contribution remained October high 2011 2012 2013 5
Entertainment Services – FY 2013: performance in line with market leadership Revenues (excl. legacy), € m Adj. EBITDA, € m Key Business Achievements Change at constant rates & Margin Resilient DVD Services +2% -6% 230 230 13% 14% Overall DVD Volumes reached 199 1.48bn units, 2 nd best year ever 12% 1,547 1,549 Blu-ray TM discs: 17% of total 1,530 volumes vs. 13% in 2012 3 contracts with top customers renewed 2011 2012 2013 2011 2012 2013 Digital Creative Services Exit of legacy almost completed Best quarter ever for VFX Adj. EBITDA up 19% at constant rate Revenues, € m revenues in Q4 2013 driven by improved operating performance across businesses: Market share gains in Theatrical 285 for Postproduction services Improved product mix from higher Blu-ray TM volumes in DVD Services Creative talents and technological 181 edge largely recognized by the Revenue growth in Digital Creative 88 industry Services -36% -51% Cost and operating efficiency initiatives across activities 2011 2012 2013 6
Connected Home - FY 2013: growth and cash generation Revenues, € m Adj. EBITDA, € m & Key Business Achievements Change at constant rates Margin 41 3% +22% +14% Strong commercial pipeline Revenue growth in all regions in (43) 1 FY 2013 1,346 1,244 Deployments in H2 of new higher 989 end devices in particular in the US Profitable growth 2011 2012 2013 Positive impact of recent market 2011 2012 2013 share gains Geographical breakdown & growth Introduction of new innovative Adj. EBITDA up € 40m compared with FY solutions at constant rate 2012: +9% +11% Driven by volume growth, mix APAC NAM improvement and operating efficiency 15% 26% Higher gross margin at 13.6% (+1.2 LATAM pts) and Adj. EBITDA margin at 3% EMEA 41% 18% Material free cash flow generation +20% +6% 7
FY 2013 – Adj. EBITDA increase driven by strong operating execution 13 (13) 39 (14) 537 512 498 2012 Adj Change in 2012 Adj Businesses Corporate Forex Impact 2013 Adj EBITDA perimeter EBITDA Contribution & other EBITDA as reported at constant scope 8
Net profit excl. costs related to the refinancing increased by € 91m vs. 2012 FY 2012 FY 2013 Variation (in € million) Adjusted EBIT 287 338 +51 Restructuring Costs (29) (68) (39) Net Impairment Losses (10) (31) (21) EBIT 263 226 (37) (197) (127) +70 Financial Costs Refinancing Costs - (161) (161) Share of profit/(loss) from associates (5) (1) (6) Income Tax (49) (41) +8 Profit/Loss from 13 (111) (124) Continuing Operations (35) (54) Discontinued Operations 19 Net Result (22) (70) (92) Adjusted Net Result, excl. costs related (22) +91 69 to the refinancing transaction 9
153M € of free cash flow generation, up 45% YoY (114) (49) (18) (84) 537 (80) 374 (39) 153 2013 Net capital Net OCF* Change in Financial Tax, Pensions EU antitrust Group FCF Adjusted expenditures restructuring working and Others fine payment EBITDA capital & OAL Significant decrease in net capex: down € 33 million compared with 2012 Material reduction in cash interest charges: down 28% compared with 2012 * From continuing operations 10
Gross nominal debt decreasing by € 145 million New Debt restructuring fees Group FCF 31 Dec. 2012 31 Dec. 2013 Senior Debt repayments Other Disinvesting (131) Forex +153 +4 Cash (124) 397 (25) +33 307 position Gross 1,091 1,236 Nominal Accrued interests & Scheduled Debt Forex Other Debt Debt Repayments Repayments refi. (33) +12 (57) (67) Net Debt/ 1.64x 1.46x Adj. EBITDA 11
Well on track to deliver Amplify 2015 objectives Amplify 2015 2011 2012 2013 2014 2015 objectives Adjusted € 452m € 498m € 537m > € 600m EBITDA* Annual € 106m € 81m € 153m Group FCF over 2012-2015 € 259m Cumulative > € 500m Nominal Net 2.44x Debt / Adj. 1.64x 1.46x < 0.9x EBITDA 13 *Adj. EBITDA is at constant scope (excl. Broadcast Services, IPTV & VoIP)
Halfway through Our Strategic Roadmap Implementation 2012-2013 Priority applications 1 up 25% in 2 years Boost innovation Large number of innovative solutions and products launched in the market (M-GO, Qeo, Virdata, Ultravisual, new high-end Connected Home products, etc) Sustained renewals and new contracts pipeline Expanding Licensing Successful launch of smartphone program Development of a technology licensing offering (color certification, 4K upscaling, etc) Back to profitable growth and cash generation in Connected Home Solid operational execution in Near record performance in DVD Services in 2013 Established Businesses Continued strong organic growth in Digital Creative Services Leaner cost structure Continuous cost optimization and operating efficiency initiatives € 259m of free cash flow generation in 2 years Strengthened balance sheet € 409 million of nominal gross debt reduction in 2 years Full refinancing of 2010 debt, all debt maturing 2020 2 (1) a priority application is the 1st patent application that protects a new invention filed at a Patent Office, and is the origin of a 14 patent family which may contain many patents in various countries. (2) completed by end of April 2014
Innovation & Licensing – Growing IP Generation and Portfolio Selected IP acquisition Growing IP internally +25% A Number of priority applications Sony patents related to technologies for 507 smartphones & tablets (LTE, WCDMA, UMTS, WiFi, 444 406 haptics, software, user interface, LCD & Amoled) Thales patents related to Display Technologies (driving methods & circuits, LCD backlight, panel structure, touchscreen) Technology areas of 2013 filings 2011 2012 2013 Product engineering Generating IP across & other Compression, the Group adaptation and Audio rendering Connected Very strong IP generation in R&I Home Technology Personalization Higher level of first filings coming from Connected Home & New and Digital Creative Services businesses Material IP generation from new activities Communication User & Interactions Interoperability 15
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