Touched but not sunk? Held afloat by a capital injection accompanied by a new restructuring of its debt, Technicolor Creative Studios, flagship of special effects and French animation, claims to be able to survive without selling activities.
Its rescue plan of 170 million euros supported by its main shareholders (Vantiva, the Angelo Gordon fund, Bpifrance, etc.) alongside major lenders (often the same ones), was endorsed at a general meeting on Monday in Paris against a backdrop of strong criticism from minority shareholders, whose shares have collapsed by 90% since the group went public in September.
Stock market crash
For the new general manager, Caroline Parot, the challenge now is to avoid any haemorrhage of customers and talents, which could give a knockout blow. For this, the group must show that it is on a path to return to equilibrium with results covering the debt burden. This is not won, even if part of these debt charges is transferred to financial debt below a certain level of gross operating income (EBITDA).
In the first quarter, Technicolor’s sales fell another 15% year on year. Even if Mikros (an animation studio) recorded a notable progression, its two biggest engines of activity (MPC in visual effects for films and The Mill in advertising) saw their revenues melt like snow in the sun.
“We are all flushed, disgusted by the results,” launched a shareholder on Monday, referring to the fixed remuneration of the management “completely indecent, it’s as if you were spitting in our face”. Questioned by a small carrier on a possible internal fault or lack of supervision, the management kicked in touch, speaking of “a gap in efficiency which has not been measured”. Especially before the IPO, complained some shareholders.
Resulting from the split of Technicolor with on one side Vantiva which kept the manufacturing activities of connected boxes and DVDs, and Technicolor CS, on the other, the latter made its IPO at the end of September burdened with a large part of the debt of the former group. From November, major problems emerged (production delays, additional costs, excessive turnover, etc.) and the group significantly revised its forecasts downwards.
Towards an et sale?
The hypothesis of a sale by apartments was mentioned. “Lenders had talked a lot about tactical selling, but it was a moment of intense emotion, ures today Caroline Parrot in an interview with Les Echos. Are sales possible? Maybe. But this is not a question that we ask ourselves today”.
The leader ures that the injection of funds has been calibrated to “step over the crisis” by continuing to invest 40 to 50 million euros per year in technology and talent retention strategies.
“Spanning the crisis”
This will gradually reduce turnover. Variable by nature in these businesses, the number of TCS employees should stabilize at around 10,000, including 6,000 to 8,000 creative talents. More than half are in India, with price competitiveness being key at a time when giant streaming customers are tightening budgets.
“Without ignoring the past, we want to start a virtuous cycle again, highlights Caroline Parot. We are looking for a production of very high quality services and increased recognition of our know-how in order to monetize them”.
Pause in “Charlie and the Chocolate Factory” for Netflix
Caroline Parot ures that TCS “did its own thing, because the worst would have been to lose our customers”. It ensures that it has not suffered any cancellation of orders due to the economic situation of the company. At the end of 2022, to deliver the projects, the group increased the losses because its costs exploded (+221 million euros over the year 2022).
We did our whatever it takes. The worst would have been to lose our customers.
Caroline Parot Managing Director, Technicolor Creative Studios
But, according to our information, netflix decided to put an animated series (“Charlie and the Chocolate Factory”) on hiatus for 12 months in order to rewrite this tens of millions project based on Roald Dahl’s book and for which a collaboration with Mikros was planned. That said, the platform continues to work with TCS on other projects.