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France's Technicolor warns on profits as connected home sales lag
January 12, 2017 / 6:37 PM / 10 months ago

France's Technicolor warns on profits as connected home sales lag

(Reuters) - French media and entertainment company Technicolor (TCH.PA) said on Thursday that core profits last year fell short of its forecast, hit by lower than anticipated sales in its Connected Home business and changes in foreign exchange rates.

Sandra Carvalho, Chief Marketing Officer of Technicolor, speaks during the LG press conference at CES in Las Vegas, U.S., January 4, 2017. REUTERS/Rick Wilking

A 5 million euro negative contribution from exited activities also hit profits.

The company said it expects to report full year 2016 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of about 565 million euros. In October it reaffirmed a forecast of 600-630 million euros.

In 2015 Technicolor bought Cisco System’s (CSCO.O) Connected Devices business, a move intended to boost its presence in the home entertainment market and expand its North American footprint.

The company said it was ahead of schedule with synergies from the Cisco Connected Devices acquisition, but revenue in the Connected Home division, which deals in digital and cable set-top boxes, as well as broadband devices, had been affected by the devaluation of Latin American currencies versus the U.S. dollar, hitting client spending in the region.

Connected Home revenue was also affected by the decision of two large U.S. customers to cut spending, component shortages and pricing pressure on memory chips.

This resulted in a decline of about 12 percent in 2016 connected home revenue.

Although the Cisco Connected Devices acquisition has increased new contract wins, particularly in the U.S., the impact on the top line will not be felt until late 2017 or early 2018, the company said.

The company also booked a negative foreign exchange impact in its Entertainment Services division of about 10 million euros related to the depreciation of the British pound.

Despite the problems in the Connected Home division, the company said free cash flow was in line with its target at above 240 million euros.

Reporting by Alan Charlish; Editing by Greg Mahlich and Alexandra Hudson

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