technicolor - 2018 Registration document

RISKS, LITIGATION, AND CONTROLS

RISK FACTORS

Competition GRI [103-1 Market presence] [103-2 Market presence]

Risk Management Risks concerning the economic, regulatory and social environment are managed by each business, either in decentralized form for risks specific to a given activity, or through support functions. They are regularly reviewed in detail by Group Management as part of the monthly or Quarterly Business Review Meetings. Financial risks 3.1.3 GRI [102-15]

Risk description The Group’s products and services are subject to intense competition. Although the Group has leading positions in many of its market segments, the competitors are sometimes part of groups which are significantly larger than Technicolor, and thus may have greater resources, including greater financial, technical, marketing and other resources. These groups may include customers who already have, or may develop, in-house capabilities to supply the products or services which Technicolor offers, such as studio customers who have in-house production services. If the Group’s competitors or customers use their greater size and resources to place additional competitive pressure on Technicolor, the Group’s operations may be materially adversely affected. Furthermore, rapid technological innovation and changing business models within the Connected Home and Production Services markets may allow new participants to enter into certain markets, who may in turn offer alternative products, technologies and services potentially at lower costs, thereby decreasing the market share size or market of current market participants. Risk Management To identify changing market conditions and minimize the exposure to related risks, the Group regularly reviews the market and competitive landscape and the market positioning throughout the year. It also frequently reviews the Strategic Plan/objectives and adjusts when appropriate based on changing market conditions. Economics, political and social conditions Risk description Any deterioration in the macroeconomic environment may adversely affect consumer confidence, disposable income and spending, and result in decreased volumes for some of the Group’s products or increased demand for lower-end products at the expense of higher-end products. For example, Technicolor is well implemented in Latin America through the Connected Home segment, and the economic uncertainties in this area may negatively impact the revenue and results. Furthermore, weakness in general economic conditions may result in an increasing number of the Group’s customers becoming delinquent on their obligations to the Group or being unable to pay, which in turn could result in a higher level of write-offs of receivables. Any prolonged global economic downturn may therefore have adverse effects on the Group’s operating results or financial condition. As an example, the contemplated exit of United Kingdom from the European Union may have negative impacts on the Group performance in this geography.

Indebtedness Risk description

At December 31, 2018, the Group had €1,029 million of total gross nominal debt (corresponding to €1,024 million in IFRS, taking into account the fair value adjustment) comprising mainly term loan debt for a total nominal amount of €983 million (€978 million in IFRS) (see note 8.3 to the consolidated financial statements). The Group has three committed revolving credit facilities to support its working capital needs: a €250 million revolving credit facility (the “RCF”), a €35 million bilateral committed credit line and a committed receivables facility (the “Committed Receivables Facility”) under which it may borrow up to €109 million on the basis of the amount of receivables available. For further information on the terms of these debt facilities and instruments, see Chapter 2: “Operating and Financial Review and Prospects”, section 2.10.3: “Financial Resources” of this Registration Document and note 8 to the consolidated financial statements. The level of debt may have significant negative consequences for the Group and its shareholders. For example the terms of the debt require the Group to dedicate a large portion of any excess cash flow towards repayment of outstanding principal, thereby reducing the availability of cash flow for other purposes. In addition, the significant level of debt: increases the Group’s vulnerability to adverse general economic • conditions and industry developments; may limit the Group’s flexibility in planning for, or reacting to, changes • in the business and the industries in which the Group operates; may limit the Group’s ability to raise additional debt or equity capital; • may limit the Group’s ability to make strategic acquisitions and take • advantage of business opportunities; and may place the Group at a competitive disadvantage compared to • competitors with less debt. Any of the foregoing could limit the Group’s ability to grow its business. The financial loans documentation of the Group’s Term Loan Debt as well as its credit facilities includes provisions which limit the Group’s flexibility in operating its business (as further described in note 8.3.3.5), a breach of which may (in certain cases following the expiration of a grace period) constitute a default hereunder.

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TECHNICOLOR REGISTRATION DOCUMENT 2018