technicolor - 2020 Universal Registration Document

3 RISKS, LITIGATION, AND CONTROLS RISK FACTORS

IMPAIRMENT OF NON-CURRENT ASSETS, INCLUDING GOODWILL

Risk identification

Risk monitoring and management

If management’s estimates change or market conditions adversely evolve, the estimate of the recoverable value of the Group’s assets could decrease significantly. If the Group does not generate revenues from its businesses as anticipated, the businesses may not generate sufficient positive Operating Cash Flows. This, or other factors, may lead to a decrease in the value of the Group’s intangibles assets, including goodwill, resulting in impairment charges, which could have a material adverse effect on the Group’s results of operations or financial position. At December 31, 2020, the Group’s accounted for €716 million of goodwill and €535 million of intangible assets. Of the €716 million of goodwill at December 31, 2020, €142 million relate to DVD Services, compared to €222 million in 2019. The difference mainly comes from a €66 million impairment resulting from decreased sales expectations resulting from the loss of a replication contract and lack of new releases in 2021 due to the protracted Covid-19 pandemic (see note 4.5 to the Group’s consolidated financial statements). Indeed, worse than anticipated market conditions can result in additional impairment charges in the Group’s consolidated statement of operations. The discounted cash flows of DVD Services are computed over a finite life of circa fifteen years and accordingly the goodwill will be impaired over this period depending on the evolution of the fair value as determined through the discounted cash flows. The Group may experience significant further impairment charges in future periods, particularly in the event the markets for the Group’s products and services experience further deterioration. For additional information on the impairment tests, see note 4.5 to the Group’s consolidated financial statements.

The Group’s management periodically assesses the carrying amount of the tangible and intangible assets using certain key assumptions, including budgeted data, cash flow projections and growth rates. The Group assesses the carrying amount of these assets more frequently if events or changes in circumstances indicate that their carrying amounts may not be recoverable.

RESTRUCTURING PLAN

Risk identification

Risk monitoring and management

Panorama restructuring plan will lead to major costs savings and transformation throughout the Group. Risk of inefficiencies in executing or monitoring the implementation of the plan may result in unexpected restructuring expenses or lower than planned costs savings resulting in potential lower profitability of some Business Division(s) of the Group.

Panorama actions plans and related savings and costs are closely monitored by a Steering Committee. Each of the Divisions CEOs and CFOs have set up specific plans with sufficient granularity to ensure a strict and timely monitoring of the plan’s execution. These granular plans by the Divisions have been reviewed in detail by the Group COO and CFO. On a monthly basis, the COO is reviewing with each Division’s management the progress and execution of the plan. When a deviation is observed, actions steps are taken to mitigate the risk of missing savings or additional restructuring costs. Every month, the plans are consolidated and reviewed by the Group CEO.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020