Vantiva S.A. (TNM2.MU) Earnings Call Transcript & Summary

Ladies and gentlemen, you have received the press release for the first quarter 2020 publication. Richard Moat, the CEO; and Laurent Carozzi, the CFO, will give you a short presentation on the key highlights of the quarter. [Operator Instructions] Just to remind all of you, this conference is being recorded. During this conference call, statements could be made that constitute forward-looking statements based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward-looking statements. For a more complete list of the description of risks and uncertainties, refer to Technicolor's filing with the French Autorité des marchés financiers. I would like now to hand the call over to Richard Moat. Sir, please go ahead.

Thank you very much. Good evening, everybody, and thanks very much for attending this conference call. Obviously, we're in the middle of an unprecedented crisis, both in our daily lives and in our business lives. And I hope you're all keeping well and you and your families are safe and healthy. For Technicolor, the impact that we had during the first quarter was relatively limited and we saw good resilience, both in our Connected Home and Advertising activities. And as I said in the press release, I've been really impressed with the response of our employees right across the group, which has been really extraordinary. And we've been able to deploy work-from-home capabilities very rapidly for 80% of those employees. And that's been a challenge, particularly in India, where the broadband capability has not been as great as many of the other geographic locations where we operate. But I'd like to especially congratulate our technology, security and IT teams who worked tirelessly to get us up and running remotely and have facilitated the efficient operation of the group despite the constraints, which we're operating under. So we've maintained our operations, wherever possible. For example, we've kept our factories going in the DVD division in Memphis and Guadalajara throughout. But we've nevertheless ensured that we guarantee safety for our employees, but at the same time, tried to ensure as much continuity as possible for our major customers. I'm proud of the contribution that we've made to help fighting COVID-19. We've performed initiatives such as logistic support in various geographies, creativity for education campaign and sourcing and distribution for personal protective equipment. So moving on to our first quarter achievements and figures. As I mentioned, the impact in the first quarter was relatively limited. In Connected Home, the supply chain was interrupted in Asia quite early in the year. And we also saw delayed orders coming through in our Film & Episodic Visual Effects division. But the additional costs that we've had relating to the COVID-19 crisis have been limited to only about EUR 2 million in the first quarter, and that's mainly representing the cost of idle facilities in Production Services. Our sales in the quarter were EUR 739 million. That's down 12.8% year-on-year, but that was in line with our overall expectations. Our adjusted EBITDA was down 16% to EUR 27 million. That's ahead of our budgeted expectations, reflecting improvement in Connected Home, but a decrease in Film & Episodic Visual Effects and in DVD Services caused by lower disc volumes, partly compensated by efficiency gains. Our adjusted EBITDA improved by EUR 7 million, and that was due to better management of render costs in our Film division. But nevertheless, EBITDA was still negative by EUR 34 million. We announced on our Capital Markets Day on the 19th of February that we intended to continue our focus on the operational and financial transformation of the group, and that has continued despite the exigencies of the COVID crisis. We've worked on achieving the EUR 150 million target over the life of the plan from 2020 to 2022. And as promised, we're on track to achieve $100 million run rate savings by the end of 2020, mainly through headcount reduction, of which 70% have been completed by the end of the first quarter. Now on top of that EUR 150 million target, I said at the Capital Markets Day that we were working on an incremental target. And so we're announcing in this press release that we've identified an additional EUR 75 million of cost reductions, implementing further simplification of the organizational structure and also focusing particularly on operations in transversal group functions. And we expect that EUR 50 million of that EUR 75 million will be achieved on a run rate basis in 2020. So we're now looking at EUR 150 million run rate savings in this calendar year. And obviously, this is reinforcing our commitment to do whatever it takes to create a sustainable future for the Technicolor group. So with that, I'll pass it over to Laurent Carozzi, our CFO, who will give you more details on each division and our current financial situation.

Thank you, Richard, and good evening, everyone. So I will now take you through our Q1 results shortly, given the format we have to comply with today. But I hope you're going to get enough details. And of course, we will open to questions afterwards. So overall, again, to reemphasize Richard's message, Q1 2020 has been an overall good quarter. And we had still a limited impact of COVID-19 to EUR 2 million, as mentioned by Richard. So let me provide you now with some details at division levels. So if we start with Production Services, the revenues reached EUR 176 million. So they were down 15% year-on-year at constant rate, driven primarily by the previously anticipated lower first half of activity in Film & Episodic Visual Effects. This lower level of activities was expected and it means, of course, as you remember, in particular if you attended our Capital Markets Day, to expected delays in awards coming from one of our key clients. The adjusted EBITDA amounted to EUR 11 million, 6.2% of revenue. The reduction of EBITDA actually was mainly driven by Film & Episodic Visual Effects, and it was combined with lower cloud rendering costs, leading to a lower impact on adjusted EBITDA. So good improvements in terms of margin as we said. Film & Episodic Visual Effects revenues were down mainly due to the anticipated reduction in studio tentpole volumes, so in our MPC Film subsidiary. Nevertheless, we've experienced good growth in the remaining part of the segment, servicing the streamers, so Netflix and consoles. Advertising has had a very strong start of the year, double-digit revenue growth compared to last year, and it's been mainly led by very, very successful Super Bowl campaign, very strong demand for our products. As you know, there is a new leadership team. And clearly, the results are coming through. Animation & Games, strong double-digit revenue growth was driven by higher volume in both feature and episodic work-for-hire animation services and also a greater number of episodes delivered by Technicolor Animation Productions. Finally, in Production Services, we also have the Post Production division and its revenues were down due to mainly exit from unprofitable film work, -- the restructuring we were presented with last year. And the division is refocused mainly towards episodic partially and its subsegments. Episodic has been growing at double-digit level in Canada and in the U.K. So in summary, down in revenues, but mainly, we could call it an appropriately better performer issue here. If we move on to DVD Services, the revenues totaled EUR 160 million in the first quarter. They were down 16.5% year-on-year at constant rate. And this is perfectly aligned with the trends we were expecting and that we outlined to you in our Capital Markets Day. And the adjusted EBITDA amounted to EUR 1 million at current rates, in line with expectations, again, and it was actually bolstered by ongoing cost savings. We always have a low contribution in terms of EBITDA in Q1. It's been slightly improved from the level we could expect. Lower D&A and renewal contracts have helped to also deliver an improved adjusted EBITDA at negative EUR 16 million, only up EUR 2 million versus last year despite the drop in revenues. In more details versus the various formats we have, Standard Definition DVD volumes were down 28%, was basically driven by overall expected demand reduction for the format. We also had a decline of 13% in the Blu-ray segment, but that has been partially mitigated by the very strong growth enjoyed with the Ultra HD DVDs and up 13% in the quarter. CD volumes were modestly up 3% year-on-year. We had here the positive impact of some new customers and share gains with existing customers. If we move on to Connected Home, the revenues totaled EUR 393 million, so down 13% year-on-year at current rates. The demand slowdown in America and in Eurasia was not fully offset by the strong demand from the North American cable division. Pre-COVID, the North American cable division was already enjoying a strong growth. And I think this hasn't weakened even in the coming past weeks. Adjusted EBITDA amounted to EUR 16 million, driven by the gross margin mix in the North American video market and also driven by OpEx improvement. You remember that we have very heavy and significant plan of cost reductions being implemented. They are gradually bearing fruit on top of basically component pricing remaining at a very low -- at reasonably low level. Adjusted EBITA was 0.4 million (sic) [ EUR 1 million ]. It's an increase of EUR 14 million versus last year. North America revenues, they were up compared to the first quarter '19 and was basically mainly driven by the continued progress we enjoyed in the broadband in terms of broadband market share, and we've grown by 16% versus prior year. So good contribution here. Revenues in broadband remained, nevertheless, stable in Eurasia. And we had here some impact in terms of delays in production due to the COVID-19 impact from our suppliers, probably we're estimating that at around EUR 13 million impact in terms of revenues. As far as Lat Am is concerned, here we also faced a weakening of demand. And first of all, we had a slower-than-expected transition to DOCSIS 3.1 and Fiber. In particular in Brazil, we believe that the overall degradation of the economic environment, so we had, if you remember, currency devaluation and drop in oil prices pre-COVID. Already this has continued to weaken this expected demand surge. Over the quarter, memory and key component pricing have remained, as I already mentioned, low. And that has led to a continued improved gross margin. We have already started to see the benefit of that in H2 '19. This is continuing. Connected Home is also benefiting from the significant progress of the 3-year transformation plan. The division is focused increasingly on selective investments on key customers, specific part of its portfolio, and that helps and needs to improve margins over the years. In broadband, investments are focused on Fiber and DOCSIS 3.1 products. For video, Android TV-based solutions are gaining even greater traction, in line with the objectives of a higher win rates and global leadership we had set to ourselves. So overall, the group has delivered a strong quarter, marked, I believe, in particular by an EUR 8 million improvement of recurring EBITDA. The COVID impact has remained limited, we mentioned that. It's mainly centered around Connected Home, and the rebound at Connected Home seems to have happened quite rapidly here. Finally, as you know, shareholders approved all resolutions related to the proposed Rights Issue at our shareholders' meeting held on March 23. Basically, we are reviewing that currently with JPMorgan and Natixis, our partners here, the potential windows for execution for launching the transaction, which will depend, of course, on market conditions in the coming weeks. And with that, and now I'll pass on to Richard for the outlook and the conclusion of our call. Richard, over to you.

Thanks very much, Laurent. So we are still currently assessing the future impact of the COVID crisis on Technicolor, but it's clear that it's going to have a more significant impact in the second quarter than it did in the first. Connected Home, as I said, experienced an early disruption of its supply chain in Asia, but suppliers now returned almost to normal and the market is recognizing the relevance of having powerful broadband connections and high-quality Wi-Fi services with more people staying at home. So demand from key customers, particularly in North America, has increased substantially, whilst the lockdown in some markets and the currency crisis in Lat Am, which Laurent described, will continue to impact the revenues in the short term. But overall, the situation is expected to gradually improve in the coming months. And I think that the Connected Home division is headed for a good year, driven by that strong demand in the U.S. The impact of the crisis is more pronounced in Production Services, so Film & Episodic Visual Effects and Post Production are being meaningfully affected by the complete shutdown of live-action shooting, which is leading to significant delays in production launches. On the other hand, the Advertising pipeline is relatively robust and has been good through the first quarter, and indeed, into April. But it's nevertheless going to be affected as the quarter continues. And so we'll report more on that later. Project in Animation & Games are less impacted by the lockdown measures because of the desktop nature of the work and also the fact that we managed to enable so many people to be able to work from home. The group's been able to add the technical capability to support secure, remote working conditions wherever possible for a large percentage of employees. At present, obviously, the return to normal date in several territories remains uncertain, which makes it very difficult for us to accurately predict sales for the rest of the year. The DVD Services division is expected to be negatively affected, given the cancellation of new theater releases, because obviously, the cinemas, particularly in the U.S., are shut. But this is being offset by strong back catalog sales as the public start to rewatch favorite shows and movies and look for a variety of different forms of entertainment during the lockdown. Demand in the U.S. has been particularly strong, supported by retail outlets pushing DVD sales. Replication and distribution activities, as I've said earlier, have continued without any significant interruption, although the evolving response of the relevant authorities to the virus brings a continuing risk of selected temporary plant closures. Overall, the uncertainty of how long this crisis is going to last compounds the need to do as much as we possibly can to manage our liquidity and to reduce costs in order to sustain the business. So we, as you know, put in place a freeze on all noncritical spend, whether it be OpEx or CapEx, restricting it to only that which is required to deliver products to customers, keep our employees safe or enable cost savings, which can be realized in this current year. The finance team is leading efforts to identify and make use of government support in all of the territories in which we operate, which is being offered to businesses. And we're taking advantage of those wherever we can. As I mentioned in my introduction, we're on track to achieve EUR 100 million on a run rate basis cost savings by the end of 2020. And now we're going to be implementing an additional EUR 75 million over the 3-year plan, with EUR 50 million of that coming in this current year. Now we issued a press release on the 23rd of March, where we suspended our 2020 to 2022 targets, which were no longer relevant in these current unprecedented circumstances. We plan to provide updated guidance once there's more clarity around the impact of the pandemic. Globally, we are dependent, in particular, on the resumption of work by the U.S. major film studios. But in Connected Home and DVD, they have greater resilience and the risk is somewhat lower. Overall, I think we continue to have valuable assets in all 3 of our business units and global leadership positions. And everything that we're doing from a business perspective is focused on ensuring that Technicolor emerges stronger from this crisis and ready to face whatever the new future may hold. So thanks very much for your attention. And together with Laurent, we are ready now to answer your questions.

[Operator Instructions] Your first question from David Cerdan from Kepler Cheuvreux.

A few questions for you. The first one is related to your new saving plan of EUR 75 million. For 2020, you expect to deliver another EUR 50 million of cost cutting. Can you give us some details on the sources of savings, in which segment, in which part of your cost? This is my first question. Second question is regarding the risk related to the commitment of Morgan Stanley and Natixis. Is there a change in their commitments because of this unprecedented crisis? So this is my second question. And my third question is something -- is around -- is about Connected Home, sorry. Can you explain why the demand from U.S. is so strong? And do you think that it's only related to the crisis and the lockdown? And I would say that very rapidly, the business should return to normal. So have you benefited from a special lockdown effect in the U.S.?

Okay. Well, I'll take the first and the third of those questions, and then I'll turn it over to Laurent for #2 about JPMorgan and Natixis. So in terms of the first question, the savings, which we expect to achieve from the second phase of the cost saving program, which we call Panorama 2, EUR 50 million are split roughly 20-20-10, I would say, HES, Production Services and Connected Home. So HES and Production Services probably EUR 20 million each and Connected Home EUR 10 million. And embedded within those figures are significant savings coming from our transverse functions, which are procurement, legal, IT, finance, HR, which are incurred at group level, but allocated down into the individual business units. So some of those figures actually relate to the amount of recharge, which they're receiving. So the reduction in cost at transverse function group levels being reflected in better results in the operating units. So that's the answer to the first question. In terms of the third question, I think that there has been an unprecedented demand for broadband gateway equipment, because people are obviously being confined to their homes and discovering perhaps in a way they didn't before that their existing broadband Wi-Fi capabilities are not as good as they should be, particularly when you're putting it under stress with working from home and constant video conferencing. And so this has led to a significant uptick in demand. And I think you can see that, for example, in Comcast first quarter figures, which -- I mean, Comcast, our largest customer, they published their first quarter figures last week. And they add 477,000 new high-speed Internet connections during the first quarter. And I think that was their best quarter for 12 years. And as soon as the lockdown started, they started some very aggressive broadband promotions, saying to people, you're going to be at home a lot, you need to improve your broadband capability. And people have responded to these in very large numbers. And that's shown through in the demand, which we've experienced. So Laurent, would you like to talk about the underwriting banks?

Yes, of course. But I think my answer will be very brief. There's no change in the commitment of the 2 banks in relation with our operation.

Okay. May I have just a follow-up question regarding Connected Home? So the lockdown has been positive at the end for your business in the U.S., but do you expect the same in Europe in Q2?

I think that Europe -- demand in Europe will be more impacted by the fact that the lockdowns were more severe than they have been in the U.S. And therefore, we haven't seen the same uptick in demand in Europe as in the U.S. So no, it's a tale of 2 continents in that context, I think.

Next question from Fiona Orford-Williams from Edison Group.

Can I ask, first of all, how long you would expect the lag factor to be between the resumption of live-action filming and work resuming at your end of the piece? And my other question was just being -- trying to do a little bit of the math on the -- on Connected Home in North America. We've got -- I'm looking at the balance between video and broadband. Can you just help me a little there and whether the split is broadly the same in North America as it is overall?

Okay. I'll take the first question. I mean it is very difficult to know what is going to happen with respect to resumption of filming in Hollywood. The optimist would say that it could resume in June or July. And the pessimists are talking about the end of the year with maybe the realist somewhere in between, September and October. And when filming does resume, it's definitely not going to be the same as it was before. So some people are talking about, there will be [ pubs ] established where everyone who's on a film set is going to be locked away for 16 weeks. And once they've been tested, they won't be allowed to leave the filming environment and nobody else will be allowed in. But alternatively, if they're going to film on a more normal day-by-day basis, people being tested before they enter the set could add maybe 90 minutes to every day or maybe subtract 90 minutes from normal filming time and obviously drive up costs because of that and because of the need for increased personal protective equipment. So the timing of restart and then the knock-on impact on how many films are actually going to be filmed once the restart happens is really uncertain. I think broadly speaking, we're already -- I mean we're in discussions with film studios and with the episodic and streaming players already about new work. And obviously, it's their ambition to get back to shooting as soon as possible. We will have episodic work virtually straight away, I would say, in the FEV division. But in terms of sort of big tentpole movies, preproduction starts in September. Then visual effects, probably, we're not going to start getting new work until Q1, Q2 next year. And Laurent, are you able to take that one on Connected Home with the broadband mix?

Yes, Fiona, sorry, could you maybe repeat the question, because the line is not very clear? So I had difficulty...

Okay, sorry. I was just looking -- you were telling us the broadband demand in North America was up 16%. I was just trying to do the math, because overall, you've got North America at 10.6% year-on-year. And I was just trying to work out what the split then -- whether the split between video and broadband in North America was the same as it is for the group.

No. But usually, as you know, we do not disclose the breakdown of broadband and video in particular in the readings. But broadband is the majority of our sales now in -- particular in Q1 and would be for the full year in North America. If you recall, we had explained that -- I think it was during the course of '18, and to a degree, feel a little bit in the -- with the lag effect in early '19. We went out almost entirely, not completely, but almost entirely to the video market in the year. So we are broadband to -- total of 90% in North America. And yes, the growth is driven by, obviously, by the broadband access.

Yes. Okay. And presumably, when you were talking about the differences with Europe and the lockdown, that's presumably because engineers couldn't get to go to places to do the physical joining up that was necessary.

Yes, that's absolutely right. I mean term rolls have continued in North America, but they weren't possible in several of the countries where the lockdown was almost complete and businesses like that weren't operating and they couldn't get access to households anyway.

Next question Phyllis Lam from CIFC Asset Management.

So I want to get a sense for the movement in working capital this quarter.

Yes?

Can you hear my question?

Yes, go ahead. Yes. Yes, okay. I think you're discussing working cap, isn't it, and the working cap movements. So year-on-year, we've had an improvement of the working cap variation, a little bit short of over EUR 40 million. How do we explain that? To make it very simple, if you recall, last year, last -- and I'm simplifying a bit, but I think you have a broad story here. Last year, we had quite a bit of over-inventories at Connected Home. That was in relation with the -- well, basically, the buildup of over-inventories, mainly focused on -- in North America. We no longer have that. We've since then introduced a very tight control of inventory. So inventories are under control, very neatly managed. And so we solved that issue. We had also a little bit of excess inventories in last year -- in the last quarter of '19 in relation to the DVD division. They had, at the time, acquired a little bit early a lot of raw material they needed for their DVD production. And so we no longer have that, and so that has been quite a big positive. And that has been partially offset by the fact that we had lower sales initially. When you have lower sales with the structure of our of work cap, you have a negative impact on the work cap. So positive, better management of inventories and natural flow of the work cap following declining sales in Connected Home, mainly in the -- in HES -- in DVD.

We don't have any more question for the moment. [Operator Instructions] We have a new question from David Cerdan from Kepler Cheuvreux.

I have a question regarding your cash and your net debt and liquidity position at the end of March. Can we have an update on your positions? Second question is regarding some compensation you could receive from governments. Can we have an update on this? And could you receive also some compensation from your big clients in order to support you during this tough period?

Do you want me to add…

Laurent? Yes, go ahead with the cash and net debt.

Okay. So in a nutshell or, as you know, the Q1 is, usually, as is Q2 and as is overall the first part of the year, usually a period of the year where we are -- we have negative free cash flows. So at the end of Q1, our net debt is approximately $1.6 billion. That's basically due to the negative free cash flow we have through the period. And that usually you have a negative H1 and a positive H2. So that's basically in line with our expectations. And again, we don't forecast -- and the forecast we gave you [indiscernible]. The second part of the -- of your question is -- I'm not sure we should talk in terms of compensation today, because I don't think the dialogue with the public authorities are in the region of -- in terms of compensation. But it's more -- they -- what we do is that we -- as much as we can, we're delaying payments. So that should not have an impact, I believe, at the year-end if we go back to normal at some point. But it should help not Q1, but it should help Q2, of course. And here, you talk about main various payments you need to do to social services, to tax, to -- sometimes you have rent holidays. So you have a whole variety of elements like that. But it's not really compensation. I don't think we can disclose the amount, but it's reasonably significant. So there is anything to help quite a bit in Q2 this year.

Yes. And with respect to big clients, I'm afraid, as I'm sure you've probably heard from other firms, in these kind of circumstances, it's kind of dog-eat-dog. So Connected Home is doing pretty well and I think we'll get close to the targets, which we originally set for that division. And certainly, our biggest clients are helping in the sense that they're putting bigger orders our way than we were expecting. In Film, the big studios have got real problems themselves. I mean even Disney, which, okay, Disney's sitting on a huge pile of cash, but nevertheless, it's taking a big hit from the loss of its theme park revenues and this complete cessation of live-action shooting. And some of the other smaller studios have been hit even harder. So the prospects of them giving us a helping hand, I think, are relatively remote. But one thing that I would say is that in the DVD division, possibly, that's the one area where we are getting some traction. And we are working hard to secure further long-term contracts there with studios to protect our margins. So I think, yes, we are getting some kind of beneficial effect in the DVD division. But I would say it's not showing through the other 2.

If I'm right, you dominate your 3 business lines. And are you too big to fail? Because if you have to stop your operation in Production Services or something like that, it's impossible to recreate overnight your studios, your capacities, your knowledge, et cetera. So maybe it's really dangerous for the big studios to lose such a partner?

Yes, I think you're absolutely right.

It's not maybe a question, that's a discussion...

But I don't think the studios necessarily see it that way. They're just in kind of self-preservation mode at the moment, so they're not necessarily thinking strategically like that.

Because if it's difficult for you, what is the situation for the small studios? Do you have any idea...

Yes. I mean the word is out that there's a lot of smaller players in trouble out there.

Okay. And just on the cash, the liquidity, so you answered to the net debt at EUR 1.6 billion. And for the cash liquidity?

I'm not sure I'm getting your question. It's the -- this EUR 1.6 billion, of course, is [ bested ] by a big negative working cap, although improving versus last year. But today and as we've explained back at the Capital Markets Day, currently, we are very, very, very focused on liquidity, on cash. We -- all the measures we are taking, whether they have the Panorama plans now being accelerated and the reduction of cost that Richard has mentioned, are helping us. So basically, we -- I don't have any comments on liquidity as more as now. And as far as the future is concerned, if this is your question, basically, as Richard has explained, we are basically working currently on our forecast. We're trying to access in particular the Film & Episodic division performance. This is very, very difficult, frankly, to have any kind of visibility. So today, we are refraining from -- to give any forward-looking statements. As far as this is concerned, we will need to do a bit more work before coming back to you. That's the most prudent approach to trying to get to future.

Next question for [indiscernible] from [ Barings ].

First question, can I just confirm if that EUR 1.6 billion net debt includes the pension liability? Or is that excluding pension?

No, no. This is excluding pension liabilities, of course. This is something different. The move we have in the net debt here is, as I've mentioned and I want everybody to be just conscious of that, is at the end of Q1, we had big negative work cap. Of course, that resolves then progressively through Q2. But no, we don't have it.

And so that's changed from December 2019, I think, the net debt position was around about EUR 1 billion. So that's gone from EUR 1 billion to EUR 1.6 billion?

That's basically mainly, you have some negative free cash flow in Q1, as we've explained. But -- and within this free cash flow, the big number, because our operating performance is actually doing -- in Q1 is actually quite good. So the big swing factor is, of course, the work cap. And the work cap in this part of the year is usually quite negative, although we've already managed to resolve it from where it was last year.

And has that started to improve in April? I believe your trough period is around the end of Q1. Has that started to improve? And I guess a follow on to that, you've mentioned that Q2, the impacts from the virus are set to get a little bit worse. Could you give us some sort of quantitative steer on that? Is it 10% worse than Q1? Is it 20% less than Q1? I mean -- and this is -- I'm asking you based on the first 3 weeks of April, I'm not asking for a forecast for Q2.

Yes, exactly, because I'm not in a position to give you a forecast for Q2, obviously, that would be meaningful. So I think the start of the month of April, I think we've seen -- but I would also let Richard comment further on that. I think Connected Home seems to be on track with our expectations. We -- the various businesses show more resilience than we thought, so including in Advertising and in the DVD segment. FEV was already planned to be fairly low. So I think at the moment, what we see, April starts to be softer than -- and probably partially affected by COVID. We feel that in -- sorry, we feel that mainly in Advertising in some of these entities. But we believe this is really the start. We will see probably the negative impact unfold later. And that makes it difficult with the exercise to today make forecast. But the business, as Richard has mentioned, is showing resilience and the very early April numbers are basically illustrating that. But this is a little bit as far as I can go in terms of the forward-looking statements, apologies.

And I'm sorry, the first question was -- is the net debt position, is it -- has it improved from 31st of March? Or is that EUR 1.6 billion today?

I don't have -- I can't comment on that in terms of net debt at the end of April. We have this 7th of May, so we're still finalizing our close. So I don't have the data. But as far as we -- as you know, we're monitoring our cash very carefully and whatnot. So we are where we think we are supposed to be. So this -- I can't say something, but I do not have all my numbers fully finishing it until the end of the quarter.

All right. And when can we expect an update on -- I know you said when the situation becomes a bit clearer. Can you give us a time line for when you expect an update on expectations for budget? And just some -- I mean I think more looking for impacts on revised CapEx guidance, revised -- just a bit more clarity on how you manage to prepare the business for what lies ahead.

I fully understand your question. It's a very valid question. I'll go back to what basically Richard has explained. I think as far as we see, Connected Home seems to be doing really okay. The DVD will be affected, but we do not expect them to be massively affected at the end of the year. It's a very resilient business. It's proving more resilient than we believed before. Now the big question mark is around Production Services. And within Production Services, the big chunk of that is Film & Episodic. And I think Richard explained the issues we have in terms of time lag between the moment studio start -- goes back to work and then we're getting the business. So this is really that. So for us, everything else -- sorry, cost cutting, restructuring efficiencies, Richard has mentioned that we are not only in line with our expectations, but we are ahead. CapEx, making sure that we don't overspend, that we are getting all the -- whatever holidays we can get in terms of payments. We really are focusing on that and we are really at the max. So really, really, really the question mark is around when will FEV start working again. And so for us to be in a position to give you -- and for us to have a better quality, we need to go beyond the statistical scenarios into getting some more information coming from, on one hand, the Hollywood studios; and second, with the streamers. So we're very dependent on their agenda. The day we fix and they resume orders and whatnot, on that day, we'll be able to fine-tune our numbers, and we will be likely to give you a precise idea. I think this is -- I don't know, Richard, if you concur, but I think this is really our main point of -- or dark spot, which is we don't know. So we -- and we are dependent on our clients. So is it going to take a few weeks, a bit more? I don't know. I literally don't know. We have scenarios, of course, but they're not robust enough to -- it's difficult to second-guess 2 years in this context.

Thank you, ladies and gentlemen. We have no more questions. Back to you for the conclusion, sir. I'm sorry, I'm sorry, we have a new question, I'm really sorry, for Emmanuel Matot from ODDO.

Yes. Just a clarification. The net debt of EUR 1.6 billion at the end of March, is it including the release debt, which was standing at EUR 272 million end of last year?

We have, in there, you have -- yes, yes, yes, it does.

Okay. So we were more at EUR 1.3 billion end of this -- end of 2019 and we moved to EUR 1.6 billion. That's how it worked. Okay. Second, do you think the current environment could delay the capital increase, which was planned for Q2? And do you commit to give us guidance before launching it?

Look, again, if you -- again, what -- the only thing I can tell you today is -- and I think you're mentioning the word guidance and that's very important. You're -- that you need guidance and that is basically today, what we're telling you is the team is very actively working on making the assumptions. They're trying to get as accurate as we can. And so we are dependent on the time where we'll be able to properly assess the end of the year. So we're literally dependent on that. And of course, you don't consider to go in the market and your rights issue without having been in a position to properly inform investors of where you're going to land in 2020 and whatnot. So we are dependent on that, yes.

That was the last question. So back to you for the conclusion, sir.

Well, thank you very much for attending the call. It's good to talk to you, and thank you very much for your questions. And we look forward to speaking to you again when we give you an update on the next quarter. Thank you very much, indeed, ladies and gentlemen.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.