Videndum Plc · LSE:VID
Videndum — The Vitec Group — FY2019 Earnings Presentation
45 slides from Videndum's earnings presentation, Feb 28, 2020
Slide 1: The Vitec Group plc Full Year Results 2019
Enabling the capture and sharing of exceptional content. The Vitec Group plc Full Year Results 2019 28 February 2020
Slide 2: Important notice
Important notice Forward-looking statements This presentation contains forward-looking statements with respect to the financial condition, performance, position, strategy, results and plans of The Vitec Group plc (the “Group”, “Vitec”, or the “Company”) based on Management’s current expectations or
Slide 3: Agenda
Agenda > Highlights > Stephen Bird, Group Chief Executive > Financial Review > Martin Green, Group Finance Director > Market and Strategy Update > Stephen Bird, Group Chief Executive > Q&A Page 3
Slide 4: 2019 highlights
2019 highlights Financial highlights > Robust financial performance despite non-repeat of the Winter Olympics > Stable adjusted operating margin* > Benefits from self-help actions > Impact of two, specific, one-off events: severe retailer destocking in Imaging Solutions and slower than expected reco
Slide 5: Financial Review
Financial Review Page 5
Slide 6: Full year results: Robust financial performance
Full year results: Robust financial performance Better / > Reported revenue 2019 2018 Better / (worse) at (worse) Constant > Retailer destocking at Imaging Solutions £m £m FX > Disruption at SmallHD Revenue 376.1 385.4 (2.4%) (3.9%) > Non-repeat of 2018 Winter Olympics Gross profit * 170.1 174.1 (2.
Slide 7: Divisional performance
Divisional performance Revenue Operating profit* Better / Better / Better / (worse) Better / Better / Better / (worse) 2019 2018 (worse) at at organic constant 2019 2018 (worse) at at organic constant (worse) constant FX FX, excl EU Services (worse) constant FX FX, excl EU Services £m £m % % % £m £m
Slide 8: Group revenue bridge 2018 - 2019
Group revenue bridge 2018 - 2019 £m 390 > European Services: 2018 Winter Olympics 380 European Services SmallHD > SmallHD: disruption following 2018 fire Underlying 370 revenue > Retailer destocking, £8.5m YoY estimated impact: Retailer FX destocking > 2019: c.£12.0m 360 > 2018: c.£3.5m Acquisitions
Slide 9: Group operating profit bridge 2018 - 2019
Group operating profit* bridge 2018 - 2019 £m European > European Services: 2018 Winter Olympics 54 Services > SmallHD: lower volumes and lower insurance Corporate proceeds 52 costs > Retailer destocking, £4.3m YoY estimated SmallHD IFRS 16 Underlying impact: 50 Insurance Retailer destocking > 2019:
Slide 10: Retailer destocking
Retailer destocking > Q4 2018: started Index Amazon vs. Others > H2 2019: more severe than expected 150 140 > Reduction in overall inventory: 130 Amazon sell in 120 > Growing impact of e-commerce 110 Sell out DESTOCKING 100 > Amazon continuing to gain share 90 Independent distributors 80 > Destockin
Slide 11: Cash generation
Cash generation Better / 2019 2018 (worse) £m £m £m Operating profit * 52.4 53.5 (1.1) > Continued strong cash generation Depreciation (1) 18.6 11.4 7.2 > Reported free cash flow £3.0m lower than prior year Working capital (7.2) (5.9) (1.3) > Depreciation: IFRS 16 impact of £6.4m Restructuring cash
Slide 12: Net debt
Net debt £m 110 Free cash flow* Employee > £30.5m free cash flow* Net lease incentive additions FX > Dividends: 2018 final and 2019 interim 100 shares Acquisitions/ > New banking facility signed in early February 2020 Disposals Dividends 90 > £165m RCF vs £150m previously > 5 years plus option to ex
Slide 13: FY20 guidance
FY20 guidance > SmallHD’s operating profit is likely to be c.£5m lower than 2019 as previously guided > Restructuring to transform digital and e-commerce capabilities: > Expected cost of c.£3m > P&L incremental savings of c.£2m > Higher amortisation charge of c.£2m in 2020 reflecting higher level of
Slide 14: Market & Strategy Update
Market & Strategy Update Page 14
Slide 15: Group strategic priorities
Group strategic priorities 2. Margin 3. Further M&A 1. Organic growth improvement activity The right strategy for long-term growth and value creation Page 15
Slide 16: Vitec operates in the growing image capture and content creation market
Vitec operates in the growing “image capture and content creation” market Photographic market* Broadcast market ICC/Cine market TAM TAM TAM £1.1bn £400m £500m Market 2019-2022 CAGR Market 2019-2022 CAGR Market 2019-2022 CAGR c. +1% Flat c. +6% Market trend Market trend Market trend Imaging Solutions
Slide 17: Focused on growth opportunities in faster growing segments
Focused on growth opportunities in faster growing segments Imaging Solutions Production Solutions Creative Solutions Launch Smartphonography Launch complete 4K eco- Deliver Summer Olympics accessories system for Cine (Teradek & SmallHD) – key driver for Restructure to deliver Benefit from US Preside
Slide 18: Imaging Solutions: continues to outperform a challenging market
Imaging Solutions: continues to outperform a challenging market Market > Continued growth in e-commerce channel > Premium end of photographic market resilient > Decline in entry level DSLR market > Severe retailer destocking expected to slow down > Growth in smartphonography, motion control, audio c
Slide 19: Imaging Solutions: transforming digital and e-commerce capabilities
Imaging Solutions: transforming digital and e-commerce capabilities > Invested in new digital platform and team to improve web marketing and e-commerce capabilities > Taking advantage of growth in higher margin e-commerce channel where we outperform the competition > Invested in global e-commerce ca
Slide 20: Imaging Solutions: new JOBY brand strategy and smartphonography products
Imaging Solutions: new JOBY brand strategy and smartphonography products > New brand strategy and digital marketing campaign to position JOBY as the destination brand for aspiring “Generation Z” influencers and vloggers (born 1995-2015) > Multiple new products under JOBY brand to enhance photo/video
Slide 21: Imaging Solutions: JOBY Video
Imaging Solutions: JOBY Video “I love my JOBY gear! As a solo traveller, JOBY makes it easier to create videos independently. I've been using JOBY gear since I started making videos and it's amazing to witness the evolution of these products.” Steve Yalo, Travel Photographer & Vlogger “The Beamo lig
Slide 22: Production Solutions: good performance with continued operational excellence
Production Solutions: good performance with continued operational excellence Market > Broadcast market broadly stable; continuing cost pressures in studios benefits robotics > Cine market buoyant > Continued growth in on-location news and sports production Litepanels Strategy update: maintain revenu
Slide 23: Creative Solutions: well placed to grow
Creative Solutions: well placed to grow Market > Production spend and volume of series continues to grow, especially in scripted shows on newer platforms, while TV networks’ content budgets remain robust > New media, streaming and connected devices driving increased wireless transmission of data and
Slide 24: Creative Solutions: 4K and HDR wireless technology
Creative Solutions: 4K and HDR wireless technology Market requirements Vitec opportunity > In 2014, Netflix* mandated original content in 4K; other > Vitec uniquely able to supply complete eco-system of wireless production companies followed to future proof content 4K products using patented Amimon
Slide 25: Creative Solutions: 4K video
“4K delivery is now standard, so it is crucial to monitor an image that matches the final look Creative Solutions: 4K video of the film, while on set. That's why Teradek’s Bolt 4K is key. It is the only solution to monitor a true 4K image, completely wireless. On this feature it has been a game-chan
Slide 26: Update on COVID-19
Update on COVID-19 > Evolving situation which we are monitoring closely; our priority is to ensure the safety and wellbeing of our employees China > 53 Vitec employees; c. 5% Group turnover > 25 finished goods suppliers who supply products which amount to c. 25% Group revenue; third-party logistics
Slide 27: Summary
Summary 1. Robust 2019 financial performance despite some challenges 2. Amimon integration complete, Teradek Bolt 4K wireless products shipping 3. Restructuring of Imaging’s digital and e-commerce capabilities on track 4. Continue to focus on growth opportunities in faster growing segments 5. Strong
Slide 28: Outlook
Outlook “2019 was a year of significant progress against our strategic objectives. We delivered a robust financial performance despite being impacted by severe retailer disruption in Imaging Solutions and a slower than expected recovery at SmallHD. “For 2020, the Group is focusing on the growth pote
Slide 29: Q&A
Q&A Page 29
Slide 30: Appendices
Appendices Page 30
Slide 31: Investment proposition
Investment proposition 1. “Image capture and content creation” market is growing 2. Market-leading brands with premium pricing, increasing technology capability 3. Well positioned for organic growth and margin improvement 4. Sound financial performance and robust balance sheet 5. Progressive dividen
Slide 32: Consumers in the image capture and content creation market
Consumers in the “image capture and content creation” market • Professional companies • Independent professionals • Producing commercial content • Producing content for their own • Broadcasters, TV Networks, Film platform and/or partner needs Production Companies • Cameraman, Cinematographer, • e.g.
Slide 33: Competitive landscape
Competitive landscape Manual cine/broadcast Supports On Set Wireless Prompters Photographic Bags 6x 13x 4x 5x 55% 37% 27% 85% Photographic Tripods Batteries LED Lights Key 5x Vitec market share 1.4x 4.4x 36% Competition market share 21% 9% Page 33 Market share data based on management estimates.
Slide 34: The Vitec Group: M&A track record
The Vitec Group: M&A track record From start of 2012 2012 2013 2014 2015 2016 2017 2018 2019 to 2019 c. £140m invested 18% return* 1 2 3 M&A clearly aligned Doing the right deal: Extraction of synergies with strategic disciplined approach objectives * Return in FY19 post-interest, pre-tax, attributa
Slide 35: Where we operate
Where we operate > Sites in 11 countries; sell into 100+ countries > Sales: UK accounts for only 11% of revenue US > Well capitalised manufacturing in Italy, Costa Rica, UK & US Israel Japan China > Low cost APAC sourcing, including China & Vietnam > R&D centres in Israel, Italy, New Zealand, UK & U
Slide 36: COVID-19 exposure as of 26/02/2020 (China)
COVID-19 exposure as of 26/02/2020 (China) China > Vitec operations: Production Solutions > 53 employees in Beijing, Shanghai and ⚫ Rep office Guangdong ⚫ 5 employees > No Vitec manufacturing plant Imaging Distribution > Suppliers: 24 employees > 25 finished goods suppliers, mainly in ⚫ Wuhan ⚫ Wait
Slide 37: COVID-19 exposure as of 26/02/2020 (Italy)
COVID-19 exposure as of 26/02/2020 (Italy) > Vitec operations: North Italy Feltre ⚫ Manufacturing plant for VIS > 550 employees in Bassano del Grappa (HQ) and Amazon EU VIS HQ brands warehouse Feltre ⚫ 400 people > Vitec manufacturing plant in Feltre ⚫ Vercelli ⚫ 150 people ⚫ 32,000m 2 ⚫ Managed dir
Slide 38: Vitec Imaging Solutions products
Vitec Imaging Solutions products Bags Motion control Lighting & controls Camera accessories Audio capture Supports * Clockwise from top left: Lowepro: FreeLine BP 350 AW; Manfrotto: Noreg; National Geographic: Walkabout –Medium Camera Backpack; Gitzo: Adventury; Syrp: Magic Carpet Pro 3 Axis Kit; La
Slide 39: Vitec Production Solutions products
Vitec Production Solutions products Bags Camera accessories Prompters Mobile power Distribution, rental & services Robotic camera systems Lighting & controls Supports * Clockwise from top left: Sachtler: Comporter; OConnor: O-Rig Pro Kit; Autoscript: E.P.I.C. prompter; Autocue: PSP17 teleprompter; A
Slide 40: Vitec Creative Solutions products
Vitec Creative Solutions products Camera accessories Monitors Video transmission systems Clockwise from top left: Teradek: Bolt 4K; Wooden Camera: Directors’ monitor cage v3; Teradek RT: MK3.1 controller; Teradek: Serv Pro; Paralinx: Dart; SmallHD and Teradek: Focus 7 Bolt 500 RX; SmallHD: Cine 7. P
Slide 41: FX sensitivities
FX sensitivities Currency Current spot FY 19 FY 18 rates average average (26 Feb 20) rates rates USD 1.30 1.28 1.33 EUR 1.19 1.14 1.13 YEN 143 140 147 > The expected year-on-year impact on 2020 adjusted operating profit* at current spot rates would be a headwind of c. £0.3m** > The expected further
Slide 42: Five year summary
Five year summary % Total performance for continuing and discontinued operations 55 16 50 14 45 40 12 35 10 30 25 8 FY15 FY16 FY17 FY18 FY19 Adjusted operating profit* (£m) Adjusted operating margin* (%) Total continuing and discontinued FY15 FY16 FY17 FY18 FY19 operations Revenue (£m) 317.8 376.2 3
Slide 43: IFRS 16 Leases
IFRS 16 “Leases” > IFRS 16 “Leases” requires lessees to recognise most leases on the balance sheet, as the distinction between operating and finance leases is removed. The Group has adopted IFRS 16 from 1 January 2019 without restating comparatives. > The impact of IFRS 16 on adjusted measures in FY
Slide 44: Alternative performance measures
Alternative performance measures APM Closest equivalent statutory measure Definition & Purpose > In addition to statutory reporting, Vitec Adjusted operating profit Operating profit Calculated as operating profit before charges associated with acquisition of businesses and other adjusting items. rep
Slide 45: The Vitec Group plc
The Vitec Group plc Bridge House Heron Square Richmond TW9 1EN United Kingdom T +44 (0)20 8332 4600 F +44 (0)20 8948 8277 info@vitecgroup.com www.vitecgroup.com Page 45