Videndum Plc · LSE:VID
Videndum — The Vitec Group — H1 2019 Earnings Presentation
41 slides from Videndum's earnings presentation, Aug 8, 2019
Slide 1: The Vitec Group plc Half Year Results 2019
Enabling the capture and sharing of exceptional content. The Vitec Group plc Half Year Results 2019 Results in line with expectations 8 August 2019
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 > Kath Kearney-Croft, Group Finance Director > Market and Strategy Update > Stephen Bird, Group Chief Executive > Q&A Page 3
Slide 4: Highlights: results in line with expectations
Highlights: results in line with expectations Financial highlights • Robust performance in a non-Olympic year • Continued strength in reported adjusted operating margin, towards our stated mid teen goal • As expected, increase in net debt from acquisitions and IFRS 16 impact, with capacity for furth
Slide 5: Financial Review
Financial Review Page 5
Slide 6: Robust performance in a non-Olympic year
Robust performance in a non-Olympic year Better / > Reported revenue growth despite non-repeat of 2018 Winter H1 H1 Better / (worse) at 2019 2018 (worse) Constant Olympics £m £m FX > Growth in adjusted operating profit* Revenue 184.2 183.3 0.5% (2.2%) Gross profit 87.7 83.7 4.8% 2.7% > Continued foc
Slide 7: Divisional performance
Divisional performance Revenue Adjusted operating profit* H1 H1 Better / Better / (worse) H1 H1 Better / Better / (worse) 2019 2018 (worse) at Constant FX 2019 2018 (worse) at Constant FX £m £m % % £m £m % % Imaging Solutions 95.5 98.5 (3.0%) (4.2%) 13.4 14.9 (10.1%) (5.5%) Production Solutions 54.8
Slide 8: Group revenue bridge
Group revenue bridge £m 190 > Anticipated reduction in revenue at European Services driven European FX Services by non-repeat of 2018 Winter Olympics Underlying revenue 180 Acquisitions > Underlying revenue decline reflects: > Challenging market conditions for Imaging Solutions > Solid performance a
Slide 9: Group adjusted operating profit bridge
Group adjusted operating profit* bridge £m > Anticipated reduction in profit at European Services driven by IFRS 16 26 FX non-repeat of Winter Olympics; and slightly lower corporate costs Underlying profit Acquisitions > Underlying profit growth reflects: 24 > Efficiency improvements in Production S
Slide 10: Cash generation
Cash generation H1 H1 Better / > Reported free cash flow at a similar to level to prior year 2019 2018 (worse) £m £m £m > Working capital investment includes timing of payments Operating profit * 25.8 25.5 0.3 and seasonal inventory build Depreciation (1) 9.1 5.5 3.6 Working capital (8.7) (2.1) (6.6
Slide 11: Net debt
Net debt £m 120 Employee > Free cash flow of £16.0m offset by: incentive FX 110 Free cash shares flow > 2018 final dividend payment Acquisitions Lease Dividends additions 100 > Acquisition of Syrp and small Amimon working capital adjustment 90 Jun 19 > Transactions in own shares for funding of Dec 1
Slide 12: H2 guidance
H2 guidance > As expected, performance will be H2 weighted, driven by Amimon, Syrp & Rycote as well as underlying seasonality > Potential geopolitical challenges > US/China tariffs in H2 expected to be mitigated by pricing and alternative sourcing > We continue to monitor the situation around Brexit
Slide 13: Market & Strategy Update
Market & Strategy Update Page 13
Slide 14: Group strategic priorities
Group strategic priorities 2. Margin 3. Further M&A 1. Organic growth improvement activity Continued growth and value creation Page 14
Slide 15: 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 16: Growth initiative targets mapped to most attractive growth opportunities
Growth initiative targets mapped to most attractive growth opportunities Imaging Solutions Production Solutions Creative Solutions Smartphone Accessories LED Lights Wireless Broadcast Sports JOBY Litepanels Teradek/Amimon Audio Capture Robotics 4K On-Camera Monitors On-camera microphones (JOBY) Vint
Slide 17: Imaging Solutions: continues to outperform a challenging market
Imaging Solutions: continues to outperform a challenging market Market > Ongoing transition to e-commerce channel > Premium end of photographic market resilient; decline in entry level DSLR market > Continued growth in smartphone accessories, motion control and audio capture JOBY GorillaPod 3K Strat
Slide 18: Imaging Solutions: investing in on-line capabilities
Imaging Solutions: investing in on-line capabilities Project details > Taking advantage of further growth in higher margin e-commerce channel where we continue to outperform the competition > Investing in new digital platform and team to improve web marketing and e-commerce capabilities > Reorganisi
Slide 19: 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 > Continued growth in on-location news and sports production Litepanels Strategy update: maintain revenue and improve margins
Slide 20: Creative Solutions: continues to grow with further benefit in H2
Creative Solutions: continues to grow with further benefit in H2 Market > Production spend continues to grow, especially in scripted series on newer platforms, while TV networks’ content budgets remain robust > New media, streaming and connected devices driving increased wireless transmission of dat
Slide 21: Update from SmallHD
Update from SmallHD > Recovering after difficult 12 months, but still work to be done > Moved to new custom-designed premises > Launched range of well-received new products at NAB April 2019 > Unique Cine 7 monitor; first to market with camera controls on the monitor > Focusing on core high end / hi
Slide 22: Update from SmallHD
Update from SmallHD | i | Page 22
Slide 23: Update on Amimon acquisition
Update on Amimon acquisition > H1 performance in line with our expectations > Integration complete > Creative Solutions now has centres of R&D excellence in California, Texas, North Carolina and Israel > Maximising R&D efficiency, prototyping and production workflow: fast and cost-effective developm
Slide 24: Update on Amimon acquisition
Update on Amimon acquisition Page 24
Slide 25: Summary: results in line with expectations
Summary: results in line with expectations 1. Robust performance in non-Olympic year despite some challenges 2. Good progress executing strategy to drive growth and efficiencies Integration of Amimon is complete and the launch of wireless products into 3. the broadcast sports market is on schedule f
Slide 26: Q&A
Q&A Page 26
Slide 27: Appendices
Appendices Page 27
Slide 28: 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 29: 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 30: Competitive landscape
Competitive landscape Broadcast Camera Supports Cinema Camera Supports On Set Wireless Prompters Photographic Bags 6x 7x 13x 4x 5x 55% 60% 36% 27% 85% Photographic Tripods Batteries LED lights Key 5x Vitec market share 1.1x 4.3x 35% 24% Competition market share 9% Page 30 Market share data based on
Slide 31: A higher technology focused business
A higher technology focused business Revenue from Production Solutions and Creative Solutions Traditional Broadcast 38% 37% 46% 41% Production Solutions excluding higher 50% technology* revenue 59% 64% Higher Technology 59% 62% 63% 50% 54% All Creative Solutions’ products plus higher 41% technology*
Slide 32: M&A track record
The Vitec Group: M&A track record From start of 2012 2012 2013 2014 2015 2016 2017 2018 2019 to H1 2019 c. £140m invested Excluding impact of acquisitions in 2018 & 2019 20% return* 1 2 3 M&A clearly aligned Doing the right deal: Extraction of synergies with strategic disciplined approach objectives
Slide 33: Where we operate
Where we operate > Sites in 13 countries; sell into 100+ countries > Sales: UK accounts for only 12% 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 34: Vitec Imaging Solutions products
Vitec Imaging Solutions products Bags Motion control Lighting & controls Supports Camera accessories Audio capture * 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 35: Vitec Production Solutions products
Vitec Production Solutions products Bags Camera accessories Prompters Mobile Power Distribution, rental Robotic camera Lighting & Supports & services systems controls * Clockwise from top left: Sachtler: Comporter; OConnor: O-Rig Pro Kit; Autoscript: E.P.I.C. prompter; Autocue: PSP17 teleprompter; A
Slide 36: Vitec Creative Solutions products
Vitec Creative Solutions products Camera accessories Video transmission systems Monitors * 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.
Slide 37: FX sensitivities
FX sensitivities Currency Current spot rates H2 2018 (7 Aug 2019) average rates USD 1.22 1.30 EUR 1.09 1.12 YEN 129 145 > The expected impact on adjusted Currency Movement Impact on operating profit* operating profit* from currency (£m) movements in H2 2019 is: USD +/- $0.10 -/+ 0.6 EUR +/- €0.10 -/
Slide 38: 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 FY13 FY14 FY15 FY16 FY17 FY18 Adjusted operating profit* (£m) Adjusted operating margin* (%) Total continuing and discontinued FY13 FY14 FY15 FY16 FY17 FY18 HY19 operations Revenue (£m
Slide 39: 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 financial metrics in H1
Slide 40: Alternative performance measures
Alternative performance measures APM Closest equivalent Definition statutory measure > In addition to statutory reporting, Vitec Adjusted operating profit Operating profit Calculated as operating profit before charges associated with acquisition of businesses and material non-operating events. The t
Slide 41: 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 41