Enabling the capture and sharing
- f exceptional content.
The Vitec Group plc Half Year Results 2020 6 August 2020 Important - - PowerPoint PPT Presentation
Enabling the capture and sharing of exceptional content. The Vitec Group plc Half Year Results 2020 6 August 2020 Important notice Forward-looking statements This presentation contains forward-looking statements with respect to the financial
Enabling the capture and sharing
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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 beliefs as well as assumptions about future events. These forward-looking statements are not guarantees of future performance. Undue reliance should not be placed on forward-looking statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. The Company undertakes no obligation to publicly revise or update any forward-looking statements or adjust them for future events or developments. Nothing in this presentation should be construed as a profit forecast. The information in this presentation does not constitute an offer to sell or an invitation to buy shares in the Company in any jurisdiction or an invitation or inducement to engage in any other investment activities. The release or publication of this presentation in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements. This presentation contains brands and products that are protected in accordance with applicable trademark and patent laws by virtue of their registration. Adjusted performance measures In addition to statutory reporting, Vitec reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods and Divisions, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and Management for performance analysis, planning, reporting and incentive purposes. A definition of the APMs used in this presentation and a reconciliation from adjusted operating profit to statutory operating profit is included in the Appendix.
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> Stephen Bird, Group Chief Executive
> Stephen Bird, Group Chief Executive
> Martin Green, Group Finance Director
> Stephen Bird, Group Chief Executive
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> Vitec affected early in the pandemic
> 50% of the Group's revenue either from products sourced from China or made in Italy > Customer demand significantly impacted from March; film and scripted TV productions suspended, sporting events postponed, professional photographers impacted by lack of travel and events, and many retail outlets closed
> Trading conditions have improved since April
> April revenue down 57% vs 2019, May -50%, June -42%, H1 revenue down 35%, H1 loss before tax £7.0m > July has shown further improvement and, combined with our latest view for August, we expect that the combined revenue for the two months will be down approximately 10% on last year
> During the pandemic, more video content has been consumed, captured and shared than ever before
> Some market segments grew despite the industry shutdown > Vitec well placed to benefit over time from structural market changes
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> Prioritised safe working environment > £20.0 – £25.0m FY 2020 cost reductions on track
> c.£13.0m achieved in H1 > Protected R&D investment
> Strong cash performance, with positive operating cashflow
> Net debt lower than at June 2019
> Further reinforced our liquidity position > Confident that markets will recover well, although difficult to predict the pace and shape of recovery
> Currently expect trading conditions to continue to significantly improve > Expand restructuring in Imaging Solutions
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> Professional, high end segment (c.60% Imaging revenue) resilient; expected to recover as events and travel resume and new, higher value Compact System Cameras launched (e.g. Canon R5/R6 & Sony A7S III) > Entry-level, hobbyist segment (c.20%) declining as smartphones continue to replace lower value cameras > Consumer segment (c.10%) growing with JOBY smartphonography accessories; JOBY, audio and motion control products expected to offset decline in hobbyist segment > Transition to the higher margin e-commerce channel accelerating, albeit some short-term disruption to traditional retail channel expected; e-commerce a strategic strength and we continue to restructure our business to benefit from this change
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We expect a gradual recovery with continued growth in JOBY smartphonography accessories
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> Investing in faster growing on-location markets, including LED lighting and mobile power products due to growing demand for 24-hour news > Physical distancing and continuing cost pressures in studios benefit robotics, remote controlled and voice activated products > Benefit from rescheduled major global sports events; 2021 & 2022 expected to be strong years > Driving further margin improvements through further operational productivity efficiencies
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Expect solid recovery with a benefit in 2021 from rescheduled sporting events
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Source: 2019 S&P Global Market Intelligence
> Greatest area of growth and opportunity > Expect strong bounce back in content production
exact timing uncertain > Significant multi-year growth opportunity from technology upgrade to 4K with our proprietary integrated eco-system
> Replace the installed base of HD equipment (c.90k Teradek Bolts and c.30k competitor units) > Launch of SmallHD 4K monitors
> COVID-19 driving a fundamental structural change to the cine market with opportunity for live streaming, more monitors on set, more remote monitoring and more remote production to facilitate safe working Strong bounce back from increasing spend in original content, 4K growth and new opportunity in remote monitoring
2000 4000 6000 8000 10000 12000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Netflix Hulu Apple Amazon Prime
$m spend on original content creation 2014-2023
CAGR 25%
$4.5bn $6.2bn $7.8bn $9.5bn $10.9bn
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H1 2020 H1 2019 £m £m Revenue 118.9 184.2 (35%) (37%) Gross profit * 44.4 87.7 (49%) (50%)
Gross margin % * 37.3% 47.6%
(10.3%pts) (9.9%pts)
Operating expenses * (48.8) (61.9) 21% 22% Operating profit * (4.4) 25.8 (117%) (117%)
Operating margin % * (3.7)% 14.0%
(17.7%pts) (17.5%pts)
Net finance expense (2.6) (2.3) PBT * (7.0) 23.5 (130%) (129%) Adjusted EPS * (p) (9.9) 39.9 (125%) ROCE + 7.4% 20.1% (12.7%pts) Better / (worse) Better / (worse) at Constant FX
* Before charges associated with acquisition of businesses and other adjusting items. + Return on capital employed (ROCE) is calculated as adjusted operating profit* for the last twelve months divided by average total assets less current liabilities excluding the current portion of interest-bearing borrowings.
> Demand significantly impacted by pandemic > Reduced gross margin due to lower revenue > 2019 included 3%pts benefit from SmallHD insurance > Operating profit > Management actions: c.£13.0m including government support (£1.7m) > Operational efficiencies from restructuring at Imaging Solutions (£2.1m) > No interim dividend has been recommended – plan to resume dividend payments as soon as is practicable
Revenue decline partly offset by £13.0m of management actions
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£m H1 2020 H1 2019 Better / (worse) Operating profit* (4.4) 25.8 (30.2) Depreciation (1) 9.4 9.1 0.3 Dec / (inc) in working capital 5.4 (8.7) 14.1 Capital expenditure (2) (8.5) (7.9) (0.6) Other (3) 0.6 1.4 (0.8) Operating cashflow* 2.5 19.7 (17.2) Interest and tax paid (4.8) (3.3) (1.5) Earnout and retention bonuses (2.1)
Restructuring cash outflow (1.4) (0.4) (1.0) Free cash flow* (5.8) 16.0 (21.8)
> Working capital movement (+£14.1m) mainly: > Benefit from lower inventory (+£0.5m) vs increase in H1 2019 (-£5.3m) > Net trade receivables and payables +£5.2m inflow vs +£3.8m inflow in H1 2019 > Reduction in other payables (-£1.1m) vs larger reduction in H1 2019 (-£6.3m) > Capex: £1.4m for postponed Tokyo Olympics > Interest paid increased by £1.4m: RCF upfront fees > Earnouts: Rycote; retention bonus: Amimon
* Before charges associated with acquisition of businesses and other adjusting items.
(1) Includes depreciation, amortisation of software and capitalised development costs (2) Purchase of property, plant and equipment (“PP&E”) and capitalisation of software and development costs. (3) Includes change in provisions, share based payments charge, proceeds from the sale of PP&E, gain on disposal of PP&E, fair value derivatives, and foreign exchange movements
Strong cash performance, with positive operating cashflow
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10 20 30 40 50 60 70 80 90 100 110 Jun 20
Net debt
Free cash flow* Upfront fees
Employee incentive shares FX
£5.8m £(1.9)m £1.5m £1.7m £4.3m
£m
Net debt lower than at June 2019
£107.4m
Lease additions Dec 19
Net debt
£96.0
> Net debt £11.4m higher than Dec-19 but £1.0m lower than Jun-19 (£108.4 million) > FX increase primarily driven by a strengthening dollar ($1.24 vs $1.32 at Dec-19) > Revised covenants for 2020 under the new five-year RCF and eligible under CCFF: > £165.0m RCF (c.34% utilised) > £50.0m under CCFF > Total liquidity of £128.4m: > £108.7m unutilised RCF > £16.1m cash > £3.6m unused overdraft
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* Before charges associated with acquisition of businesses and other adjusting items.
Imaging Solutions Production Solutions Creative Solutions > Travel and events restrictions; retail outlets closed; retailer destocking > Growth in JOBY smartphonography products and B2B channel > Fewer broadcast productions; postponement of live sporting events > Prompting resilient; new licensees of Litepanels’ intellectual property > Scripted TV shows and cinema productions paused > Growth in IP products to live stream news and information
H1 2020
H1 2019
Better / (worse)
Better / (worse) at
constant FX
H1 2020
H1 2019
Better / (worse)
Better / (worse) at
constant FX
£m £m % % £m £m % % 63.8 95.5 (33%) (34%) (1.2) 13.4 (109%) (111%) 33.7 54.8 (39%) (39%) 1.4 8.4 (83%) (79%) 21.4 33.9 (37%) (38%) (0.8) 10.2 (108%) (108%) 118.9 184.2 (35%) (37%) (0.6) 32.0 (102%) (102%)
(6.2) 39% 39% 118.9 184.2 (35%) (37%) (4.4) 25.8 (117%) (117%) Corporate & unallocated Revenue Operating profit* Imaging Solutions Production Solutions Creative Solutions
All Divisions significantly impacted by drop in demand but some areas of growth
Corporate > Tight control of expenditure; lower LTIP and bonus accruals
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Half year 2020 financial performance significantly impacted by COVID-19 Net debt at FY 2020 expected to be broadly similar to FY 2019 Market growth drivers remain positive with beneficial structural changes Significant actions to cut costs, manage cash and reinforce liquidity 1. 2. 3. 4. Trading conditions continuing to improve 5. Well positioned to return to growth once markets fully reopen 6. We expect our markets to recover well and are well placed to benefit from structural market changes
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BBC News, 2020
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We are confident that our end market drivers are just as relevant as the demand for, and investment in, original content continues to grow
Creative Solutions
> Expect strong bounce back in content production, when sets reopen > Significant growth from technology upgrade to 4K with our proprietary integrated eco-system replacing the installed base of HD equipment > COVID-19 driving a fundamental structural change to the cine market – live streaming, more monitors on set, more remote monitoring and more remote production to enable physical distancing
Imaging Solutions
> Professional, high end segment resilient and transitioning to higher value compact system cameras > Hobbyist segment (c. 20% Imaging revenue) declining but offset by growth in JOBY smartphonography accessories > Continued disruption to the traditional photographic retail channel; transition to the higher margin e-commerce channel will accelerate
Production Solutions
> Growth in on-location lights and mobile power, robotic cameras and voice activated prompting > 2021 & 2022 expected to be strong years for major sporting events > Further operational efficiencies
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“Image capture and content creation” market will return to growth Robust financial position, long-term financing and short-term flexibility Well positioned for medium-term organic growth post COVID-19 Market-leading brands with premium pricing, increasing technology capability Medium-term M&A opportunities 1. 2. 3. 4. 5. Our strategy for long-term growth and value creation remains just as relevant as it was before the crisis
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R&D spend broadly in line with 2019 and remains focused on faster growing segments
85% 46% 15% 54% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
R&D spend on projects Forecast 2020 revenue
R&D spend: investing in the future
Fast growing categories Traditional business
R&D spend focused on faster growing segments
> Audio, smartphonography, LED lights, wireless transmission, remote/on-set monitoring, robotics, motion control, batteries > Expected 2019-23 market growth rate for these categories >5% CAGR
Gross spend slightly lower (c.£23.0m in 2019)
> Capitalisation in line with 2019 (c.£11.0m in 2019) > Amortisation of c.£5.0m (c.£3.0m in 2019) > Headcount remains the same as 2019 (c.200)
JOBY Wavo Mic (launched Spring 2020) Teradek Bolt 4K Lite SmallHD Camaro 4K JOBY Beamo light (launched Spring 2020) Vinten Robotics FHR-155 Head
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FUJI X100V Feb 2020 FUJI X-T200 Feb 2020 FUJI X-T4 May 2020
2020 2021
NIKON D6 May 2020 NIKON D780 Mar 2020 1DX Mk III Jan 2020 EOS R5/R6 July 2020 NIKON Z5/Z8/Z9 TBC 2020 NIKON Z30/Z70 TBC 2021 SONY a7S III TBC 2020
Q1 Q2 Q3 Q4
EOS 850D April 2020
> 700€ > Great for vlogging, equipped with features for beginners > 4K video with ‘digital gimbal’ feature, lightweight, large touchscreen > Suitable for Manfrotto Element and Befree
NIKON Z6s/Z7s TBC 2020
> 1,500€ > 4K video > Ideal for all skill levels > Great for vlogging > In-body stabilization & gimbal-like feature for slow movements > Suitable for Gitzo Traveler and Manfrotto Befree Advanced > 3,000€ > New image sensor > Great for low-light shooting > 4K video > Longer recording times > Potentially suitable for Befree Alpha and Gitzo Traveller Alpha Rumoured: > Entry-level consumer > Compact > compete with Fuji A5, Lumix GX80) Rumoured: > Z8 – same sensor as in Sony a7R IV, larger body, 6K video > Z9 – large body to replace D6 in far future > Z6s/Z7s – incremental upgrade to the current Z6 and Z7 > 4,999€ R5 – 2,699€ R6 > 8K video R5; 5K R6 > In-body stabilisation > Advanced Face and Animal AF/Recognition > Perfect for Gitzo Traveler and Manfrotto Befree/190 > 7,000€ > excellent burst for fast action (no significant video upgrade from D5), fast reliable AF, large & heavy > Suitable for Gitzo Mountaineer Tripods and Manfrotto 055 Series Tripods > 1,000€ > Entry-level consumer > 4K video > High-speed response & accuracy > Sport & wildlife > Suitable for Manfrotto 190/055 > 1,600€ > advanced 4K video, fast live view AF, excellent continuous shooting > Suitable for Manfrotto Befree GT Tripod > 7,000€ > 20 frames per second burst using electronic shutter > 5.7k RAW video > Sport & wildlife > Suitable for Gitzo Mountaineer/Systematic & Manfrotto 190/055
Market shifting towards premium cameras, with higher end features. Mirrorless to become the dominant technology
NIKON Z5 July 2020
> 2,000€ with kit lens > Entry level Z series > EVF > 4K video > IBIS
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> Sites in 11 countries; sell into 100+ countries > Sales: UK accounts for only 11% of revenue > Well capitalised, world-class manufacturing facilities in Italy, Costa Rica, UK & US > Low cost APAC sourcing, including China & Vietnam > R&D centres in Israel, Italy, New Zealand, UK & USA
US Costa Rica Singapore China Japan UK Germany Italy Vitec manufacturing, R&D & procurement sites Distribution sites
2019 revenue analysis by location of customer
35% 42% 20% 3% Europe North America APAC Rest of the World Australia Israel New Zealand
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9% 21%
Manual cine/broadcast Supports On Set Wireless Prompters
Key
Vitec market share Competition market share
55%
6x
85%
13x
37%
4x
Photographic Tripods Batteries Photographic Bags
36%
5x
27%
5x
1.4x
LED Lights
4.4x
Market share data based on management estimates.
For 85% of its revenue, Vitec is #1 or #2 in its niche market
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Clockwise from top left: PHOTO & VIDEO SUPPORTS - Manfrotto: Fast Twin Carbon Tripod with Nitrotech 612 head, Befree 3 Way Advanced for Sony, Gitzo: Center Ball Head; LIGHTING - Lastolite: Skylite Rapid Kit; Avenger: Wind Up stand; SMARTPHONOGRAPHY - JOBY: Vlogging KIT, Wavo, Beamo GripTight Pro Telepod; BAGS - Lowepro: ProTrekker BP 5500 ; Manfrotto: Chicago Camera Backpack; Gitzo: Legende Backpack; MOTION CONTROL & STABILISERS - Manfrotto: GimBoom and Gimball MVG 220; Syrp: GenieOne ; AUDIO CAPTURE - Rycote: Windjammer; JOBY: Wavo.
Photo & video supports Lighting Bags Audio capture Motion control & stabilisers Smartphonography
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Clockwise from top left: STUDIO PEDESTALS - Vinten: Quartz Two pedestal; ON-LOCATION SUPPORTS - OConnor: Ultimate 1040 Flowtech System; Sachtler/Vinten: Flowtech; PROMPTERS - Autoscript: EPIC-IP19 with CLOCKPLUS-IP; Autocue: iPad Pro teleprompter; MOBILE POWER - Anton/Bauer: Product Family; BAGS & CAMERA ACCESSORIES - OConnor: O-Rig Pro Kit; Sachtler: Comporter; LIGHTING & CONTROLS - Litepanels: Gemini 2x1, Gemini 1x1, Astra Soft, Astra 6x; ROBOTIC CAMERA SYSTEMS - Vinten: FH-155, FHR155, FP-188 Pedestal; DISTRIBUTION, RENTAL & SERVICES - Camera Corps: Q-Ball 3.
Studio pedestals On-location supports Prompters Mobile power
Distribution, rental & services
Robotic camera systems Lighting & controls Bags & camera accessories
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Clockwise from top left: VIDEO TRANSMISSION SYSTEMS - Teradek: Bolt 4K, Orbit PTZ, Ranger; IP VIDEO - Teradek: Prism, VidiU Go; MONITORS - SmallHD: OLED-22, Cine 7 with Teradek integration; CAMERA ACCESSORIES - Wooden Camera: Arri Mini LF Unified Accessory Kit, Director’s Monitor Cage v3; Teradek: RT CTRL.3 Controller.
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Monitors IP Video Video transmission systems Camera accessories
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Currency Current spot rates (5 Aug 20) HY 20 average rates HY 19 average rates
USD 1.31 1.27 1.29 EUR 1.11 1.15 1.15 YEN 138 138 143
* Before charges associated with acquisition of businesses and other adjusting items
Currency Movement Impact on operating profit* (£m) USD +/- $0.10
EUR +/- €0.10
YEN +/- 10 YEN
> The expected further impact from subsequent currency movements
2020 is:
**This includes the year-on-year impact resulting from the loss on cash flow hedges and balance sheet revaluations in 2020
> The expected year-on-year impact on 2020 adjusted operating profit* at current spot rates would be a tailwind of c. £0.6m**
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8 10 12 14 16 25 30 35 40 45 50 55 FY15 FY16 FY17 FY18 FY19 Adjusted operating profit* (£m) Adjusted operating margin* (%) Total continuing and discontinued
FY15 FY16 FY17 FY18 FY19 Revenue (£m) 317.8 376.2 378.1 385.4 376.1 Adjusted operating profit* (£m) 35.4 41.5 44.8 53.5 52.4 Adjusted operating margin* 11.1% 11.0% 11.8% 13.9% 13.9% Cash generated from operations (£m) 41.7 64.8 48.7 54.0 59.2
* Before charges associated with acquisition of businesses and other adjusting items
Total performance for continuing and discontinued operations
%
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Alan Hollis
Divisional CEO, Vitec Production Solutions Appointed: Oct 2015 Shares: 82,079
Nicol Verheem
Divisional CEO, Vitec Creative Solutions Appointed: Dec 2013 Shares: 121,019
Marco Pezzana
Divisional CEO, Vitec Imaging Solutions Appointed: Dec 2008 Shares: 90,969
Stephen Bird
Group Chief Executive Appointed: April 2009 Shares: 307,957
Martin Green
Group Finance Director Appointed: April 2003 Shares: 112,114
Jennifer Shaw
Group Communications Director Appointed: June 2016 Shares: 3,318
Jon Bolton
Group Company Secretary & HR Director Appointed: Sept 2008 Shares: 42,637
Average tenure of senior team is over nine years; together they hold c. 750,000 shares in the company (1.67%)
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 33