The Vitec Group plc The Vitec Group plc Full Year Results 2018 - - PowerPoint PPT Presentation

Enabling the capture and sharing

• f exceptional content.

The Vitec Group plc Full Year Results 2018 The Vitec Group plc Full Year Results 2018

Record financial performance and significant strategic progress 21 February 2019 Record financial performance and significant strategic progress 21 February 2019

Page 2

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.

Important notice

Page 3

> 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

Agenda

Page 4

1. Record Group performance in revenue, profit before tax and EPS

> Growth in revenue of 9.1% and adjusted profit before tax* of 20.8% > Adjusted basic earnings per share* significantly improved by 32.2%, partially benefitting from lower 2018 tax rate > ROCE

+ increased to 21.8% (2017: 19.6%)

2. Significant strategic progress: continued organic growth; improved margins; transformational acquisitions

> Invested selectively in faster growing market segments to achieve organic growth > Continued to improve margin to 13.9%, up 110 basis points (c. 13.5% excluding SmallHD insurance benefit) > Expanded addressable markets and increased higher technology capabilities through acquisition of Amimon core technology and Rycote audio

• 3. Good cash generation, strong balance sheet and net debt/adjusted EBITDA* ratio at 1.2 times
• 4. Total dividend increased by 21.3% to 37.0 pence with dividend cover at 2.5 times

Highlights: record Group performance

* Before charges associated with acquisition of businesses and material non-operating events, as described in the Appendix.

+ 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.

Outlook for further progress in 2019 remains unchanged

Page 5

Financial Review Financial Review

Page 6

Full year results: another record performance

* Before charges associated with acquisition of businesses and material non-operating events, as described in the Appendix.

+ 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.

> Record revenue, PBT and EPS > Strong revenue growth

> Solid performance from underlying business > FY benefit from 2017 acquisition of JOBY and Lowepro

> Improvement in adjusted operating margin*

> Continued and sustainable operational efficiencies > Small benefit from accounting treatment of SmallHD insurance

> Significant improvement in adjusted EPS* to 93.2p > Total dividend increased by 21.3% to 37.0p with cover

• f 2.5x

2018 2017 £m £m Revenue 385.4 353.3 9.1% 10.8% Gross profit * 174.1 156.5 11.2% 11.7%

Gross margin % * 45.2% 44.3% +90 bps +40 bps

Operating expenses * (120.6) (111.3) (8.4%) (9.5%) Operating profit * 53.5 45.2 18.4% 17.1%

Operating margin % * 13.9% 12.8% +110 bps +70 bps

Net finance expense (2.3) (2.8) PBT * 51.2 42.4 20.8% 17.5% Adjusted EPS * (p) 93.2 70.5 32.2% Dividend per share (p) 37.0 30.5 21.3% ROCE + 21.8% 19.6% +220 bps Better / (worse) Better / (worse) at Constant FX

Page 7

Divisional performance

* Before charges associated with acquisition of businesses and material non-operating events, as described in the Appendix.

Imaging Solutions Production Solutions Creative Solutions > Underlying business delivered a solid performance against challenging market conditions > Revenue growth driven by FY impact of JOBY and Lowepro > Margin dilution due to change in product mix; underlying margin increased by +50 bps > Strong performance driven by new products including Gemini lights and Flowtech tripods > Margin accretion includes the benefit of the Winter Olympics, operational efficiencies and FX > Good performance despite SmallHD disruption; growth includes Rycote and Amimon > Underlying margin improved adjusting for SmallHD disruption 2018

2017

Better / (worse) Better / (worse) at Constant FX

2018

2017

Better / (worse) Better / (worse) at Constant FX

£m £m % % £m £m % % 201.6 175.9 14.6% 15.8% 31.1 29.9 4.0% 7.0% 118.7 114.2 3.9% 5.6% 20.1 15.2 32.2% 19.7% 65.1 63.2 3.0% 6.2% 15.7 13.0 20.8% 24.6% 385.4 353.3 9.1% 10.8% 66.9 58.1 15.1% 14.3%

• (13.4)

(12.9) (3.9%) (3.9%) 385.4 353.3 9.1% 10.8% 53.5 45.2 18.4% 17.1% Corporate & unallocated Creative Solutions Revenue Adjusted operating profit* Imaging Solutions Production Solutions

Page 8

Group revenue bridge

> Underlying revenue growth: > Growth in Production Solutions and Creative Solutions with benefit from new product launches > Reduction in Imaging Solutions in challenging market conditions > Despite SmallHD disruption > Significant acquisition benefit > Mainly JOBY and Lowepro > FX headwind from year-on-year strengthening of Sterling

330 340 350 360 370 380 390 400

FY 18

Revenue

FY 17

Revenue

Underlying Revenue Acquisitions FX

£353.3m £2.4m £35.4m £(5.7)m £385.4m

Continuing operations £m

Page 9

Group adjusted operating profit* bridge

* Before charges associated with acquisition of businesses and material non-operating events, as described in the Appendix

> Underlying profit growth driven by: > Strong cost control including operational efficiencies > Benefit from Winter Olympics > Includes insurance proceeds relating to SmallHD property damage and business interruption > Benefit from acquisitions, primarily nine months of JOBY / Lowepro contribution

35 40 45 50 55

FY 18

Profit

FY 17

Profit

Underlying Profit Acquisitions

£45.2m £5.5m £2.2m £0.6m £53.5m

FX

Continuing operations £m

Page 10

Cash generation

> Free cash flow £10.0m higher than 2017 > Lower working capital investment > Lower tax reflecting timing of payments and Patent Box benefit in Italy > £2.2m integration cash outflow related to JOBY/Lowepro as expected > Operating cash conversion of 84%

* Before charges associated with acquisition of businesses and material non-operating events

(1) Includes depreciation, amortisation of software and capitalised development costs and impairment losses on property, plant and equipment. (2) Includes change in provisions, share based payments charge, gain on disposal of PPE, fair value derivatives, transaction costs relating to acquisition of businesses. (3) Purchase of PPE and capitalisation of software and development costs.

2018

2017

Better / (worse)

£m £m £m Operating profit * 53.5 44.8 8.7 Depreciation (1) 11.4 14.1 (2.7) Working capital (5.9) (9.4) 3.5 Restructuring cash outflow 0.0 (1.4) 1.4 Integration cash outflow (2.2) (0.6) (1.6) Other (2) (2.8) 1.2 (4.0) Cash generated from operations 54.0 48.7 5.3 Capital expenditure (3) (14.4) (15.1) 0.7 Proceeds from asset sales 0.5 3.5 (3.0) Net interest and tax paid (6.6) (13.6) 7.0 Free cash flow 33.5 23.5 10.0

Total performance for continuing and discontinued operations

Page 11

Net debt

> Acquisitions reflect Amimon, Rycote and Adeal, as well as Wooden Camera earnout > Adverse FX due to strengthening of US Dollar against Sterling at the balance sheet date > Net Debt to EBITDA ratio of 1.2x (Dec 17: 0.7x)

10 20 30 40 50 60 70 80 90

Dec 17

Net Debt

Dec 18

Net Debt

Free Cash flow Dividends Acquisitions Employee incentive shares FX

£42.9m £(33.5)m £14.1m £51.8m £1.8m £3.9m £81.0m

£m

Capacity to fund further acquisitions

Page 12

> Outlook for further progress in 2019 remains unchanged > Potential geopolitical challenges

> Well positioned to manage and mitigate US tariffs > Actively implementing Brexit mitigation strategy

> H1/H2 phasing: profit and cash expected to be H2 weighted > Effective Tax Rate of maximum 25% for full year

> Without the repeat of various items that depressed the rate in 2018

> Net finance expense c. £4.5m (pre-IFRS 16) > Amortisation of acquired intangibles expected to be c. £9m, including impact from FY18 acquisitions > IFRS 16 (applies from 1 January 2019) detail in the Appendix > FX guidance is reflected in the Appendix

FY19 Guidance

Page 13

Market & Strategy Update Market & Strategy Update

Page 14

Group strategic priorities

Continued growth and value creation

• 1. Organic growth
• 2. Margin

improvement

• 3. Further M&A

activity

Page 15

Market

> Introduction of new Compact System Cameras driving market stability > Continued growth in smartphone and vlogging accessories market

Strategy

• 1. Invest selectively in core business to drive organic growth
• 2. Accelerate growth in smartphone accessories via JOBY
• 3. Accelerate digital transformation
• 4. Continue to strengthen our presence in APAC, currently 26% of sales
• 5. Drive further margin improvements
• 6. Develop new and deepen existing strategic partnerships

Imaging Solutions

Imaging Solutions 3-year strategy – increase revenue and maintain margins

Photographic market TAM £900m Growth p.a.

• c. +2%

Market trend

70% 30%

Photographic Market ICC/Cine Market Imaging Solutions** Division revenue versus CIPA shipments

Moving annual totals at constant currency, indexed to 100 at December 2013 * Quantity of global shipments of interchangeable lens cameras as published by the Camera and Imaging Products Association (CIPA), ** Excludes the impact of JOBY/Lowepro Imaging Solutions revenue ** Imaging Solutions revenue at organic constant FX ** CIPA shipments *

Imaging Solutions

50 60 70 80 90 100 110 120 130

Dec- 15 Dec- 13 Jun- 17 Jun- 14 Dec- 14 Jun- 15 Jun- 16 Jun- 18 Dec- 16 Dec- 17 Dec- 18

Note: TAM is management estimate at manufacturers’ prices.

Page 16

FY 2018: solid performance despite challenging market conditions

• 1. Core business: JOBY and Lowepro fully integrated; new CSC products launched
• 2. Smartphone accessories: launched JOBY GripTight TelePod, listed in Apple stores
• 3. Digital: upgraded/integrated web stores; 2018 ecommerce now approximately one third of total revenue
• 4. APAC: strengthened presence through Adeal and Syrp; China and India strong year-on-year performance
• 5. Margin: over-achieved 3% productivity improvement goal; JOBY/Lowepro integration delivered planned synergies
• 6. Strategic partnerships: profitable Sony partnership for Manfrotto and Gitzo Sony Alpha accessories

Imaging Solutions

JOBY GripTight TelePod Gitzo Traveler designed for Sony Alpha

Page 17

acquisition

Page 18

Market

> Broadcast market stable, although cost pressures in studios > Growth in on-location news and sports production

Strategy

• 1. Invest in growth areas with new products aimed at:

> On-location news and sports, e.g. lights, batteries and Flowtech > Reducing broadcaster costs in studios, e.g. robotics

• 2. Grow in APAC: goal to grow from 17% of sales
• 3. Further margin improvements

Production Solutions

Production Solutions 3-year strategy – maintain revenue and improve margins

65% 35%

Broadcast Market ICC/Cine Market

Broadcast market TAM £400m Growth p.a. Flat Market trend Production Solutions

Note: TAM is management estimate at manufacturers’ prices.

Page 19

FY 2018: strong performance with continued operational excellence

• 1. On-location news and sports:

> Strong growth from Flowtech100 tripod and Litepanels Gemini lights > Growth supplemented by record Winter Olympics

• 2. APAC: Focus on China, Korea, Australia and India
• 3. Margins:

> Increased production capacity in new Bury St Edmunds site in 40% less space > Transfer of manufacturing from Shelton to Costa Rica completed > Higher margin Flowtech100 and Autoscript IP Prompting

Production Solutions

Sachtler/Vinten Flowtech100 tripod Litepanels Gemini light Robotic cell in new Bury site

Page 20

Creative Solutions

Creative Solutions 3-year strategy – increase revenue and maintain higher margins Market

> Production spend continues to grow, especially in scripted series on newer platforms, while networks content budgets remain robust > New media, streaming and connected devices driving increased wireless transmission of data and images

Strategy

1. Maintain and expand presence in scripted series and films with core and integrated products 2. Expand addressable markets and further increase higher technology capabilities 3. Grow in APAC: goal to grow from 10% of sales

10% 90%

Broadcast Market ICC/Cine Market

ICC/Cine market TAM £500m Growth p.a.

• c. 6%

Market trend Creative Solutions

Note: TAM is management estimate at manufacturers’ prices.

Page 21

FY2018: good performance despite disruption to SmallHD

• 1. Maintain and expand share:

> Launched a wide range of core and integrated products across the Division from Teradek, SmallHD and Wooden Camera

• 2. Expand addressable markets and further increase higher technology capabilities

> Acquired Amimon in November to expand into Broadcast on-location sports and news market > Acquired Rycote in September to enter audio capture market

• 3. APAC: Focus on Japan and China

Creative Solutions

703 Bolt Integrated Director’s Monitor

Page 22

acquisition

• 1. Acquired on 8 November 2018 for expected total investment of US$59.9 million (£46.1 million)

> Amimon brings market-leading and exclusive technology and high calibre engineering capabilities > Amimon develops proprietary algorithms, hardware and software for real-time wireless video transmission, primarily for professional filmmaking and high end live productions > We know the business well: strong customer/supplier relationship since 2012; Amimon’s technology is used in many Creative Solutions products; built a new market for professional wireless video

• 2. Enables Vitec to develop and grow in the wireless video market

> Transformed wireless video capabilities – expanded R&D with access to new patents > Strengthened position in cine market > Fast and cost-effective development of the next generation of highly differentiated wireless video products for Broadcast

• n-location sports/news

> Uniquely placed to access cost synergies through integration with our existing Creative Solutions’ capabilities

Excellent strategic fit – margin enhancing acquisition

Page 23

• 1. Retained and integrated new product development and engineering teams
• 2. Integrated sales force with Creative Solutions

> Particular focus on growing Japan and China

• 3. Developed roadmap for 2019-20 includes end products for:

> Cine in 2019 > Broadcast Sports in 2020

• 4. Market as exciting as initially anticipated

progress since 8 November 2018

Wireless video capabilities transformed by margin enhancing acquisition

Page 24

• 1. Rycote designs and assembles advanced noise reduction

equipment for the audio capture market

> Highly respected, market-leading brand

• 2. Excellent strategic fit enabling Vitec to develop and grow in the

audio capture market

> Adds innovative and complementary products > Opportunities across Vitec’s three Divisions to sell Rycote products in conjunction with JOBY GorillaPods, Manfrotto tripods, SmallHD monitors, Teradek transmitters, Flowtech tripods and Anton/Bauer batteries

3. Progress since September acquisition

> Launch of first non-Windshield product: Professional Connection System > Audio capture strategy developed and in early stages of implementation

acquisition

New opportunities in the growing audio capture market

Page 25

Summary

Strong Group performance in revenue, profit, dividend and EPS Organic growth and margin improvement Expanded addressable markets and increased higher technology capabilities through acquisitions Strong cash generation and robust balance sheet Transformed Group well positioned to deliver further progress in 2019 and longer term sustainable growth 1. 2. 3. 4. 5.

Page 26

Q&A Q&A

Page 27

Appendices Appendices

Page 28

Investment proposition

“Image capture and content creation” market is growing Market-leading brands with premium pricing, increasing technology capability Well positioned for organic growth and margin improvement Sound financial performance and robust balance sheet Progressive dividend policy 1. 2. 3. 4. 5. 6. Continued M&A opportunities

The right strategy for continued growth and value creation

Page 29

• 1. Designs motion control technology (incl. software) to remotely control camera equipment

> Market-leading products enable capture and smooth tracking for video, time-lapse and hyper-lapse photography > Social media driving unprecedented growth in this attractive market with short dynamic videos and time-lapse productions; TAM c. US$50m with growth p.a. +6%

• 2. Excellent strategic fit: increases addressable markets and expands technology capabilities

> Highly complementary to existing brands, gives customers greater flexibility to create content > Significant growth opportunities to sell Syrp through Imaging’s global sales and distribution network > Syrp benefits from Vitec’s marketing, manufacturing and supply chain capabilities

• 3. Financials

> Revenue 2018 NZ$4.3 million > Initial cash consideration of NZ$4.5 million (£2.4 million1) debt/cash free > Up to a further NZ$25.5 million (£13.4 million) cash consideration will be payable dependent on Syrp meeting financial targets in 2019 and 2020, subject to the vendors remaining employed by the Group at the earnout date. The maximum consideration is payable only if the contribution2 from products that include Syrp’s technology exceeds NZ$13.4 million (£7.0 million) in 2020.

acquisition

Increases addressable market and expands higher technology capabilities

>1. Estimated foreign exchange rate at completion: £1 = NZ$1.91, 2. ‘Contribution’ = revenue – cost of goods sold – R&D .

Page 30

Results for total operations

* Before charges associated with acquisition of businesses and material non-operating events, as described in the Appendix.

2018 2017 £m £m Revenue * 385.4 378.1 1.9% 3.5% Gross profit * 174.1 162.4 7.2% 7.6%

Gross margin % * 45.2% 43.0% +220 bps +170 bps

Operating expenses * (120.6) (117.6) (2.6%) (3.6%) Operating profit * 53.5 44.8 19.4% 18.2%

Operating margin % * 13.9% 11.8% +210 bps +170 bps

Net finance expense (2.3) (2.8) PBT * 51.2 42.0 21.9% 18.6% Adjusted EPS * (p) 93.2 68.1 36.9% Better / (worse) Better / (worse) at Constant FX Total performance for continuing and discontinued operations

Page 31

Consumers in the “image capture and content creation” market

• Active hobbyist
• Shooting stills and videos
• Sharing with friends on social

media

• e.g. JOBY, Manfrotto,

Lowepro

• Advanced enthusiasts
• Pursuing specific genre

development

• Portrait, Outdoor, Urban
• e.g. Manfrotto, Gitzo,

Lowepro, Syrp

• Independent professionals
• Producing content for their own

platform and/or partner needs

• Cameraman, Cinematographer,

Videographer, Photographer,

• Lighting Specialist
• e.g. Teradek, SmallHD, Wooden

Camera, Manfrotto, Sachtler, Syrp, Rycote

• Professional companies
• Producing commercial content
• Broadcasters, TV Networks, Film

Production Companies

• e.g. Vinten, Sachtler, Litepanels,

Autoscript, Autocue, Anton/Bauer, Camera Corps, Rycote

Professional Studio Independent Content Creators Social Sharer Traditional Enthusiast

Page 32

9% 24%

Broadcast Camera Supports On Set Wireless Prompters

Key

Vitec market share Competition market share

55%

6x

85%

13x

36%

4x

Photographic Tripods Batteries Photographic Bags

35%

5x

27%

5x

1.1x

Cinema Camera Supports

60%

7x

LED lights

4.3x

Competitive landscape

Market share data based on management estimates.

Page 33

A higher technology focused business

34% 41% 50% 54% 59% 62% 66% 50% 46% 41% 59% 38%

Higher Technology Traditional Broadcast

All Creative Solutions’ products plus higher technology* revenue in Production Solutions

2013 2014 2015 2016 2017 > Higher technology products generally have a higher margin than other broadcast products > Growth in revenue from higher technology products is mainly driven by acquisitions

Production Solutions excluding higher technology* revenue

Revenue from Production Solutions and Creative Solutions

2018

* Higher technology revenue in Production Solutions is made up of robotics, mobile power, LED lighting, specialty cameras, and IP prompter product sales plus Camera Corps’ rentals revenue.

Page 34

The Vitec Group: M&A track record

2012 2013 2014 2015 2016 2017 2018 From start of 2012 to end of 2018

£140m invested

Excluding impact of acquisitions in 2018

20% return

1 2 3 M&A clearly aligned with strategic

• bjectives

Doing the right deal: disciplined approach Extraction of synergies

Page 35

Where we operate

> Sites in 13 countries; sell into 100+ countries > Sales: UK accounts for only 11% of revenue > Well capitalised manufacturing 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 France Netherlands Germany Italy Vitec manufacturing, R&D & procurement sites Distribution sites

2018 full year revenue from continuing operations

36% 41% 20% 3% Europe North America APAC Rest of the World Australia Israel New Zealand

Page 36

Vitec Imaging Solutions products

* Clockwise from top left: Lowepro: Flipside Trek BP 450 AW; Manfrotto: Noreg; National Geographic: Australia Collection; Gitzo: Adventury; Syrp: Magic Carpet Pro 3 Axis Kit; Lastolite: Skylite Rapid Kit; Manfrotto: Lykos; JOBY: GripTight Pro Telepod; GorillaPod Mobile Rig; Manfrotto: Befree advanced and PIXI Evo; Gitzo: Traveler a tripod; Avenger: Wind Up stand; Manfrotto: Xume filters.

Bags Lighting & controls Supports Camera accessories Motion control

Page 37

Vitec Production Solutions products

* Clockwise from top left: Sachtler: Comporter; OConnor: O-Rig Pro Kit; Autoscript: E.P.I.C. prompter; Autocue: PSP17 teleprompter; Anton/Bauer: Dionic XT Batteries; Vinten: Quartz Two pedestal ; Sachtler: Flowtech; OConnor: Ultimate 2560 Fluid Head; Litepanels: Gemini; Vinten: Vinten Vantage; Camera Corps: Q-Ball 3.

Bags Camera accessories Prompters Mobile Power Distribution, rental & services Robotic camera systems Lighting & controls Supports

Page 38

Vitec Creative Solutions products

* Clockwise from top left: Offhollywood: OMOD; Wooden Camera: Unified DSLR Cage; Teradek RT: MK3.1 controller; Teradek: Serv Pro; Paralinx: Dart; Rycote: Windjammer; SmallHD and Teradek: 703 Bolt; SmallHD: Focus.

Camera accessories Video transmission systems Monitors Audio capture

Page 39

FX sensitivities

Currency Current spot rates (20 Feb 2019) FY 18 average rate FY 17 average rate

USD 1.30 1.33 1.29 EUR 1.15 1.13 1.14 YEN 145 146 145

* Before charges associated with acquisition of businesses, restructuring costs and material non-operating events, as described on slide 42

Currency Movement Impact on operating profit* (£m) USD +/- $0.10

• /+ 3.1

EUR +/- €0.10

• /+ 2.1

YEN +/- 10 YEN

• /+ 0.6

> The expected impact on adjusted operating profit* from currency movements in 2019 is:

Page 40

Five year summary

8 10 12 14 16 25 30 35 40 45 50 55 2013 2014 2015 2016 2017 2018 Adjusted operating profit (£m) Adjusted operating margin (%) Total continuing and discontinuing

• perations

FY13 FY14 FY15 FY16 FY17 FY18 Revenue (£m) 315.4 309.6 317.8 376.2 378.1 385.4 Operating profit* (£m) 39.5 38.8 35.4 41.5 44.8 53.5 Operating margin* 12.5% 12.5% 11.1% 11.0% 11.8% 13.9% Cash generated from operations (£m) 52.4 42.0 41.7 64.8 48.7 54.0

* Before charges associated with acquisition of businesses and material non-operating events, as described on slide 42

* *

Total performance for continuing and discontinued operations

%

Page 41

> IFRS 16 “Leases” requires lessees to recognise most leases on the balance sheet, as the distinction between

• perating and finance leases is removed. The Group will adopt IFRS 16 from 1 January 2019 without restating

comparatives. > We anticipate that IFRS 16 will have an impact on key financial metrics in 2019 as follows:

>

• c. £1m movement from operating profit to interest

>

• c. £20m increase to reported assets and net debt

> Net debt/adjusted EBITDA* impact c. +0.2x >

• c. £6m movement from operating lease expense to depreciation

>

• c. £6m cash flow movement from operating activities to financing activities

IFRS 16 “Leases”

* As described on slide 42

Page 42

> 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 is given on this slide.

Alternative performance measures

APM Closest equivalent statutory measure Adjusted operating profit Operating profit 2018 2017 £m £m Adjusted Operating Profit 53.5 45.2 Amortisation of acquired intangible assets (6.4) (7.4) Effect of fair value of acquired inventory (0.3)

• Transaction costs relating to acquisition of businesses

(2.0) (1.3) Earnout payments (1.4) (4.1) Integration costs (1.9) (2.2) Development costs written off (0.6)

• Guarantee minimum pension charge

(0.7)

• Statutory Operating Profit

40.2 30.2 Adjusted operating expenses Operating expenses Adjusted profit before tax Profit before tax Adjusted profit after tax Profit after tax Adjusted basic earnings per share Basic earnings per share Free cash flow Net cash from operating activities Operating cash flow Net cash from operating activities Return on capital employed None Adjusted EBITDA Operating profit Calculated as adjusted operating profit for the last twelve months before depreciation of tangible fixed assets and amortisation of intangibles (other than those already excluded from adjusted operating profit). Calculated as operating profit before charges associated with acquisition of businesses and material non-operating events. The table below shows the reconciliation for continuing

• perations:

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. Free cash flow before payment of interest, tax, restructuring costs, transaction costs relating to acquisition of businesses and integration costs. Net cash from operating activities after proceeds from property, plant and equipment and software, purchase of property, plant and equipment, and capitalisation of software and development costs. Definition Calculated as operating expenses before charges associated with acquisition of businesses and material non-operating events. Calculated as profit before tax, before charges associated with acquisition of businesses and material non-operating events. Calculated as profit after tax before charges associated with acquisition of businesses, material non-operating events, and profit on disposal of businesses. Calculated as adjusted profit after tax divided by the weighted average number of ordinary shares in issue during the period.

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 43