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 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 f uture 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 specifie d under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporti ng 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 Grou p’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. Page 2
Agenda Half Year 2020 Summary and COVID-19 Update > Stephen Bird, Group Chief Executive Market and Strategy Update > Stephen Bird, Group Chief Executive Financial Review > Martin Green, Group Finance Director Summary > Stephen Bird, Group Chief Executive Q&A Page 3
Half year 2020 summary – what happened > 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 Trading conditions have improved since April Page 4 Page 4
Half year 2020 summary – our response > 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 Swift and decisive management actions in response to COVID-19 Page 5 Page 5
Market & Strategy Update Page 6
Imaging Solutions > 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 We expect a gradual recovery with continued growth in JOBY smartphonography accessories Page 7 Page 7
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Production Solutions > 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 Expect solid recovery with a benefit in 2021 from rescheduled sporting events Page 9 Page 9
Creative Solutions > Greatest area of growth and opportunity > Expect strong bounce back in content production once film and scripted TV sets reopen, although 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 12000 $m spend on original change to the cine market with opportunity for $10.9bn CAGR 25% content creation 10000 $9.5bn live streaming, more monitors on set, more 2014-2023 8000 $7.8bn remote monitoring and more remote production $6.2bn 6000 to facilitate safe working $4.5bn 4000 2000 0 Strong bounce back from increasing spend 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Netflix Hulu Apple Amazon Prime in original content, 4K growth and Source: 2019 S&P Global Market Intelligence new opportunity in remote monitoring Page 10 Page 10
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Financial Review Page 12
Half year 2020 results > Demand significantly impacted by pandemic H1 2020 H1 2019 Better / Better / (worse) at (worse) Constant FX £m £m > Reduced gross margin due to lower revenue Revenue 184.2 (35%) (37%) 118.9 > 2019 included 3%pts benefit from SmallHD Gross profit * 44.4 87.7 (49%) (50%) insurance Gross margin % * 37.3% 47.6% (10.3%pts) (9.9%pts) > Operating profit Operating expenses * (61.9) 21% 22% (48.8) > Management actions: c.£13.0m including Operating profit * (4.4) 25.8 (117%) (117%) government support (£1.7m) Operating margin % * (3.7)% 14.0% (17.7%pts) (17.5%pts) > Operational efficiencies from restructuring at Net finance expense (2.6) (2.3) Imaging Solutions (£2.1m) PBT * (7.0) 23.5 (130%) (129%) > No interim dividend has been recommended – plan Adjusted EPS * (p) (9.9) 39.9 (125%) to resume dividend payments as soon as is ROCE + 7.4% 20.1% (12.7%pts) practicable * 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. Revenue decline partly offset by £13.0m of management actions Page 13
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