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25 March 2020
The Vitec Group plc
Update on the possible impact of COVID-19
As COVID-19 continues to impact people's health and economies around the world, The Vitec Group plc ("Vitec" or "the Group"), provides the following update.
The Group continues to implement detailed COVID-19 response plans, as the advice from Governments in the countries where we operate evolves. Our aims remain to safeguard employee health and wellbeing, continue to support our customers, protect the Group's financial position and manage our supply chain. The response of our teams has been outstanding.
It is very difficult to provide financial guidance, given the evolving situation. Nonetheless, the Group now expects to experience significantly more disruption than anticipated at the time of the FY2019 results announcement on 28 February 2020, not only to end user demand but also affecting our global manufacturing facilities (most of which are now temporarily shut down) and our distribution hubs. We are taking substantial actions to manage costs and cash to reinforce the financial strength and resilience of our business and to ensure that we emerge in good shape when the crisis is over. Clearly at this stage the duration and total impact of COVID-19 is unknown and we have modelled a range of scenarios as to its impact on sales, profit and cash flow. Nonetheless, the Group's trading performance for the first half and the current full year is now expected to be significantly lower than our previous expectations.
End market demand
The image capture and content creation market is being increasingly disrupted across all regions with filming of TV shows and movies suspended, the majority of sporting events postponed, including the Summer Olympic Games, professional photographers impacted, and a large number of retail outlets closed across EMEA and the Americas.
Although trading in mainland China has started to recover, sales in EMEA and the Americas are falling dramatically. We currently expect the industry slowdown to continue for several months, but to recover well once the crisis is over due to the growing demand for original content.
On the positive side, Vitec's JOBY sales are growing, TV networks have been ordering equipment for increased news production and Teradek has sold out of its remote streaming products. As a result, we are adding more remote production capabilities to our products to allow productions to get back to work but with reduced exposure on set, for example, we are developing networked SmallHD monitors.
The majority of our sites have been recently closed as a result of Government Orders, and we have recommended that employees who work in roles that can be done from home do so to ensure that we can respond to customer needs and to perform business critical functions. As of today, our Chinese supply chain, which supplies products relating to c. 25% of the Group's revenue, is back up and running, while our manufacturing facility in Feltre, Italy, which supplies products relating to c. 25% of Group revenue is now closed, following recent Italian guidance. Our Bury St Edmunds, UK and Costa Rica facilities are closed and in the US most sites are closed, although our Teradek facility in California is currently operating at a reduced capacity but continues to supply and support products used in remote production for sectors considered essential.
Mitigating actions to manage costs and cash
The Group is actively managing the business to protect profit and to preserve cash while seeking to ensure we are well placed for recovery when the crisis is over. We are taking significant and far-reaching actions to reduce costs. We are implementing plans to deal with the short-term facility closures and fall in demand, which include short time working and asking our employees to take annual leave. We have postponed all non-essential capital expenditure, deferred pay rises, frozen all recruitment and reduced all non-essential operating spend. Government support initiatives in the markets in which we operate, for example "cassa integrazione" in Italy, may also help to preserve the long-term capabilities of the business.
Financing and liquidity
Vitec has a robust financial position with liquidity and long-term financing. As at the end of February 2020 the Group had net debt of £108.4 million. The Group signed a new £165.0 million and £35.0 million accordion five-year (plus optional extensions) multicurrency Revolving Credit Facility in February 2020 with a syndicate of five banks. The financial covenants attached to the committed banking facility are tested twice a year and are 3.25 times net debt to adjusted EBITDA and 4.0 times adjusted interest cover. The Group is in discussions with its banks to expand and amend the current arrangements on a short-term basis to provide it with greater flexibility.
Given the current circumstances, the Board is no longer recommending the payment of a final dividend in respect of the full year 2019 at the forthcoming Annual General Meeting. The Board is very mindful of the importance of dividends to the Group's shareholders and intends resuming dividend payments as soon as is practicable.
The Group's long-term prospects remain strong. For 2020 and years beyond, the Group is focusing on the growth potential from the launch of the complete 4K eco-system in the cine market as well as new wireless products for the adjacent live production market, plus JOBY smartphonography accessories in the independent content creator market.
Stephen Bird, Group Chief Executive, commented:
"Our priority is the health and wellbeing of our employees, customers and communities, as well as to protect the Group's financial position and our shareholders' interests. I would like to thank all of our staff and stakeholders for their support and commitment during this difficult time.
"Although the COVID-19 pandemic is having a significant impact on end user demand and our global operations, we expect to come through this period in a competitive position with a healthy organisation ready to return to growth.
"Vitec is a strong, agile business, with leading brands, operational excellence and technology innovation, supplying a fast changing and growing global market. The Board remains confident in securing its banks' support, if required, and in delivering long-term value to our shareholders.
"We will continue to monitor the situation closely and provide further updates as necessary."
For further information please contact:
The Vitec Group plc
Telephone: 020 8332 4602
Stephen Bird, Group Chief Executive
Martin Green, Group Finance Director
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Telephone: 020 3128 8100
Tim Rowntree/Ollie Hoare
Notes to Editors
Vitec is a leading global provider of premium branded products and solutions to the fast changing and growing "image capture and content creation" market.
Vitec's customers include broadcasters, independent content creators, photographers and enterprises, and our activities comprise: design, manufacture and distribution of high performance products and solutions including camera supports and accessories, wired and wireless video transmission systems, robotic camera systems, prompters, LED lights, mobile power, monitors, bags, motion control and noise reduction equipment.
We employ around 1,700 people across the world in 11 different countries and are organised in three Divisions: Imaging Solutions, Production Solutions and Creative Solutions.
The Vitec Group plc is listed on the London Stock Exchange with 2019 revenue of £376.1 million.
More information can be found at: www.vitecgroup.com
LEI number: 2138007H5DQ4X8YOCF14
This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of The Vitec Group plc is Jon Bolton, Group Company Secretary.
This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of the The Vitec Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, The Vitec Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.
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