Posts Tagged ‘SmallHD’

Vitec Group acquires Wooden Camera for Consideration Up to $35 million

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Sep 20 2016

The Vitec Group has acquired Wooden Camera, a provider of camera accessories including baseplates, cages, hand grips, matte boxes, monitor mounts, shoulder rigs, and zip boxes.  deal-logo

Wooden Camera is based in Dallas, Texas and privately owned by its management team, Ryan and Elizabeth Schorman.  Both will remain with business post-acquisition.  Wooden Camera will become part of Vitec’s Broadcast Division.

The press release announcing the acquisitions cites the opportunity to grow Wooden Camera through expanded distribution as part of Vitec’s global sales network.  Also noted in the announcement is the opportunity for Wooden Camera to benefit from Vitec’s manufacturing and product sourcing capabilities.

As part of the acquisition announcement The Vitec Group disclosed portions of Wooden Camera’s recent financial results along with the high-level deal terms.

Wooden Camera generated an unaudited adjusted EBITDA of £1.9 million ($2.5 million) for the 2015 calendar year.   Management indicated Wooden Camera has grown in the year-to-date period of 2016.

The upfront cash consideration is £15.3 million ($20.0 million), which is subject to post-closing adjustments.  The deal also includes a potential earn out representing an additional £11.5 million ($15.0 million) of consideration.  The earn out payments are based on Wooden Camera achieving “demanding” EBITDA targets for the financial periods thru the close of the 2018 calendar year.  The 2018 EBITDA target is $7.3 million (this represents an almost tripling of 2015 EBITDA).   Vitec will finance the transaction using its existing banking facility.

Using the 2015 EBITDA disclosure, the upfront consideration values Wooden Camera at 8.0x 2015 EBITDA (not including the earn-out).  The total consideration has the potential to value Wooden Camera at 17.5x 2015 EBITDA.  Since more than 40 percent of the total potential deal value is in the form of an aggressive earn-out, it is more appropriate to focus on the implied valuation of the upfront consideration.  The multiple of 2016 EBITDA – though unavailable – is likely less since Wooden Camera has continued to grow.

To put these figures in context, The Vitec Group currently trades in the public markets at a valuation of 7.8x trailing twelve month EBITDA and 1.0x trailing twelve months of revenue (on an enterprise value basis).

The press release states “The Board expects the acquisition to be immediately earnings enhancing.”  This statement is then clarified in the notes to the press release as follows, “This statement should not be taken to mean that earnings per share of The Vitec Group plc will necessarily exceed or be lower than historic earnings per share of The Vitec Group plc and no forecast is intended or implied. This refers to earnings before charges associated with acquisition of businesses.”

It is interesting to reflect on the impact of a weaker GBP currency on the transaction pricing.  The “Brexit” referendum of June 23, 2016 precipitated a decline of the GBP versus the US dollar.  A weaker GBP should – on balance – benefit Vitec’s revenue results.  However, it will make expenditures in other currencies more expensive, including the acquisition of a US-based business as is the case with Wooden Camera.  On June 1, 2016 the exchange rate was 1.44 USD / GBP.  The figures in The Vitec Group press release were based on an exchange rate of 1.31 USD / GBP or 9% lower.  Meaning, the acquisition in GBP terms was 9% more expensive because of the recent disruption in the GBP currency.

The Vitec Group often structures its acquisitions with a substantial portion of contingent consideration.  This was also the case in the recent acquisitions of Offhollywood, SmallHD, and Teradek.

Commenting on the acquisition Vitec’s Group Chief Executive Stephen Bird stated, “I am delighted to welcome the Wooden Camera team to Vitec. Wooden Camera’s products are the glue that binds all the building blocks together on a professional camera system.  This leading business complements Vitec’s strategy of providing premium branded broadcast products and services to our customers to capture and share exceptional images. The business has great prospects and we anticipate that it will generate a good return on our investment.”

 

 

Related Content:

Vitec Group Press Release on Wooden Camera Acquisition

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Vitec Group Acquires two Businesses, Grows Broadcast 10% in 1H 2016

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Aug 15 2016

The Vitec Group, which owns more than a dozen brands in the broadcast industry as well as technical services company Bexel, released its results for the first half of 2016.  Vitec Group Logo

Total revenue for 1H 2016 was £171.1 million, an increase of 9.7% versus 1H 2015, and an increase of 5.7% when compared to 2H 2015.  Operating profit was £12.6 million, a decrease of 8.7% versus 1H 2015, and a 41.7% decrease against 2H 2015.  On a constant currency basis, revenue increased 3.1% and operating profit increased 5.2% on a year-over-year basis.

Operating profit declined despite the revenue growth because of non-repeat, high-margin Haigh-Farr antennas contracts in the comparison period (1H 2015) and a greater mix of lower margin broadcast services business during the first six months of 2016.

Operating profit is reported before costs associated with the acquisition of business ($2.7 million during 1H 2016), restructuring (£2.8 million in 1H 2016), and also the £0.7 million gain on sale of The Vitec Group’s manufacturing facility in Bury St Edmunds.  Vitec indicated the restructuring activities initiated in 2015 resulted in savings of £2.5 million in the first six months of the year.

Vitec Acquisitions:

Vitec acquired two businesses in the first half of 2016.  In January Vitec purchased Provak Foto Film Video B.V., a Netherlands distributor partner for cash consideration of £0.9 million.  On April 12, 2016, Vitec’s Broadcast Division acquired Offhollywood Digital for upfront cash consideration of £1.6 million along with contingent compensation of up to $8.0 million (USD) if gross profit targets are met for the periods to December 2018.  Offhollywood Digital provides camera-back modules for RED cameras along with related services.

Vitec often structures its acquisitions with contingent consideration.  During the period Vitec made yet another payment in the amount of £2.8 million on the earn-out related to the 2013 acquisition of Teradek.

Vitec Broadcast Division:

Vitec’s broadcast brands serve various parts of the broadcast industry: Anton/Bauer, Autocue, Autoscript, Bexel, Camera Corps, Haigh-Farr, Litepanels, OConnor, Paralinx, Petrol Bags, Sachtler, SmallHD, Teradek, The Camera Store, and Vinten.

Vitec reports the results of its Broadcast Division separate from its Photographic division. For the first half of 2016, the Broadcast Division represented 60.0% of The Vitec Group’s total sales.  In 1H 2015 and 2H 2015 the Broadcast Division accounted for 60.0% and 59.0%, respectively.

The below slide is taken from the Vitec Group earnings presentation and offers a summary on the key developments with the Broadcast Division in the first half of 2016.

Vitec-slide

The Broadcast Division had revenue of £102.3 million in 1H 2016, an increase of 10.0% versus 1H 2015 (an increase of 4.0% on constant currency basis), and an increase of 6.6% compared to the preceding period, 2H 2015.

In the Company’s release, management noted strength in the US market, which offset a more challenging environment in the EMEA region.

Positive currency benefits from a weaker British pound accounted for 60% of the Broadcast Division’s growth in 1H 2016.  Given the currency volatility stemming from the recent EU referendum in the UK, The Vitec Group expects to realize a net currency benefit in the second half of 2016.  Management indicated the hedges it maintains on the GBP to USD and GBP to EUR exchange rates will also delay part of the impact of a weaker GBP into the 2017 fiscal year.

Product sales for the Broadcast Division were £78.7 million for 1H 2016, an increase of 0.5% over 1H 2015, and a decrease of 4.0% over 2H 2015.  As a percentage of Broadcast Revenue, Products sales accounted for 76.9% of revenue in 1H 2016.  This compares to 84.6% in 1H 2015 and 85.4% during 2H 2015.

Within Product sales management highlighted the increased sales of wireless transmitters and receivers, camera monitors, and mobile power.  The US market was especially strong for broadcast battery products.  These results were offset by a decrease in large camera support sales.

Services sales from Vitec’s Bexel subsidiary were £23.6 million in 1H 2016, an increase of 66.2% versus 1H 2015, and an increase of 62.8% against 2H 2015.  Services represented 23.1% of Broadcast revenue during 1H 2016.  In 1H 2015 Services were 15.4% of sales and during 2H 2015 Services were 15.1% of Broadcast Revenue.

The strong growth in Services was due to a large contract with the NFL for project management and support to upgrade the communication infrastructure for all 31 NFL stadiums. The contract includes the pass-through of low margin products impacting the profitability of the Broadcast Division.

Operating profit for the Broadcast Division in 1H 2016 was £8.5 million, a decrease of 12.4% versus the 1H 2015 result (down 10.0% on constant currency basis), and a decrease of 34.6% against 2H 2015. In addition to the greater concentration with Services, operating profit was also negatively impacted by Vitec’s continued investment in the development of its wireless products and camera monitor business.

Operating margin for the Broadcast Division was 8.3% during the first half of 2016, a decrease of 220 basis points against 1H 2015, and a decrease of 600 basis points compared to 2H 2015.

 

Business Outlook:

Commenting on the first half results and outlook for the full year, Group Chief Executive Stephen Bird offered the following, “The Board’s expectations for the full year are unchanged. We anticipate that the Group’s performance in the second half of the year will benefit from the Rio 2016 Olympics, full year savings from the previously announced restructuring plans, and, potentially, from weaker Sterling.”

 

Related Content:

Press Release: Vitec Group 1H 2016 Results

Presentation: Vitec Group 1H 2016 Results

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Vitec Group 2015 Growth Driven by M&A Activity

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Feb 29 2016

The Vitec Group, which owns more than a dozen brands in the broadcast industry as well as technical services company Bexel, released its results for 2015.Vitec Group Logo

Total revenue was £317.8 million, an increase of 2.6% versus 2014.  Operating profit was £35.4 million, a decline of 8.8% versus last year.  On a constant currency basis, revenue increased 1.3% and operating profit decreased 1.8%.

In the earnings release, management highlighted the negative impact of currency, the disposal of IMT during 2014, and the softness in comparisons against 2014 given the non-repeat of large events.

Stephen Bird, Group Chief Executive commented, “We have continued to invest additional resources in driving new product sales in line with our strategy. As expected, the full year results reflect the non-repeat of the 2014 Sochi Winter Olympics and FIFA World Cup, and an anticipated negative impact from foreign exchange. There was growth in revenue and operating profit over the prior period excluding these items. The Group is making good progress in streamlining certain activities with lower growth prospects, with some further actions being taken to drive profitable growth.”

Vitec also announced it has sold its main UK Broadcast manufacturing site in Bury St Edmunds.  The proceeds from the sale were £3.9 million.  Vitec is planning to move the business to a smaller leased facility in the same region.  In recent years, Vitec had transitioned a significant amount of its manufacturing to Costa Rica.

 

Vitec Broadcast Division:

Vitec’s Broadcast brands serve various parts of the broadcast industry: Anton/Bauer, Autocue, Autoscript, Bexel, Camera Corps, Teradek, Haigh-Farr, Litepanels, OConnor, Paralinx, Petrol Bags, Sachtler, SmallHD, Vinten and Vinten Radamec.

The Broadcast Division had revenue of £189.0 million in 2015, an increase of 10.5% versus 2014 when excluding the divested IMT’s revenue from 2014 (and up 7.0% on constant currency basis).

Vitec’s acquisitions of Paralinx (February 2015) and SmallHD (December 2014) contributed approximately 75% of the revenue increases over 2014.

Given the positive contribution from companies acquired through M&A actions, Vitec highlighted its acquisition track record in its presentation to investors.

 

Vitec FY Presetnation - highlights M&A

 

Remarking on the Broadcast Division results, CEO Stephen Bird stated, “The Broadcast Division performed satisfactorily in variable market conditions. Our higher technology product businesses are performing well, including further strong growth of our wireless products. This partially offset lower sales of large camera supports, the non-repeat of major sporting events, and investments in the future growth of our higher technology businesses.”

Bird continued, “Broadcast Market continues to show some variability in demand with customers remaining cautious this is impacting large project activity.  The US market has been more positive and Japan is performing well.  However, conditions in EMEA are more challenging.”

Operating profit for the Broadcast Division in2015 was £20.3 million, a decrease of 4.2% versus the 2014 result (down 1.3% on constant currency basis).  Operating profit is stated before restructuring costs and charges associated with acquired businesses.

Restructuring costs for 2015 were predominantly attributable to streamlining activities in the Broadcast Division.

These activities were announced as part of Vitec’s first half earnings release.  Additional streamline actions for the entire company were announced in the year-end earnings release.

In aggregate, one-off costs associated with the continued restructuring are approximately £10 million, an increase from Management’s previous estimate of £6 million.  The restructuring is focused on the UK, US, and Europe operations and will be completed by the end of 2016.

 

 

 

Related Content:

Press Release: The Vitec Group plc 2015 Full Year Results

The Vitec Group plc. Full year results 2015 Presentation

Vitec Group Announces Intention to Divest IMT Wireless Communications and Microwave Business

Vitec Group Broadcast Revenue Up 6.3 Percent in 2014; Changes Reporting Structure to Focus on Core Businesses

Broadcast Vendor M&A: Vitec Group Buys SmallHD for up to $30 Million in Cash

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Broadcast Vendor M&A: Vitec Group Buys SmallHD for up to $30 Million in Cash

Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results | Posted by Joe Zaller
Dec 11 2014

The Vitec Group, which owns more than a dozen brands in the broadcast industry, announced that it has acquired the business of SmallHD for up to $30m.

Based in North Carolina, SmallHD provides high-definition on-camera field monitors used by broadcasters and independent content creators, so its products are complementary with Vitec wide range of camera support and accessory brands, including Vinten, Vinten Radamec, Sachler, OConnor, Andon/Bauer, Autoscript, Camera Corps, Teradek, The Camera Store, Haigh-Farr, Litepanels, and Petrol Bags.

Typical of a Vitec M&A transaction, the deal includes an up-front cash payment and a large potential earn-out for SmallHD managers if the company meets certain performance targets after being acquired.

Specifically, Vitec will pay an initial cash consideration of $4.6m on a debt/cash free basis, and up to a further $25.4m, payable in cash, dependent on SmallHD’s performance over a two and a half year period to 30 June 2017.  To achieve the maximum payment, SmallHD must deliver an annualized EBITDA run-rate of $9m in 2017.

For the financial year-ended 31 December 2013, SmallHD had sales of $8.1m, and generated an unaudited adjusted profit before tax of $300,000. At the end of 2013 SmallHD had gross assets of $2.5 million.

Vitec says that SmallHD has grown during 2014 and is investing in new product platforms, and that the company anticipates “both healthy sales and profit growth going forward.”

According to Vitec, the SmallHD deal is in line with its “strategy of offering a growing range of high technology solutions to the Group’s established global customer base. It complements Vitec’s existing video activities, including Teradek, which serves a similar customer base. There are opportunities to sell SmallHD’s products through Vitec’s global sales and distributor network. SmallHD is being acquired from its current management, who will remain with the business, and it will operate as a business unit within the Videocom Division.”

The consideration will be financed out of Vitec’s existing banking facilities. The Board expects the acquisition to be earnings enhancing in the year ending 31 December 2015.

“I am delighted to welcome the SmallHD team to Vitec, said Vitec CEO Stephen Bird. “This high technology business complements our market-leading broadcast activities and is in line with our strategy of enabling our customers to capture and share exceptional images. There is an increasing demand for SmallHD’s products from the growing community of independent content creators who use this world leading technology. The business has great prospects and we anticipate that it will generate a good return on our investment.”

The purchase of SmallHD is similar to the 2013 transaction when Vitec acquired Teradek for up to $30m.  For the Teradek deal, Vitec paid $14.9m in cash and up to a further $15.5m dependent on Teradek achieving against annual EBIT targets over the three-year period to 31 December 2015.

The Teradek deal appears to have been a success for Vitec.  Since the time of the Teradek acquisition, subsequent Vitec financial filings indicate that the company has indeed been making earn-out payments to Teradek shareholders over the past year.  The addition of Teradek, which is active in the fast growing bonded cellular and wireless communication links segment, forced the company to re-think it’s overall portfolio, and ultimately to divest its IMT Wireless Communications and Microwave Business in mid-2014.

 

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Related Content:

Vitec Group Announces Intention to Divest IMT Wireless Communications and Microwave Business

Vitec Group 1H 2014 Results: Videocom Down 1%, Bexel up 39.9%

Broadcast Vendor M&A: Vitec Buys Teradek for $15 Million

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© Devoncroft Partners 2009 – 2014. All Rights Reserved.

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