The Vitec Group, which owns more than a dozen brands in the broadcast industry as well as technical services company Bexel, announced that its total for the full year 2014 was £309.6m, a decline of 1.8% versus 2013.
Operating profit was £38.8m, a decline of 1.8% versus last year. On a constant currency basis, however revenue increased 3.3% and operating profit increased 7.4%.
Changes to Financial Reporting Structure Reflects Focus on Core Businesses
Vitec has about a dozen brands that serve various parts of the broadcast industry, including Anton/Bauer, Autocue, Autoscript, Bexel, Camera Corps, The Camera Store, Litepanels, OConnor, Petrol Bags, Sachtler, Teradek, SmallHD, Vinten and Vinten Radamec.
During 2014, Vitec divested its IMT wireless communications and microwave business, which included the IMT, Nucomm, and RF Central brands.
Historically, Vitec reported its broadcast-centric activities through its Videocom and Services divisions, but following the sale of IMT, the company has changed its financial reporting structure, starting with the release of its full year 2014 results. Vitec now reports its broadcast revenue through its newly named “Broadcast Division,” which it further breaks out as “Broadcast Equipment” and “Broadcast Services.”
According to the company this new reporting structure more appropriately describes its core operating businesses. “Following our exit from the loss-making IMT business we are focused on our core Broadcast and Photographic markets supplemented with selective value-adding acquisitions,” said Vitec CEO Stephen Bird.
Vitec Broadcast Division
As shown in the chart below, Vitec’s Broadcast Division had revenue of £171.1m in 2014, an increase of 6.3% versus 2013 (up 11.9% on constant currency basis).
2014 Broadcast Division Operating profit for 2014 was £21.1m, an increase of 9.3% versus 2013’s results (16.6% on constant currency basis). Operating profit for 2014 would have been negatively impacted by £1.8m had IMT’s results been included.
“Our Broadcast Division performed well in a variable market including a strong performance from Teradek, acquired in the second half of 2013,” said Bird. “We also benefited in 2014 from contracts to support the Sochi Winter Olympics and the FIFA World Cup. Our premium product and service offering was further strengthened through the acquisitions of Autocue, the specialty camera assets of SIS, and more recently SmallHD.”
The Broadcast Equipment business (excluding IMT) had 2014 revenues of £131.9m, an increase of 1.6% (7.0% on constant currency) versus 2013.
Vitec made three acquisitions during 2014, which are now reported in the Broadcast Equipment business:
- The specialty camera assets of SIS Outside Broadcasts Limited (integrated into Vitec’s Camera Corps business)
- Autocue, a well-known provider of teleprompters (now combined with Vitec’s Autoscript business)
- SmallHD, a provider of high definition on-camera field monitors
The combination of currency fluctuations, and the inorganic contributions from these acquisitions accounted for all the growth in the Broadcast Equipment business. On an organic constant currency basis, Broadcast Equipment revenue in 2014 was declined by 2.2% versus the previous year.
Broadcast Equipment operating profit was £18.8m in 2014, an increase of 5.0% (12.3% on a constant currency basis) over 2013.
Operating margin for Broadcast Equipment was 14.3% a slight improvement from the 2013 margin of 13.8%.
The company said that a lower level of investment by studios in larger camera supports had impacted its business, but that this was offset by smaller camera support products performing in line with expectations.
The Anton-Bauer battery business had lower revenue, but is expected to benefit from new ranges of products launched in 2014.
Although Vitec did not specifically break out the performance of Teradek, it did disclose that “contingent consideration of £4.2 million ($7.0 million) was accrued during the year to be paid to the previous owners of Teradek in 2015 in relation to the business’s performance in 2014 and is subject to final agreement. The business has delivered strong growth in the year and has performed ahead of our pre-acquisition expectations.”
Vitec offered Broadcast Division results excluding the performance of the IMT business. IMT had recorded an operating loss of £1.3m in 2014 on revenue of £7.9 million. IMT had breakeven results in 2013 on revenue of £14.0m.
The Broadcast Services generated revenue of £39.2m in 2014, an increase of 26.0% (32.9% on a constant currency basis) versus 2013. 2014 operating profit for Broadcast Services was £2.4m, equating to an operating margin of 6.1%. This compares favorably to the operating profit of £1.5m in 2013 (4.8% operating margin).
Management attributed the strong performance of the Broadcast Services segment to major events in 2014 including the Sochi Winter Olympics and the FIFA World Cup, along with a rise in the underlying rentals business for other major events. The company also cited participation in a number of improvements in the infrastructure of NFL stadiums including player positioning systems.
It is interesting to review the capital expenditure requirements of the Broadcast Services business.
Broadcast Services spent £12.7m on rental assets in 2014. This constitutes the majority Vitec’s capital expenditures as a company, which totaled £17.5 million excluding capitalization of software development costs. Broadcast Services capital expenditures are partially financed by proceeds from the sale of certain rental assets. These sales amounted to £5m in 2014. Thus, total net capital expenditures were £6.7m for Broadcast Services. This £6.7m cash outflow is in the context of a £3.8m operating cash inflow generated by the segment.
There is additional strategic rationale in Broadcast Services, which was noted in the Company’s release. Management stated the Broadcast Services business “enables Vitec to closely monitor changes in technology and to showcase our products.”
Press Release: The Vitec Group plc, 2014 Full Year Results
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