Videndum's discount is warranted as demand picture remains blurred

It was a terrible year for Videndum (VID), the seller of audio visual equipment. A triple whammy of the actors’ and writers’ strikes in Hollywood, a “challenging macroeconomic environment” and destocking by customers drove revenue from continuing operations down by 31 per cent to £307mn, leading it to declare a pre-tax loss of £18.8mn, compared with a prior-year profit of £42.2mn. 

As bad as this sounds, things look even worse when one considers that these numbers are based on restated accounts, stripping out the performance of the Lightstream and Amimom businesses – on which it took a £50mn impairment charge. Factor those back in and the pre-tax loss widens to nearly £80mn. Around £19mn of impairments were booked against Lightstream, which was sold for just £400,000 in October. 

Videndum suffered a free cash outflow from continuing and discontinued operations of over £34mn and tapped the markets for £125mn in November to shore up its balance sheet via a placing and open offer that almost doubled the number of shares in issue. This bought the company time, which was needed as the recovery in demand from film and TV companies is taking longer than expected.  

Chief executive Stephen Bird is talking up the company's prospects of a stronger second half in 2024, though, with new equipment purchases likely to be spurred by events such as the Paris Olympic Games and the US presidential election. Analysts seem less convinced, with Jefferies stating that it expects medium to high double-digit downgrades to consensus forecasts. Given this, the fact that Videndum's shares trade at a discount on most valuation metrics to their five-year average and their peers looks justified. Hold.

Last IC view: Hold, 351p, 26 Sep 2023