Vitec: lights, camera, action!

Such optimism isn’t without foundation. Vitec enjoyed a very strong first half of 2018. Revenues climbed 11.2 per cent to £183m, while the operating margin improved from 11.1 per cent to 11.3 per cent. Moreover, the group reported record profits and underlying EPS, with the latter soaring 15.5 per cent to 39.5p.

Impressively, this momentum came despite setbacks, including adverse foreign exchange movements. At constant currencies, Vitec’s sales would have risen 16 per cent. And the group’s SmallHD business – which sells on-camera monitors – saw its North Carolina premises temporarily closed in April, because of a fire breaking out next door.

Pre-fire, SmallHD’s sales were growing at around 70 per cent, driving 9 per cent growth for Vitec's ‘creative solutions’ division in which it sits. But the disruption from the fire meant that sales here, ultimately, fell 10.1 per cent in the first half to £27.7m. Still, insurance cover should offset any losses. In fact, insurance income – with no adjustment for lost revenue – helped creative solutions’ underlying operating margin increase from 21.1 to 25.3 per cent.

Elsewhere, Vitec’s numbers were very positive. ‘Imaging solutions’ – its largest business, which produces the likes of camera supports, bags, lighting supports and LED lights – enjoyed 25.6 per cent revenue growth to £98.5m, despite a slow first quarter. And while currency movements delivered a small blow, sales here were buoyed by a £21.5m contribution from JOBY and Lowepro. These brands, acquired last September, have boosted Vitec’s exposure to the so-called ‘iPhoneography’ and video blogging consumer-accessories market. Encouragingly, their performance should pick up further in the second half.

JOBY and Lowepro’s products are lower margin than imaging solutions’ other wares. This meant the division's first-half margins were dampened from 17.2 to 15.1 per cent but underlying operating profit still rose an impressive 10.4 per cent to £14.9m. Meanwhile, Vitec's acquisition in March of Adeal – formerly its imaging-solutions distribution partner in Australia – for A$5m (£2.8m) should help drive margin expansion in 2019.  

Vitec’s other division is ‘production solutions’, which specialises in video heads and tripods, among other items. It experienced a 2.5 per cent rise in first-half revenues to £57.1m, while its operating margin increased from 11.8 per cent to 17.3 per cent. Operating profits increased by 50 per cent to £9.9m, reflecting the benefit of higher-margin sales related to the Winter Olympics. The division is also cost-cutting. The relocation of its manufacturing operations from the US to Costa Rica should bring savings in 2019.