Tip Update: Hold at 1,000p
- Tip style
- GROWTH
- Risk rating
- HIGH
- Timescale
- LONG TERM
- Our previous tip
- We said BUY at 1,310p on 06 Sep 2018
- Tip performance to date
- -24%
Vitec (VTC) shares plunged by over a tenth after the camera supports manufacturer issued a profit warning. The group’s imaging solutions division has been hampered this year by an “unusually severe” rate of retail de-stocking. Its field monitor brand SmallHD, meanwhile, is making a slower recovery than anticipated from a fire in 2018, and resulting insurance income has concluded.
Vitec trimmed its full-year forecasts for adjusted operating profit to a range of £47m to £50m, beneath a previous consensus level of £53.2m. Retail de-stocking is judged to have had an operating profit impact of around £6m. Delays to launching new SmallHD products, meanwhile, will cause SmallHD’s 2020 operating profits to sit £5m below 2019, which benefited from £6.5m in insurance money that will not recur next year.
IC View
Vitec’s full-year cash conversion is expected to be “satisfactory, albeit lower than in 2018”. The group described the retail slowdown and its fire woes as “two, specific, one-off events” - while this could reasonably be said of a fire, a fall in retail inventories could plausibly be repeated. Political and sporting events next year could provide a catalyst to earnings but with this downgrade and Vitec’s persisting exposure to the US-China trade dispute, we move to hold.
Last IC View: Buy, 1,090p, 8 Aug 2019
