NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

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28 February 2020

The Vitec Group plc

2019 Full Year Results

The Vitec Group plc ("Vitec" or "the Group"), the international provider of premium branded products and solutions to the fast changing and growing "image capture and content creation" market, announces its audited results for the year ended 31 December 2019.

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Results¹
Results¹	2019	2018

Revenue	�376.1m	�385.4m
Adjusted operating profit*	�52.4m	�53.5m
Adjusted operating margin*	13.9%	13.9%
Adjusted profit before tax*	�48.0m	�51.2m
Adjusted basic earnings per share*	80.6p	93.2p

Total dividend per share	39.0p	37.0p
Free cash flow*	�30.5m	�33.5m

Statutory results
Operating profit	�32.0m	�40.2m
Operating margin	8.5%	10.4%
Profit before tax	�27.6m	�37.9m
Basic earnings per share	44.9p	76.1p

¹ 2019 results have been prepared under IFRS 16 Leases. Prior year comparatives have not been restated.

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Highlights

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�� Financial highlights

-�� Robust financial performance despite non-repeat of the Winter Olympics

-� Stable adjusted operating margin* including benefit from self-help actions

-� Impact of two, specific, one-off events: severe retailer destocking in Imaging Solutions and slower than expected recovery at SmallHD following the fire in 2018

-� Statutory operating profit of �32.0 million (2018: �40.2 million) after �20.4 million (2018: �13.3 million) of adjusting items, including previously announced restructuring

-�� Strong financial position: net debt of �96.0 million is �7.4 million lower than 2018 (excl. IFRS 16) and net debt to adjusted EBITDA* is 1.2x

-�� Total dividend up 5.4% to 39.0p per share, dividend cover at 2.1 times

�� Operational and strategic highlights

-�� Significant strategic progress investing in targeted growth initiatives in faster growing segments

-�� Imaging Solutions' restructuring on track to transform digital and e-commerce capabilities

-�� Further margin improvement at Production Solutions driven by operational efficiencies

-�� Integration of Amimon in Creative Solutions complete and Teradek 4K wireless video products for the cine market shipping

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* In addition to statutory reporting, Vitec reports alternative performance measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"). The Group uses these APMs to improve the comparability of information between reporting periods and Divisions, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group's businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary.

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Commenting on the results, Stephen Bird, Group Chief Executive, said:

"2019 was a year of significant progress against our strategic objectives. We delivered a robust financial performance despite being impacted by severe retailer disruption in Imaging Solutions and a slower than expected recovery at SmallHD.

"For 2020, the Group is focusing on the growth potential from the launch of the complete 4K eco-system in the cine market as well as new wireless products for the adjacent live production market, plus JOBY smartphonography accessories in the independent content creator market. We expect to benefit from further operational efficiencies in Production Solutions, the Summer Olympics and the US Presidential election.

"Although the Group's order visibility is limited, we remain confident in delivering further strategic progress in 2020. However, the duration and impact of COVID-19 is unknown at this stage and, given that half of our revenue comes from products either sourced from China or manufactured in Italy, on the basis of our current assumptions, we estimate that operating profit for H1 and FY 2020 will be impacted by �3.0 to �5.0 million. As a result, we expect 2020 to be more H2 weighted than usual.

"Vitec is a strong, agile business, and the Group's market-leading brands, operational excellence and technology innovation makes us uniquely positioned to take advantage of the fast changing and growing global "image capture and content creation" market, and to deliver long-term value to our shareholders."

For further information please contact:��	��
The Vitec Group plc	Telephone: 020 8332 4600
Stephen Bird, Group Chief Executive
Martin Green, Group Finance Director

MHP Communications	Telephone: 020 3128 8100
Tim Rowntree/ Ollie Hoare

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Vitec will present its results to analysts at 10.30am on Friday, 28 February 2020. A live video webcast of the presentation will be available on our website, and an on-demand recording, along with the presentation slides and a highlights video, will be available after the meeting.

Users can pre-register to access the recording and slides using the following link:

www.vitecgroup.com/investors/results-reports-and-presentations/

Notes to Editors:

Vitec is a leading global provider of premium branded products and solutions to the fast changing and growing "image capture and content creation" market.

Vitec's customers include broadcasters, independent content creators, photographers and enterprises, and our activities comprise: design, manufacture and distribution of high performance products and solutions including camera supports, camera mounted electronic accessories, robotic camera systems, prompters, LED lights, mobile power, monitors, bags, motion control and noise reduction equipment.

We employ around 1,700 people across the world in 11 different countries and are organised in three Divisions: Imaging Solutions, Production Solutions and Creative Solutions.

The Vitec Group plc is listed on the London Stock Exchange with 2019 revenue of �376.1 million.

More information can be found at: www.vitecgroup.com

LEI number: 2138007H5DQ4X8YOCF14

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Notes

¹	This statement is based on information sourced from management estimates and includes comparing performance at constant exchange rates to assist in understanding the underlying performance of the Group.
³	2019 average exchange rates: �1 = $1.28, �1 = �1.14, �1 = $1.12, �1 = Yen140.
⁴	2018 average exchange rates: �1 = $1.33, �1 = �1.13, �1 = $1.18, �1 = Yen147.
⁵ ^� ^� ⁶	The Company's Annual General Meeting ("AGM") will be held on Wednesday, 27 May 2020. The 2019 Annual Report and Accounts and Notice of AGM will be posted to shareholders and available on the Company's website from Wednesday, 25 March 2020. This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of The Vitec Group plc is Jon Bolton, Group Company Secretary. �

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2019 management and financial overview

	Adjusted*					Statutory
	2019	2018	% Change	% Change at constant FX	% Change organic at constant FX excl. EU Services ¹	2019	2018
Revenue	�376.1m	�385.4m	-2.4%	-3.9%	-6.1%	�376.1m	�385.4m
Operating profit	�52.4m	�53.5m	-2.1%	-2.6%	-4.6%	�32.0m	�40.2m
Profit before tax	�48.0m	�51.2m	-6.3%	-6.3%	-8.9%	�27.6m	�37.9m
Earnings per share	80.6p	93.2p	-13.5%			44.9p	76.1p

¹ 2019 versus 2018 performance after stripping out the impact of acquisitions, FX and European Services (our business which benefits from the Olympics every other year). The purpose of these adjustments is to give a better view of underlying performance.

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Revenue in 2019 decreased by 2.4% to �376.1 million (2018: �385.4 million) and adjusted operating profit* was 2.1% lower at �52.4 million (2018: �53.5 million). The results were impacted by retailer destocking at Imaging Solutions, non-repeat of the Winter Olympics at Production Solutions, and slower than expected recovery at SmallHD in Creative Solutions following the fire in 2018. Underlying revenue declined by �12.8 million, but underlying adjusted operating profit* increased by �2.2 million, driven by the benefit from self-help actions including operational efficiencies at Production Solutions and restructuring savings at Imaging Solutions. Revenue was lower by 6.1% on an organic constant FX basis excluding European Services.

Amimon, in its first full year of ownership, performed in line with our expectations with adjusted operating profit* of �2.5 million, including the benefit from additional external sales in Teradek and SmallHD. Amimon's adjusted EBITDA* was �3.4 million, slightly ahead of guidance at the time of acquisition.

Insurance staged payments totalling �6.5 million ($8.4 million) were received in 2019 in relation to business interruption and increased costs for the SmallHD business following the fire in April 2018.

Despite partially mitigating the impact of US tariffs on imports from China by sourcing products elsewhere in Asia-Pacific and bringing other products in-house to Italy, we estimate the year-on-year adverse net profit impact of the tariffs to be �2.0 million in 2019 and expect this to continue into 2020 at slightly lower levels assuming no further changes.

Group adjusted gross margin* of 45.2% was in line with the prior year. This reflects continued operational improvements across the Group and favourable product mix, offsetting the impact of lower volumes.

Adjusted operating expenses* were �2.9 million lower than 2018 at �117.7 million, reflecting cost control across the Group and a reduction in the share based payments charge, partly offset by the impact of acquisitions and higher investment in R&D.

Adjusted operating margin* was 13.9% on a reported basis which includes a benefit from the accounting treatment of the SmallHD insurance claim. Insurance proceeds have been recognised as other income within gross profit with no adjustment for revenue in line with IAS 1. We estimate the insurance had a favourable impact on adjusted operating margin* of c. 40 bps, in both the current and prior years, after adding back the estimated impact of lost revenue.

Adjusted profit before tax* of �48.0 million was �3.2 million lower than the prior year (2018: �51.2 million).

The Group's effective tax rate ("ETR") on adjusted profit before tax* was 24% in 2019 (2018: 18%). 2018 included a number of one-off benefits, including a favourable decision by the Italian tax authorities relating to our application for a Patent Box.

Adjusted basic earnings per share* were 80.6 pence per share (2018: 93.2 pence per share). Statutory basic earnings per share were 44.9 pence per share (2018: 76.1 pence per share).

Statutory profit before tax of �27.6 million (2018: �37.9 million) decreased due to the factors referred to above and higher charges associated with acquisition of businesses and other previously highlighted adjusting items of �20.4 million (2018: �13.3 million).

Further strategic progress

2019 was a year of significant progress against our strategic objectives. We delivered a robust financial performance despite being impacted by two, specific, one-off events. First, retailer destocking in Imaging Solutions was unusually severe and second, there was a slower than expected trading recovery at SmallHD following the fire in 2018 and the ending of receipt of insurance income.

Our strategic investment during the year was wide-ranging, including innovative product development, sourcing and manufacturing excellence, extending our distribution and digital channels, strengthening our talent base, and expanding our addressable markets through M&A activity. Our structure is simple and lean which enables focused decision making and allows us to react quickly to customer, market and technological changes. We have a strong balance sheet to support future organic and M&A investment, while providing progressive dividends for shareholders.

Our strategic priorities were unchanged in 2019 and continue to remain appropriate so will again be our priorities for the medium term: to drive organic growth; improve margins; and to invest in new technology and markets.

Organic growth: we continue to leverage our premium brands to invest selectively in faster growing market segments. We remain confident in the growth potential of the independent content creator ("ICC") and cine segments and growth drivers for our products include: the continued investment in original content by companies such as Netflix, Amazon, Apple and Disney; technology innovation and social media, smart and connected devices, which stimulate the capture and sharing of millions of images every day; broadcasters creating better content more cost effectively; and customer preference shifting to compact system cameras which is offsetting the decline in low-end traditional DSLR cameras.

The Group is increasingly exposed to more growth markets and is investing in targeted growth initiatives. During 2019, we launched a significant number of innovative new products including the world's first 4K zero delay wireless video transmission products. We grew our JOBY smartphonography accessories brand, and developed new on-camera monitors, audio capture, motion control, LED lighting, robotics and mobile power products across multiple brands.

In May, we announced a significant investment in a new digital platform and team to improve our web marketing and e-commerce capabilities in our Imaging Solutions Division. This was an important strategic move, enabling us to take advantage of retail trends towards e-commerce, where we outperform the competition and enjoy higher margins. The restructuring is well advanced and we expect to get the full benefit of this restructuring by the end of 2021. This investment will give Vitec the industry's leading e-commerce platform and provides a long-term competitive advantage.

We faced several headwinds during the year, including a slower than expected recovery at SmallHD, severe retailer destocking in Imaging Solutions and the continued delay in the launch of a wide range of new mirrorless cameras. There was also a �2.0 million year-on-year net profit impact from tariffs affecting imports from China into the US in 2019.

Margin improvement: we continue to optimise our manufacturing and assembly portfolio, improve productivity and channel mix, and capture synergies from acquisitions.

During the year, we continued to drive margin improvements through further operational productivity efficiencies. Our Production Solutions Division minimised air freight which brought financial benefits as well as reducing carbon footprint, while supply chain optimisation through purchasing price initiatives delivered further financial savings. The Group also continues to implement lean manufacturing initiatives across its manufacturing sites. The integration of the 2018 Amimon and Rycote acquisitions is complete, delivering the planned synergies, and the businesses are performing in line with our expectations. We see more opportunity to continue to improve our margins.

M&A activity: we look to expand our addressable markets by investing in core and adjacent niche markets to further increase our technology capabilities. Our robust balance sheet will support additional value-adding acquisitions.

In January 2019, we supplemented organic growth with the acquisition of Syrp, the New Zealand based slider and motion control company. Syrp designs and develops motorised camera sliders and motion control hardware and software, which enable creatives to control their camera equipment remotely, allowing the capture and smooth tracking of shots for video, time-lapse and hyper-lapse photography. This acquisition is in line with Vitec's strategy to drive growth by increasing our addressable markets and expanding our higher technology capabilities. Syrp's market-leading products are highly complementary to Vitec's existing brands and give our photographer and ICC customers greater flexibility to create and share exceptional content. The integration of Syrp into Imaging Solutions is complete and the business has become an R&D centre of excellence for mechatronic development.

The 2018 Amimon acquisition has transformed Vitec's wireless video capabilities and given us a great platform to grow our Creative Solutions Division. Amimon's unique, patented technology enables users to wirelessly monitor multiple video signals, in many locations, all at once, with no delay. This gives content creators much more creative freedom with camera angles and movement and saves tremendous cost on set.� As previously mentioned, we have utilised Amimon technology to strengthen our position in the cine market with the launch of the world's first 4K zero delay wireless video transmission products from Teradek in 2019. The development of a complete 4K wireless video eco-system as well as new wireless products for the adjacent live production market are on track for launch in 2020.

Imaging Solutions

The Imaging Solutions Division designs, manufactures and distributes premium branded equipment for photographic and video cameras and smartphones, and provides dedicated solutions to professional and amateur image makers, independent content creators and vloggers. This includes camera supports and heads, camera bags, smartphone accessories, lighting supports, LED lights, lighting controls, motion control, lens filters, audio capture and noise reduction equipment marketed under the most recognised accessories brands in the industry. Imaging Solutions represents 52% of Group revenue, and our three-year strategy is to increase revenue and maintain margins.

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	Adjusted*					Statutory
Imaging Solutions	2019	2018	% Change	% Change at constant FX	% Change organic at constant FX	2019	2018
Revenue	�196.6m	�201.6m	-2.5%	-2.5%	-5.2%	�196.6m	�201.6m
Operating profit	�27.1m	�31.1m	-12.9%	-9.4%	-10.7%	�17.8m	�28.6m
Operating margin	13.8%	15.4%	-160 bps	-110 bps	-90 bps	9.1%	14.2%

* For Imaging Solutions, before charges associated with acquisition of businesses and other adjusting items of �9.3 million (2018: �2.5 million).

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Imaging Solutions' revenue declined by 2.5% to �196.6 million and also by 2.5% at constant exchange rates with lower sales of photo and video supports and bags, partly offset by higher sales of JOBY, lighting supports and lighting controls. This was mainly driven by retailer destocking, which has been unusually severe, and does not reflect end-user demand which remains resilient. Revenue was 5.2% lower on an organic constant currency basis after stripping out the impact from the acquisitions of Adeal, Rycote and Syrp.

Retailer destocking started in Q4 2018 and became more severe in H2 2019. The key drivers were the decline in low end DSLR shipments, underperformance in the launch of new mirrorless cameras, and the growing impact of e-commerce with Amazon continuing to gain market share. Retailer destocking is expected to continue in 2020, albeit at a much lower rate.

While the latest data from Camera & Imaging Products Association ("CIPA") showed a year-on-year decline in interchangeable lens camera volume, the core high-end photographic market remained resilient. This is reflected by the increase in sales of lighting supports and controls versus the prior year. In addition, the average selling price of ILCs has risen by c. 3% and despite the overall decline in shipments, the proportion of mirrorless cameras has increased. Our accessories have a higher attachment rate to higher priced ILC cameras.

We further increased our exposure to faster growing markets by continuing to target independent content creators, with an increase in R&D investment, including in smartphone accessories, audio capture and motion control equipment. Sales of JOBY smartphone accessories grew and included the benefit from the new range of GorillaPod supports launched during the year.

As previously announced, we are transitioning our business to take advantage of the growth in the higher margin e-commerce channel. The restructuring is on track and is expected to deliver annual run-rate savings of c. �3.7 million per year by 2021 at a total project cost of c. �9.0 million.

Statutory operating profit decreased by �10.8 million to �17.8 million, which included �9.3 million of charges associated with acquisition of businesses and other adjusting items (2018: �2.5 million).

Adjusted operating profit* for Imaging Solutions declined by 12.9% to �27.1 million and by 9.4% at constant exchange rates driven by lower volumes and the impact of US/China tariffs, partly offset by cost savings relating to the digital restructuring project. Adjusted operating margin* decreased by 160 bps to 13.8%. After excluding the impact of acquisitions and foreign exchange, adjusted operating margin* is 90 bps below 2018.

We expect the Division to continue to outperform the market by diversification into adjacent markets and restructuring of its business model, in line with the three-year strategy to increase revenue and maintain margins.

Production Solutions

The Production Solutions Division designs, manufactures and distributes premium branded and technically advanced products and solutions for broadcasters, film and video production companies, independent content creators and enterprises. Products include video heads, tripods, lights, batteries, prompters and speciality camera systems. It also supplies premium services including equipment rental and technical solutions. Production Solutions represents 30% of Group revenue, and our three-year strategy is to maintain revenue and improve margins.

	Adjusted*					Statutory
Production Solutions	2019	2018	% Change	% Change at constant FX	% Change at const. FX excl. EU Services	2019	2018
Revenue	�111.8m	�118.7m	-5.8%	-8.4%	-5.9%	�111.8m	�118.7m
Operating profit	�19.6m	�20.1m	-2.5%	-6.4%	+5.8%	�18.9m	�18.7m
Operating margin	17.5%	16.9%	+60 bps	+30 bps	+200 bps	16.9%	15.8%

* For Production Solutions, before charges associated with acquisition of businesses and other adjusting items of �0.7 million (2018: �1.4 million).

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Production Solutions' revenue decreased by 5.8% to �111.8 million and by 8.4% at constant exchange rates, which includes the non-repeat of the 2018 Winter Olympics and the impact of our decision to exit the lower margin medical batteries business. On a constant currency basis excluding European Services, the Division delivered a solid performance with 5.8% adjusted operating profit* growth on a reduction in revenue of 5.9%.

There was a reduction in sales of manual supports, and volumes of white LED lights declined as anticipated due to the trend towards commoditisation. We continued to focus on the more technically advanced multi-colour lighting segment and launched Litepanels' LED Gemini 1x1 lights in H1 2019. Other new products launched during the year include a Vinten robotic head, which contributed to significant growth in robotic supports, and Anton/Bauer Titon digital batteries, which drove an increase in battery sales. We continue to invest in higher growth areas, including more products targeted at the ICC market.

Statutory operating profit increased by �0.2 million to �18.9 million, which included �0.7 million of adjusting items (2018: �1.4 million).

Adjusted operating margin* increased by 60 bps to 17.5% but increased by 200 bps on a constant currency basis excluding European Services. We have continued to drive margin improvements through operational efficiencies, including the full year benefit from transferring our manufacturing operations from Shelton, US to our facility in Costa Rica in the prior year.

We expect continued progress from Production Solutions, particularly on margins, with a benefit in 2020 from the Olympic Games and US Presidential election. The Division's three-year strategy is to maintain revenue and improve margins.

Creative Solutions

The Creative Solutions Division develops, manufactures and distributes premium branded products and solutions for independent content creators, enterprises, broadcasters, and film and video production companies. It is made up of a number of brands that Vitec has acquired and includes Teradek, SmallHD, Amimon, Wooden Camera and RTMotion. Products include wireless video transmission and lens control systems, monitors, camera accessories and software applications. Creative Solutions represents 18% of Group revenue, and our three-year strategy is to increase revenue and maintain higher margins.

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	Adjusted*					Statutory
Creative Solutions	2019	2018	% Change	% Change at constant FX	% Change organic at constant FX	2019	2018
Revenue	�67.7m	�65.1m	+4.0%	-0.1%	-9.4%	�67.7m	�65.1m
Operating profit	�15.6m	�15.7m	-0.6%	-4.9%	-23.2%	�5.3m	�6.3m
Operating margin	23.1%	24.1%	-100 bps	-100 bps	-350 bps	7.8%	9.7%

* For Creative Solutions, before charges associated with acquisition of businesses and other adjusting items of �10.3 million (2018: �9.4 million).

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Creative Solutions' revenue grew by 4.0% to �67.7 million and was broadly flat at constant exchange rates. Reported revenue growth included a benefit from the acquisition of Amimon and was 9.4% lower than the prior year after adjusting for currency and the acquisition. Growth at Teradek and RTMotion was more than offset by lower sales at SmallHD, driven by increased competition in the low-end of the market. Adjusted operating profit* was broadly in line with prior year at �15.6 million and declined by 4.9% at constant exchange rates.

SmallHD trading has been slow to recover following the fire in April 2018 as the business has continued to experience delays in launching new products. The low-end of the monitor market, which was a key driver of sales in 2018, has seen a significant increase in competition. We expect to launch a range of higher end 4K field monitors later this year. The SmallHD insurance claim is now settled with proceeds of �6.5 million (2018: �7.8 million) received in 2019.

During the year we launched a number of market leading new products, including Teradek Bolt 4K wireless cine products, the SmallHD Cine 7 monitor, and wireless lens control from RTMotion that integrates with other Creative Solutions brands.

The Division has continued to execute its strategy of integrated, 4K zero delay wireless video products, which it is uniquely able to deliver using Amimon's technology. The integration of Amimon in Creative Solutions is complete and the business is performing in line with expectations.

Statutory operating profit decreased by �1.0 million to �5.3 million, which included �10.3 million of charges associated with acquisition of businesses and other adjusting items (2018: �9.4 million).

Adjusted operating margin* decreased by 100 bps to 23.1% on a reported basis, which included a benefit from the accounting treatment of the SmallHD insurance proceeds in 2019 and the prior year. Excluding SmallHD and the insurance income, adjusted operating margin* was slightly lower in 2019, including the initial impact of Amimon and investment for future growth, although margins remain higher than the Group average.

We expect further growth for Creative Solutions including the benefit from the Amimon acquisition. We expect to maintain higher margins in line with the three-year strategy.

Corporate costs

Corporate costs include payroll and bonus costs for the Directors and head office team, Long Term Incentive Plan costs for key individuals across the Group, professional fees, property costs and travel costs.

	Adjusted*				Statutory
Corporate costs	2019	2018	% Change	% Change at constant exchange rates	2019	2018
Operating (loss)	�(9.9)m	�(13.4)m	-26.1%	-26.1%	�(10.0)m	�(13.4)m

* For corporate costs, before charges associated with acquisition of businesses and other adjusting items of �0.1 million (2018: �nil).

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The decrease in corporate costs includes lower Long Term Incentive Plan and bonus accruals linked to financial performance.

Financial detail

Net finance expense

Net finance expense of �4.4 million was �2.1 million higher than 2018 reflecting the impact of IFRS 16 and higher average net debt following the acquisition of Amimon. The average cost of borrowing for the year, which includes interest payable, commitment fees and amortisation of set-up charges, was 3.2% (2018: 3.4%) reflecting an interest cost of �3.7 million (2018: �2.7 million).

The Board has maintained a prudent capital structure and Vitec has operated comfortably within its loan covenants during 2019. A new RCF facility was signed on 14 February 2020 comprising a new five year �165 million committed facility at similar interest rates to the prior �150 million facility.

Charges associated with acquisition of businesses and other adjusting items

Charges associated with acquisition of businesses and other adjusting items in profit before tax were �20.4 million versus �13.3 million in 2018. As shown below, the 2019 charges mainly included amortisation of acquired intangibles, restructuring costs, earnout and retention charges, effect of fair valuation of acquired inventory and loss on disposal of business. �5.8 million of the total �6.2 million restructuring costs relates to the strategic project to transform the digital and e-commerce capabilities in Imaging Solutions.

�million�	2019	2018
Amortisation of acquired intangible assets	(9.4)	(6.4)
Effect of fair valuation of acquired inventory	(1.8)	(0.3)
Transaction costs relating to acquisition of businesses	(0.1)	(2.0)
Earnout charges and retention bonuses	(2.5)	(1.4)
Loss on disposal of business	(0.4)	-
Restructuring costs	(6.2)	-
Integration costs	-	(1.9)
Development costs written off	-	(0.6)
Guaranteed minimum pension charge	-	(0.7)
Total	(20.4)	(13.3)

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Foreign exchange

2019 adjusted operating profit* included a �0.3 million net favourable foreign exchange effect after hedging, mainly due to the stronger US Dollar being partly offset by year-on-year hedging losses. The impact on 2020 adjusted operating profit* from a ten cent stronger/weaker US Dollar or Euro is expected to be an increase/decrease of approximately �2.9 million and �1.2 million respectively.

Acquisitions

On 23 January 2019, the Group acquired 100% of the issued share capital of Syrp Ltd ("Syrp"), a company based in New Zealand, for an initial cash consideration of NZ$4.5 million (�2.4 million). Up to a further NZ$14.5 million (�7.6 million) cash consideration will be payable dependent on Syrp meeting financial targets in 2020, subject to the vendors remaining employed by the Group at the earnout date.

Cash flow and net debt

Operating cash conversion* was 85% for 2019 (2018: 84%) which included a benefit from IFRS 16, offset by the year-on-year net impact of higher R&D capitalisation.

Free cash flow* of �30.5 million was �3.0 million lower than the prior year (2018: �33.5 million) on a reported basis and was �9.4 million lower than the prior year after excluding the benefit from IFRS 16, which mainly reflected restructuring costs (�3.3 million) and higher investment in R&D (�6.3 million). The overall impact of IFRS 16 on net cash flow was nil, but there was a �6.4 million reallocation in the cash flow statement from operating activities to financing activities in the year.

Net debt at 31 December 2019 was �96.0 million�(31 December 2018: �81.0 million). The increase in net debt compared to 31 December 2018 included an opening adjustment of �22.4 million�due to additional lease liabilities being recognised under IFRS 16. The underlying decrease of �7.4 million, after excluding the impact on opening net debt from IFRS 16,�reflected: free cash flow* of �30.5 million and favourable foreign exchange of �3.1 million; payment of the 2018 final dividend (�11.5 million); payment of the 2019 interim dividend (�5.6 million); net investment in acquisitions and disposals (�2.2 million); transactions in own shares relating to funding of our employee incentive programme (�4.3 million); and net lease additions (�2.6 million). The Group's balance sheet remains strong with a net debt to adjusted EBITDA* ratio of 1.4 times, or 1.2 times on a pre-IFRS 16 basis (31 December 2018: 1.2 times).

ROCE* of 18.5% was 330 bps lower than the prior year (2018: 21.8%), which reflects lower adjusted operating profit* and higher average capital employed, including the anticipated adverse impact from the acquisition of Amimon and IFRS 16.

Dividend

The Board has recommended a final dividend of 26.7 pence per share amounting to �12.2 million (2018: 25.5 pence per share, amounting to �11.5 million). The final dividend, subject to shareholder approval at the 2020 Annual General Meeting, will be paid on Friday, 29 May 2020 to shareholders on the register at the close of business on Friday, 24 April 2020. This will bring the total dividend for the year to 39.0 pence per share (up 5.4%).�A dividend reinvestment alternative is available with details available from our registrars, Equiniti Limited.

Impact of IFRS 16 (applies from 1 January 2019)

The effect of adopting IFRS 16 has impacted results as expected. There has been a small impact on certain lines within the income statement, and a c. �16 million increase to reported assets and a c. �18 million increase in net debt. The expected impact on the net debt/adjusted EBITDA* ratio is an increase of c. +0.2�times.

Update on impact of COVID-19

We are monitoring the situation carefully and in light of recent developments in Northern Italy have issued all of our employees with further guidance including restricting travel and precautionary measures in our sites. Our priority is on taking actions and precautions to ensure the safety and wellbeing of our employees.

China

Vitec employs 53 people in China and the country accounts for approximately 5% of the Group's turnover. While we do not own any manufacturing sites in China, we have 25 suppliers of finished goods who supply products relating to approximately 25% of the Group's revenue. They are mainly based in the Guangdong province and we use a third-party logistics hub in Yiantian, both of which are over 800 miles from Wuhan. All of these facilities have reopened, however our supply chain suffered some disruption in January and February 2020, and there has been a slowdown in demand from the domestic Chinese market.

Italy

Vitec employs 550 people in Italy and the country accounts for less than 4% of the Group's turnover. Approximately 25% of Group revenue comes from products made in our manufacturing facility in Feltre, we have an office facility in Cassola and we use a third-party logistics hub near Padua, all of which are in North Italy. Currently, all of these sites are open, however, many Cassola employees are working from home as a precaution. We are continually evaluating and mitigating, where possible, the impacts of a closure of any of our Italian facilities on our supply chain, or a slowdown in end user demand from the domestic Italian market.

Current assumptions

Clearly the duration and impact of COVID-19 is unknown at this stage. We currently estimate a total adverse H1 and FY 2020 impact on operating profit in the range of �3.0 to �5.0 million. This is based on the following assumptions. While we see the situation in China improving and we don't expect any further supply chain impact, we still anticipate a continued softness in domestic demand from China and APAC, significantly below our H1 expectations. In Italy, the lower end of the range assumes no shutdown of our Italian operations but a softness in domestic demand in Italy. The higher end of the range assumes a four-week shutdown of all of our Italian operations and a continued softness in domestic demand in Italy. �

Responsible business - our approach to ESG matters

Vitec is small company with a global footprint, and we take our corporate responsibility extremely seriously. Our strategic priorities focus on driving organic growth, improving margins and investing in new technologies and markets. This strategy affects how we do business, who we do business with, where we operate and the communities we are embedded in. It is also reflected by our employees who understand the importance of the right values and behaviours when carrying out their roles at Vitec.

The Board has overall accountability for corporate responsibility and considers and approves our key policies, including our Code of Conduct ("Code"), Environmental Policy and Health and Safety Policy. These policies set a standard for all our employees, are available on our website, and are central to our approach to being a responsible business.

We continue to implement initiatives aimed at sustaining and protecting the environment in the areas of energy efficiency, reducing carbon emissions, water use and waste; and sustainable use of materials, packaging and waste disposal. We also encourage a culture of environmentally sustainable behaviour at work and ensure that our employees understand how they can contribute. Our products and services have a comparatively low impact on the environment. We report our scope 1 and 2 Greenhouse Gas Emissions and energy usage and full details can be found in the 2019 Annual Report. Our emissions and energy reporting complies with the appropriate regulations and guidance as published in 2018 and 2019 on environmental reporting and we are taking proactive steps to minimise our impact in this area. We use low hazard materials, minimise the use of resources during the manufacturing process and search for materials that are sustainable and can be recycled or reused. Our efforts and environmental awareness have continued to evolve, not only to comply with regulations but also to make our business better and more sustainable.

We understand how much our employees value giving back to the communities where they work and live, and at the same time, social, ethical and environmental issues are more important than ever to the society we live and work in. There are many examples of this within Vitec and our 2019 Annual Report will set out some of those activities. Although responsible business activities are prioritised and implemented by each Division, the Group strategy is to focus all responsible activities on investing in projects where the power of images specifically, or the creative arts more generally, can be used to help underprivileged people. Over a three-year period, our aim is for Vitec to positively impact one disadvantaged person for every Vitec employee in the communities in which we operate. So, 1,700 students or young people by 2021, or 600 each year. In 2019 our employees helped 410 people.

Our corporate governance is strong and the Board remains committed to high standards of governance throughout the Group. The 2019 Annual Report provides detailed information on how the Group is managed and the governance, culture and framework under which Vitec operates. Our strong governance procedures are demonstrated by our compliance with the 2018 UK Corporate Governance Code, the explanations provided in the governance report and our ongoing engagement with our stakeholders.

Our 2019 Annual Report will be published on 25 March 2020.

Outlook

Although the Group's order visibility is limited, we remain confident in delivering further strategic progress in 2020. However, the duration and impact of COVID-19 is unknown at this stage and, given that half of our revenue comes from products either sourced from China or manufactured in Italy, based on our current assumptions, we estimate that operating profit for H1 and FY 2020 will be impacted by �3.0 to �5.0 million. As a result, we expect 2020 to be more H2 weighted than usual. We will continue to monitor the situation closely.

In Imaging Solutions, the previously announced restructuring to transform the Division's digital and e-commerce capabilities is expected to deliver savings, and it will benefit from the launch of a range of JOBY smartphonography accessories. Retail destocking is expected to continue, albeit at a lower rate.

In Production Solutions, the Summer Olympics and US Presidential election should help to increase revenue, and we are targeting further operational efficiencies.

In Creative Solutions, we intend to launch the complete 4K eco-system in the cine market as well as new wireless products for the adjacent live production market.

We will continue to identify bolt-on acquisitions in core and adjacent segments to further increase our technology capabilities and expand our addressable market.

Vitec is a strong, agile business, and the Group's market-leading brands, operational excellence and technology innovation makes us uniquely positioned to take advantage of the fast changing and growing global "image capture and content creation" market, and to deliver long-term value to our shareholders.

Board changes

As previously announced, Ian McHoul joined the Board on 25 February 2019 and succeeded John McDonough CBE as Chairman of the Company at the conclusion of the Company's Annual General Meeting on 21 May 2019.

During 2019, there was one other change to the Board. Kath Kearney-Croft left the Board as Group Finance Director on 13 September 2019. Martin Green succeeded her as Acting Group Finance Director and on 10 February 2020 we announced that Martin would become the Group Finance Director with immediate effect.

Forward-looking statements

This announcement contains forward-looking statements with respect to the financial condition, performance, position, strategy, results and plans of the Group based on Management's current expectations or beliefs as well as assumptions about future events. These forward-looking statements are not guarantees of future performance. Undue reliance should not be placed on forward-looking statements because, by their very nature, they are subject to known�and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. The Company undertakes no obligation to publicly revise or update any forward-looking statements or adjust them for future events or developments. Nothing in this announcement should be construed as a profit forecast.

The information in this announcement does not constitute an offer to sell or an invitation to buy shares in the Company in any jurisdiction or an invitation or inducement to engage in any other investment activities. The release or publication of this announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements.

This announcement contains brands and products that are protected in accordance with applicable trademark and patent laws by virtue of their registration.

Going concern and viability

The Directors have made appropriate enquiries and consider that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have considered the potential near-term risks of Brexit and, while continuing to monitor developments as the Group implements contingency plans, they currently consider these risks to be minimal. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

The Directors have also assessed the long-term viability of the Group over a three year period, taking account of the Group's current position and prospects, its strategic plan, risk appetite and the principal risks and how these are managed. Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over this period.

For and on behalf of the Board

Stephen Bird	Martin Green
Group Chief Executive	Group Finance Director

�

Condensed Consolidated Income Statement
For the year ended 31 December 2019
		2019	2018
	Notes	�m	�m
Revenue	2	376.1	385.4
Cost of sales		(214.3)	(219.4)
Other income	3	6.5	7.8
Gross profit		168.3	173.8
Operating expenses		(136.3)	(133.6)
Operating profit		32.0	40.2
Comprising�
-�� Adjusted operating profit	4	52.4	53.5
-�� Charges associated with acquisition of businesses and other adjusting items	4	(20.4)	(13.3)
		32.0	40.2
Net finance expense	5	(4.4)	(2.3)
Profit before tax		27.6	37.9
Comprising�
-�� Adjusted profit before tax	4	48.0	51.2
-�� Charges associated with acquisition of businesses and other adjusting items	4	(20.4)	(13.3)
		27.6	37.9
Taxation		(7.4)	(3.6)
Comprising taxation on
-�� Adjusted profit	6	(11.7)	(9.2)
-�� Charges associated with acquisition of businesses and other adjusting items	6	4.3	5.6
	6	(7.4)	(3.6)
Profit for the year attributable to owners of the parent		20.2	34.3

Earnings per share	7
Basic earnings per share		44.9p	76.1p
Diluted earnings per share		44.5p	75.6p

Average exchange rates
�� Euro		1.14	1.13
�� US$		1.28	1.33

�

Consolidated Statement of Comprehensive Income			�
For the year ended 31 December 2019
		2019	2018
		�m	�m
Profit for the year		20.2	34.3
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit obligation	0.7		4.0
Related tax	(0.2)		(0.7)
Items that are or may be reclassified subsequently to profit or loss:
Currency translation differences on foreign currency subsidiaries	(10.0)		7.6
Net investment hedges - net gain/(loss)	2.8		(3.7)
Cash flow hedges - reclassified to the Income Statement, net of tax	1.4		(0.2)
Cash flow hedges - effective portion of changes in fair value, net of tax	(0.4)		(1.8)
Other comprehensive (expense)/income, net of tax	(5.7)		5.2
Total comprehensive income for the year attributable to owners of the parent	14.5		39.5

�

Condensed Consolidated Balance Sheet	Notes
As at 31 December 2019
		2019	2018
		�m	�m
Assets
Non-current assets
Intangible assets		127.7	132.1
Property, plant and equipment		46.7	33.7
Trade and other receivables		1.7	2.0
Deferred tax assets		21.0	28.4
		197.1	196.2
Current assets
Inventories		76.0	80.1
Trade and other receivables		59.4	68.7
Derivative financial instruments		0.6	0.1
Current tax assets		8.6	1.6
Cash and cash equivalents		18.9	17.5
		163.5	168.0
Total assets		360.6	364.2
Liabilities
Current liabilities
Bank overdrafts		-	2.4
Interest-bearing loans and borrowings		0.2	0.5
Lease Liabilities	10	5.8	-
Trade and other payables		55.9	70.3
Derivative financial instruments		0.3	1.1
Current tax liabilities		10.6	5.2
Provisions		5.0	3.2
		77.8	82.7
Non-current liabilities
Interest-bearing loans and borrowings		96.5	95.6
Lease Liabilities	10	12.4	-
Other payables		0.1	0.8
Post-employment obligations�		8.3	9.4
Provisions		1.2	1.7
Deferred tax liabilities		7.6	11.7
		126.1	119.2
Total liabilities		203.9	201.9
Net assets		156.7	162.3

Equity
Share capital		9.1	9.1
Share premium		20.7	18.6
Translation reserve		(11.9)	(4.7)
Capital redemption reserve		1.6	1.6
Cash flow hedging reserve		0.3	(0.7)
Retained earnings		136.9	138.4
Total equity		156.7	162.3

Balance Sheet exchange rates
�� Euro		1.18	1.11
�� US$		1.32	1.27

�

Consolidated Statement of Changes in Equity �
	Note	�Share capital	�Share premium�	Translation reserve	�Capital redemption reserve	�Cash flow hedging reserve	�Retained earnings	�Total equity
		��m	��m	��m	��m	��m	��m	��m
Balance at 1 January 2019		9.1	18.6	(4.7)	1.6	(0.7)	138.4	162.3
Adoption of IFRS 16	1	-	-	-	-	-	(1.3)	(1.3)
Balance at 1 January 2019 (adjusted)		9.1	18.6	(4.7)	1.6	(0.7)	137.1	161.0
Total comprehensive income for the year
Profit for the year		-	-	-	-	-	20.2	20.2
Other comprehensive income/ (expense) for the year		-	-	(7.2)	-	1.0	0.5	(5.7)
Contributions by and distributions to owners
Dividends paid		-	-	-	-	-	(17.1)	(17.1)
Own shares purchased		-	-	-	-	-	(6.4)	(6.4)
Share-based payment charge, net of tax		-	-	-	-	-	2.6	2.6
New shares issued		-	2.1	-	-	-	-	2.1
Balance at 31 December 2019		9.1	20.7	(11.9)	1.6	0.3	136.9	156.7

Balance at 1 January 2018		9.0	16.8	(8.6)	1.6	1.3	115.5	135.6
Adoption of IFRS 9		-	-	-	-	-	(0.1)	(0.1)
Balance at 1 January 2018 (adjusted)		9.0	16.8	(8.6)	1.6	1.3	115.4	135.5
Total comprehensive income for the year
Profit for the year		-	-	-	-	-	34.3	34.3
Other comprehensive income/(expense) for the year		-	-	3.9	-	(2.0)	3.3	5.2
Contributions by and distributions to owners
Dividends paid		-	-	-	-	-	(14.1)	(14.1)
Own shares purchased		-	-	-	-	-	(3.7)	(3.7)
Share-based payment charge, net of tax		-	-	-	-	-	3.2	3.2
New shares issued		0.1	1.8	-	-	-	-	1.9
Balance at 31 December 2018		9.1	18.6	(4.7)	1.6	(0.7)	138.4	162.3

�

Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2019
			2019	2018
	Notes		�m	�m
Cash flows from operating activities�
Profit for the year			20.2	34.3
Adjustments for:
�� Taxation			7.4	3.6
�� Depreciation			14.1	7.2
Impairment losses on property, plant and equipment			0.6	-
�� Amortisation of intangible assets			13.9	10.6
�� Write-off of intangible assets			-	0.6
�� Net loss/(gain) on disposal of property, plant and equipment and �� software			0.2	(0.2)
�� Fair value (gains)/losses on derivative financial instruments			(0.1)	0.2
�� Foreign exchange (gains)/Losses			(0.4)	0.3
�� Share-based payment charge			2.3	3.1
�� Earnout charges and retention bonuses�			2.5	1.4
�� Loss on disposal of business, before tax			0.4	-
�� Net finance expense			4.4	2.3
Operating profit before changes in working capital and�� provisions�			65.5	63.4
�Decrease/ (Increase) in inventories			1.0	(0.8)
�Decrease/(increase) in receivables			6.3	(0.5)
�Decrease in payables			(12.6)	(4.3)
�Decrease in provisions			(1.0)	(3.8)
�Cash generated from operating activities			59.2	54.0
�Interest paid			(4.3)	(2.5)
�Tax paid			(6.3)	(4.1)
Net cash from operating activities			48.6	47.4

Cash flows from investing activities�
Proceeds from sale of property, plant and equipment and software�			0.5	0.5
Purchase of property, plant and equipment			(6.2)	(8.4)
Capitalisation of software and development costs			(12.4)	(6.0)
Acquisition of businesses, net of cash acquired		8	(3.1)	(51.8)
Net cash inflow on disposal of business			0.9	0.5
Net cash used in investing activities			(20.3)	(65.2)

Cash flows from financing activities�
Proceeds from the issue of shares			2.1	1.9
Own shares purchased			(6.4)	(3.7)
Principle lease repayments			(6.4)	�� -
Repayment of interest-bearing loans and borrowings			(57.8)	(101.7)
Borrowings from interest-bearing loans and borrowings			61.4	138.1
Dividends paid			(17.1)	(14.1)
Net cash (used in)/from financing activities			(24.2)	20.5

Increase in cash and cash equivalents��		11	4.1	2.7
Cash and cash equivalents at 1 January			15.1	12.6
Effect of exchange rate fluctuations on cash held�			(0.3)	(0.2)
Cash and cash equivalents at 31 December�		11	18.9	15.1

�

1 Accounting policies

Basis of preparation

In reporting financial information, the Group presents alternative performance measures ("APMs") which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information to better reflect the underlying business and enable more meaningful comparison over time. Note 13 "Glossary of Alternative Performance Measures" provides a comprehensive list of APMs that the Group uses, including an explanation of how they are calculated, why they are used and how they can be reconciled to a statutory measure where relevant.

Basis of consolidation

Subsidiaries are entities that are directly or indirectly controlled by the Group.� Control exists when the Group has the rights to variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity.� The results of subsidiaries sold or acquired during the year are included in the accounts up to, or from, the date that control exists.

Impact of adoption of new accounting standards

The Group has applied IFRS 16 "Leases" from 1 January 2019, which has impacted the Group's financial statements as described below.

IFRS 16 "Leases"

On initial application, the cumulative impact of adopting the standard has been recognised as an adjustment to opening equity, and the comparative amounts presented in the Consolidated Income Statement and Consolidated Balance Sheet have not been restated.

On adoption, the Group recognised lease liabilities of �22.4 million for leases previously classified as operating leases, measured at the present value of the remaining lease payments. In accordance with the transition provisions of IFRS 16, the Group discounted the future lease payments at the incremental borrowing rate of the lessee at the date of adoption. The weighted average lessee's incremental borrowing rate applied to lease liabilities at 1 January 2019 was 4.6%. At the same time, the Group recognised right-of-use assets of �20.7 million, measured as if the standard had been applied since commencement date of the lease, and discounted using the lessee's incremental borrowing rate at the date of adoption. As a result of the adoption of IFRS 16 the Group also recognised deferred tax assets of �0.3 million at 1 January 2019 and made adjustments for prepayments and accruals of �0.1 million.

A difference arises between the present value of operating lease commitments disclosed at 31 December 2018 and the lease liabilities recognised by the Group at 1 January 2019. This is due to the Group taking advantage of the exemptions in IFRS 16 that permit lease payments for short term leases, and leases of low value assets, to continue to be accounted for as an expense on a straight line basis over the lease term.

In applying IFRS 16 for the first time, The Group has used the following practical expedients permitted by the standard:

-�� The use of a single discount rate applied to a portfolio of leases with reasonably similar characteristics;

-�� Reliance on previous assessments of whether leases are onerous;

-�� The exclusion of initial direct costs in the measurement of the right-of-use at the date of initial application;

-�� The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and

-�� Elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date, the Group relies on its assessment made applying IAS 17 "Leases" and IFRIC 4 ''Determining whether an Arrangement contains a Lease''.

There has been no material impact on the financial statements of adopting other new standards or amendments.

New standards and interpretations not yet adopted

Amended standards and interpretations not yet effective are not expected to have a significant impact on the Group's consolidated financial statements.

�

2 Segment reporting

The Group has three reportable segments which are reported in a manner that is consistent with the internal reporting provided to the Chief Operating Decision Maker on a regular basis to assist in making decisions on capital allocated to each segment and to assess performance.

�

	Imaging Solutions		Production Solutions		Creative Solutions		Corporate and unallocated		Consolidated
	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
	�m	�m	�m	�m	�m	�m	�m	�m	�m	�m
Total revenue from external customers	196.6	201.6	111.8	118.7	67.7	65.1	-	-	376.1	385.4
Inter-segment revenue ⁽¹⁾	0.4	0.6	0.4	0.4	-	0.2	(0.8)	(1.2)	-	-
Total revenue	197.0	202.2	112.2	119.1	67.7	65.3	(08)	(1.2)	376.1	385.4
Adjusted operating profit/(loss)	27.1	31.1	19.6	20.1	15.6	15.7	(9.9)	(13.4)	52.4	53.5
Amortisation of acquired intangible assets	(2.1)	(1.0)	-	(0.7)	(7.3)	(4.7)	-	-	(9.4)	(6.4)
Effect of fair valuation of acquired inventory	�(0.1)	-	-	-	(1.7)	(0.3)	-	-	(1.8)	(0.3)
Transaction costs relating to acquisition of businesses	(0.1)	(0.1)	-	-	-	(1.9)	-	-	(0.1)	(2.0)
Earnout charges and retention bonuses	(1.2)	-	-	-	(1.3)	(1.4)	-	-	(2.5)	(1.4)
Loss on disposal of business	-	-	(0.4)	-	-	-	-	-	(0.4)	-
Restructuring costs	(5.8)	-	(0.3)	-	-	-	(0.1)	-	(6.2)	-
Integration costs	-	(1.4)	-	-	-	(0.5)	-	-	-	(1.9)
Development costs written off	-	-	-	-	-	(0.6)	-	-	-	(0.6)
Guaranteed minimum pension charge	-	-	-	(0.7)	-	-	-	-	-	(0.7)
Operating profit/(loss)	17.8	28.6	18.9	18.7	5.3	6.3	(10.0)	(13.4)	32.0	40.2
Net finance expense									(4.4)	(2.3)
Taxation									(7.4)	(3.6)
Profit for the period									20.2	34.3

Segment assets	139.4	134.5	93.7	87.2	77.8	93.4	1.2	1.6	312.1	316.7
Unallocated assets
Cash and cash�� equivalents							18.9	17.5	18.9	17.5
Current tax assets							8.6	1.6	8.6	1.6
Deferred tax assets							21.0	28.4	21.0	28.4
Total assets									360.6	364.2

Segment liabilities	42.2	43.4	29.9	22.2	11.5	13.2	5.4	7.7	89.0	86.5
Unallocated liabilities
Bank Overdraft							-	2.4	-	2.4
Interest-bearing loans and borrowings							96.7	96.1	96.7	96.1
Current tax liabilities							10.6	5.2	10.6	5.2
Deferred tax liabilities							7.6	11.7	�� 7.6	11.7
Total liabilities									203.9	201.9
Cash flows from operating activities	22.0	26.0	22.9	21.1	18.9	13.0	(15.2)	(12.7)	48.6	47.4
Cash flows from investing activities ⁽²⁾	(9.8)	(8.2)	(3.6)	(5.8)	(6.8)	(51.7)	(0.1)	-	(20.3)	(65.7)
Cash flows from financing activities	(3.0)	-	(1.8)	-	(1.4)	-	(18.0)	20.5	(24.2)	20.5
Capital expenditure
Property, plant and equipment	3.7	3.5	2.0	4.1	0.5	0.8	-	-	6.2	8.4
Software and development costs	3.8	2.2	2.6	1.9	5.9	1.9	0.1	-	12.4	6.0

�

⁽¹⁾	Inter-segment pricing is determined on an arm's length basis. These are eliminated in the corporate and unallocated column.
⁽²⁾	In 2018, cash flows from investing activities excluded cash inflow of �0.5 million relating to a previous disposal.
⁽³⁾	The 2018 segment assets of the Creative Solutions Division has been adjusted to reflect an increase in goodwill of �1.3 million relating to the acquisition of Amimon. This was recognised in the period as a result of adjustments to deferred tax assets, which were reduced by �1.3 million in the Corporate segment.

�

One customer (2018: one) accounted for more than 10% of external revenue. In 2019, the total revenue from this customer, which was recognised in all three segments, was �44.8 million (2018: �50.7 million).

�

Geographical Information

	2019	2018
	�m	�m
Analysis of revenue from external customers, by location of customer
United Kingdom	41.4	42.5
The rest of Europe	91.8	94.3
North America	156.9	158.9
Asia Pacific	76.1	78.6
The rest of the World	9.9	11.1
Total revenue from external customers	376.1	385.4

�

The Group's operations are located in several geographic locations, and sell products and services on to external customers in all parts of the world.

�

3 Other income

On 26 April 2018, the offices and warehouse of SmallHD LLC ("SmallHD") in North Carolina, US (part of the Creative Solutions Division) were damaged as a result of a fire in an adjacent office. An evacuation was conducted successfully with no injuries to our team. The insurance policy held by the Group covers both damage to assets and business interruption.

During the year �6.5 million (2018: �7.8 million) was received from the insurer and recognised in other income. The insurance claim has now been finalised.

4 Charges associated with acquisition of businesses and other adjusting items

The Group presents Alternative Performance Measures ("APMs") in addition to its statutory results. These are presented in accordance with the Guidelines on APMs issued by the European Securities and Markets Authority ("ESMA").

APMs used by the Group and where relevant, a reconciliation to statutory measures are set out in note 13 "Glossary of Alternative Performance Measures". Adjusting items are described below along with more detail of the specific adjustment and the Group's rationale for the adjustment.

The Group's key performance measures, such as adjusted operating profit, exclude charges associated with acquisition of businesses and items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner.

Charges associated with the acquisition of business

Amortisation of intangible assets are that acquired in a business combination

Acquired intangibles are measured at fair value, which takes into account the future cash flows expected to be generated by the asset rather than past costs of development. Additionally, acquired intangibles include assets such as brands, know-how and relationships which the Group would not normally recognise as assets outside of a business combination. The amortisation of the fair value of acquired intangibles is not considered to be representative of the underlying performance of the businesses within the Group. On an ongoing basis, the Group capitalises development costs of intangible assets and the costs of purchasing software. These intangible assets are recognised at cost and the amortisation of these costs are included in adjusted operating profit.

Effect of fair valuation of acquired inventory

As part of the accounting for business combinations, the Group measures acquired inventory at fair value as required under IFRS 3. This results in the carrying value of acquired inventory being higher than its original cost based measure. The impact of the uplift in value has the effect of increasing cost of sales thereby reducing the Group's gross profit margin which is not representative of ongoing performance.

Transaction costs

Transactions costs related to the acquisition of a business do not reflect its trading performance and so are adjusted to ensure consistency between periods.

Earnout charges and retention bonuses agreed as part of the acquisition

Generally earnouts are agreed based on the value of the acquired business and hence are economically treated as the consideration for the acquisition. Under IFRS 3, most of the Group's earnouts are treated as post combination remuneration, although the levels of remuneration generally do not reflect market rates and do not get renewed as a salary (or other remuneration) might. The Group considers this to be inconsistent with the economics reflected in the deals because other consideration for the acquisition is effectively included in goodwill rather than an income statement item. Retention agreements are generally entered into with key management at the point of acquisition to help ensure an efficient integration. Where performance warrants, any costs associated with renewal of these agreements are not adjusted for.�

Integration costs

For an acquired business, the costs of integration, such as termination of third party distributor agreements, severance and other costs included in the business's defined integrations plan do not reflect the business's trading performance and so are adjusted to ensure consistency between periods.

Other adjusting items

-�� Restructuring costs and other associated costs arising from significant strategy changes that are not considered by the Group to be part of the normal operating costs of the business;

-�� Loss on disposal of businesses;

-�� Impairment charges that are considered to be significant in nature and/or value to the underlying performance of the business;

-�� Past service charges associated with defined benefit pensions, such as gender equalisation of guaranteed minimum pension ("GMP") for occupational schemes; and

-�� Other significant initiatives not related to underlying trading.

In addition to the above, Alternative Performance Measures impacting adjusted profit before tax, adjusted profit after tax and adjusted basic earnings per share are adjusted for:

-�� The tax effect of adjustments to profit/(loss) before tax;

-�� Significant adjustments to current or deferred tax which have arisen in previous periods but are accounted for in the current period; and

-�� The net effect of significant new tax legislation changes.

�

Adjusted operating profit, adjusted profit before tax and adjusted profit after tax are not defined terms under IFRS and may not be comparable with similarly titled profit measures reported by other companies. They are not intended to be a substitute for GAAP measures. All APMs relate to the current year results and comparative periods where provided.

�

	2019	2018
	�m	�m

Amortisation of acquired intangible assets	(9.4)	(6.4)
Effect of fair valuation of acquired inventory ⁽¹⁾	(1.8)	(0.3)
Transaction costs relating to acquisition of businesses ⁽²⁾	(0.1)	(2.0)
Earnout charges and retention bonuses ⁽³⁾	(2.5)	(1.4)
Loss on disposal of business ⁽⁴⁾	(0.4)	-
Restructuring costs ⁽⁵⁾	(6.2)	-
Integration costs ⁽⁶⁾	-	(1.9)
Development costs written off ⁽⁷⁾	-	(0.6)
Guaranteed minimum pension charge ⁽⁸⁾	-	(0.7)
Charges associated with acquisition of businesses and other adjusting items	(20.4)	(13.3)

�

⁽¹⁾	The fair value uplift of �1.8 million (2018: �0.3 million) relating to acquired inventory which has been sold by the Group since the business combination is adjusted from cost of sales.
⁽²⁾	Transaction costs of �0.1 million were incurred in relation to acquisition of Syrp (2018: �1.8 million in relation to Amimon, �0.1 million in relation to Rycote and �0.1 million in relation to Adeal).
⁽³⁾	A charge of �1.6 million (split between Rycote: �1.1 million and RT Motion: �0.5 million) relates to continued employment and certain non-financial targets being met during 2019 and those that are expected to be met in 2020. This also includes an amount of �0.9 million in relation to retention payments agreed as part of the acquisition of Amimon in 2018 (2018: �0.6 million in relation to Wooden Camera earnouts, �0.5 million in relation to RT Motion earnouts and �0.3 million in relation to Rycote earnouts).
⁽⁴⁾	During the year, the Group disposed of its medical batteries business. The loss on disposal of the business of �0.4 million is not considered representative of the underlying performance of the Group and so has been excluded from adjusted operating profit.
⁽⁵⁾	During the year, Imaging Solutions began a strategic project ("Project Digital") to rebalance the allocation of resources from off-line to on-line to enable growth, reduce operating costs and improve margins. The costs related to the project are expected to impact the Division until 2021. The main costs incurred in 2019 include severance costs (�3.0 million), recruitment costs (�0.4 million), asset impairments (�0.9 million), move costs in relation to changing our logistics provider (�0.4 million) and professional fees (�0.6 million) including legal, tax and strategic consulting. The Division incurred other consulting and marketing costs which did not meet the Group's criteria for adjustment and hence have not been adjusted for.
⁽⁶⁾	In 2018, integration costs of �1.9 million mainly comprise costs to terminate agreements with third party distributors in relation to the integration of JOBY and Lowepro and employment termination costs in relation to the integration of Amimon into the Group.
⁽⁷⁾	Following the acquisition of Amimon, an existing development project relating to radio frequency technology was abandoned. As such, the capitalised development costs of �0.6 million associated with the project was written off in 2018.
⁽⁸⁾	In October 2018, the High Court reached a judgment in relation to Lloyds Bank's defined benefit pension schemes, which concluded that the schemes should equalise pension benefits for men and women in relation to guaranteed minimum pension benefits. The issues arising from the judgment would apply to most other UK defined benefit pension schemes. To reflect the estimated impact of this judgment, in 2018 the Group recognised a past service cost of �0.7 million in the income statement and increased the liabilities of the defined benefit pension scheme by the same amount.

�

5 Net finance expense

	2019	2018
	�m	�m
Finance income
Net currency translation gains	0.5	0.8
Finance expense
Unwind of discount on liabilities	(0.1)	(0.2)
Interest expense on lease liabilities	(0.9)	-
Interest expenses on interest-bearing loans and borrowings	(3.7)	(2.7)
Interest expense on net defined benefit pension scheme	(0.2)	(0.2)
	(4.9)	(3.1)
Net finance expense	�(4.4)	(2.3)

�

6 Taxation

	2019	2018
	�m	�m
The total taxation charge/(credit) in the Income Statement is analysed as follows:
Summarised in the Income Statement as follows
Current tax	4.5	4.3
Deferred tax	2.9	(0.7)
	7.4	3.6
Charges associated with acquisition of businesses and other adjusting items
Current tax ⁽¹⁾	(1.5)	(3.2)
Deferred tax ⁽²⁾	(2.8)	(2.4)
	(4.3)	(5.6)
Before charges associated with acquisition of businesses and other adjusting items
Current tax	6.0	7.5
Deferred tax	5.7	1.7
	11.7	9.2

�

⁽¹⁾

Current tax credit of �1.5 million (2018: �3.2 million credit) was recognised in the year of which �1.1 million credit (2018: �0.4 million credit) relates to restructuring and integration costs, �0.4 million credit (2018: �0.1 million credit) to tax on the acquisition and disposal of businesses and �nil (2018: �2.7 million credit) for the Italian Patent Box benefit in respect of prior years.

⁽²⁾

Deferred tax credit of �2.8 million (2018: �2.4 million credit) was recognised in the year of which �0.2 million credit (2018: �0.4 million credit) relates to restructuring and integration costs, �0.9 million credit (2018: �0.3 million credit) to acquisitions, �1.7 million credit (2018: �1.1 million credit) to amortisation of intangible assets, and �nil (2018: �0.6 million credit) to the impact of US tax reform.

�

7 Earnings per share

Earnings per share ("EPS") is the amount of post-tax profit attributable to each share.

Basic EPS is calculated on the profit for the year divided by the weighted average number of ordinary shares in issue during the year.

Diluted EPS is calculated on the profit for the period divided by the weighted average number of ordinary shares in issue during the year, but adjusted for the effects of dilutive share options.

The adjusted EPS measure is used by management to assess the underlying performance of the ongoing businesses, and therefore excludes charges associated with acquisition of businesses and other adjusting items, all net of tax.

The calculation of basic, diluted and adjusted EPS is set out below:

	2019	2018
	�m	�m
Profit for the financial period	20.2	34.3
Add back charges associated with acquisition of businesses and other adjusting items, all net of tax	16.1	7.7
Adjusted profit after tax	36.3	42.0

�

	Weighted average number of shares '000		Adjusted earnings per share		Earnings per share
	2019	2018	2019	2018	2019	2018
	Number	Number	pence	pence	pence	pence
Basic	45,030	45,084	80.6	93.2	44.9	76.1
Dilutive potential ordinary shares	409	324	(0.7)	(0.7)	(0.4)	(0.5)
Diluted	45,439	45,408	79.9	92.5	44.5	75.6

�

8 Acquisitions

Acquisitions are accounted for under the acquisition method of accounting.� With limited exceptions, identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. A detailed exercise is undertaken to assess the fair value of assets acquired and liabilities assumed, with the use of third-party experts where appropriate.

The valuation of intangible assets requires the use of assumptions and estimates, including future growth rates, expected inflation rates, discount rates used and useful economic lives. This process continues as information is finalised, and accordingly the fair values presented in the tables below are provisional amounts. In accordance with IFRS 3 until the assessment is complete the measurement period will remain open up to a maximum of 12 months from the acquisition date so long as information remains outstanding.

The excess of the consideration transferred, any non-controlling interest recognised and the fair value of any previous equity interest in the acquired entity over the fair value of net identifiable assets acquired is recorded as goodwill. Acquisition-related costs are recognised in the Income Statement as incurred in accordance with IFRS 3.

Acquisition of Syrp

On 23 January 2019 the Group acquired 100% of the issued share capital of Syrp Ltd ("Syrp"), a New Zealand incorporated company, for net cash consideration of NZ$4.5 million (�2.4 million). The fair value of the net assets acquired in the business at acquisition date was �1.8 million resulting in goodwill of �0.6 million. The goodwill is attributable to the workforce and the potential for future technology development. The trade receivables acquired had a fair value and a gross contractual value of �0.2 million. Syrp operates within the Imaging Solutions Division.

The Group's consolidated results include �2.4 million of revenue and �0.2 million operating loss from the acquired business. This would have been the same, had the acquisition been made at the beginning of the year (i.e. 1 January 2019). The level of profitability is stated after charges associated with acquisition of business.

�

A summary of the effect of the acquisition of Syrp is detailed below:

	Fair value of net assets acquired
	�m
Net assets acquired
Intangible assets	0.8
Property, plant and equipment	1.3
Inventories	0.9
Trade and other receivables	0.2
Trade and other payables	(0.3)
Lease liability	(0.9)
Deferred tax	(0.2)
	1.8
Goodwill	0.6
Consideration satisfied from existing cash resources	2.4

�

Acquisition of Amimon (acquired in 2018)

In the period, the process to measure the fair values of the assets and liabilities acquired was completed in respect of the Amimon acquisition. The 2018 Balance Sheet has been adjusted to reflect an increase in goodwill of �1.3 million which was recognised in the period as a result of adjustments to deferred tax assets. An amount of �0.3 million was paid in the period in relation to the final working capital adjustment for Amimon.

�

An analysis of cash flows relating to acquisitions is provided below:

	2019
	�m
Net outflow of cash in respect of acquisitions
Cash consideration in respect of 2019 acquisitions	2.4
Earnout payment for RT Motion (acquired in 2017)	0.2
Liability for pre combination amount related to Amimon's unvested options (acquired in 2018)	0.2
Final working capital adjustment paid for Amimon (acquired in 2018)	0.3
Net cash outflow in respect of acquisitions	3.1

�

9 Dividends

The proposed final dividend for the year ended 31 December 2019 was recommended by the Directors. This is subject to approval by shareholders at the AGM on Wednesday 27 May 2020 and, if approved, will be paid on Friday 29 May 2020.

	2019	2018
	�m	�m
Amounts arising in respect of the year
Interim dividend for the year ended 31 December 2019 of 12.3p (2018: 11.5p) per ordinary share	5.6	5.1
Proposed final dividend for the year ended 31 December 2019 of 26.7p (2018: 25.5p) per ordinary share	12.2	11.5
	17.8	16.6

The aggregate amount of dividends paid in the year
Final dividend for the year ended 31 December 2018 of 25.5p (2017: 20.1p) per ordinary share	11.5	9.0
Interim dividend for the year ended 31 December 2019 of 12.3p (2018: 11.5p) per ordinary share	5.6	5.1
	17.1	14.1

�

10 Leases

Up to and including the 2018 financial year:

Leases in which a significant portion of risks and rewards were not transferred to the Group were classified as operating leases. The payments made for operating leases were recognised in profit or loss on a straight line basis over the period of the lease.

�

New accounting policy from 1 January 2019:

Each lease is recognised as a right-of-use asset with a corresponding liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Interest expense is charged to the Consolidated Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

�

For the Group, lease payments generally comprise the following:

-�� Fixed payments, less any lease incentives receivable;

-�� Variable payments that are based on an index or rate; and

-�� Payments to be made under extension options which are reasonably certain to be exercised.

�

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liability, and lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and restoration costs.

When an adjustment to lease payments based on an index takes effect, the liability is remeasured with a corresponding adjustment to the right-of-use asset.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the Consolidated Income Statement.

�

The Group's leasing activities

The Group enters into leases of land and buildings in relation to offices, warehouses and factory premises around the world. In addition the Group leases plant, machinery and vehicles, as well as other equipment.

Contracts entered into by the Group have a wide range of terms and conditions but generally do not impose any additional covenants. Several of the Group's contracts include indexation adjustments to lease payments in future periods which are not reflected in the measurement of the lease liabilities at 31 December 2019.

Many of the contracts entered into by the Group include extension or termination options which provide the Group with additional operational flexibility. If the Group considers it reasonably certain that an extension option will be exercised or a termination option not exercised, the additional period is included in the lease term. Generally, extension options are not included in the lease term for plant, machinery and vehicles, and equipment, fixtures and fittings. Most options in respect of land and buildings are not included in the calculation of the lease term.

�

Right-of-use assets

	Total	Leasehold land and buildings	Plant, machinery and vehicles	Equipment, fixtures and fittings
	�m	�m	�m	�m
Cost
At 31 December 2018	-	-	-	-
Adoption of IFRS 16	35.1	32.3	2.7	0.1
Adjusted amount at 1 January 2019	35.1	32.3	2.7	0.1
Currency translation adjustments	(1.0)	(0.9)	(0.1)	-
Additions	2.2	1.3	0.9	-
Termination of leases	(2.3)	(1.6)	(0.7)	-
Acquisitions	0.9	0.9	-	-
At 31 December 2019	34.9	32.0	2.8	0.1

Depreciation
At 31 December 2018	-	-	-	-
Adoption of IFRS 16	14.4	13.2	1.2	-
Adjusted amount at 1 January 2019	14.4	13.2	1.2	-
Currency translation adjustment	(0.6)	(0.6)	-	-
Depreciation charge in the year	6.4	5.4	1.0	-
Impairment losses in the year	0.6	0.6	-	-
Depreciation on termination of lease	(1.8)	(1.1)	(0.7)	-
At 31 December 2019	19.0	17.5	1.5	-

Carrying amounts
Adjusted amount at 1 January 2019	20.7	19.1	1.5	0.1
At 31 December 2019	15.9	14.5	1.3	0.1

�

Total cash outflow for leases is �7.3 million of which �0.9 million relates to interest and �6.4 million to principal lease repayments.

�

11 Analysis of net debt

The table below analyses the Group's components of net debt and their movements in the year:

	2019	2018
	�m	�m
Increase in cash and cash equivalents	4.1	2.7
Acquisitions - leases/government grant	(0.9)	(0.5)
Principal lease repayments	6.4	-
Repayment of interest-bearing loans and borrowings	57.8	101.7
Borrowings from interest-bearing loans and borrowings	(61.4)	(138.1)
Decrease/(increase) in net debt resulting from cash flows	6.0	(34.2)
� Effect of exchange rate fluctuations on cash held	(0.3)	(0.2)
Effect of exchange rate fluctuations on lease liabilities	0.4	-
Effect of exchange rate fluctuations on debt held	3.0	(3.7)
Effect of exchange rate fluctuations on net debt	3.1	(3.9)

Lease liabilities on adoption of IFRS 16	(22.4)	-
Lease liabilities entered into by the Group during the year	(2.2)	-
Lease liabilities on early terminations	0.5	-
Lease liabilities - non cash transactions	(24.1)	-

Movements in net debt in the year	(15.0)	(38.1)
Net debt at 1 January	(81.0)	(42.9)
Net debt at 31 December ⁽¹⁾	(96.0)	(81.0)

Cash and cash equivalents in the Balance Sheet	18.9	17.5
Bank overdrafts	-	(2.4)
Cash and cash equivalents in the Statement of Cash Flows	18.9	15.1
� Interest-bearing loans and borrowings	(96.7)	(96.1)
� Lease liabilities	(18.2)	-
Net debt at 31 December ⁽¹⁾	(96.0)	(81.0)

�

⁽¹⁾	Net debt at 31 December is not comparable due to the adoption of IFRS 16 on 1 January 2019.

�

12 Financial instruments

This provides details on:

-�� Financial risk management

-�� Derivative financial instruments

-�� Fair value hierarchy

-�� Interest rate profile

-�� Maturity profile of financial liabilities

Financial risk management

The Group's multinational operations and debt financing expose it to a variety of financial risks. In the course of its business, the Group is exposed to foreign currency risk, interest rate risk, liquidity risk and credit risk.

Financial risk management is an integral part of the way the Group is managed. Financial risk management policies are set by the Board of Directors. These policies are implemented by a central treasury department that has formal procedures to manage foreign currency risk, interest rate risk and liquidity risk, including, where appropriate, the use of derivative financial instruments. The Group has clearly defined authority and approval limits built into these procedures.

Foreign currency risk

Foreign currency risk arises both where sale or purchase transactions are undertaken in currencies other than the respective functional currencies of Group companies (transactional exposures) and where the results of overseas companies are consolidated into the Group's reporting currency of Sterling (translational exposures).

The Group has businesses that operate around the world and accordingly record their results in a number of different functional currencies. Some of these operations also have some customers or suppliers that transact in a foreign currency.� The Group's results which are reported in Sterling are therefore exposed to changes in foreign currency exchange rates across a number of different currencies with the most significant exposures relating to the US Dollar (USD), Euro (EUR) and Japanese Yen (JPY). The Group proactively manages a proportion of its short-term transactional foreign currency exposures using derivative financial instruments, but remains exposed to the underlying translational movements which remain outside the control of the Group.

The Group manages its transactional exposures to foreign currency risks through the use of forward exchange contracts including the US Dollar, Euro and Japanese Yen. Forward exchange contracts are typically used to hedge approximately 65% of the Group's forecasted foreign currency exposure in respect of forecast cash transactions for the following 12 months. Forward exchange contracts may also be used to hedge a proportion of the forecast cash transactions for the following 13 to 24 months. The forward exchange contracts currently have maturities of less than one year at the Balance Sheet date.

The Group's translational exposures to foreign currency risks relate to both the Income Statement and net assets of overseas subsidiaries which are converted into Sterling on consolidation. The Group does not seek to hedge the translational exposure that arises primarily from changes in the exchange rates of the US Dollar, Euro and Japanese Yen against Sterling. However the Group does finance overseas investments partly through the use of foreign currency borrowings in order to provide a net investment hedge over the foreign currency risk that arises on translation of its foreign currency subsidiaries.

The Group ensures that its net exposure to foreign denominated cash balances is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. In addition the Group manages the denomination of surplus cash balances across the overseas subsidiaries to allow natural hedging where effective in any particular country.

It is estimated that the Group's adjusted operating profit for the year ended 31 December 2019 would have increased/decreased by approximately �1.7 million from a ten cent stronger/weaker US Dollar against Sterling, by approximately �2.4 million from a ten cent stronger/weaker Euro against Sterling and by approximately �0.4 million from a ten Yen stronger/weaker Japanese Yen against Sterling. This reflects the impact of the sensitivities to the translational exposures and to the proportion of the transactional exposures that are not hedged. The Group, in accordance with its policy, does not use derivatives to manage translational risks. During 2019 the Group's operating profit included a net loss of �1.6 million (2018: �0.6 million profit) in relation to the crystallisation of forward exchange contracts as described later in this note.

It is estimated that the statutory operating profit for the year ended 31 December 2019 would have increased/decreased by �0.8 million from a ten cent stronger/weaker US Dollar against Sterling, by approximately �2.1 million from a ten cent stronger/weaker Euro against Sterling and by approximately �0.4 million from a ten Yen stronger/weaker Japanese Yen against Sterling.

Interest rate risk�

Interest rate risk comprises the interest cash flow risk that results from borrowing at variable rates.��

For the year ended 31 December 2019, it is estimated that a general increase/decrease of one percentage point in interest rates, would decrease/increase the Group's profit before tax by approximately �1.2 million.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group was utilising 64% of the �150 million Multicurrency Revolving Credit Facility as at 31 December 2019. On 14 February 2020, the Group signed a new �165 million five year (with two optional one year extensions) Multicurrency Revolving Credit Facility with a syndicate of five banks. This facility will expire on 14 February 2025 without the utilisation of the extensions.

Credit risk

Credit risk arises because a counterparty may fail to meet its obligations. The Group is exposed to credit risk on financial assets such as trade receivables, cash balances and derivative financial instruments. The Group's maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the Group Balance Sheet.

a) Trade receivables

The Group's credit risk is primarily attributable to its trade receivables. Trade receivables are subject to credit limits, and control and approval procedures in the operating companies. At the Balance Sheet date, the Group's largest customer, which has a high credit rating, accounts for 14% of the gross outstanding trade receivables (2018: 14%) which represents a concentration of credit risk.

b) Cash balances and derivative financial instruments

Credit risk associated with cash balances is managed by transacting with a number of major financial institutions worldwide and periodically reviewing their creditworthiness. Transactions involving derivative financial instruments are managed centrally. These are only with banks that are part of the Group's Multicurrency Revolving Credit Facility Agreement and which have strong credit ratings. Accordingly, the Group's associated credit risk is limited. The Group has no significant concentration of credit risk.

Derivative financial instruments

This is a summary of the derivative financial instruments that the Group holds and uses to manage transactional exposure. The value of these derivatives changes over time in response to underlying variables such as exchange rates. They are carried in the Balance Sheet at fair value.

The fair value of forward exchange contracts is determined by estimating the market value of that contract at the reporting date. Derivatives with a positive fair value are recorded as assets and negative fair values as liabilities, and presented as current or non-current based on their contracted maturity dates.

Contracts with derivative counterparties are based on ISDA Master Agreements. The Group entered into ISDA agreements during the year and has not previously been party to such contracts. Under the terms of these arrangements, only in certain situations will the net amounts owing/receivable to a single counterparty be considered outstanding. The Group does not have the present legal ability to set-off these amounts and so they are not offset in the balance sheet. Of the derivative assets and derivative liabilities recognised in the balance sheet, an amount of �0.3 million would be set-off under enforceable master netting agreements.

Accounting policies

Financial assets classification and measurement

The Group classifies its financial instruments depending on the business model for managing the financial assets and their contractual cash flows. Trade receivables and contract assets are measured at amortised cost while derivatives are measured at fair value through profit or loss unless designated in a qualifying hedging relationship.

Derivative financial instruments

In accordance with Board approved policies, the Group uses derivative financial instruments such as forward foreign exchange contracts to hedge its exposure to fluctuations in foreign exchange rates arising from operational activities. These are designated as cash flow hedges. It does not hold or use derivative financial instruments for trading or speculative purposes.��

Cash flow hedge accounting

Cash flow hedges are used to hedge the variability in cash flows of highly probable forecast transactions caused by changes in exchange rates.��

Where a derivative financial instrument is designated in a cash flow hedge relationship with a highly probable forecast transaction, the effective part of any change in fair value arising is deferred in the cash flow hedging reserve within equity, via the Statement of Comprehensive Income. The gain or loss relating to the ineffective part is recognised in the Income Statement within net finance expense. Amounts deferred in the cash flow hedging reserve are reflected in the Income Statement in the periods when the hedged item is recognised in the Income Statement.��

If a hedging instrument expires or is sold but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.� If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the Income Statement.��

For hedges of foreign currency sales, the Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item and the Group designates the forward exchange rate as the hedged risk. The Group therefore performs a qualitative assessment of effectiveness. In hedges of foreign currency sales, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty.

If a derivative financial instrument is not formally designated in a cash flow hedge relationship, any change in fair value is recognised in the Income Statement.

Forward exchange contracts

The following table shows the forward exchange contracts in place at the Balance Sheet date. These contracts mature in the next 12 months, therefore the cash flows and resulting effect on profit and loss are expected to occur within the next 12 months.


		As at 31 December 2019 millions	Average exchange rate of contracts	As at 31 December 2018 millions	Average exchange rate of contracts

	Currency
Cash flow hedging contracts
USD/GBP forward exchange contracts	USD	11.3	1.31	9.1	1.31
USD/EUR forward exchange contracts	USD	11.3	1.16	30.2	1.20
EUR/GBP forward exchange contracts	EUR	14.2	1.13	15.9	1.09
JPY/GBP forward exchange contracts	JPY	550.0	140.2	542.2	143.5
JPY/EUR forward exchange contracts	JPY	730.0	123.5	891.7	128.9

�

A net loss of �1.6 million (2018: �0.6 million profit) relating to forward exchange contracts was reclassified to the Income Statement, to match the crystallisation of the hedged forecast cash flows which affect the Income Statement.

The table below provides further information on the Group's cash flow hedging relationships:

	2019	2018
	�m	�m
Net forward exchange contracts asset/(liability)	0.3	(1.0)
Maturity dates	January 2020 to December 2020	January 2019 to January 2020
Hedge ration	1:1	1:1
Change in value of hedging instruments since 1 January	(0.4)	(2.1)
Change in value of the hedged item used to determine hedge effectiveness	0.4	2.1

�

The balances and movements into and out of the cash flow hedging reserve are shown in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity respectively. Amounts reclassified from the cash flow hedging reserve to the Consolidated Statement of Comprehensive Income are included in cost of sales.

Fair value hierarchy

The following summarises financial instruments carried at fair values and the major methods and assumptions used in estimating these fair values.�

The different levels of fair value hierarchy have been defined as follows:

Level 1

Fair value measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2

Fair values measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3

Fair values measured using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The carrying values of the Group's financial instruments approximate their fair value. The fair value of floating rate borrowings approximates to the carrying value because interest rates are at floating rates where payments are reset to market rates at intervals of less than one year. The Group's derivative financial instruments are Level 2. The fair value of derivative financial instruments is determined based on the present value of future cash flows using forward exchange rates at the balance sheet date.

Fair value hierarchy

Net investment hedge accounting

The Group uses its US Dollar, Euro and Japanese Yen denominated borrowings as a hedge against the translation exposure on the Group's net investment in overseas companies. The Group designates the spot rate of the loans as the hedging instrument. There was no ineffectiveness to be recognised on hedges of net investments in foreign operations.

Where the hedge is fully effective at hedging the variability in the net assets of such companies caused by changes in exchange rates, the changes in value of the borrowings are recognised in the translation reserve within equity, via the Statement of Comprehensive Income. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Income Statement.

The effective portion will be recycled into the Income Statement on the sale of the foreign operation.

The table below provides further information on the Group's net investment hedging relationships:

	2019	2018
	�m	�m
Hedge ratio	1:1	1:1
Change in value of hedging instruments due to foreign currency movements since 1 January	2.8	3.7
Change in value of the hedged item used to determine hedge effectiveness	(2.8)	(3.7)

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The balances and movements into and out of the foreign currency translation reserve are shown in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity respectively.

Interest-bearing loans and borrowings

The table below analyses the Group's interest-bearing loans and borrowings including bank overdrafts, by currency:

	� Total	Fixed rate borrowings	Floating rate borrowings
Currency	�m	�m	�m
US Dollar	51.7	-	51.7
GB Pound	28.0	-	28.0
Euro	13.5	0.8	12.7
Japanese Yen	3.5	-	3.5
At 31 December 2019	96.7	0.8	95.9
US Dollar	62.5	-	62.5
GB Pound	7.4	-	7.4
Euro	25.0	1.7	23.3
Japanese Yen	3.6	-	3.6
At 31 December 2018	98.5	1.7	96.8

The floating rate borrowings comprise borrowings bearing interest at rates based on LIBOR.

Maturity profile of financial liabilities

The table below analyses the Group's financial liabilities and derivative financial liabilities into relevant maturity groupings based on the period remaining until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always reconcile with the carrying amounts disclosed on the Balance Sheet.

The following are the contractual maturities of financial liabilities, including undiscounted future interest payments:

	� � Carrying amount	� Total contractual cash flows	� � Within one year	� From two to five years	� Greater than five years
	�m	�m	�m	�m	�m
2019
Unsecured interest-bearing loans and borrowings including bank overdrafts ⁽¹⁾	(96.3)	(99.5)	(2.3)	(97.2)	-
Lease liabilities	(18.2)	(20.8)	(6.4)	(9.8)	(4.6)
Trade payables	(31.1)	(31.1)	(31.1)	-	-
Forward exchange contracts outflow	(0.3)	(15.9)	(15.9)	-	-
Total outflows	(145.9)	(167.3)	(55.7)	(107.0)	(4.6)
Forward exchange contracts inflow	-	15.5	15.5	-	-
Net outflows	(145.9)	(151.8)	(40.2)	(107.0)	(4.6)
2018
Unsecured interest-bearing loans and borrowings including bank overdrafts ⁽¹⁾	(98.0)	(103.9)	(5.3)	(98.6)	-
Trade payables	(34.3)	(34.3)	(34.3)	-	-
Forward exchange contracts outflow	(1.1)	(41.3)	(41.3)	-	-
Total outflows	(133.4)	(179.5)	(80.9)	(98.6)	-
Forward exchange contracts inflow	-	39.7	39.7	-	-
Net outflows	(133.4)	(139.8)	(41.2)	(98.6)	-

^�

⁽¹⁾	This excludes an amount of �0.4 million (2018: �0.5 million) of an interest-bearing liability in relation to a government grant which does not meet the definition of a financial liability.

^�

The Group had the following undrawn borrowing facilities at the end of the year:

	2019	2018
Expiring in:	�m	�m
Less than one year
-�� Uncommitted facilities	10.9	8.7
More than one year but not more than five years
-�� Committed facilities	54.5	56.0
Total	65.4	64.7

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13 Glossary of Alternative Performance Measures ("APMs")

APM	Closest equivalent statutory measure	Definition & Purpose
Income Statement Measures
Adjusted gross profit	Gross profit	Calculated as gross profit before charges associated with acquisition of businesses and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. The table below shows a reconciliation: See note 4 " Charges associated with acquisition of businesses and other adjusting items ".
			2019	2018
			�m	�m
		Gross profit	168.3	173.8
		Charges associated with acquisition of businesses and other adjusting items.	1.8	0.3
		Adjusted gross profit	170.1	174.1
Adjusted gross profit margin	None	Calculated as adjusted gross profit divided by revenue.
Adjusted operating profit	Operating profit	Calculated as operating profit before charges associated with acquisition of businesses and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. This is a key management incentive metric. Charges associated with acquisition of businesses include non-cash charges such as amortisation of acquired intangible assets and effect of fair valuation of acquired inventory. Cash charges include items such as transaction costs, earnout and deferred payments and significant costs relating to the integration of acquired businesses. See Consolidated Income Statement for a reconciliation.
Adjusted operating profit margin	None	Calculated as adjusted operating profit divided by revenue. Progression in adjusted operating margin is an indicator of the Group's operating efficiency.
Adjusted operating expenses	Operating expenses	Calculated as operating expenses before charges associated with acquisition of businesses and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. The table below shows a reconciliation: See note 4 " Charges associated with acquisition of businesses and other adjusting items ".
			2019	2018
			�m	�m
		Operating expenses	136.3	133.6
		Charges associated with acquisition of businesses and other adjusting items.	(18.6)	(13.0)
		Adjusted operating expenses	117.7	120.6
Adjusted profit before tax	Profit before tax	Calculated as profit before tax, before charges associated with acquisition of businesses and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. This is a key management incentive metric and is a measure used within the Group's incentive plans as set out in the Remuneration Report. See Consolidated Income Statement for reconciliation.
Adjusted profit after tax	Profit after tax	Calculated as profit after tax before charges associated with acquisition of businesses and other adjusting items. See Consolidated Income Statement for reconciliation.
Adjusted basic earnings per share	Basic earnings per share	Calculated as adjusted profit after tax divided by the weighted average number of ordinary shares in issue during the period. This is a key management incentive metric and is a measure used within the Group's incentive plans as set out in the Remuneration Report. See note 7 "Earnings per share".
Cash Flow Measures
Free cash flow	Net cash from operating activities	Net cash from operating activities after proceeds from property, plant and equipment and software, purchase of property, plant and equipment, and capitalisation of software and development costs. This measure reflects the cash generated in the period that is available to invest in accordance with the Group's capital allocation policy.
Operating cash flow	Net cash from operating activities	Free cash flow before payment of interest, tax, restructuring costs, transaction costs relating to acquisition of businesses and integration costs. This is a measure of the cash generation and working capital efficiency of the Group's operations. Operating cash flow as a percentage of adjusted operating profit is a key management incentive metric.
			2019	2018
			�m	�m
		Net cash from operating activities	48.6	47.4
		Proceeds from sale of property, plant and equipment and software	0.5	0.5
		Purchase of property, plant and equipment	(6.2)	(8.4)
		Capitalisation of software and development costs	(12.4)	(6.0)
		Free cash flow	30.5	33.5
		Add back:
		Interest paid	4.3	2.5
		Tax paid	6.3	4.1
		Payment of restructuring costs, transaction costs relating to acquisition of businesses and integration costs	3.4	4.6
		Operating cash flow	44.5	44.7
		This is a measure used within the Group's incentive plans as set out in the Remuneration Report.
Other Measures
Return on capital employed (ROCE)	None	Calculated as adjusted operating profit for the last twelve months divided by average total assets less current liabilities excluding the current portion of interest-bearing borrowings. This is a measure of the efficiency of the Group's asset base.
Adjusted EBITDA	Operating profit	Calculated as adjusted operating profit for the last twelve months before depreciation of tangible fixed assets and amortisation of intangibles (other than those already excluded from adjusted operating profit).

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Principal risks and uncertainties

In order to achieve its strategic objectives, the Group recognises that it will take on certain business risks. The Group has a well established framework for reviewing and assessing these risks on a regular basis, and has put in place appropriate processes and procedures to mitigate against them. This includes formal risk reviews and risk registers maintained at Group, Divisional and Business unit level.

Vitec aims to take business risks in an informed and proactive manner, such that the level of risk after mitigating action is aligned with the potential business rewards. Management regularly reviews risk exposures against current business-risk level tolerances.

Demand for Vitec's products

Demand for our products may be adversely affected by many factors, including changes in customer and consumer preferences and our ability to deliver appropriate products or to support changes in technology. Demand may be impacted by changes in distribution channels.

The Group increasingly produces and sells products that are more technologically advanced, including encoders, transmitters and on-camera monitors. These products have a shorter life cycle than our historical products, and continuous investment in new product development is needed to keep up with changing demand. Demand may also be impacted by competitor activity, particularly from low-cost countries.�

We value our relationships with our customers and to mitigate this risk we closely monitor our target markets and user requirements. We maintain good relationships with our key customers and make significant investments in product development and marketing activities to ensure that we remain competitive. We complete appropriate market analyses before developing new products to ensure that they are appropriately designed for our target markets. We closely monitor the demand for new products and phase out old product lines. We are actively pursuing growth in selected emerging markets.

We actively pursue a strategy to reduce reliance on traditional market segments through the development of e-commerce platforms, and products for adjacent niche markets.

New markets and channels of distribution

As we enter new markets and channels of distribution we may achieve lower than anticipated trading volumes and pricing levels or higher costs and resource requirements. This may impact the levels of profitability and cash flows delivered.

We expect that the proportion of our business conducted through online channels will continue to increase, and we will continue our investment in new innovative products which address the needs of independent content creators. We are also increasing our presence and investment in APAC.

To mitigate these risks, we have a thorough process for assessing and planning the entry into new markets and related opportunities. This includes marketing and advertising strategies for our products and services. We continuously assess our performance and the related opportunities and risks in these markets. We adapt our approach taking into account our actual and anticipated performance. We review our channels of distribution to make sure that they remain appropriate. Our increased online presence creates IT security and compliance challenges which the Group is continually addressing.

In 2019, we continued to expand our reach with the acquisition of Syrp in New Zealand. The Group announced a significant restructuring investment which will transition the Imaging Solutions Division to improve our digital and e-commerce capabilities.

Acquisitions

In pursuing our business strategy, we continuously explore opportunities to expand our business through development activities such as strategic acquisitions. This involves a number of calculated risks including: acquiring desired businesses on economically acceptable terms; integrating new businesses, employees, business systems and technology; and realising satisfactory post-acquisition performance. We acquired Syrp in 2019 which will increase our addressable markets and expand our higher technology capabilities.�

We mitigate these risks by having a clear acquisition strategy with a robust valuation model. Thorough due diligence processes are completed including the use of external advisors where appropriate. The post-acquisition performance of each business is closely monitored and, before completion of any acquisition, a plan is developed to integrate the acquired businesses in an effective way.

Pricing pressure

Vitec provides premium branded products and faces a number of competitors. The strength of this competition varies by product and geographical market.

We continue to face price pressure from new market entrants, which we are responding to through the launch of new competitive product ranges. We continually review our production and sourcing activities for cost saving opportunities. We have also faced issues relating to parallel trades / price arbitrage particularly in our Imaging Solutions business which led us to enforce "Minimum Advertised Price" where this is permitted.

We ensure that our product and service offering remains competitive by investing in new product development and in appropriate marketing and product support, and by improving the management of supply chain costs. This, and by working closely with our suppliers and managing expenses and cost base appropriately, allows us to support price increases when required. We are rationalising our product range to reduce complexity which will also allow us to achieve some cost saving on production.

Most of our products and services have a premium or niche differentiation. Vitec has in the past exited markets where the margins and sales volumes are unattractive. We continue to monitor our pricing across the main currencies to reflect ongoing fluctuations.

Dependence on key suppliers

We source materials and components from many suppliers in various locations and in some instances are more dependent on a limited number of suppliers for particular items. If any of these suppliers or subcontractors fail to meet the Group's requirements, we may not have readily available alternatives, thereby impacting our ability to provide an appropriate level of customer service.

Our overall dependence on key suppliers has increased over the last few years as a result of the Group's decision to reduce its costs by outsourcing some manufacturing and assembly activities. For several of our products we are heavily dependent on a specific supplier for the provision of core elements of the products.

To address this risk we aim to secure multiple sources of supply for all materials and components, and develop strong relationships with our major suppliers. We review the performance of strategically important suppliers and outsourced providers globally on an ongoing basis. Where economical we look to source materials closer to the manufacturing facilities to reduce lead times and improve control over the supply chain.

The acquisition of Amimon in 2018 and the successful development of alternative raw materials for some products have addressed some areas of exposure; however, this is offset by an increased reliance on vendors within other product groups. The coronavirus outbreak may also result in supply chain disruption (see risk related to Business continuity for more details).

Dependence on key customers

While the Group has a wide customer base, the loss of a key customer, or a significant worsening in their success or financial performance, could result in a material impact on the Group's results.

Vitec's largest customer accounted for marginally more than 10% of the Group's total turnover in 2019. The business also works with a variety of customers on large sporting events and the extent of these activities varies year-on-year. It is possible that the coronavirus outbreak may result in large events being cancelled, which would adversely affect our results.

We mitigate this risk by closely monitoring our performance with all customers through developing strong relationships and dedicated account management teams, and we monitor the financial performance of our key customers and the receivable balances outstanding from them. We continue to expand our customer base including entering into new channels of distribution. The increased investment in digital platforms will enable the Group to better serve end consumers and reduce reliance on third party distributors.

People

We employ around 1,700 people and are exposed to a risk of being unable to retain or recruit suitable diverse talent to support the business. We manufacture and supply products from a number of locations and it is important that our people operate in a professional and safe environment.

The overall risk is reduced due to a strong talent pool at all levels in the organisation. Turnover of management personnel is low; and retention plans are in place for key employees.

We recognise that it is important to motivate and retain capable people across our businesses to ensure we are not exposed to risk of unplanned employee turnover. We reward our people fairly and have appropriate recruitment, appraisal, talent management and succession planning strategies to ensure we recruit and retain diverse, good quality people and leadership across the business. We take our employees' health and safety very seriously and have appropriate processes in place to allow us to monitor and address any issues appropriately.

Laws and regulations

We are subject to a comprehensive range of legal obligations in all countries in which we operate. As a result, we are exposed to many forms of legal risk. These include, without limitation, regulations relating to government contracting rules, taxation, data protection regimes, anti-bribery provisions, competition, and health and safety laws in numerous jurisdictions around the world. Failure to comply with such laws could significantly impact the Group's reputation and could expose the Group to fines and penalties. We may also incur additional cost from any legal action that is required to protect our intellectual property.

The recent increases in tariffs on imports from China to the US has had an adverse effect on the purchase cost for some of our raw materials.

The UK's exit from the European Union (Brexit) may have an impact on rates of duties and other taxes applied to our UK entities' exports and imports after the transition period has ended.� While we expect this to be minimal, there may be other legal, regulatory and commercial ramifications, the likely impact of which are difficult to measure until a final trade agreement is in place between the UK and the EU.

We address this risk by having resources dedicated to legal and regulatory compliance supported by external advice where necessary. We monitor and respond to developments in the regulatory environment in which our companies operate, including the effect of tax changes.

We enhance our controls, processes and employee knowledge to maintain good governance and to comply with laws and regulations. The Group has processes in place, including senior management training, to ensure that its worldwide business units understand and apply the Group's culture and processes to their own operations. We actively protect our intellectual property, and will legally pursue parties that infringe our intellectual property rights.

We have a Brexit steering group which monitors developments and implements contingency measures to minimise the risk of disruption to trade flows which may arise at the end of the transition period, following the UK's exit from the EU. We aim to optimise product flows to reduce incremental tariffs and will review our pricing strategy in response to any changes in input costs, maintaining close contact with our distributors and suppliers. Due to the Group's diversified geographical footprint, and the characteristics of the industry sectors in which the Group operates, we believe that we are well positioned to manage any negative impact.

With regards to the China/US tariffs affecting imports from China into the US, we continually evaluate our pricing and sourcing strategy to mitigate the impact of additional tariff costs.

Reputation of the Group

Damage to our reputation and our brand names can arise from a range of events such as poor product performance, unsatisfactory customer service, and other events either within or outside our control. We are mindful of the increasing levels of regulatory and stakeholder scrutiny of companies' affairs, coupled with the widespread impact of social media.

We manage this risk by recognising the importance of our reputation and attempting to identify any potential issues quickly and address them appropriately. We recognise the importance of providing high quality products, good customer service and managing our business in a safe and professional manner. This requires all employees to commit to, and comply with, the Vitec Code of Conduct. Our IT Policy covers Social Media matters and is communicated to all employees and contractors. A whistleblowing facility is in place to allow employees to confidentially report any compliance issues.

We have implemented a compliance programme with key vendors which includes site inspections and compliance database checks, and we require all vendors to sign up to the Vitec Code of Conduct or equivalent standards.

Exchange rates

The global nature of the Group's business means it is exposed to volatility in currency exchange rates in respect of foreign currency denominated transactions, and the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group is exposed to a number of foreign currencies, the most significant being the US Dollar, Euro and Japanese Yen.

We regularly review and assess our exposure to changes in exchange rates. We reduce the impact of sudden movements in exchange rates with the use of appropriate hedging activities on forecast foreign exchange net exposures. We do not hedge the translation effect of exchange rate movements on the Income Statement or Balance Sheet of overseas subsidiaries. However, the Group does finance overseas investments partly through the use of foreign currency borrowings in order to provide a net investment hedge over the foreign currency risk that arises on translation of its foreign currency subsidiaries.

Business continuity including cyber security

There are risks relating to business continuity resulting from specific events such as natural disasters including earthquakes, floods or fires, or pandemic flu. These may impact our manufacturing plants or supply chain, particularly where these account for a significant amount of our trading activity. We are also dependent on our IT platforms continuing to work effectively in supporting our business and therefore there is a cyber security risk for the Group.

The combination of the Coronavirus (COVID-19) outbreak, which may disrupt our business and our activity in China and elsewhere, together with a general continued business continuity and cyber security threats, has increased this risk.

As regards COVID-19, Vitec employs 53 people in China and China accounts for 5% of the Group turnover. While we do not own any manufacturing sites in China, we do have approximately 25 suppliers of finished goods who are mainly based in the Guangdong province, and we use a third party logistics hub in Yiantian. Any prolonged closure of the manufacturing sites of our Chinese suppliers, as a result of efforts to contain COVID-19, may also affect the availability of key manufacturing components or spare parts sourced from China. Activities in other countries may be impacted, particularly Italy, where Vitec has a significant presence including manufacturing facility.��

We address this risk with Business Continuity Plans and Disaster Recovery Plans at our key sites, and by carrying out periodic IT and cyber security vulnerability assessments. There are standard procedures in place to escalate breaches and remediate IT security incidents.

We have global insurances in place which provide cover for certain business interruption events. We review coverage annually to determine whether adjustments are needed.

We have issued our employees with guidance on business travel to China, and other areas most affected by COVID-19, and are continually evaluating and mitigating any long-term impact of the Coronavirus threat.

Our HR teams are closely monitoring the status of Vitec employees based in China and other high risk locations, and communicating regular advice. The operations teams are in continuous communications with suppliers to assess the supply chain impact and take mitigating steps such as an increased use of air freight to reduce lead times. If the disruption persists in specific locations, it may be possible to switch production to alternative suppliers, or adapt routes to market.

Effectiveness and impact of restructuring

In 2019, we invested in our Imaging Solutions business to improve our digital and e-commerce capabilities. This restructuring of the sales and marketing network will deliver cost savings and margin improvements, and will help the Group develop online sales.

There is a risk that the restructuring activity could be poorly executed and the objectives might not be fully achieved.

To address this risk, projects are monitored closely by senior operational management with regular updates provided to the Board. We anticipate that there will be significant year-on-year savings. The status of the restructuring activities and risks relating to these projects are being carefully monitored.