Videndum Plc (VID.L) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Vitec's Half Year Results Presentation for 2020. I'm Stephen Bird, Group Chief Executive; and with me here is Martin Green, Group Finance Director. Instead of being at the London Stock Exchange today, we're recording this presentation from our head office in Richmond. This morning, we'll start by giving you an insight into how the group has been affected by COVID-19 and how we've responded. I'll also provide a market and strategy update. Martin will take you through the first half financial results, and there will be an opportunity to ask questions at the end. So let's start by setting some context around what's happened over the past few months. Vitech felt the effects of COVID-19 on its supply chain at the end of February, earlier than many others, as half of the group's revenue comes either from products sourced from China or made in Italy. Although, facility closures were a challenge early on, it's really been the impact on end-user demand that has affected us most. Customer demand was significantly impacted from March onwards as our core markets almost completely shut down. Film and scripted TV production was suspended. Sporting events were postponed. Professional photographers were impacted as there were no live events or travel and many retail outlets were closed. April was our worst trading month with revenue down 57% in the month versus the previous year. Trading conditions have improved since then, with May down 50% and June down 42%. We finished H1 with revenues down 35% and a GBP 7 million loss. July has shown further improvement, and combined with our flash for August, we expect that the combined revenue for the 2 months will be down approximately 10% on last year. And this is quite encouraging, even if only a short period of time and not our biggest months. Although the pandemic has had a significant short-term impact on end customer demand, some market segments grew in the first half despite the industry shutdown as more and more video content is being consumed, captured and shared. We expect fundamental and lasting structural change in production as a result of the pandemic. Film and TV companies will need to do things differently to ensure a safer work environment, and this means either more equipment on set or more remote controlled and remote working products to enable physical distancing on sets, on location, in studios or at live events. We believe this could significantly benefit the group and are actively exploring how we can take advantages of these new opportunities. And I'll tell you more about this later. So turning to our response to COVID 19. I'm really proud of how the group has responded to the pandemic. We focused on protecting our people by ensuring a safe working environment, so our operations can continue. We've also been focused on managing the things we can control like cost and cash to preserve the long-term capabilities of the business and to ensure that we come through this period with a healthy organization ready to return to growth. The majority of our manufacturing facilities were actually only shut for 3 weeks, and all of them are now operational, although reflecting production with demand and managing inventory levels very carefully. All of our logistics hubs have remained open throughout the period. We implemented significant and far-reaching mitigating actions to cut costs and protect our cash, and we're using government support where possible. The year-on-year benefit of the cost actions is expected to be between GBP 20 million and GBP 25 million, and we've delivered GBP 13 million of these savings in the first half. We've protected R&D spend to still be able to capitalize on growth opportunities as markets reopen. Our cash performance has been strong with a positive operating cash flow in the first half. That led to net debt at the end of June being GBP 1 million lower than at the same time last year, and we further reinforced the group's liquidity position, and Martin will give you more detail later. Looking forward, it's still a challenging and changing environment. However, we're confident that our end markets will recover well, although it's difficult to predict the pace and shape of recovery. We will continue to action what we can control. And as an example, we will intend to expand the restructuring products in imaging to reflect the acceleration in growth of the e-commerce channel. Now I'm going to briefly look at our markets and strategy and medium-term prospects for each of our 3 divisions. We believe that our end markets are just as relevant or potentially even more relevant than before as people are consuming, capturing and sharing even more content. So as markets recover, the growth prospects for the group are very good. Let's start with Imaging Solutions. In Imaging Solutions, we expect a gradual recovery with continued growth in JOBY Smartphonography accessories, which will offset the decline in the entry-level camera market, which we call the Hobbyist segment. Approximately 60% of the division's revenue comes from our core professional high-end photographic market. We believe that this market is resilient. We're confident that it will recover well post pandemic as studios reopen, travelers resumed and new higher-value compact system cameras are launched, all of which will stimulate demand for our higher end products. Just last week, saw the launch of the new Canon R5 Mirrorless Camera and Sony brought forward the release of their new Alpha 7 model. This is very encouraging news and what we've been waiting for. Approximately 20% of Imaging's revenues come from the Hobbyist segment of low-end photo supports and bags. We continue to expect this to continue to decline as smartphones continue to replace lower value cameras. The growth of JOBY smartphone accessories is expected to offset this weakness driven by the growing number of people using their smartphones to capture and share video content. The launch of the new JOBY products in March this year was a huge success despite the pandemic and despite only being able to initially sell online on joby.com and Amazon. We've just started now to sell into selective mobile phone and consumer electronics stores as they've opened up, and we expect sales to go from strength to strength. JOBY is now the #2 brand for supports in the U.S., behind Manfrotto, which, of course, is #1. Although we expect the market to gradually recover, we do expect further disruption to the traditional photographic retail channel as the pandemic has accelerated the transition to the higher-margin e-commerce channel. And we intend to expand the scope of the restructuring project to benefit from this change. So here's a short video, which will give you a flavor of the launch of the new JOBY products earlier this year. [Presentation]

JOBY is very important to us strategically, taking advantage of the growth in smartphone news, so I'm delighted that JOBY has grown so well despite the pandemic. Now let's look at Production Solutions. We expect a solid recovery from production solutions with continued growth in on-location productions, including news and sport and in our LED lighting and mobile power products for the broadcast, cine and independent content creator markets. This is where we're focusing our investment and new business development. TV and film productions and live events have begun to adapt to safe working guidelines with a restricted number of crew allowed onset to allow for physical distancing. These new guidelines should drive demand for remote control products like our robotic cameras and prompters, although short-term equipment budgets could be constrained. We expect 2021 and 2022 to be bumper years for sporting events, for example, with the rescheduled European Football Championships and the Summer Olympics. We are confident that 2021 will be a strong year of growth for us even if sporting events continue to be held behind closed doors and even if some of them are canceled. Finally, we will drive further margin improvements in the division through continued lean manufacturing initiatives. Now on to Creative Solutions. Creative Solutions is potentially our greatest area of growth and opportunity. Despite the cine market being completely shut down and only just now reopening, the division has seen a strong performance in products, which facilitate live streaming. Although there is uncertainty about when production sets will open up fully, we're now even more confident that when this happens, we're going to see significant multiyear growth driven by 3 main things. First, we expect a strong bounce back in the volume of new productions as there's enormous pent-up demand for new film and scripted TV content. The chart on this slide shows a CAGR of 25% for spend on original content between 2019 and 2023. Once markets open up fully, spending on equipment should recover quickly. Second, we will benefit from the adoption of 4K equipment to replace the existing base of HD equipment. We've already launched our 4K transmitters and the good news is that last week, we launched our 4K monitors. These have been incredibly well received by our customers and orders are already significantly ahead of our expectations, and we'll be shipping in September. We're uniquely placed to benefit from the replacement cycle and see another wave of multiyear growth. And third, as a result of the pandemic, more equipment is going to be needed to facilitate safe working. In the U.S., there are already regulations requiring more monitors and fewer people on set. So this will drive not only more monitors on the set, but an increase in near set and remote monitoring and remote production, all of which is excellent news for our ecosystem on monitors and transmitters. Here's a video now from Nicol to explain more about the opportunities in Creative Solutions. [Presentation]

Hopefully, you can see from the video that once sets fully open up, we expect a strong bounce back in Creative Solutions from the increasing spend in original content, the 4K replacement cycle and the need for more [ modest ] set and remote monitoring, all to allow safe working. Now I'll hand over to Martin for the financial review.

Thank you, Stephen. I'll now outline our financial results for the half, including our liquidity position and performances within the divisions. As previously communicated, we've been hit hard by the pandemic, which is reflected in the results. Initially, it affected our operations, although the majority of our manufacturing facilities were only shut for 3 weeks, and all of them are now operational. Subsequently, we were affected by significantly lower demand which was the principal driver of the group's revenue decline of 35%, the peak impact being in April. Since then, we have seen an improving trend as the markets start to recover slowly. Gross margin was significantly lower due to the lower volume of sales, though pricing has been stable. Note that 2019 margin includes a 3 percentage point benefit from SmallHD insurance proceeds, as previously reported. To combat the decline in demand, we took significant actions to reduce our cost base and manage cash. We implemented a company-wide program of salary reductions and froze recruitment. Many staff went on short time working. We reduced production levels to manage inventory, postponed all nonessential capital expenditure and reduced all nonessential operating spend. Our cost actions delivered GBP 13 million of savings in the half, which included GBP 1.7 million of government support, the majority of which was in Italy as well as the U.K. Furlough Scheme. We also benefited from GBP 2.1 million of savings in Imaging Solutions from the previously announced restructuring. Nonetheless, we made a half year operating loss of GBP 4.4 million. Net finance expense of GBP 2.6 million includes GBP 0.5 million of amortization of upfront fees. As previously announced, we expect net finance expense for the full year to be GBP 1 million higher than in 2019 at around GBP 6 million, which reflects higher interest costs in H2 from the amended revolving credit facility. The group's effective tax rate and adjusted loss was 36% in the first half. Our expectation for the full year ETR is unchanged at 25%. We are not paying an interim dividend to preserve flexibility, but plan to resume dividend payments as soon as is practicable. Turning to cash generation. While the pandemic impacted profits heavily, we've managed our cash and debt position well. Operating cash flow was positive despite the operating loss. There was a GBP 5.4 million cash inflow from lower working capital versus a cash outflow in the prior period of GBP 8.7 million. This was mainly driven by a GBP 15.1 million reduction in trade receivables due to lower sales and tight control on customer collections, partly offset by GBP 9.9 million decrease in trade payables due to lower purchases in response to lower demand and the focus on managing cash. Despite lower sales, we also benefited from a slight decrease in inventory at constant FX compared with the usual increase seen in the prior period. This was driven by actions taken by management to flex purchases and production to match the reduced demand. On a reported basis, inventory at June 2020 was GBP 5.7 million lower than at June 2019. Net trade receivables and payables were a GBP 5.2 million inflow compared to the GBP 3.8 million inflow in the prior period. We also benefited from around GBP 3 million of deferred tax payments, and so we saw a smaller reduction in [ other ] payables than in the prior period. Whilst capital expenditure increased year-on-year, this included GBP 1.4 million of spend in relation to the postponed Tokyo Olympics. The assets purchase will be used in 2021 and beyond. We've sought to protect R&D investment and so capitalized development costs only slightly lower than the level seen in H2 2019. Amortization in H2 '20 will increase as we launch new products and expect it to be around GBP 5 million for the full year. Interest paid increased by GBP 1.4 million, mainly due to the payment of the RCF upfront and arrangement fees. Earnouts and retention bonuses are in relation to Rycote and Amimon, respectively. Restructuring cash primarily relates to Imaging Solutions. Turning now to net debt. Net debt was GBP 11.4 million higher than in December 2019. This includes a GBP 4.3 million increase due to FX, primarily driven by a strengthening dollar. Net debt was GBP 1 million lower than at this point last year. In addition to managing our cash tightly, as previously announced, we've sought to reinforce our liquidity position by agreeing revised covenants to the end of 2020 under our RCF. We've also accessed GBP 50 million under the U.K. government's CCFF. Our total available liquidity at the end of June was GBP 128.4 million, largely from our RCF, where we are only currently using 34%. As previously communicated, based on current expectations and subject to FX fluctuations, we expect net debt at the end of 2020 to be broadly similar to that at the end of 2019. Now let's look a bit more on the performance of each of our divisions. Demand in all divisions has been impacted by the pandemic. In Imaging Solutions, we've been severely impacted by restrictions on travel and events such as weddings. This has impacted both the high end professional market and the entry-level hobbyist market. Retailer destocking has been impacted by COVID-19, and although, it'll be worse in 2020 than we have previously anticipated, the full year impact is expected to be less than in 2019. The pandemic has accelerated to shift online, from which we are well placed to take advantage following the previously announced restructuring to move to the higher-margin e-commerce channel. In half 1 2020, we incurred GBP 0.2 million of expense and GBP 1.3 million of cash costs and delivered GBP 2.1 million of savings in relation to the restructuring. We saw growth in JOBY smartphone accessories, such as its new vlogging kit. And in B2B, growth has been driven by the sale of products to support thermal cameras. Production Solutions suffered severely from the reduction in the production of broadcast TV and cine scripted content and the postponement of live sporting events. Prompting has been more resilient as new ways of working are adopted and content is created from home. Litepanels benefited from royalties in relation to new licensees of its intellectual property, which were not in 2019. The pause in filming of scripted TV shows and cinema productions has had a significant impact on Creative Solutions. This was a factor in our decision to delay the launch of our full range of 4K products, which has just happened, as Stephen mentioned. The second quarter saw growth in IP products in the enterprise and independent content creator markets who turned to Teradek as a trusted supplier to help them live stream news and information from home. Lower corporate costs are due to tight control of expenditure and lower LTIP and bonus accruals. I will now hand back to Stephen to summarize.

Thank you, Martin. So to summarize, COVID-19 significantly impacted our financial performance in the first half. We acted quickly to reduce our cost base, manage our cash and reinforce our liquidity, and the response of our teams has been outstanding. Although the pandemic has affected short-term customer demand, we are confident that our market drivers are just as relevant, if not actually more relevant than before. And we're also well placed to benefit over time from structural changes in the market. We expect the group will emerge from this challenging period with an enhanced competitive position, well placed to return to growth once our markets fully reopen. Now that concludes the formal presentation. We're now going to move on to our question-and-answer session. So I'd now like to hand over to the operator. Thank you.

[Operator Instructions] We will take our first question from Andrew Douglas from Jefferies.

I have 3 questions, please, if I may. First one is just regarding -- is regarding the cost savings and the benefits that we're expecting to get in the second half. Clearly, we'll have some of the unwinding of that of the benefit you had. Can we just talk about 2021? And how much of these temporary cost savings will unwind as we go into next year? And then two, on the divisions on the market. I just wondered if you could talk to us about the competitive position of Creative Solutions. And I'm assuming that, that strengthened through the period. And I was just wondering also on Amimon. Have we seen anything specific that's driving the move into sports slowing down a little bit? Or is that more market related?

Sure. Andy, thanks for your question. If it's okay, I'll probably take the second question first, and then I will just talk about the cost savings next year. In terms of Creative Solutions, competitive position, yes, you're absolutely right. I mean, one of the reasons that we bought Amimon was to get control of the technology, which is unique, and nobody else can replicate. And we are the only people who have the 4K chips in the world. So there were some old HD chips from Amimon that give 0 delay that Amimon had sold to us prior to us buying the company. So there were some of those chips running around, and there were some Chinese companies who had a small number, and we're getting some sales. But it was in the fairly low single-digit millions of dollars. That has all pretty much dried up. So the competitive position of Teradek is now extremely strong. So we are the only people with the 4K technology and the 0 delay technology. And as a result, clearly, that's a very positive thing. In terms of the broadcast situation, we have taken a decision at the moment to put that on pause. Broadcast sports, as you can imagine, is in disarray. And it will be a very bad time to go in and tell them about exciting new technology that they need to trial because they just don't have the bandwidth to handle that sort of thing at the moment. They're really trying to just basically stay above water. What we have done is switched our resources onto IP streaming -- onto our streaming product. So the streaming products are doing incredibly well. So our streaming business, although it's not huge, last year, it was about $10 million of sales, that's going to double this year. So that business has doubled through the first half, in fact, a bit more than that. So that is where we sell products that allow people to stream high-quality video using Wi-Fi but high quality video to people's homes and devices and so on in a way that you just can't do with other platforms such as Zoom and things like that. So the competitive situation is very strong. The Amimon technology is enormously strong. We have switched into focusing on streaming. Streaming is a big new opportunity for us. So we are in a unique position to be able now, as we come out of the crisis, to help our customers monitor on set. So deliver wirelessly the 4K HDR image on set to a monitor on set, but then also to be able to deliver that image to near set monitoring. So people in a room nearby but also to monitoring at home, which we are doing through our live streaming. So this is potentially enormously exciting. In terms of cost savings, Martin is going to quickly answer that. I mean, clearly, we've been working very hard to take cost out of the business, and we've had enormous support from our people. So from the obvious cases of, obviously, freezing headcount and reducing salaries and not paying bonuses. Clearly, some of that cost will come back next year. I mean, exactly how much, who knows. But given that we expect recovery next year, maybe not full recovery, but certainly significant recovery. Some of that cost will come back, but some -- it will still allow us to deliver, I think, a very acceptable performance next year. Martin, do you want to add anything to that?

Yes, I think there's 2 things, Andy, one is, obviously, we've had GBP 1.7 million of government support so far, and that will probably not be repeated next year. I mean the furlough scheme in the U.K. is ending. The Italian [ integration ] will probably not be needed next year, assuming volumes return. And there are several million pounds we've had from short time working, which, as Stephen said, as markets recover and as we increase production, we would expect to incur next year. But obviously, that will be more than offset by the fact that we are producing products.

Okay. And is that so -- yes. That's perfect. Just 1 quick follow-on. With regards to the launch of the 4K monitors and now that you have the full ecosystem in place, are you able to share with us what you think the replacement opportunity is over the next -- and again, you can put the number of years you want, I don't mind, for kind of replacing [ Convex ], SmallHD and potentially some of your competitors' products, given you've got unique infrastructure?

Sure. So I mean, clearly, this is big news. We've launched the monitors. We won't probably be shipping until early next -- early September, so we have launched them 2 customers, and the response has been absolutely phenomenal. So we're extremely pleased with that. I mean, the timing is pretty good. People are starting to now obviously come out of lock down and looking forward to the future and monitoring in 4K and HDR, and the HDR piece is as important as the 4K piece. It's hugely exciting. And as you've probably seen, if you managed to watch the video, the regulations are now such that you need to have fewer people on set. So the remote monitoring piece is enormously important. And you need to have more monitors on set because you don't want lots of people crowding around the same monitors. So all of this looks enormously exciting. The replacement, I don't want to be too precise about the replacement market, but the replacement market is very large for us. So it is all of the stuff that we've sold plus what our competitors have sold in the last 5 or 6 years of HD monitors -- sorry, HD transmitters and monitors. So in terms of volume of units, the park out there to replace is something like 120,000 units. We're talking about a multiyear opportunity and we're talking about hundreds of millions of dollars. It's that sort of size. So clearly, when this comes back, this wave of adoption of 4K and HDR is going to be transformational for Creative Solutions. The caution is the recovery hasn't yet really started to happen, and we're just starting to smell it and see it and starting to see rental companies picking stuff up. But when it does come, it should be very exciting. And as we said, I think, clearly, there's pent-up demand to start these productions going. If you're going to be monitoring and you're going to be buying monitors, you're going to buy 4K HDR monitors because you -- why not, wouldn't you? And we are the only game in town to do that. So potentially, this is, as you asked before, competitively a very strong place for us to be because no competitor can match this. And it is just a question of when the recovery comes. So that's about as specific as I'd like to be on this, okay?

[Operator Instructions] We will take our next question from Anthony Plom from Berenberg.

I just have a couple of questions, please. Maybe just a little bit more color on the gross margin change. So I understand, obviously, 3 percentage points out of the 10 are due to a SmallHD. So I was just wondering if there's any notable mix impact there or any sort of discount price at all in the first half. And then second question was, do you mind just talking a little bit more about your competition, I guess, how they said over the past few months? I suppose more specifically the [indiscernible], that would be quite useful.

Yes. Okay. Anthony, good questions. I'll let Martin talk a little bit about more margin in a second because he will have perhaps a bit more granular detail. But I mean, very simply, there's nothing in there to be concerned about. I think that the margins pretty much, as you would expect, certainly no pricing issues. I mean, pricing if anything has held up really well. There's no evidence that we're under enormous price pressure. And that's because -- it kind of leads to your second question, the competitive scene has got much better for us. So our competitors are struggling more. We're not seeing a lot of price pressure. And actually, if you look at our pricing, our pricing has held up very well and referencing Andy's question about Creative Solutions, competition in that area is weaker. So competition on Creative Solutions is weaker. And because we're introducing our new products with 4K, we'll be -- we're able to get our prices up and charge an appropriate premium for those products. So competitive situation is very strong. I don't want to comment too much on it more specifically. There's some public information about them. You can see their trading. I actually don't know trading update reasonably recently. We know that they are trying to switch into streaming, which is where we are succeeding at the moment. So our streaming business, as I said, has doubled, and they've seen that, and they know we make good margins. I think that means that they are less focused probably on trying to get into high end monitors. That's a supposition, but I think that's probably what you'd read into their trading update. In terms of margins, Martin, do you just want to...

Yes, the only thing to say is almost all volume. So as Stephen said, there's no price impact. I don't know if there's any particular mix impact we felt. So all we've had is basically lower volumes to -- which obviously, don't cover our -- as much of our fixed costs, so there's not so much of a contribution to our variable cost. That's probably what I really want to say about it. There's no FX impact. It's basically all being related to volume.

Does that -- does that make sense? I don't want to comment but in terms of -- I don't want to take too much more. I mean in terms of -- I mean, as you know, we've not got a lot of competition, direct competition. So where are we feeling direct competition? Nowhere really. I mean without sounding complacent. There are no big competitors causing us problems. Atomos are not causing those problems. Chinese competition against Manfrotto and JOBY is definitely weaker. So there are a -- there is some consolidation going on in that market and some of the competitors are definitely struggling. Competition in Creative Solutions is definitely less strong. So as I said, I think in the video, we will be in a stronger competitive position. There's no doubt about that. And you know that we have nice positions in niche markets that give us good pricing power. So I think all that side of things is pretty good. I mean, everything feels like it's coming together very well as long as we see some sort of recovery soon, which we expect to.

[Operator Instructions] We do not have any questions. We do actually -- sorry, we have one question from Andrew Douglas from Jefferies.

Just a quick follow-up. Are you able to go into more detail about Imaging Solutions and the restructuring that you're undertaking there, just so we can understand exactly kind of what it is that you're doing. And can you just give me an idea of how much or percentage of sales are online now? I guess it's probably [ camouflaged ] for the fact that retail hasn't been open, but can you can just give us an indication, that would be really helpful.

Sure. Okay. So in terms of the restructuring, what we're doing is just looking to expand a bit more what we've done before. So I can't be too explicit about what we're doing because we clearly have -- it does involve talking to some of our people. But we are looking at further polarization of the customer base. And as you know, we've taken some actions to focus more on our digital marketing capabilities on a particularly European and global basis. So we're just looking at doing a little bit more of that. It's nothing massive, but just to take advantage of that, we are seeing -- which is really your second question, we are seeing, obviously, the percentage of our business that is going through e-commerce increasing significantly. So in the U.S., which is probably the most developed market, 60% of our imaging products were sold online before the crisis. It's now, as you can imagine, a lot more than that. So we are looking at adapting ourselves to that to make sure we take advantage of the e-commerce trend. We actually make higher margins on e-commerce. So if we manage this correctly, there shouldn't be a problem for us. Sorry, what was the second part of your question, Andy?

I think that -- what percentage of sales are online?

Yes. So I mean, broadly, right now, the U.S. is over 60%. I don't know exactly how much over 60% is kind of varying. But as you can imagine, if you took a particular month when all retail was shut down and Amazon were the only people around that it was probably 70% or 80%. Because Amazon, as you can imagine, done very well, so have B&H. In Europe, it's less than that, but obviously growing. So in Europe, it's more like sort of 40% to 50%. And the interesting -- so the other key kind of -- sorry, just the other key thing is what we've developed is a sort of index of how open our customers are. So how many of our customers' retail outlets or productions or whatever are open. It's a very rough index. But if you start before the crisis is the 100%, the Imaging business got very shutdown, so sort of 60%, 70% shutdown in April. We now think it's only sort of 15% shutdown. So it has opened up a lot recently, which is enormously encouraging. E-commerce obviously been strong on the way through, but we are seeing retail opening up. And that correlates with the orders that we're getting from imaging. So as we said in the note, July was encouraging. We've seen a significant increase in orders in July. So Imaging's orders in July were actually higher than the period last year. So that's a bit of a one-off. And you could say that last year it was a bit of a weak comparison. You could also say there's a bit of phasing. We've had a couple of large orders coming in from customers who want to get hold of stock and make sure that they're planning for things like Black Friday and so on. But so you can carry out as much as you like, but I can tell you it's good news, and I'm really, really pleased about it. So imaging is tracking the reopening of customers. What's interesting is Creative Solutions is still pretty shut down. But delivering really -- I mean considering that, they're pretty much 80%, 90% shutdown. So 80% or 90% of the customers that we were normally dealing with are shut, rental houses are shut, they're just starting to open. Despite that, Imaging -- Creative Solution has done a really good job getting business through live streaming and so on. And actually, their revenue last month was extraordinarily good compared to the shutdown in the market. As that market picks up, as I think I've said before, we are very confident that things are going to pick up significantly.

And whilst I'm on, in Production Solutions, it looks like you're using the same third-party logistics provider that Imaging Solutions are, which will help drive operational efficiencies. Excuse my ignorance, are there more opportunities like that across the division to drive efficiency gains? I'm assuming that's all part of the...

Yes, there are. I mean, that's kind of good day-to-day business. We're continually doing that. So there are -- we generally want to drive at least 3% productivity efficiency in our businesses every year through operational improvement, which can range from better sourcing to more efficiency in your factory, lean manufacturing, putting your third-party logistics suppliers together. So yes, there's always going to be a bit more of that in Imaging. One of the other things we're looking at in terms of driving -- so you should continue to expect an improvement in productivity and margins. One of the things we're looking to do is to try and become less reliant on China. And do more ourselves. So in the medium term, we want to bring back as much production as we can out of China. Into our own facilities. So something like the Gorilla port would be something that we would want to do that for strategic reasons, but also for financial reasons because Feltre is so efficient. It's phenomenally efficient and automated factory. Okay. We've had 1 question that's come in by e-mail to us. So I'm not sure the person is on the line or not, but the question was about what's the -- been the reception to the Canon R5? And will it make up for the poor performance of the last version. Our experts in our team who are -- some of whom are extremely interested in what Canon do because they are Canon users and have been Canon users forever, and we're disappointed with the last one. I can tell you enormously excited about it. I won't tell you in detail about why they're so excited about it because some of the technical issues are I don't understand myself, but the Canon is enormously -- has been enormously well received. So the model is the R5. So if you look it up and google it, you'll see that. And that is clearly what we've been waiting for. So now we've been probably waiting for that for couple of years actually. And as a result, we believe Sony had brought forward their camera launch. So yes, that is exciting. And we'll wait and see, but having a new Canon compact system camera in the market means that most Canon users are going to switch over to it. They can use their existing lenses and Canon are famous for their lenses. They can use our existing lenses on that new body. And that should be really exciting. And that's one of the reasons we think the Professional segment is going to be a very key [indiscernible] segment is going to be very resilient. The other question -- it's slightly less easy to answer is what's the total addressable market for JOBY. So JOBY, that's a difficult one to answer. I can tell you that JOBY is strategically hugely important to us. It's a big success story. So despite everything that's been going on and despite the fact that we launched it at probably the worst time we possibly could, just as the shutdown happened, and despite the fact we're only able to launch it on joby.com and Amazon, JOBY has grown really well. It's a very exciting success story. And obviously, it's all about us taking advantage of the shift to -- from low-end cameras to smartphones, and we're all using our smartphones more than we were before. So we're seeing real growth there, which is offsetting that decline in the low end camera market. JOBY today is around -- this year will be around about $25 million, $30 million of sales. Will grow -- and that's in a very difficult market, will grow significantly next year. The total addressable market is really down to us to grow. But I think that in terms of accessories that help you take better video with your smartphones is kind of almost open-ended market and as big as we can make it. So I mean, technically, the market for that -- for those sort of accessories is probably sort of GBP 100 million or so. And I've got one more question apparently on -- it's come in, which is about M&A opportunities. Are there any new M&A opportunities emerging from the crisis? The answer to that is yes. Right now, there's nothing huge that we're looking at immediately. There are some smaller opportunities. There are some companies who are clearly doing less well than us, and there are some companies that have really struggled. So we are looking at a number of opportunities. But right now, the focus is on really just getting everyone back to work and making sure we're taking advantage of the existing market, but we will continue to look at opportunities. We are good at acquisitions, and it may well be that something comes up over the next 12 months, but at the moment, nothing significant. Are there any more questions? Thank you for those questions we've...

We have one question over the phone from Kevin Fogarty from Numis.

I just needed a clarification, and I'm sorry if I missed it earlier, but as you sort of look towards the second half of the year, just given sort of ongoing changes, restructurings, et cetera. Are there any sort of -- what sort of significant exceptional cost or cash outflow should we think about? And here, I guess, any sort of cost of restructuring earn-outs, et cetera. Just if you could help clarify that, that'd be great.

Yes, sure. Maybe, Martin, you can you can take that?

Yes, sure. So in terms of earn-outs or anything unusual besides restructuring, which I'll come back to, the answer is, no, nothing significant or unusual. I think in relation to restructuring, as Stephen said, I think we previously guided the overall cost of the Imaging restructuring will be about GBP 9 million, and we have given figures for how much cash was spent in the first half of the restructuring, it may be a little bit higher in the second half, depending on the extent of the expansion of the restructuring we plan to do later this year, but not hugely -- not huge, so probably low single-digit millions in terms of cash out on top of what we've already said.

Okay. Have we got any other questions?

We appear to have no further questions over the phone at this time.

Okay. Well, maybe -- if I'm still on, I'm not being cut off yet. Just thanks, everybody. I know this is a kind of weird thing talking to you like this, but hopefully, it's worked well. And hopefully, you'll manage to see the presentation. We -- obviously, you can -- we'll send everybody another link so that you can all see it, if you've missed any of it or had technical difficulties. We are enormously confident about the business, the end drivers. It's been obviously very, very difficult. And obviously, the results are very, very challenging so far, but we are seeing improvement. And we do believe that although the process has been enormously challenging for everyone, people are consuming more content that's driving more content creation and more sharing of content, and we're seeing really -- a real increase in our potential end markets. And for those of you who have not got a GorillaPod, if you haven't got a GorillaPod, you should have a GorillaPod for all these Zoom calls and talking with people on FaceTime. And so I hope it's not going to offend anybody, but if you would like a GorillaPod, please let us know and we'll make sure we get one to you because you'll find it enormously useful and it will improve your lives. So anyway, I hope everyone's well. And obviously, we'll be very happy to catch up with the people one-on-one at sometime in the future. Okay. Thank you very much.