Disposal and Interim Manageme

RNS Number : 4712W

Vislink PLC

19 November 2010

 



Vislink plc                                                                                                                             

Interim Management Statement

19 November 2010

Vislink plc (the "Group"), the global technology business specialising in secure communications products and services for the news & entertainment, law enforcement & public safety, and marine & energy markets, today issues its Interim Management Statement for the period 1 July 2010 to date.

Corporate activity

In our Interim Results Statement of 25 August 2010, we explained that a review of the future composition of the Group was underway. As a result of this review, the Board has decided to focus the Group on the news & entertainment and the law enforcement & public safety markets which the Board believes, have long-term, sustainable growth and share common technologies.

As a result of this and following approaches that have been made to the Group, the Board has decided to sell the Group's Marine and Energy business.  The Group has entered into a sale and purchase agreement to sell the entire issued share capital of Hernis Scan Systems A/S and its subsidiary holdings ('Hernis') to a subsidiary of Cooper Industries plc., for a total consideration of £32.5 million payable in cash, subject to certain agreed working capital adjustments (the 'M&E Disposal'). The M&E Disposal is being made on a cash free, debt free basis, and consequently the Group will also retain approximately £6.0 million of cash (before expenses) currently held in Hernis.  

Hernis designs, manufactures and sells closed circuit television systems and wireless power products for both the onshore and offshore oil and gas industry and the marine, cruise, naval and related engineering markets.

The M&E Disposal will constitute a Class 1 transaction for the purposes of the UK Listing Authority Listing Rules and is conditional on, inter alia, shareholder approval and clearance by certain regulatory authorities.  Under the terms of the sale and purchase agreement, the Group has given detailed warranties and indemnities and will on completion of the M&E Disposal, deposit £4.9 million in an escrow account pending any claims.  The Board is not aware of any potential material claims.

For the year ended 31December 2009, Hernis recorded an operating profit of £4.6 million and at 31 December 2009 had gross assets of £19.0 million.  For the six months ended 30 June 2010, Hernis recorded an operating profit of £2.8 million and at 30 June 2010 had gross assets £17.6 million. The preceding balances have been extracted without material adjustment from the Group's consolidation schedules for the relevant periods.

Further details of the M&E Disposal together with the notice of the general meeting of the Group to approve the transaction are expected to be sent to shareholders of the Group in early December.  It is expected that the M&E Disposal will complete on 30 December 2010.

In addition, the Board has decided to dispose of Western Technical Services Inc., its services business located on the West Coast of the USA. Negotiations are underway with a number of parties and a sale is expected to be concluded in early 2011 for a consideration of between £2.5 million to £4.5 million subject to negotiation and structure.

On completion of these two disposals (together, the 'Disposals'), the Board believes the Group will be well positioned to accelerate its move into Internet Protocol  ('IP') based systems for the news & entertainment and law enforcement & public safety markets where following its recent investments, the Board believes it is already regarded as a market leader.

The Board intends to consult with shareholders on the use of the proceeds from the Disposals and explain the future direction of the Group. However, the Board currently expects to use part of the proceeds from the Disposals to repay all the Group's current borrowings, to invest further in IP development provided it can maintain superior returns, and to make earnings enhancing acquisitions to achieve scale in its core markets. To this end, the Group is in advanced negotiations to acquire Gigawave, one of its competitors in the broadcast market, and it is hoped that, subject to the completion of the M&E Disposal, the acquisition will be completed early in 2011. The Group expects to pay £5.75 million, of which £1.75 million will be paid on completion, and up to a maximum of £4.0 million will be a deferred earn-out mechanism over the four years following completion. The transaction is expected to be earnings enhancing in its first full year.

Appointment of Chairman

Tim Trotter announced at the 2010 AGM that he would be stepping down as Chairman in 2011.  The Board intends to appoint John Hawkins in succession to Mr Trotter. It is intended that Mr Hawkins will join the Board as a non-executive director and chairman-elect in December 2010.

Mr Hawkins has led a number of companies through successful turnarounds and is currently non-executive Chairman of Psion plc.  He retired in November this year as Chairman of Genus plc where he successfully steered the company from Offex to Aim and then to become a member of the FTSE 250. In the past five years, he also chaired All New Video plc, Salamander Organisation Limited, Easybroker International Limited and as CEO of Atex group  grew the company from a $22 million loss to a $30 million operating profit. There is no further information that falls to be disclosed pursuant to paragraph 9.6.13 of the UK Listing Authority Listing Rules.

Current trading

In our Interim Results Statement, we said that we saw some signs of recovery across the Group though we continue to have limited visibility into all our markets. In the third quarter of the year, we have seen orders increase by 19% and revenue increase by 15% compared to the second quarter. For the nine months to 30 September orders and sales were down 20% and 24% respectively on the same period in 2009 compared with 26% for both metrics at the half year.

The signs of recovery in the news and entertainment market continue. The order intake for the nine months to 30 September was 6% higher than in the same period in 2009 and 36% higher than the second quarter of 2010.  The business won two prizes for its new IP products at the International Broadcasters Convention in September. The marine and energy business continues to recover as the demand for energy increases as worldwide economic growth accelerates. Order intake in the third quarter was 18% higher than the second quarter but is 32% down on the year to 30 September compared to the same period in 2009. The business launched its new camera station product in September.  Our services business has begun to develop traction in the broadband markets into which it is moving, but as we described in the Interim Results Statement, this has been at a slower pace than planned. In Law Enforcement and Public Safety, the challenge remains the timely conversion of opportunities into orders. Whilst order intake in the third quarter was 29% up on the second quarter, the year to date order intake is 30% down on 2009.

The majority of the Group's manufacturing should have moved to contract manufacturers in Asia by June 2011 and this coupled with the consequential cost savings, is expected to reduce the fixed cost base of the Group following the Disposals, to below £27.0 million.

In line with the rest of the industry, the Group continues to experience delays in the award of certain US and overseas security contracts that would have provided our Law Enforcement & Public Safety business unit with organic growth in 2010. Whilst several awards are still expected to be made this year, they may be too late to contribute significantly to revenue in 2010. This would result in Group revenues for the year being at the lower end of market expectations. 

Financial position

There have been no significant changes in the financial position of the Group since the announcement of the half-year results at 30 June 2010 save for the information contained within this Interim Management Statement.

At the end of the third quarter of the year, the Group had net debt of £5.6 million (30 June 2010: net debt £3.4 million) after dividend payments of £1.7 million in the period. This includes approximately £6.0 million of cash on the balance sheet of Marine & Energy which will be retained by the Group on the completion of the M&E Disposal.

Duncan Lewis,

Chief Executive

19 November 2010

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For further information, please contact:

Duncan Lewis, Chief Executive                                                          [phone]

James Trumper, Group Finance Director                                          [phone]

Charlie Jack, Hudson Sandler                                                            [phone]                                                          

About Vislink plc

Vislink plc is a global technology business specialising in secure communications and services for the news & entertainment, law enforcement & public safety and marine & energy markets. The Company has four international business units serving these markets with manufacturing operations in the UK, Norway and the USA.

The Company's strategic focus is the design, manufacture, sale, installation and maintenance of wireless, video and IP technologies together with the supporting management systems. Vislink products include microwave radio, satellite transmission, wireless camera and marine CCTV systems.

Headquartered in the UK with operations in the USA, Norway, Dubai, South Africa and Singapore the Company employs over 400  people worldwide. The Company is fully listed on the London Stock Exchange (LSE:VLK).

For further information, please visit www.vislink.com.

Forward looking statements

Certain statements in this report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

 

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