Final Results
Vislink PLC
28 March 2007
Vislink plc
Results for the year ended 31 December 2006
Vislink plc ('The Group') is a leading supplier of microwave and satellite video
and data links for the broadcast, defence, law enforcement and security markets
and of integrated CCTV systems for the marine safety market. Today the Group
announces its results for the year ended 31 December 2006.
Financial summary
----------------------------------- -------- --------
For the year ended 31 December 2006 £'000 2005
£'000
----------------------------------- -------- --------
Revenue 100,498 85,072
Operating profit 12,939 7,141
Adjusted* operating profit 14,303 8,348
Profit before tax 12,675 6,365
Earnings per share - basic 5.65p 2.66p
Earnings per share - adjusted* basic 6.35p 3.30p
----------------------------------- -------- --------
*Adjusted operating profit is operating profit before amortisation of acquired
intangibles. Adjusted earnings per share are calculated on the same basis.
Key points
• Group revenue was up 18% to £100.5 million
• Group adjusted operating profit was up 71% to £14.3 million
• Sales growth of 29% into target markets of defence, law enforcement and
security
• Adjusted earnings per share increased by 92% to 6.35 pence
• The Board recommends an increased dividend up by 100% to 1.0 pence per
share
• Group cash generation was strong; the year ended with net funds of £3.9
million.
Bob Morton, Chairman of Vislink plc, said:
'I am pleased to report that the Group has had another strong trading year
following on the success achieved in 2005. With record profits, a clear
strategy, good order books and a positive cashflow the Group is well placed for
future growth.'
- Ends -
Enquiries:
Vislink
Ian Scott-Gall, Chief Executive 01488 685500
James Trumper, Group Finance Director 01488 685500
Hudson Sandler
Andrew Hayes 020 7796 4133
James White 020 7796 4133
CHAIRMAN'S INTRODUCTION
I am pleased to report that the Group has had another strong trading year
following on from the success achieved in 2005. This has culminated in the Group
being promoted to the all share index in December 2006. With record profits, a
clear strategy, good order books and a positive cashflow the Group is well
placed for future growth.
This year's record performance was achieved while continuing to invest in our
operational capabilities. The success of our proven technology in the broadcast
industry is enabling the Group to address the defence, law enforcement and
security markets where we achieved revenue growth of 29%. To build on this
progress we have continued to invest for the future. Our research and
development costs increased by 10% to £5.4 million (2005 - £4.9 million). This
is being supported by investment in additional marketing capabilities across the
Group. As a result, our new products have won a series of technology awards
during the year and the Group has delivered organic growth.
Another record year
Group revenues increased by 18% to £100.5 million (2005 - £85.1 million). The
Group's adjusted operating profit, being operating profit before the
amortisation of acquired intangibles, increased by 71% to £14.3 million (2005 -
£8.3 million). The adjusted profit margin also improved significantly to 14.2%
of sales (2005 - 9.8%). The reported operating profit was £12.9 million (2005 -
£7.1 million).
Pre-tax profit rose to £12.7 million (2005 - £6.4 million). The Group's cash
inflow from operating activities was £8.4 million (2005 - £6.5 million) and the
Group ended the year with net funds of £3.9 million (2005 - £ 2.2 million).
Shareholder returns
Adjusted earnings per share increased by 92% to 6.35 pence (2005 - 3.30 pence)
and basic earnings per share were 5.65 pence (2005 - 2.66 pence). Given this
strong performance, the Board is proposing a 100% increase in the full-year
dividend to 1.0 pence per share (2005 - 0.50 pence).
Board and management changes
Len Mann, our Chief Technology Officer, will step down from his executive role
on March 31, 2007. Len was a founder and the managing director of Link Research
Limited and has played a key role in their successful integration into the Group
since the acquisition in 2005. I am pleased to report that Len will remain on
the Board as a non-executive director. Mike Payne, the Vice President of
Marketing and Business Development at MRC has been appointed the Group Chief
Technology Officer with effect from April 1, 2007.
After fourteen years as Chairman of the Group I have decided that the time has
come for a change and I will therefore not be standing for re-election at the
next Annual General Meeting. I am pleased that the Board has decided to appoint
Tim Trotter, our senior independent non-executive director, as Chairman elect in
my place and I thank all my colleagues past and present for their help and
support during my term as Chairman.
Employees
I would like to conclude by thanking the Board, management and employees for
their support and dedication that has been integral to our record year.
Prospects
The prospects for 2007 are encouraging. The Group has started the year with a
forward order book of £34.7 million (2005 - £38.8 million).
Advent, Link and MRC are all benefiting from increased demand in the
international broadcast markets outside of North America. In addition MRC is
expected to continue to benefit from the re-channelisation programme in the US
through 2007 and 2008. The UK business, through Link's supply of OEM equipment,
will also benefit from the programme.
Building on the growth achieved in 2006, we are continuing to target the
worldwide defence, law enforcement and security markets, which offer good
opportunities for growth for the Group beyond the US re-channelisation programme
for Advent, Link and MRC.
Hernis has entered 2007 with a record order book. The marine, offshore and
onshore markets all remain strong for Hernis. Their growth has been fuelled by
the high oil price and the increasing demand for natural resources that has
encouraged investment in a number of shipping and exploration projects around
the world by the oil and gas industry.
In summary, we have a clear strategy for the development of our markets and our
products in order to maintain organic growth across the Group's businesses. The
board looks forward to 2007 with confidence.
ALR Morton
Chairman
CHIEF EXECUTIVE'S STRATEGY REVIEW
Objectives: broadcast and beyond
Our strategy is to deliver increasing shareholder value by building upon our
market leading positions in the marine safety and broadcast markets, whilst
increasing our capacity to capitalise on the growing defence, law enforcement
and security markets ('DLES') through investment in our product offering and the
development of our sales channels. Our businesses will continue to evolve as
technologies develop and market opportunities and conditions change. The Group
has a number of strategic objectives, which are to:
1. Maintain market leadership in the television broadcast contribution
technology segment
2. Remain the world leader for the provision of intrinsically safe marine CCTV
systems
3. Become a global provider of high quality wireless transmission systems for
defence, law enforcement and security markets
4. Evolve our product offering to meet the specific needs of new growth
markets
5. Seek out earnings enhancing strategic acquisitions.
Broadcast Market
We aim to maintain our strong position in the existing markets for professional
television contribution technologies and continue to deliver organic growth by
investing in people, new products and technologies.
Our broadcast products continue to offer the most flexible range of TV
contribution technology systems that enable the transmission of live news and
sports. The different applications of live contribution technology define our
broadcast markets. We are developing new products to meet the increasing demands
for greater mobility, High Definition (HD) and IP based systems. We see the move
from Standard Definition (SD) to HD within the professional broadcast market as
a strong growth opportunity.
Defence, Law Enforcement and Security Market (DLES)
We believe that there is a major opportunity for our products and technologies
by developing new and existing global sales channels to the DLES markets. These
markets require communication systems that are mobile, are able to deal with
difficult environments with minimal infrastructure whilst providing high
bandwidth, high quality video and high-speed data transmission. There is a
significant trend towards the convergence of terrestrial microwave and satellite
systems in these markets. We have developed products to meet these needs; we can
provide rapidly deployable tactical, multi-agency video and data communications
from vehicles, airborne platforms, point-to-point microwave and satellite links.
In the public safety arena, our digital video solutions are offering authorities
powerful new ways to gather and share video surveillance and data on the move.
Investment has been made in key sales management positions to accelerate our
growth.
Marine Safety Market
Our marine safety CCTV business, Hernis, provides video protection systems for
increasingly valuable shipping and petrochemical assets in the marine
transportation and oil & gas markets. Our market leading camera stations and
tailor-made integrated software control systems are utilised in both on and
offshore installations. We will continue to invest in the global expansion of
Hernis to maintain its market leading position.
Product Development and Technology
Our key development objective is to create software configurable building
blocks, with shared technology, for the next generation of networked devices.
These will have market leading performance and feature sets with built in
upgrade capabilities. We are currently investing 5.4% of our revenue in product
development to create exciting new opportunities and to meet our customers
evolving needs.
We are implementing a unified corporate level product strategy across the
related businesses of Advent, Link and MRC under the guidance of the Chief
Technology Officer. We have also formed a strategic Technology Committee with
senior management from each business to maintain a focus on our strategic
development direction and to review competing and complementary technologies.
Acquisitions
Our strategy is to seek out suitable acquisitions in two areas. Firstly those
which will strengthen and accelerate our growth into the defence, law
enforcement and security markets and secondly those that would bring growth
through complementary businesses and technology for our existing products and
markets.
IH Scott-Gall
Chief Executive
OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 DECEMBER 2006
2006 highlights and key performance indicators
2006 was a record year for the Group. The highlights were:
• 18% increase in sales to £100.5 million
• Reported operating profit £12.9 million (2005 - £7.1 million)
• 71% increase in adjusted operating profit to £14.3 million (2005 - £8.3
million)
• Adjusted earnings per share of 6.35 pence (2005 - 3.30 pence)
• All key performance indicators have improved on the prior year
The Group has achieved a 14.2% (2005 - 9.8%) return on sales at the adjusted
operating profit level, being operating profit before the amortisation of
acquired intangibles. This is ahead of the Group's previously stated key
strategic objective of a 10 per cent return. The table below sets out the trend
in the key indicators that are used to measure the Group's performance. The 2006
results show further improvement in all these metrics.
Year ended December 31 2006 2005 2004
----------------------------- -------- -------- -------
Orders received (£'000) 97,540 95,503 49,717
Sales (£'000) 100,498 85,072 67,831
Adjusted operating profit(1) (£'000) 14,303 8,348 2,549
Adjusted profit as a percentage of sales 14.2% 9.8% 3.8%
Adjusted earnings per share (pence) 6.35 3.30 1.21
Net cash generation from operating activities
(£'000) 8,372 6,461 (3,847)
Return on capital employed(1) (ROCE) 36.6% 21.0% 9.3%
----------------------------- -------- -------- -------
Review of operations in 2006
Markets Overview
The Group has a global spread of revenues. In 2006, 54% of the Group's sales
were in North America, 18% in the UK and Europe, 11% in Asia and 17% in the rest
of the world. The Group saw growth in all regions in the year except for South
America where a large broadcast infrastructure contract has been completed.
The operating businesses sell into three distinct global markets; broadcast,
defence, law enforcement and security (DLES), and marine safety.
Broadcast Market
Each of our brands, Advent, Link and MRC, are recognised within the broadcast
industry as market leaders with specialist knowledge. Each has well established
routes to market around the world, as well as taking advantage of being part of
the Group through coordinated distribution. In particular Link wireless cameras
and Advent satellite products are distributed in the North American markets by
MRC, utilising MRC's established market strength.
Group sales in the broadcast market grew 18% to £77.6million representing 77% of
the Group's sales (2005 - 78%). The Group has seen increased demand in the
Middle East and Asia as well as continuing to benefit from the re-channelisation
programme in the US. In addition HDTV is driving infrastructure spend by the
broadcasters. The Group also benefits from major sporting events and having had
success in 2005/6 with the Winter Olympics we are looking to benefit from the
anticipated spend for the summer Olympics in Beijing.
Defence, Law Enforcement and Security Market (DLES)
Sales in the DLES markets increased 29% to £10.0 million, representing 10% of
the Group's sales (2005 - 9%). It is our strategy to develop these markets
further with a strategic objective that they should represent 30% of Group sales
by 2009. The Group is continuing to invest in these markets through the
appointment of two senior sales executives who will head up the development of
opportunities in the US and rest of the world respectively.
Government agencies around the world are adopting digital technology and
creating growth markets. The need for two way, secure, bandwidth efficient video
and data communications to support tactical military, law enforcement and
surveillance operations is driving the demand for new applications of our
technology. With limited reliance on terrestrial infrastructure and power, our
microwave and satellite product lines, and core competencies, put us in a strong
position to provide solutions based on our proven expertise that meet the market
needs.
Marine Safety Market
Hernis, our Norwegian business, sells into the global marine safety market
through a network of business partners and service centres. Hernis have
pioneered the integration of intrinsically safe marine CCTV with other systems
including process control, fire, gas and intruder alarms.
Sales into the marine safety market have increased 30% to £12.8 million,
representing 13% of the Group's sales (2005 - 12%). The market is sub divided
into onshore and offshore oil and gas and marine (including high risk vessels
such as tankers and cargo ships as well as cruise and naval ships). The growth
in the year has come from offshore (up 29%) and marine (up 77%) markets. With
the oil and gas companies continuing to invest in exploration of increasingly
harsh environments and the strong build programme for new Liquid Natural Gas
(LNG) vessels we expect Hernis to continue to see an increase in demand.
Operational review
The table below summarises the Group's operating results by each business
segment.
----------------------------------- --------- --------
Year ended 31 December 2006 2005
£'000 £'000
----------------------------------- --------- --------
Revenue by segment:
UK 27,020 27,772
US 60,384 47,256
Norway 13,094 10,044
--------- --------
Group total 100,498 85,072
--------- --------
Adjusted operating profit by segment:
UK 4,095 2,095
US 11,241 7,414
Norway 1,318 942
Central costs (2,130) (1,802)
Unrealised profit in inventory (221) (301)
--------- --------
Operating profit before amortisation of acquired
intangibles 14,303 8,348
----------------------------------- --------- --------
Operational review - UK business
The UK business consists of three activities, the satellite communications
business of Advent, the wireless camera business of Link and the CML
international projects business.
------------------------- -------- -------- --------
Year ended 31 December 2006 2005 Change
£'000 £'000
------------------------- -------- -------- --------
Revenue:
Advent 18,388 14,990 +23%
Link 12,905 9,156 +41%
CML projects 6,100 10,377 -41%
-------- -------- --------
Gross revenue 37,393 34,523 +8%
Less: Inter segmental revenue (10,373) (6,751) +54%
-------- -------- --------
External revenue 27,020 27,772 -3%
-------- -------- --------
Adjusted operating profit 4,095 2,095 +95%
Amortisation of acquired intangibles (1,364) (1,207)
-------- --------
Operating profit 2,731 888
-------- --------
Adjusted operating margin(1) 11.0% 6.1% +4.9%
------------------------- -------- -------- --------
The core UK businesses of Advent and Link have shown good sales growth this
year, whilst CML project sales decreased in line with expectations following the
completion of the VTV contract.
Advent has experienced sustained demand for satellite newsgathering products,
with particular success in the Middle Eastern and Asian markets in the year.
Advent has strong brand awareness in its markets, class leading products in
terms of performance and a reputation for reliability. Significant contract wins
in the year included a satellite earth station for the Jordan Media City, and a
further five earth stations for Skylogic at Torino, building on the success of
the earth stations built for the Turin Winter Olympics in 2005. In addition,
Advent is building momentum in the DLES market having entered into a framework
agreement with INDRA, a major European defence integrator, for the supply of 30
X-band Newswift antennas in 2006/7.
The Advent business has been strengthened by the recruitment of two new senior
sales executives and a strong product development programme. In 2006 Advent
introduced new HD enabled electronic sub systems and a new easy to integrate
'flydrive' vehicle mounted antenna system. The development plan for 2007
includes enhancements to existing products for the DLES market. In the DLES
market Advent has seen growth in sales for its rugged commercial antennas that
meet military requirements in the US through MRC. A new 1.0 metre antenna,
developed jointly with MRC specifically for the military market, was launched in
the fourth quarter. After two difficult years Advent has now returned to
profitability, with an operating profit of £0.3million (2005 - loss of £0.6
million).
Sports programme makers were the first to adopt Link's standard definition
wireless camera technology, and now they are leading the way with HD wireless
cameras. Link's latest ultra low delay products are creating demand and the roll
out of their new HD wireless cameras is well underway having been used in many
high profile sporting events during 2006. Broadcast Sports and Aerial Video
Systems, leading outside broadcast production houses in the US, have adopted
Link's HD systems as standard. Link are also benefiting from the
re-channelisation programme in the US through their association with MRC. In the
UK, the BBC English Regions have appointed Link as their preferred supplier,
having ordered systems for thirteen of their regions. Link generated an
operating profit of £3.7 million (2005 - £2.8 million) after the amortisation of
acquired intangibles.
The VTV contract in Venezuela was completed in 2006. Whilst the contract made a
small profit over its full life, it was at a lower level than originally
anticipated due to delays in the completion of civil construction works and
local inflation. As a result a final charge of £1.0million was taken in the
first half of the year. The CML project business has continued to invest in
opportunities in South America at a cost of £0.30 million, which has generated a
profitable equipment supply contract for £3.1 million in the fourth quarter.
This is expected to be completed in the first quarter of 2007.
Operational review - US business
The US operation, MRC, has had its sixth consecutive year of growth since its
acquisition by the Group.
------------------------- -------- -------- --------
Year ended 31 December 2006 2005 Change
£'000 £'000
------------------------- -------- -------- --------
MRC revenue 60,762 47,403 +28%
Less: Inter segmental revenue (378) (147) +157%
-------- -------- --------
External revenue 60,384 47,256 +28%
-------- -------- --------
Operating profit 11,241 7,414 +52%
-------- -------- --------
Operating margin 18.5% 15.6% +2.9%
------------------------- -------- -------- --------
MRC has an estimated 60% market share of the North American electronic
newsgathering (ENG) market, and a strong customer base in the Americas and Asia/
Pacific regions.
MRC has continued to benefit from the re-channelisation programme in the US that
involves over 1,000 broadcasters migrating to narrower frequency bands to
accommodate new advanced wireless services. In order to achieve this
broadcasters are moving from analogue to digital transmission for electronic
newsgathering (ENG). MRC has a clear strategy in place to maintain their market
share through this programme.
Outside of the re-channelisation programme the US domestic broadcast market has
been flat. However, the programme provides only for the replacement of analogue
products with SD digital products. We see significant opportunities beyond the
programme to upgrade the new digital platforms that are being installed to HD.
In addition MRC innovations have created opportunity by creating an award
winning IP over ENG product in 2006 that allows journalists on assignment to
transmit fully edited content in the form of digital files back to the studio.
With shorter product life cycles in the digital age, we expect the underlying
broadcast market in the US to grow on a regional basis once the
re-channelisation programme has been completed.
MRC has also seen a 41% increase in DLES sales to £8.7 million. During the year
MRC won a US$3.0 million contract for the supply of the Advent Mantis antennas,
as part of a system to support voice, video and data transport for a US
Government user. MRC are also successfully developing Mobile Network Centric
Solutions (MNCS). MNCS provides fast deployable disaster communications support
for phone, video and Internet connectivity. By having an on demand
self-sufficient network that does not require existing infrastructure MNCS
enables agencies to perform together in applications such as disaster response,
ground surveillance, border patrol, central command, fire and many other types
of emergency and tactical situations. In addition MRC have been strong in the US
airborne digital video surveillance market by adapting broadcast engineering
solutions for sending video and data back to Command Centres, a capability now
enhanced by the addition of HD.
Operational Review - Norway
The Norwegian business, Hernis, has had a record year for both sales and
operating profits.
------------------------- -------- -------- --------
Year ended 31 December 2006 2005 Change
£'000 £'000
------------------------- -------- -------- --------
Revenue 13,094 10,044 +30%
Operating profit 1,318 942 +40%
Operating margin 10.1% 9.4% +0.7%
------------------------- -------- -------- --------
Growth for Hernis has come from strong marine and offshore oil and gas markets.
Hernis have a market leading position for the supply of systems for the new
Liquid Natural Gas (LNG) vessels built in Asia. The increasing level of
investment in offshore oil and gas rigs by the major oil companies has led to an
increase in demand for products and systems for floating rigs and drill ships.
In addition Hernis have benefited from increased demand for both on and offshore
oil and gas installations such as tank farms, jetties and terminals. Significant
orders received in the year included a contract for the installation of Hernis
camera systems on four new LNG carriers for Samsung Heavy Industries in Korea, a
storage tank farm for Qatar and two contracts in Norway for ultra-deepwater
semi-submersible drilling rigs. As a result sales, operating profit and margins
have all improved in the year.
Hernis have been very successful in developing regional markets and customer
relationships through sales and technical support centres set up in Singapore,
Houston and Brazil. Within the industry they have also achieved class type
approval for their explosion proof camera housings that differentiates them by
providing quality assurance for their products and systems.
Hernis have a strong product development programme. This has been enhanced by
the acquisition of a 34% stake in Wireless Power and Communications A/S (WPC) in
Norway. WPC gives Hernis access to new power and data transfer techniques, using
induction, which can be applied to a range of new camera stations. Hernis is
also developing other lateral market opportunities for this technology.
Research and development
The Group is committed to investment in research and development in order to
maintain and enhance the Group's market share and competitive advantage for the
products it manufactures. Both Link and MRC have won a number of awards for
their use of technology and new products at the major international broadcast
shows in 2006.
Expenditure in 2006 was £5.4 million representing 5.4% of revenues (2005 - £4.9
million, 5.8%). In addition the Group has capitalised development costs in the
year of £1.8 million (2005 - £1.1 million). The amortisation of development
costs of £1.0 million (2005 - £1.0 million) is included in the reported
expenditure.
Financial Review
The Group's results are summarised as follows:
--------------------------------- --------- --------
Year ended 31 December 2006 2005
£'000 £'000
------------------------- -------- --------
Revenue 100,498 85,072
--------- --------
Adjusted operating profit 14,303 8,348
Amortisation of acquired intangibles (1,364) (1,207)
--------- --------
Reported operating profit 12,939 7,141
Net finance costs (264) (776)
--------- --------
Profit before tax 12,675 6,365
Taxation (4,968) (2,883)
--------- --------
Profit after tax 7,707 3,482
--------- --------
Effective tax rate 39.2% 45.3%
Basic earnings per share 5.65p 2.66p
Adjusted earnings per share 6.35p 3.30p
--------------------------------- --------- --------
Finance costs
The net interest charge for the year was £0.26 million (2005 - £0.78 million).
Included within the interest charge is £0.22 million (2005 - £0.29 million) in
respect of the unwinding of the discounting of the deferred consideration
associated with the acquisition of Link Research Limited to its present value.
Net interest paid in the year was £0.07million (2005 - £0.47 million).
Taxation
The tax charge for the year was £4.97 million (2005 - £2.88 million). The UK
current tax charge was £0.35 million (2005 - £0.15 million) and the overseas
current taxation in the year was £5.12 million (2005 - £2.75 million). Overseas
taxation represents Norwegian corporation tax on the taxable profits of Hernis
and state and federal taxes in respect of the US business. The current tax
charge was mitigated by a net deferred tax credit of £0.50 million (2005 -
credit of £0.02 million).
The effective tax rate for the year was 39.2% compared with the standard UK
corporation tax rate applicable during the year of 30%. The Group tax charge
includes an overseas tax prior year adjustment of £0.39 million in respect of an
IRS audit, against which the Company is appealing. Excluding this one-off charge
reduces the effective tax rate to 36.1%, which reflects the higher tax rate
(40%) that is attributable to the proportion of the Group's taxable profits
generated in the US.
Current tax payable at December 31, 2006 was £1.17 million (2005 - £0.82
million). Tax paid in the year was £5.12 million (2005 - £2.67 million).
Cash flows
Group cash and cash equivalents increased to £8.16 million at December 31, 2006
(2005 - £7.12 million).
The Group generated net cash from operating activities of £8.37 million in the
year (2005 - £6.46 million) after a net absorption of working capital of £3.23
million (2005 - £0.88 million) as a result of the increased level of activities.
A further £0.58 million was generated from the proceeds of the issue of new
ordinary shares (2005 - £4.74 million).
Investing activities absorbed £3.68 million of cash (2005 - £4.43 million),
comprising £1.81 million for capitalised development costs and a net £1.87
million for property, plant, equipment and investments. Dividend payments
amounted to £0.68 million (2005 - £0.25 million).
Net debt repayments during the year were £2.70 million (2005 - £3.14 million),
including the payment of £1.50 million of deferred consideration associated with
the acquisition of Link. Group debt at December 31, 2006 comprised secured bank
loans of £2.50 million (2005 - £3.36 million) and unsecured loan notes of £1.75
million (2005 - £1.60 million) in respect of the Link deferred consideration
earned. The unsecured loan notes were settled on March 23, 2007.
At December 31, 2006 the Group had net funds of £3.91 million (2005 - £2.16
million).
Returns to shareholders
It is the Group's stated strategy to only recommend a final dividend. The Board
is committed to a dividend policy in line with the Group's performance and this
is reflected in the increase in the recommended dividend to 1.0 pence per share
(2005 - 0.5 pence). The payment of the dividend will absorb approximately £1.38
million of cash. Subject to the approval of shareholders, the dividend will be
paid on July 20, 2007, to those on the register at June 29, 2007.
Foreign currency risk
The largest exchange risk to the Group in terms of its reported results lies in
the translation of the results of the US business from US dollars to sterling at
the average rate ruling for the year. To a lesser extent the Group's results are
also affected by the translation of the results of Hernis, the Norwegian
business. The principal exchange rates used by the Group in translating overseas
profits and net assets into sterling are set out in the table below.
Rate compared to £ Average Average Year end rate, Year end rate,
sterling rate, rate, 2006 2005
2006 2005
US dollar 1.84 1.82 1.96 1.72
Norwegian
krone 11.81 11.72 12.19 11.63
Summary
2006 was a record year for the Group, with growth being achieved in all key
metrics. The Group has a clear strategy for both product and market development
for organic growth across all of its businesses. The Board looks forward to
further growth in 2007.
Finally, on behalf of the Board, we would like to thank Bob Morton for his
substantial contribution to the Group's success.
Ian Scott-Gall - Chief Executive
James Trumper - Group Finance Director
March 28, 2007
CONSOLIDATED GROUP INCOME STATEMENT
for the year ended 31 December 2006
2006 2005
Notes £'000 £'000
Revenue 2 100,498 85,072
Cost of sales (63,053) (56,452)
---------- ----------
Gross profit 37,445 28,620
Sales and marketing expenses (10,060) (8,952)
Research and development costs (5,398) (4,950)
Administrative costs (8,757) (7,407)
Other expenses (291) (170)
---------- ----------
Operating profit 2 12,939 7,141
----------------------------- ------- ---------- ----------
Operating profit is analysed as:
Operating profit before amortisation of acquired
intangibles 5 14,303 8,348
Amortisation of acquired intangibles (1,364) (1,207)
----------------------------- ------- ---------- ----------
Finance costs 3 (505) (872)
Investment income 3 241 96
---------- ----------
Profit before taxation 12,675 6,365
Tax on profit 4 (4,968) (2,883)
---------- ----------
Profit for the year being profit attributable to
equity shareholders 7,707 3,482
---------- ----------
---------- ----------
Earnings per share (pence per share): 5 5.65p 2.66p
- basic 5 5.56p 2.62p
- diluted
---------- ----------
Dividends
The directors are proposing a final dividend in respect of the financial year
ending 31 December 2006 of 1.0 pence per share, which will absorb an estimated
£1,384,000 of shareholders' funds. It will be paid on 20 July 2007 to
shareholders who are on the register of members on 29 June 2007.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2006
2006 2005
£'000 £'000
Opening shareholders' equity 37,815 25,001
----------- -----------
Profit for the financial period 7,707 3,482
Share options - value of employee services 122 75
Dividends (681) (246)
----------- -----------
Movements in the profit and loss account 7,148 3,311
Translation difference on foreign currency net (2,578) 1,765
investments
Shares issued 518 7,687
Disposal of investment in own shares 60 51
----------- -----------
Total movement in shareholders' equity 5,148 12,814
----------- -----------
Closing shareholders' equity 42,963 37,815
----------- -----------
CONSOLIDATED GROUP BALANCE SHEET
as at 31 December 2006
2006 2005
Notes £'000 £'000
Assets
Non-current assets
Goodwill 22,737 23,393
Intangible assets 6,177 6,854
Property, plant and equipment 4,689 4,547
Investment in associates 182 -
Financial assets - 43
Deferred tax assets 991 835
----------- -----------
34,776 35,672
----------- -----------
Current assets
Inventories 14,466 13,345
Trade and other receivables 18,463 17,032
Net cash and cash equivalents 7 8,159 7,122
----------- -----------
41,088 37,499
----------- -----------
Liabilities
Current liabilities
Financial liabilities - borrowings 7 1,750 3,794
Trade and other payables 24,240 22,206
Current tax liabilities 1,172 816
Provisions 668 732
----------- -----------
27,830 27,548
----------- -----------
----------- -----------
Net current assets 13,258 9,951
----------- -----------
Non-current liabilities
Financial liabilities - borrowings 7 2,500 1,169
Deferred tax liabilities 2,275 2,608
Other non-current liabilities - 3,878
Provisions 296 153
----------- -----------
5,071 7,808
----------- -----------
----------- -----------
42,963 37,815
----------- -----------
Capital and reserves
Ordinary shares 3,460 3,412
Share premium account 4,832 4,362
Investment in own shares (49) (109)
Merger reserve 30,565 30,565
Translation reserve (3,866) (1,288)
Profit and loss account 8,021 873
----------- -----------
Total shareholders' equity 2 42,963 37,815
----------- -----------
CONSOLIDATED GROUP CASH FLOW STATEMENT
for the year ended 31 December 2006
2006 2005
Notes £'000 £'000
Cash flow from operating activities
Cash generated from operations 6 13,558 9,602
Investment income 241 96
Finance costs (309) (567)
Taxation paid (5,118) (2,670)
----------- -----------
Net cash generated from operating activities 8,372 6,461
----------- -----------
Cash flows from investing activities
Acquisition of subsidiary (net of cash acquired) - (2,445)
Proceeds from sale of property, plant and 12 130
equipment
Purchase of property, plant and equipment (1,747) (1,014)
Expenditure on capitalised development costs (1,810) (1,054)
Investment in associates (139) (43)
----------- -----------
Net cash (absorbed by) investing activities (3,684) (4,426)
----------- -----------
Cash flows from financing activities
Net proceeds from issue of ordinary share 518 4,687
capital
Net proceeds from sale of own shares 60 51
Repayment of borrowings - secured (3,362) (3,138)
Repayment of borrowings - unsecured (1,836) -
Net proceeds from issue of new bank loan 2,500 -
Dividend paid to shareholders (681) (246)
----------- -----------
Net cash (absorbed by)/generated from financing (2,801) 1,354
activities ----------- -----------
Effect of foreign exchange rate changes (850) 514
----------- -----------
Net increase in cash and cash equivalents 1,037 3,903
Cash and cash equivalents at 1 January 7,122 3,219
----------- -----------
Cash and cash equivalents at 31 December 7 8,159 7,122
----------- -----------
NOTES TO THE INTERIM ACCOUNTS
for the year ended 31 December 2006
1. BASIS OF PREPARATION
These results have been prepared in accordance with all International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC
interpretations and with those parts of the Companies Act, 1985 applicable to
companies reporting under IFRS.
2. SEGMENTAL ANALYSIS
The Group is organised geographically by the location of its operations, where
its products are produced and its service delivery activities are based. The
internal management reporting within the Group also follows these lines.
Therefore for the purposes of primary segmental reporting it is appropriate to
split the results between the UK, the US and Norwegian businesses.
Revenue Operating Profit Net Assets
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
By business location:
UK 37,393 34,523 4,095 2,095 15,595 15,991
US 60,762 47,403 11,241 7,414 18,413 14,782
Norway 13,094 10,044 1,318 942 5,107 4,471
Inter-segmental
transactions (10,751) (6,898) (221) (301) - -
Central - - (2,130) (1,802) 3,848 2,571
-------- ------- ------- ------- ------- -------
100,498 85,072 14,303 8,348 42,963 37,815
Amortisation of acquired
intellectual property
and customer
relationships - - (1,364) (1,207) - -
-------- ------- ------- ------- ------- -------
Total 100,498 85,072 12,939 7,141 42,963 37,815
-------- ------- ------- ------- ------- -------
Amortisation of acquired intellectual property and customer relationships relate
to the UK business.
The table below shows the analysis of Group external revenue, by the geographic
market of its customers.
UK US Norway Total
2006 2005 2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
By
customer
geographic
market:
UK & 5,421 4,890 - 37 853 551 6,274 5,478
Ireland
Rest of 6,104 7,002 431 905 5,221 4,423 11,756 12,330
Europe
North 767 784 53,240 40,236 567 815 54,574 41,835
America
South 6,501 10,858 2,038 1,087 326 603 8,865 12,548
America
Middle 4,693 1,367 - 288 1,946 355 6,639 2,010
East
Asia 2,604 1,974 3,984 4,242 4,004 3,066 10,592 9,282
Africa 515 404 53 92 74 110 642 606
Other 415 493 638 369 103 121 1,156 983
------- ------- ------- ------- ------- ------- -------- -------
27,020 27,772 60,384 47,256 13,094 10,044 100,498 85,072
------- ------- ------- ------- ------- ------- -------- -------
The tables below analyse revenue by product categories and by category of end
user.
2006 2005
£'000 £'000
Analysis of revenue by product category
Microwave radio and wireless camera products 63,275 49,070
Satellite products 19,309 15,576
Broadcast projects 4,820 10,370
Marine CCTV products 13,094 10,044
Other - 12
-------- --------
100,498 85,072
----------------------------------------- -------- --------
Analysis of revenue by end user category
Broadcasters 77,570 66,017
Defence, law enforcement and security 10,016 7,745
Marine, oil and gas 12,773 9,803
Utility 139 1,495
Other - 12
-------- --------
100,498 85,072
----------------------------------------- -------- --------
3. FINANCE COSTS - NET
2006 2005
£'000 £'000
Interest payable on bank borrowing (236) (537)
Interest payable on other loans (46) (43)
Unwinding of interest associated with the discounting of
deferred consideration (223) (292)
--------- --------
Interest and similar charges payable (505) (872)
Investment income 241 96
--------- --------
Finance costs - net (264) (776)
--------- --------
4. TAXATION
The tax charge for the year comprises: 2006 2005
£'000 £'000
Current tax
UK corporation tax 351 149
Foreign tax 5,118 2,755
--------- --------
Total current tax 5,469 2,904
--------- --------
Deferred tax
UK corporation tax (264) 520
Foreign tax (237) (541)
--------- --------
Total deferred tax (501) (21)
--------- --------
Taxation charge 4,968 2,883
--------- --------
UK Corporation tax is calculated at 30 per cent (2005 - 30 per cent) of the
estimated assessable profit for the year. Foreign corporation taxes are
calculated at the rates prevailing in the respective jurisdictions.
5. EARNINGS PER ORDINARY SHARE
Earnings per share is calculated by reference to a weighted average of
136,495,000 ordinary shares in issue during the period, excluding shares held by
the Employees' Share Ownership Plan (2005 - 131,052,000).
The diluted earnings per share is after taking account of a further 2,094,000
shares (2005 - 1,631,000) being the dilutive effect of share options.
Adjusted earnings
Vislink believes that adjusted operating profit, adjusted profit before tax,
adjusted earnings and adjusted earnings per share provide additional useful
information to shareholders. These measures are used by Vislink for internal
performance analysis and incentive compensation arrangements. The term
'adjusted' is not a defined term under IFRS and may not therefore be comparable
with similarly titled profit measurements reported by other companies. The
principle adjustment is made in respect of the amortisation of acquired
intangibles.
The reconciliation between reported and underlying earnings and basic earnings
per share is shown below:
2006 2005
Earnings Basic EPS Earnings Basic EPS
£'000 pence £'000 pence
Reported earnings 7,707 5.65p 3,482 2.66p
Amortisation of acquired
intangibles after tax 955 0.70p 845 0.64p
--------- --------- -------- ---------
Adjusted earnings 8,662 6.35p 4,327 3.30p
--------- --------- -------- ---------
6. NOTES TO THE CASH FLOW STATEMENT
Reconciliation of operating profit to net cash flows from operating activities:
2006 2005
£'000 £'000
Profit attributable to shareholders 7,707 3,482
Taxation 4,968 2,883
Depreciation 1,321 1,081
Loss on disposal of property, plant and equipment 41 5
Amortisation of development costs 997 968
Amortisation of acquired intangibles 1,364 1,207
Share options - value of employee services 122 75
Investment income (241) (96)
Finance costs 505 872
(Increase) in inventories (2,110) (3,377)
(Increase)/decrease in trade and other receivables (2,706) 619
Increase in payables 1,457 2,150
Increase/(decrease) in provisions 133 (267)
---------- ----------
Net cash inflow from operating activities 13,558 9,602
---------- ----------
7. NET FUNDS
The movements in cash and cash equivalents and borrowings in the period are as
follows:
Net cash and Short term Other Total net funds
cash borrowings borrowings
equivalents
£'000 £'000 £'000 £'000
At 1 January
2006 7,122 (3,794) (1,169) 2,159
Cash flow for
the period 1,887 - - 1,887
Repayment of
borrowings - 3,794 1,169 4,963
New secured
bank
borrowings - - (2,500) (2,500)
New unsecured
loan notes - (1,750) - (1,750)
Exchange rate
adjustments (850) - - (850)
--------- --------- --------- ---------
At 31 December
2006 8,159 (1,750) (2,500) 3,909
--------- --------- --------- ---------
Unsecured loan notes issued in the year of £1.75 million are in respect of the
deferred consideration for the acquisition of Link Research Limited earned by
the vendors.
8. DIRECTORS RESPONSIBILITIES
The announcement represents non-statutory accounts within the meaning of section
240 of the Companies Act 1985. The statutory annual accounts for the year ended
31 December 2006, upon which an unqualified audit opinion has been given and
which did not contain a statement under section 235, 237(2) or 237(3) of the
Companies Act 1985, will be sent to the Registrar of Companies in due course.
9. REPORT AND ACCOUNTS
Copies of the Report and Accounts will be sent to shareholders in due course and
will then be available from the registered office at Marlborough House, Charnham
Lane, Hungerford, Berkshire, RG17 0EY.
--------------------------
(1) Defined as operating profit before the amortisation of acquired intangibles,
the impairment of goodwill, and rationalisation costs
This information is provided by RNS
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