Interim Results
Vislink PLC
6 September 2000
Vislink plc
Interim results for the six months ended 30 June 2000
Vislink continues to focus on its high growth technology businesses
comprising its Broadcast and Telecommunications and Video Technology
Divisions.
Highlights
- Completion of the £13.4 million acquisition of Advent Communications
Limited creates a broader satellite communications business
- Completion of the £13.8 million purchase of US based MRC provides access
to the US market for digital and analogue broadcast quality TV microwave
radio systems
- The enlarged Broadcast and Telecommunications Division will benefit from
the accelerating growth in digital TV and data systems around the world
- These two acquisitions are hugely significant in the creation of a
global business
- Orders received in the period were £26.4 million, well ahead of last
half year (1999 - £21.4 million)
- The second half has started well with £13.4 million of orders received
in first two months, and a good contribution from MRC in its first month
- Group half year pretax profits, pre goodwill amortisation were £0.63
million (1999 - £0.67 million loss) on sales of £19.94 million (1999 -
£48.51 million which included continuing operations sales of £21.57 million)
- EPS 0.36 pence (1999 continuing operations - 0.26 pence) 38% ahead of
last year
Commenting on the interim announcement, Bob Morton, Chairman of Vislink plc,
said:
'The Group's focus has been to implement the Board's strategy to become the
leading global designer and manufacturer of microwave transmission equipment
for broadcast television.
We have made rapid progress through two significant acquisitions, which pave
the way for the future growth of the Group.
The Group has experienced an encouraging level of orders and now has a strong
outstanding order book'.
For further information on Wednesday 6 September 2000, please contact:
Ian Scott-Gall, Chief Executive
Vislink plc 020 7353 1500
Thereafter contact Ian Scott-Gall on 01488 685500
Andrew Sharkey
Luther Pendragon 020 7353 1500
Chairman's Statement
Introduction
The Group's focus during the first half of the year has been to implement the
Board's strategy which is for the Broadcast and Telecommunications Division
to become the leading global designer and manufacturer of microwave
transmission equipment for broadcast television.
I am pleased to report that we have made rapid progress with the achievement
of the strategy through two significant acquisitions, which pave the way for
the future growth of the Group.
Acquisitions
Following shareholders approval, we completed the acquisition of Advent
Communications Limited ('Advent') on April 18, 2000. Advent designs and
manufactures equipment for the satellite news gathering ('SNG') market. SNG
products fall into three product types: portable 'flyaway' systems, mobile
vehicle installations and fixed earth stations. The acquisition provides the
opportunity to create a much broader based satellite communications business
within our overall Broadcast and Telecommunications Division.
The consideration was £13.38 million, satisfied by £12.46 million in cash
and the issue of 1.2 million new ordinary shares (valued at £0.92 million
on the basis of the closing mid market price per ordinary share of 76.5 pence
on April 17, 2000). In addition, Advent paid £1.14 million in pre-sales
dividends to its current shareholders and post-completion pension
contributions of £0.88 million to its directors. The acquisition was approved
by shareholders at an Extraordinary General Meeting on April 17, 2000. The
results of Advent for the period since completion are included in this
interim report within the Broadcast and Telecommunications Division.
Our second strategic acquisition was announced on June 27, 2000 when the
Company agreed to acquire the Microwave Radio Communications business ('MRC')
of Adaptive Broadband Corporation for a consideration of up to $20.75 million
(equivalent to approximately £13.8 million).
MRC is based in the United States of America and is the major supplier of
broadcast microwave terrestrial links in the United States with an estimated
market share in excess of 50%, with annual sales of US$34.8 million to June
30, 1999. MRC is involved in the design, manufacture and marketing of digital
and analogue microwave radio systems for studio to transmitter links and
portable and vehicle based electronic news gathering applications for the
broadcast industry.
The acquisition provides the Group with the opportunity to access the US
market and to strengthen its international position for both digital and
analogue broadcast quality television transmission equipment.
The Company also announced a placing to raise approximately £4.5 million
(before expenses) to finance part of the consideration for the acquisition.
The remainder of the consideration was financed from bank facilities arranged
for the purpose.
Both the acquisition and the placing were approved by shareholders at an
Extraordinary General Meeting on July 26, 2000 and the acquisition was
completed on July 28, 2000.
Both Advent and MRC will work with our existing Broadcast and
Telecommunications businesses to address the growth in digital TV and data
systems around the world.
Results for the six months to June 30, 2000
During this period the overall profit on ordinary activities before taxation
for the Group was £0.42 million (1999 - loss of £0.74 million).
The Group's continuing operations, comprising the two divisions, generated an
operating profit before central costs and goodwill amortisation of £1.12
million (1999 - £0.38 million including a loss on discontinued activities of
£0.91 million). Orders received in the first half of £26.4 million (1999 -
£21.4 million) were in line with expectations. Due to a number of contracts
scheduled for delivery in the second half, sales were £19.94 million (1999 -
£48.51 million including discontinued activities of £26.94 million).
Central costs were £0.58 million (1999 - £0.65 million) and goodwill
amortisation was £0.21 million (1999 - £0.07 million). Due to the funds
realised from last years disposal programme, net interest income was £0.09
million (1999 - expense of £0.40 million).
Following the acquisition of Advent, Group debt was £2.29 million compared
with net cash of £12.08 million at December 31, 1999.
The level of orders received in the first two months of the current half year
was excellent. These amounted to £13.4 million including a good contribution
from MRC for the month of August. The Group has a strong outstanding order
book.
Earnings Per Share
Earnings per share were 0.36 pence (1999 - 0.26 pence from the continuing
businesses) an increase of 38%.
Dividends
The Board is not recommending an interim dividend for the year in line with
the Group's strategy to only recommend an annual dividend in future.
Business Review
Broadcast and Telecommunications Division
For the six months sales were £12.70 million, including £1.92 million in
respect of Advent. Due to the longer term capital nature of contracts
currently in the order book, overall sales were lower than the same period
last year (£13.67 million).
The Division's operating profits were held back to £0.81 million (1999 -
£0.90 million) before goodwill of £0.21 million (1999 - £0.07 million)due to
an initial operating loss in Advent of £0.21 million (before goodwill
amortisation of £0.14 million). This occurred in the six weeks following the
acquisition when lower than expected levels of output were achieved due to a
combination of contract delays and the integration of the business into the
Division. Advent has been trading profitably since May with an excellent
level of orders received in the last two months.
The Broadcast Division has a strong order book, having won some significant
export orders. Notable amongst these were a £2.3 million order for a state
sponsored TV station and transmitter system for a West African country, a
£0.8 million contract from TV Espana for 38 new generation digital and
analogue portable links for outside broadcast coverage and a £1.6 million
order from Maroc Telecom for the installation and commissioning of fixed and
mobile earth terminals to link remote areas of the country to the developing
GSM network. In the UK, Continental Microwave Limited has won orders to
upgrade existing digital TV transmitters previously supplied to increase
their coverage and is well placed to win the second phase of new site
installations, which is expected towards the end of this year.
Video Technology Division
Sales in the period were £7.24 million (1999 - £7.90 million). The Division
has started an investment programme to enhance its Internet video based
systems, developed by Active Imaging for the acquisition and transmission of
real time and pre-recorded video images for the business to business sector
and the new products are expected to be available for trial later this year
with sales and shipments commencing early next year.
As a result of charging £0.11 million in respect of these exceptional
development costs, the first half year divisional operating profits were
slightly lower at £0.32 million (1999 - £0.39 million).
The Division continues to win many interesting orders. Active Imaging has won
orders from Trafficmaster to enhance and expand their national traffic
monitoring network. DataCell secured a £0.3 million order from Portals
Limited to supply a print quality controls system for the printing of bank
notes. Hernis, our Norwegian based video systems company, has won a £0.6
million order to supply Royal Caribbean Cruise Lines with an integrated CCTV
system for two new vessels providing internal and external observation and
safety systems.
Strategy
The key to the Group's future growth is the continuing development of its two
core businesses. The two recent acquisitions represent a significant
achievement in the creation of a global business with critical mass in its
international markets for the Broadcast and Telecommunications Division. The
Group will continue to develop this Division organically through both market
growth and new product development. The investment in Internet video systems
and continuing developments within the Video Technology Division are expected
to achieve future growth by capitalising on the opportunities for Internet
video and CCTV applications.
Domicile
In my letter to shareholders in respect of the acquisition of MRC, I stated
that the Board believes there would be a significant advantage to the Group's
holding company being an English rather than an Irish company, especially in
view of the fact that the business of the Group is managed from the United
Kingdom. Accordingly, it is the intention of the Board to take the necessary
steps, subject to shareholder and court approval, to effect this change.
Prospects
During the current year the Group has experienced an encouraging level of
orders and now has a strong outstanding order book. With the integration of
Advent and MRC into the Broadcast and Telecommunications Division, the Board
is looking forward to the future with confidence.
A L R Morton
Chairman
Group Profit and Loss Account for the six months ended 30 June 2000
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
Turnover
Continuing
operations:
- ongoing 18,029 21,571 43,383
- acquisitions 1,915 - -
_____________________________________________
19,944 21,571 43,383
Discontinuing - 26,943 38,770
operations _____________________________________________
19,944 48,514 82,153
_____________________________________________
Operating profit (loss)
Continuing operations
before goodwill:
- ongoing 757 638 2,113
- acquisitions (212) - -
_____________________________________________
545 638 2,113
_____________________________________________
Goodwill amortisation:
- ongoing (72) (72) (144)
- acquisitions (138) - -
_____________________________________________
Continuing operations 335 566 1,969
Discontinuing - (909) (2,154)
operations _____________________________________________
335 (343) (185)
_____________________________________________
Exceptional loss on - - (20,332)
sale of business
(including goodwill
of £20.0 million
previously written off)
_____________________________________________
Profit (loss) on 335 (343) (20,517)
ordinary activities
before interest
Interest payable (178) (400) (829)
Interest receivable 265 - 176
_____________________________________________
Profit (loss) on 422 (743) (21,170)
ordinary activities
before taxation
Tax on profit (loss) (88) 193 (679)
on ordinary activities _____________________________________________
Profit (loss) for the 334 (550) (21,849)
financial period
Dividends - - 275
_____________________________________________
Transfer to (from) 334 (550) (22,124)
reserves
=============================================
Basic earnings (loss) 0.36p (0.60)p (23.81)p
per share
=============================================
Fully diluted 0.35p (0.60)p (23.81)p
earnings (loss) per share
=============================================
Basic earnings per 0.36p 0.26p 1.31p
share from continuing
operations =============================================
Basic earnings per 0.59p 0.34p 1.47p
share from continuing
operations excluding goodwill
=============================================
Dividend per share - - 0.30p
=============================================
Statement of Total Recognised Gains and Losses for the six
months ended 30 June 2000
Six months to Six months to Year ended 31 Dec
30 June 2000 30 June 1999 1999
£'000 £'000 £'000
Profit (loss) for the 334 (550) (21,849)
financial period
Translation 276 323 8
difference on foreign
currency net investments _________________________________________________
610 (227) (21,841)
=================================================
Reconciliation of Movements in Shareholders' Funds for the six months ended
30 June 2000
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
Profit (loss) for the 334 (550) (21,849)
financial period
Dividends - - (275)
________________________________________________
334 (550) (22,124)
Value of shares 1,010 - -
issued
Goodwill on the - - 19,955
disposal of
businesses
Translation 276 323 8
difference on foreign
currency net investments
________________________________________________
1,620 (227) (2,161)
Opening equity 27,072 29,233 29,233
shareholders' funds ________________________________________________
Closing equity 28,692 29,006 27,072
shareholders' funds ================================================
Group balance Sheet as at 30 June 2000
30 June 2000 30 June 1999 31 Dec 1999
£'000 £'000 £'000
Fixed assets
Intangible assets (goodwill) 16,074 2,724 2,652
Tangible assets 5,257 11,774 3,876
Financial assets 19 40 19
___________________________________________
21,350 14,538 6,547
___________________________________________
Current assets
Stocks 10,558 22,035 8,403
Debtors 11,153 25,764 9,350
Cash at bank and in hand 2,090 682 16,466
___________________________________________
23,801 48,481 34,219
___________________________________________
Creditors - amounts due 11,468 28,628 8,781
within one year ___________________________________________
Net current assets 12,333 19,853 25,438
___________________________________________
Total assets less current 33,683 34,391 31,985
liabilities
Creditors - amounts due 3,696 4,314 3,591
after one year
Provisions for liabilities 1,295 1,071 1,322
and charges ___________________________________________
Net Assets 28,692 29,006 27,072
===========================================
Capital and reserves
Called up share capital 2,228 2,182 2,182
Share premium account 22,386 45,255 21,422
Other reserves 1,450 1,450 1,450
Profit and loss account 2,628 (19,881) 2,018
___________________________________________
Equity shareholders' funds 28,692 29,006 27,072
===========================================
Summarised statement of cash flows for the six months ended 30 June 2000
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
Net cash (outflow) (1,212) 1,021 4,455
inflow from operating
activities
Returns on 93 (317) (764)
investments and
servicing of finance
Taxation paid (66) (336) (1,407)
Capital expenditure (807) (536) (1,547)
Acquisitions and (12,994) - 24,688
disposals
Equity dividends paid - - (918)
_________________________________________________
Net cash (outflow) (14,986) (168) 24,507
inflow before financing
Financing 547 (797) (1,023)
_________________________________________________
(Decrease) increase (14,439) (965) 23,484
in cash =================================================
Reconciliation of Net Cash Flow to Movement in Net Debt
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
(Decrease) increase (14,439) (965) 23,484
in cash
Cash inflow from (335) - (360)
increase in loans
Repayment of bank loans 289 256 547
Finance lease 124 541 836
payments ________________________________________________
Change in net (debt) (14,361) (168) 24,507
cash resulting from
cash flows
Purchase of tangible - (390) (414)
fixed assets with
finance leases
Finance leases of - - 850
undertakings sold
Bank loans of - - 28
undertakings sold
Effect of foreign (6) 8 11
exchange changes _________________________________________________
Movement in net (14,367) (550) 24,982
(debt) cash
Opening net cash 12,082 (12,900) (12,900)
(debt) _________________________________________________
Closing net (debt) (2,285) (13,450) 12,082
cash =================================================
1. Segmental Analysis
Turnover Operating Profit
Six Six Year Six Six Year
months months ended months months ended
to 30 to 30 31 Dec to 30 to 30 31 Dec
June June 1999 June June 1999
2000 1999 £'000 2000 1999 £'000
£'000 £'000 £'000 £'000
By division:
Broadcast and
Telecommunications
- ongoing 10,786 13,671 28,540 1,018 903 2,537
- acquisitions 1,915 - - (212) - -
_____________________________________________________
12,701 13,671 28,540 806 903 2,537
Video Technology 7,243 7,900 14,843 423 389 901
Central costs - - - (577) (654) (1,325)
_____________________________________________________
19,944 21,571 43,383 652 638 2,113
Exceptional - - - (107) - -
development costs
Goodwill - - - (72) (72) (144)
amortisation -
ongoing
Goodwill - - - (138) - -
amortisation -
acquisitions _____________________________________________________
Continuing 19,944 21,571 43,383 335 566 1,969
operations
Discontinuing - 26,943 38,770 - (909) (2,154)
operations _____________________________________________________
Group total 19,944 48,514 82,153 335 (343) (185)
=====================================================
Goodwill amortisation is in respect of Advent Communications Limited
and Multipoint Communications Limited. Both are Broadcast and
Telecommunications Division companies.
Goodwill arising on consolidation is capitalised and amortised through the
profit and loss account by equal instalments over its estimated economic
useful life. The directors have estimated the economic useful life to be
twenty years.
Turnover Analysis
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
By market:
Continuing operations
UK & Ireland 5,562 7,870 17,280
Rest of Europe 4,084 6,474 9,609
North America 3,508 3,075 6,237
Asia 2,740 2,613 4,511
Africa 2,301 671 1,693
Other 1,749 868 4,053
________________________________________________
19,944 21,571 43,383
Discontinued operations
UK & Ireland - 20,337 29,621
Rest of Europe - 2,777 3,888
North America - 2,475 3,325
Asia - 779 981
Africa - - -
Other - 575 955
________________________________________________
Group Total 19,944 48,514 82,153
================================================
2. Taxation
The tax charge for the six months is based on the effective tax rate of 21
per cent which is estimated will apply for the full year.
3. Dividends
No interim dividend was proposed for the period. In 1999 there was no interim
dividend and the final dividend was 0.3 pence
4. Earnings per ordinary share
Earnings per ordinary share is calculated by reference to a weighted average
of 92,988,000 ordinary shares in issue during the period (30 June and 31
December 1999 - 91,767,000).
The fully diluted earnings per share is based on 94,771,000 ordinary shares
in issue during the period (30 June and 31 December 1999 - 91,767,000).
Earnings per share from continuing operations excludes after tax losses
relating to discontinued operations of £nil (30 June 1999 - £786,000; 31
December 1999 - £2,718,000) and exceptional items of £nil (30 June 1999 -
£nil; 31 December 1999 - £20,332,000).
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
Basic earnings (loss) 0.36p (0.60)p (23.81)p
per share
Adjustments:
Loss after taxation - 0.86p 2.96p
from discontinued
operations
Exceptional items - - 22.16p
_________________________________________________
Earnings per share 0.36p 0.26p 1.31p
from continuing
operations =================================================
Fully diluted 0.35p (0.60)p (23.81)p
earnings per share =================================================
5. Reconciliation of operating profit (loss) to net cash flow from
operating activities
Six months to Six months to Year ended 31
30 June 2000 30 June 1999 Dec 1999
£'000 £'000 £'000
Operating profit 335 (343) (185)
(loss)
Depreciation 400 1,082 1,710
Amortisation of 210 72 144
goodwill
Provision against - - 6
investments
(Profit) on sale of - (15) (10)
fixed assets
Decrease (increase) 49 (112) (1,477)
in stocks
Decrease (increase) (777) 2,135 6,581
in debtors
(Decrease) in (1,402) (1,770) (1,854)
creditors
(Decrease) in (27) (28) (460)
provisions
__________________________________________________
Net cash (outflow) (1,212) 1,021 4,455
inflow from operating
activities
==================================================
6. Profit and loss account
30 June 2000 30 June 1999 31 Dec 1999
£'000 £'000 £'000
The profit and loss account
comprises
Accumulated profit 5,691 3,071 4,871
Goodwill written off (3,063) (22,952) (2,853)
___________________________________________
2,628 (19,881) 2,018
===========================================
7. Acquisition of subsidiaries
Advent Communications Limited was acquired on 18 April 2000. The acquisition
has been accounted for under the acquisition method of accounting. The
following table sets out the book values and identifiable assets and
liabilities acquired and their fair value to the Group:
Book Value Revaluation £'000 Fair Value to
£'000 the Group
£'000
Assets acquired:
Fixed assets 894 - 894
Stocks 2,492 (385) 2,107
Debtors 1,308 - 1.308
Net debt (401) - (401)
Creditors (3,347) (329) (3,676)
_______________________________________________
946 (714) 232
==============================
Goodwill 13,629
______
Cost of Investment 13,861
______
Satisfied by:
Cash 12,943
Shares 386
Deferred consideration 532
______
13,861
======
The deferred consideration of 696,000 shares has been valued at the closing
mid-market price of 76.5 pence on 17 April 2000. Goodwill includes
acquisition costs of £0.48 million.
8. Subsequent Events
On 27 June 2000 the Company announced that it had agreed to acquire the
Microwave Radio Communications business of Adaptive Broadband Corporation for
a consideration of up to $20.75million (approximately £13.8million). The
Company also announced a placing of 7,758,621 new ordinary shares at 58 pence
per share in order to raise £4.5million (before expenses) to finance part of
the acquisition, the remainder of the consideration being financed from bank
facilities arranged for the purpose. Both the acquisition and the placing
were conditional on shareholder approval, which was given at an Extraordinary
General Meeting held on 26 July 2000. Completion took place on 28 July 2000
with the admission of the new ordinary shares.
9. Basis of preparation
The interim accounts, which are unaudited, have been prepared in accordance
with the accounting policies set out in the Annual Report and Accounts for
the year ended 31 December 1999. The financial information for the preceding
year is based upon the statutory accounts for the ended 31 December 1999,
upon which the auditors gave an unqualified opinion and which have been
delivered to the Companies Registration Office in Ireland.
Review report by PricewaterhouseCoopers to the directors of Vislink plc
Introduction
We have been instructed by the Company to review the financial information
set out on pages 5 to 11 and we have read the other information contained in
the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the Irish Stock Exchange in the Republic of Ireland require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists principally
of making enquiries of group management and applying analytical procedures to
the financial information and underlying financial data and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed
in accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on
the interim financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended June 30, 2000.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Bristol
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