Interim Results
Vislink PLC
03 September 2003
Vislink plc
Interim results for the six months ended 30 June 2003
Vislink plc ('Vislink') today announces its interim results for the six months
ended 30 June 2003. The Group supplies microwave radio and satellite
transmission products for the broadcast and security markets and integrated CCTV
systems for marine security and petroleum markets.
Highlights
• The Group's order intake for the continuing operations was £37.59 million
(2002 : £37.58 million)
• Sales from continuing operations were £34.04 million (2002 : £37.54
million)
• Operating profit from continuing operations before goodwill amortisation
was £1.10 million (2002 : £2.25 million)
• Profit before tax and goodwill was £0.84 million (2002 : £1.49 million)
• Headline earnings per share from continuing operations before goodwill
were 0.56 pence (2002 :1.27 pence)
• Cash generation in the period was £1.53 million reducing net debt to
£3.46million (31 December 2002 : £4.99 million) and gearing to 10.8 per cent
Commenting on the interim results, Bob Morton, Chairman of Vislink said:
'The Group traded profitably and generated cash during the first six months of
this year. Our US business has continued to trade ahead of last year whilst the
UK and international markets have remained slow for both the UK business and
Hernis.
Although the short term order intake from the core markets of the UK business
has fallen below expected levels, the current prospective orders are encouraging
for the Group as a whole. Accordingly the full year results for the Group remain
dependent on the timely conversion of the UK business' potential orders and the
Board remains cautiously optimistic for the future.'
- Ends -
For further information on September 3rd 2003, please contact:
Ian Scott-Gall (Chief Executive) 01488 685500
James Trumper (Group Finance Director) 01488 685500
Chairman's Statement
Results for the six months to 30 June 2003
The Group traded profitably and generated cash during the first six months of
this year. Our US business has continued to trade ahead of last year whilst the
UK and international markets have remained slow for both the UK business and
Hernis.
The six months order inflow for the Group of £37.59 million was similar to the
first half of last year. However as a number of contracts are scheduled to be
delivered in the second half of this year, the sales of the Group's continuing
businesses were lower at £34.04 million for the first half compared with £37.54
million for the first half of 2002.
As a result of the lower sales, the Group's operating profit before goodwill and
the exceptional redundancy costs incurred as part of the rationalisation of the
UK operations of £0.19 million (2002: £0.30 million), declined to £1.29 million
(2002: £2.55 million). After exceptional costs and goodwill amortisation of
£0.58 million (2002: £0.60 million) the operating profit from the continuing
businesses was £0.52 million (2002: £1.65 million).
The profit on ordinary activities before interest and taxation was £0.48 million
(2002: £1.30 million). The net interest charge of £0.22 million (2002: £0.41
million) was lower than the corresponding half year due to reduced debt. The
Group's profit on ordinary activities before tax for the period was £0.26
million (2002: £0.89 million).
The Group received some significant deposits from customers at the end of the
second quarter for contracts to be delivered in the second half of the year.
These have contributed to the strong cash flow generated in the period of £1.53
million which has reduced net debt to £3.46 million (31 December 2002: £4.99
million) and gearing to 10.8% (31 December 2002: 15.2%).
Earnings per share
Earnings per share from continuing operations excluding goodwill amortisation
were 0.56 pence (2002: 1.27 pence). Basic earnings per share were 0.01 pence
(2002: 0.49 pence).
Dividends
As in previous years the Board is not recommending an interim dividend in line
with the Group's stated strategy to only recommend an annual dividend.
Business Review of the half year
The Group continues to operate in the global broadcast markets through MRC, our
US based business and from the UK through its brands of Continental Microwave,
Advent and Multipoint. Our broadcast quality microwave links and satellite
communications products have found increasing applications in the growing
markets of public safety, homelands security and supporting military
communications. Hernis, our Norwegian based business continues to supply
specialised CCTV security systems to the marine and petroleum industry markets.
Trading by market
In the first six months of this year sales increased in the USA, UK and European
markets by £1.42 million to £23.72 million (2002: £22.30 million). In the
domestic USA market MRC has seen increased sales of 12.8%. Sales of digital
broadcast microwave links have continued at a satisfactory rate as the digital
TV conversion programme moves into the public broadcast and smaller TV studio
segment of the market. The levels of spend by the larger broadcasters on
electronic news gathering systems have been encouraging.
The UK business has installed the new satellite uplink for the BBC's direct
digital satellite broadcast channels and it supplied a number of specialist
satellite vehicles and antennas to a major UK defence contractor. In addition it
has supplied a satellite broadcast vehicle and ancillary systems to Croatia to
cover the recent Papal visit. Orders have been taken for delivery in the second
half for a substantial broadcast system for the Pan African games (through a UK
based major supplier) and also for satellite communication systems in Iraq and a
number of other Middle East countries. The prospects for the Middle East region
are encouraging after the recent uncertainties.
The Group has won over $1 million of homelands security business this year and
has recently won a satellite communications order in excess of $2 million for
delivery into a US government agency. It is expected that US government funded
programmes will remain strong for both satellite and microwave products,
benefiting both the UK and US businesses.
However, in Asia sales in the first half of this year were £2.77 million lower
at £3.45 million (2002: £6.22 million). This was primarily due to delays in the
second half of last year to the build programme of new ships and the regional
impact of SARS in the first half of this year, which have substantially reduced
the orders received by Hernis in this region compared with last year's record
inflow. The prospects for this region look set to improve in the fourth quarter
of the year.
In South America, sales were £2.53 million lower at £1.31 million (2002: £3.84
million) as deliveries were made in the first half of last year under two large
UN contracts for air traffic control systems. The regional prospects are
encouraging but are prone to political uncertainty.
Discontinued businesses
Following our strategic review of Datacell's business, agreement was reached to
sell the image analysis business to its main supplier Media Cybernetics, a
division of Roper Industries, Inc. In addition the frame grabber product line
and associated inventory was also sold to its supplier. The total consideration
for the two transactions was £0.16 million. Datacell had a trading loss in the
period of £0.01 million.
The Group's retained interest in American Auto-Matrix, the USA building controls
business, was sold to a US investor for $0.45 million in June.
The disposal programme of the Group's smaller companies within the former video
division is now complete.
Operational Strategies & Prospects
The Group has clear operational strategic and financial objectives.
• The Group has set an operational goal to deliver a 10% operating profit
return on sales before goodwill and central costs, whilst at the same time
growing sales organically.
• The Group's key strategy for new business growth is to develop our sales
into the government, military and security markets where there is increasing
demand for our satellite and microwave products and to develop the sales of
marine CCTV security systems. These markets have now reached around 26% of
the Group's sales.
• The Group's product development strategy is aligned to marketing to ensure
that our products remain at the forefront of technology and competitive in
order to meet the requirements of demanding global customers in both our
core businesses and new markets.
Hernis, which is well established in its chosen international markets, has
returned 9.7% on sales in the first half of 2003, despite being under margin
pressure from the strength of their domestic currency, the Norwegian krone.
MRC, the US Broadcast business, has achieved in excess of a 10% return on its
sales whilst growing both its sales and operating profits, primarily from its
strong position in the traditional broadcast microwave radio market which has
benefited from the US DTV conversion program.
In addition MRC are developing opportunities for digital microwave products in
the growing police and security markets and building on the government and
military applications where the Group has already achieved a market presence.
MRC are also breaking into the US mobile satellite communications markets,
selling products developed by the UK business, which represents a long term
opportunity for growth. Prospects in the US for the second half remain
encouraging.
The UK business, which sells microwave, terrestrial TV transmitters and
satellite products into international markets outside of the USA and in the UK,
made a small operating loss in the first half. Over the past two years the
business has seen minimal European business for terrestrial TV transmitters due
to the uncertainties over the timing of the conversion to digital terrestrial TV
transmission. The UK business is scaling down its transmitter cost base whilst
continuing to offer products for larger integrated projects. The strategic focus
will be on the satellite and microwave products and in particular developing the
public safety and military markets internationally.
In summary, although the short term order intake from the core markets of the UK
business has fallen below expected levels, the current prospective orders are
encouraging for the Group as a whole. Accordingly the full year results for the
Group remain dependent on the timely conversion of the UK business' potential
orders and the Board remains cautiously optimistic for the future.
A L R Morton
Chairman
September 3, 2003
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003
Six months to Six months to Year ended 31
30 June 2003 30 June 2002 Dec 2002
£'000 £'000 £'000
Notes
Turnover
Continuing operations 34,042 37,543 72,955
Discontinued operations 1,347 3,783 6,589
2 35,389 41,326 79,544
Operating profit
Continuing operations before goodwill amortisation 1,100 2,250 3,859
Goodwill on continuing operations (584) (603) (1,170)
Continuing operations 516 1,647 2,689
Discontinued operations (11) (346) (626)
Total operating profit 2 505 1,301 2,063
(Loss) on disposal of businesses (27) - (195)
Profit on ordinary activities before interest 478 1,301 1,868
Interest receivable 12 22 106
Interest payable (230) (433) (831)
Profit on ordinary activities before taxation 260 890 1,143
Tax on profit on ordinary activities 3 (254) (394) (730)
Profit for the financial period 6 496 413
Dividends 4 - - (205)
Transfer to reserves 6 496 208
Basic and fully diluted earnings per share 5 0.01p 0.49p 0.41p
Earnings per share from continuing operations 5 0.56p 1.27p 2.01p
excluding goodwill
Dividend per share - - 0.20p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 June 2003
Six months to Six months to Year ended 31
30 June 2003 30 June 2002 Dec 2002
£'000 £'000 £'000
Profit for the financial period 6 496 413
Translation difference on foreign currency net (560) (513) (1,208)
investments
Total recognised gains and losses for the financial (554) (17) (795)
period
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2003
Six months to Six months Year ended 31
30 June 2003 to 30 June Dec 2002
2002
£'000 £'000 £'000
Notes
Opening equity shareholders' funds previously reported 32,700 32,879 32,879
Prior year adjustment in respect of deferred tax - 1,009 814
Opening equity shareholders' funds restated 32,700 33,888 33,693
Profit for the financial period 6 496 413
Dividends 4 - - (205)
Value of shares issued in the financial period - 223 223
Change in value of shares to be issued - (216) (216)
Translation difference on foreign currency net (560) (513) (1,208)
investments
Closing equity shareholders' funds 32,146 33,878 32,700
GROUP BALANCE SHEET
as at 30 June 2003 Notes
30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000
Fixed assets
Intangible assets 19,116 20,100 19,851
Tangible assets 5,614 5,809 5,643
Financial assets 162 15 86
24,892 25,924 25,580
Current assets
Stocks 11,213 14,413 12,086
Debtors 7 12,958 19,371 17,114
Cash at bank and in hand 4,600 2,071 4,189
28,771 35,855 33,389
Creditors - amounts falling due within one year
Borrowings 2,227 2,252 2,227
Creditors 12,873 15,307 16,403
15,100 17,559 18,630
Net current assets 13,671 18,296 14,759
Total assets less current liabilities 38,563 44,220 40,339
Creditors - amounts falling due after more than one
year
5,832 9,896 6,947
Borrowings
Provisions for liabilities and charges 585 446 692
32,146 33,878 32,700
Capital and reserves
Called up share capital 2,552 2,552 2,552
Share premium account 205 205 205
Merger reserve 27,895 27,895 27,895
Profit and loss account 1,494 3,226 2,048
Equity shareholders' funds 32,146 33,878 32,700
SUMMARISED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2003
Six months to Six months to Year ended 31
30 June 2003 30 June 2002 Dec 2002
£'000 £'000 £'000
Notes
Net cash inflow from operating activities 6 2,589 217 5,923
Returns on investments and servicing of finance (106) (152) (765)
Taxation (502) (160) (155)
Capital expenditure (579) (193) (843)
Acquisitions and disposals 160 - 783
Equity dividends paid - - (101)
Net cash inflow (outflow) before financing 1,562 (288) 4,842
Financing (1,115) (871) (3,826)
Increase (decrease) in cash 447 (1,159) 1,016
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 30 June 2003
Six months to Six months to Year ended 31
30 June 2003 30 June 2002 Dec 2002
£'000 £'000 £'000
Increase (decrease) in cash 447 (1,159) 1,016
Repayment of bank loans 1,115 863 3,818
Finance lease repayments - 8 8
Change in net debt resulting from cash flows 1,562 (288) 4,842
Effect of foreign exchange changes (36) (285) (323)
Movement in net debt 1,526 (573) 4,519
Opening net debt (4,985) (9,504) (9,504)
Closing net debt (3,459) (10,077) (4,985)
NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2003
1. ACCOUNTING POLICIES
This interim report is unaudited and does not constitute audited accounts within
the meaning of the Companies Act 1985. The interim results have been prepared
using accounting policies and practices consistent with those used in the
preparation of the Annual Report and Accounts for the year ended December 31,
2002, which should be read in conjunction with this report. Those accounts (on
which the auditors gave an unqualified audit opinion) have been filed with the
Registrar of Companies.
2. SEGMENTAL REPORT
Turnover Operating Profit
Six months Six months Six months Six months
to to Year ended to to Year ended
30 June 2003 30 June 2002 31 Dec 2002 30 June 2003 30 June 2002 31 Dec 2002
£'000 £'000 £'000 £'000 £'000 £'000
By business:
Broadcast 29,833 32,108 63,183 1,431 2,389 4,130
Hernis 4,209 5,435 9,772 407 686 1,096
Central costs - - - (548) (521) (1,049)
34,042 37,543 72,955 1,290 2,554 4,177
Exceptional operating costs - - - (190) (304) (318)
Goodwill amortisation - - - (584) (603) (1,170)
Continuing operations 34,042 37,543 72,955 516 1,647 2,689
Discontinued operations 1,347 3,783 6,589 (11) (346) (626)
Group total 35,389 41,326 79,544 505 1,301 2,063
The exceptional charges in the period are redundancy costs associated with the
rationalisation of the Broadcast business companies.
Goodwill amortisation in the continuing operations is in respect of the
businesses of Advent Communications, Microwave Radio Communications and
Multipoint Communications, all of which are within the Broadcast business.
Turnover Analysis
Turnover
Six months to 30 Six months to Year ended 31
June 2003 30 June 2002 Dec 2002
By market:
£'000 £'000 £'000
Continuing operations
UK & Ireland 5,669 4,741 9,828
Rest of Europe 4,457 4,360 8,390
North America 13,597 13,203 25,918
South America 1,305 3,843 7,036
Middle East 3,636 3,049 4,981
Asia 3,447 6,215 11,904
Africa 1,473 1,893 3,816
Other 458 239 1,082
34,042 37,543 72,955
Discontinued operations
UK & Ireland 1,328 1,414 2,273
Rest of Europe 17 38 98
North America 1 2,161 4,007
Asia - 26 59
Africa - 87 -
Other 1 57 152
Group Total 35,389 41,326 79,544
3. TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge for the six months ended 30 June 2003 is based on the effective
tax rate which it is estimated will apply on earnings for the full year.
4. DIVIDENDS
No interim dividend is proposed for the period. In 2002 there was no interim
dividend and the final dividend was 0.2 pence.
5. EARNINGS PER ORDINARY SHARE
Earnings per share is calculated by reference to a weighted average of
101,362,000 ordinary shares in issue during the period, excluding shares held by
the Employees' Share Ownership Plan (30 June 2002: 101,658,000 and 31 December
2002 - 101,757,000).
The diluted earnings per share is after taking account of a further nil shares
(June 30 2002: 118,000; December 31, 2002: nil) being the dilutive effect of
share options.
Earnings per share from continuing operations excludes after tax losses relating
to discontinued operations of £8,000 (30 June 2002: £242,000; 31 December 2002:
£438,000) and after tax non-operating exceptional losses of £19,000 (30 June
2002: £nil; 31 December 2002: £137,000).
Six months to Six months to Year ended 31
30 June 2003 30 June 2002 Dec 2002
Basic earnings per share 0.01p 0.49p 0.41p
Adjustments: 0.52p 0.54p 1.04p
Goodwill
Result after taxation from discontinued operations 0.01p 0.24p 0.43p
Non-operating exceptional items 0.02p - p 0.13p
Earnings per share from ongoing operations excluding 0.56p 1.27p 2.01p
goodwill
Fully diluted earnings per share 0.01p 0.49p 0.41p
6. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
Six months to Six months to Year ended 31
30 June 2003 30 June 2002 Dec 2002
£'000 £'000 £'000
Operating profit 506 1,301 2,063
Depreciation 376 470 929
Amortisation of goodwill 584 603 1,170
Provision against investments - - 13
Loss (profit) on sale of fixed assets 34 (4) 12
Decrease (increase) in stocks 567 (1,163) 348
Decrease in debtors 3,909 523 1,186
(Decrease) increase in creditors (3,293) (1,501) 969
(Decrease) in provisions (94) ( 12) (767)
Net cash inflow from operating activities 2,589 217 5,923
7. DEBTORS
Debtors include deferred tax assets of £933,000 (June 30, 2002: £701,000 and
December 31, 2002: £937,000).
8. APPROVAL
This report was approved by a committee of the Board of Directors on September
3, 2003.
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