Interim Results
Vislink PLC
01 September 2004
Vislink plc
Interim results for the six months ended 30th June 2004
Vislink plc ('Vislink') today announces its interim results for the six months
ended 30 June 2004. 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.
Financial summary
For the six months ended 30 June 2004 2003
£'000 £'000
Turnover - continuing operations 30,107 34,042
Operating profit - continuing operations before goodwill amortisation 457 1,100
(Loss)/profit before taxation (323) 260
Earnings per share excluding goodwill amortisation and exceptional costs* 0.16p 0.58p
*Goodwill amortisation was £566,000 (2003 - £584,000) and exceptional costs were
£nil (2003 - £27,000)
Key points
• The Group is continuing to see growth from the US broadcast business and
Hernis
• Group's progress has been constrained by the strength of sterling and
the poor trading of the UK broadcast business
• A strategic review to restore the core UK business to ongoing profitability
is being made which is expected to result in a restructuring charge
Bob Morton, Chairman of Vislink said:
'The Group is continuing to see growth from the US broadcast business and
Hernis. The Board considers that both MRC and Hernis will perform to their
expected levels in the full year. Whilst the Venezuelan contract will make a
significant contribution to the UK business, the Board is carrying out a
strategic review of the UK business where further rationalisation to lower its
cost base, combined with the weak level of demand in its other markets, will
have an adverse effect on the Group's profits for the full year.'
- ends -
For further information on September 1st 2004, 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 2004
The Group has seen continued growth in sales and operating profits from MRC, our
US broadcast business and Hernis our Norwegian marine safety business, in their
local currencies. However overall the Group's progress has been constrained by
the strength of sterling and the poor trading of the UK broadcast business,
despite the first time contribution from the Venezuelan contract, which was won
at the end of 2003.
Group sales from continuing operations declined 11.5% to £30.11million (2003 -
£34.04million). Adverse rates of foreign exchange were responsible for
£2.2million (6.5%) of the reduced sales, whilst the balance was as a result of
lower sales from the UK broadcast business.
The Group's operating profit from continuing operations before goodwill was
£0.46million (2003 - £1.10million). Whilst the adverse effect of foreign
exchange on translation of operating results was responsible for £0.29million of
the decline, the trading losses in the UK business were larger than expected
during the period due to weak sales and disruption caused by the ongoing
rationalisation of the UK business in the first five months of the year. After
goodwill amortisation of £0.57million (2003 - £0.58million) there was an
operating loss of £0.11million (2003 - profit of £0.52million) from continuing
activities.
After net interest costs of £0.21million (2003 - £0.22million) the Group made a
loss on ordinary activities before tax of £0.32million (2003 - profit of
£0.26million).
At 30 June 2004 the Group had net debt of £0.22million (31 December 2003 - net
cash of £3.70million). There was a net cash outflow during the period from the
expected absorption of the deposit received on the Venezuelan contract into
working capital and from the costs of both the rationalisation and trading
losses of the UK business.
Earnings per share
Earnings per share from continuing operations excluding goodwill amortisation
and exceptional costs were 0.16 pence (2003 - 0.58 pence). The basic loss per
share was 0.40 pence (2003 - earnings per share of 0.01 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.
Board of Directors
Mr Eric Walters has resigned as a non-executive director with immediate effect.
The Board would like to thank Eric for his excellent and valuable contribution
to the Group during his term of office since he joined the Board in 1994 and
wish him every success for the future.
Business Review of the half year
MRC, the US broadcast business has seen sales in local currency grow by 8.2% and
operating profits by 20% over the corresponding period for last year. MRC has
seen increasing demand from the emerging public safety and government markets,
whilst demand for the core broadcast products was less than in the previous half
year, following the completion of the digitalisation of the US TV studio's
distribution networks.
Hernis, our specialist marine CCTV business, maintained its sales at the same
level as the first half of 2003, but achieved better margins from increased
domestic business in Norway, resulting in an increase of 20% in local currency
operating profits. The domestic offshore market has been strong this year and
there are also signs of growth in the marine market in the Far East. The
potential opportunities for additional business from the implementation of the
new International Ship and Port Safety regulations ('ISPS') have yet to be fully
realised, although there have been a number of related orders.
The UK business predominantly sells satellite communication products into the
UK, European and international markets outside of North America, as well as
undertaking large system integration projects. The UK business has benefited
from sales growth in South America with the commencement of the Venezuelan
contract. Group sales increased in the region to £6.10million (2003 -
£1.31million). The Bahrain F1 Grand Prix and the Olympic games have provided
good business, however the UK, Asia and the Middle East markets were weakened by
reduced spend after the end of the Iraqi war compared with the half year to June
2003.
The rationalisation of the UK business which was announced at the end of 2003,
commenced in the first quarter. The UK operations have been integrated onto one
site. Whilst the predicted cost reductions have been made, the UK business has
made a trading loss in the first half of this year equivalent to the full year
loss in 2003 due to weaker sales and poor operational management. Management
changes have been made to strengthen the business. A strategic review and
further cost reductions to restore the core UK business to ongoing profitability
are expected to result in a restructuring charge which will be provided for in
the full year results.
Operational Strategies & Prospects
The Group has previously stated its clear operational strategic and financial
objectives. These objectives continue to be met by the overseas businesses MRC
and Hernis whilst the UK business has been a disappointment.
The strategic focus for the UK business is the completion of the review, the
implementation of its findings and the restoration of its profitability. Its
product markets remain the international broadcast, military and public safety
satellite markets. The new UK lightweight satellite antenna and compact sized
satellite electronics products have been well received. A £1.7million contract
in West Africa has been won. This is expected to be delivered this year subject
to the timely receipt of the financing for the contract. In addition, there are
further project business opportunities in South America.
In the US market the major opportunity for the future is from the planned
regulatory change to the frequency bands used for Electronic News Gathering
(ENG). This opportunity, known as the 2GHZ re-channelisation, has been taken a
step closer following the announcement of the award to Nextel by the Federal
Communications Commission, of part of the relocation of the broadcasters to a
higher band to allow the use of the spectrum for wireless services. As part of
this award Nextel will have to compensate the broadcasters for replacing
existing ENG installations with digital equipment. This is expected to generate
incremental sales for MRC in 2005 through to 2007.
Hernis has developed new products to meet the demands of the new ISPS
regulations. The regulations came into force on 1st July 2004, and Hernis
expects the markets for its products to grow, resulting in new sales
opportunities from the regulatory requirements.
In summary, the Group is continuing to see growth from the US broadcast business
and Hernis. Although their reported growth is lessened by the continuing
strength of sterling, the Board considers that both MRC and Hernis will perform
to their expected levels in the full year. Whilst the Venezuelan contract will
make a significant contribution to the UK business, the Board is carrying out a
strategic review of the UK business where further rationalisation to lower its
cost base, combined with the weak level of demand in its other markets, will
have an adverse effect on the Group's profits for the full year.
A L R Morton
Chairman
1 September 2004
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2004
Six months to Six months to Year ended 31
30 June 2004 30 June 2003 Dec 2003
£'000 £'000 £'000
Notes
Turnover
Continuing operations 30,107 34,042 67,966
Discontinued operations - 1,347 1,425
2 30,107 35,389 69,391
Operating profit
Continuing operations before exceptional rationalisation
costs and goodwill amortisation 457 1,100 2,074
Exceptional rationalisation costs - - (3,760)
Continuing operations before goodwill amortisation 457 1,100 (1,686)
Goodwill on continuing operations (566) (584) (1,167)
Continuing operations (109) 516 (2,853)
Discontinued operations - (11) (23)
Total operating (loss)/profit 2 (109) 505 (2,876)
Loss on disposal of businesses - (27) (27)
Impairment of long leasehold property - - (50)
(Loss)/profit on ordinary activities before interest (109) 478 (2,953)
Interest receivable 36 12 38
Interest payable (250) (230) (456)
(Loss)/profit on ordinary activities before taxation (323) 260 (3,371)
Tax on profit on ordinary activities 3 (85) (254) (555)
(Loss)/profit for the financial period (408) 6 (3,926)
Dividends 4 - - (202)
Transfer (from)/to reserves (408) 6 (4,128)
(Loss)/earnings per share
Basic 5 (0.40)p 0.01p (3.88) p
Fully diluted 5 (0.40)p 0.01p (3.85) p
Earnings per share excluding goodwill and exceptional
costs
Basic 5 0.16p 0.58p 0.96p
Fully diluted 5 0.16p 0.58p 0.95p
Dividend per share - - 0.20p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 June 2004
Six months to Six months to Year ended 31
30 June 2004 30 June 2003 Dec 2003
£'000 £'000 £'000
(Loss)/profit for the financial period (408) 6 (3,926)
Translation difference on foreign currency net investments (317) (560) (1,592)
Total recognised gains and losses for the financial period (725) (554) (5,518)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2004
Six months to Six months to Year ended 31
30 June 2004 30 June 2003 Dec 2003
Restated Restated
£'000 £'000 £'000
Notes
Opening equity shareholders' funds as previously reported 26,980 32,700 32,700
Prior year adjustment in respect of UITF 38 1 (160) (84) (84)
Opening equity shareholders' funds restated 26,820 32,616 32,616
(Loss)/profit for the financial period (408) 6 (3,926)
Dividends 4 - - (202)
26,412 32,622 28,488
Purchase of own shares for ESOP trust - (76) (76)
Translation difference on foreign currency net (317) (560) (1,592)
investments
Closing equity shareholders' funds 26,095 31,986 26,820
GROUP BALANCE SHEET
as at 30 June 2004
Notes
30 June 2004 30 June 2003 31 Dec 2003
Restated Restated
£'000 £'000 £'000
Fixed assets
Intangible assets 17,458 19,116 18,091
Tangible assets 4,398 5,614 4,464
Financial assets - 2 -
21,856 24,732 22,555
Current assets
Stock 10,682 11,213 9,099
Debtors 7 13,710 12,958 12,857
Cash at bank and in hand 5,371 4,600 9,540
29,763 28,771 31,496
Creditors - amounts falling due within one year
Borrowings 35 2,227 276
Creditors 18,290 12,873 18,845
18,325 15,100 19,121
Net current assets 11,438 13,671 12,375
Total assets less current liabilities 33,294 38,403 34,930
Creditors - amounts falling due after more than one year
Borrowings 5,552 5,832 5,567
Provisions for liabilities and charges 1,647 585 2,543
26,095 31,986 26,820
Capital and reserves
Called up share capital 2,552 2,552 2,552
Share premium account 205 205 205
Investment in own shares (160) (160) (160)
Merger reserve 27,895 27,895 27,895
Profit and loss account (4,397) 1,494 (3,672)
Equity shareholders' funds 26,095 31,986 26,820
SUMMARISED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2004
Six months to Six months to Year ended 31
30 June 2004 30 June 2003 Dec 2003
£'000 £'000 £'000
Notes
Net cash (outflow)/inflow from operating activities 6 (2,961) 2,589 11,824
Returns on investments and servicing of finance (117) (106) (438)
Taxation (403) (502) (1,223)
Capital expenditure (399) (579) (1,178)
Acquisitions and disposals - 160 160
Equity dividends paid - - (205)
Net cash (outflow)/inflow before financing (3,880) 1,562 8,940
Financing (260) (1,115) (3,331)
(Decrease)/increase in cash (4,140) 447 5,609
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
for the six months ended 30 June 2004
Six months to Six months to Year ended 31
30 June 2004 30 June 2003 Dec 2003
£'000 £'000 £'000
(Decrease)/increase in cash (4,140) 447 5,609
Repayment of bank loans 260 1,115 3,331
Change in net debt resulting from cash flows (3,880) 1,562 8,940
Effect of foreign exchange changes (33) (36) (258)
Movement in net debt (3,913) 1,526 8,682
Opening net cash/(debt) 3,697 (4,985) (4,985)
Closing net (debt)/cash (216) (3,459) 3,697
NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2004
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 31 December
2003, which should be read in conjunction with this report, with the exception
of the changes caused by the adoption of Urgent Issues Task Force Abstract 38 '
Accounting for ESOP Trusts' ('UITF38') that is further discussed below.
The accounts for the year ended 31 December 2003 (on which the auditors gave an
unqualified audit opinion) have been filed with the Registrar of Companies.
UITF38 requires own shares held through an employee share ownership plan trust
to be deducted in arriving at shareholders' funds. The adoption of UITF38 has
the effect of reducing shareholders funds' brought forward by £160,000 with no
effect on the profit and loss account.
2. SEGMENTAL ANALYSIS
Turnover Operating Profit / (Loss)
Six months Six months Six months Six months
to to Year ended to to Year ended
30 June 2004 30 June 2003 31 Dec 2003 30 June 2004 30 June 2003 31 Dec 2003
£'000 £'000 £'000 £'000 £'000 £'000
By business:
Broadcast 26,183 29,833 59,599 627 1,241 2,451
Hernis 3,924 4,209 8,367 442 407 606
Central costs - - - (612) (548) (983)
30,107 34,042 67,966 457 1,100 2,074
Exceptional operating costs - - - - - (3,760)
Goodwill amortisation - - - (566) (584) (1,167)
Continuing operations 30,107 34,042 67,966 (109) 516 (2,853)
Discontinued operations - 1,347 1,425 - (11) (23)
Group total 30,107 35,389 69,391 (109) 505 (2,876)
The exceptional costs in 2003 are allocated to the Broadcast businesses.
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.
2. SEGMENTAL ANALYSIS (contd.)
Turnover Analysis
Turnover
Six months to 30 Six months to 30 Year ended 31 Dec
June 2004 June 2003 2003
£'000 £'000 £'000
By market:
Continuing operations
UK & Ireland 2,707 5,669 7,472
Rest of Europe 4,506 4,457 8,332
North America 13,101 13,597 27,170
South America 6,081 1,305 2,806
Middle East 1,734 3,636 6,154
Asia 1,610 3,447 10,386
Africa 280 1,473 5,031
Other 88 458 615
30,107 34,042 67,966
Discontinued operations
UK & Ireland - 1,328 1,401
Rest of Europe - 17 18
North America - 1 5
Other - 1 1
Group Total 30,107 35,389 69,391
3. TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge for the six months ended 30 June 2004 is based on the effective
tax rate, which it is estimated will apply to earnings for the full year.
4. DIVIDENDS
No interim dividend is proposed for the period. In 2003 there was no interim
dividend and the final dividend was 0.2 pence per share.
5. EARNINGS PER ORDINARY SHARE
Earnings per share is calculated by reference to a weighted average of
101,123,000 ordinary shares in issue during the period, excluding shares held by
the Employees' Share Ownership Plan (30 June 2003 - 101,362,000 and 31 December
2003 - 101,238,000).
The diluted earnings per share is after taking account of a further 746,000
shares (30 June 2003- nil; 31 December 2003 - 620,000) being the dilutive effect
of share options.
Earnings per share before goodwill and exceptional items exclude after tax
amounts relating to goodwill and exceptional items of £566,000 (30 June 2003 -
£584,000; 31 December 2003 - £4,893,000).
Six months to Six months to Year ended
30 June 2004 30 June 2003 31 Dec 2003
Basic Diluted Basic Diluted Basic Diluted
Basic and diluted (loss)/earnings per share (0.40)p (0.40)p 0.01p 0.01p (3.88)p (3.85)p
Adjustment for goodwill and exceptional items 0.56p 0.56p 0.57p 0.57p 4.84p 4.80p
Earnings per share from ongoing operations 0.16p 0.16p 0.58p 0.58p 0.96p 0.95p
excluding goodwill
6. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
Six months to Six months to Year ended 31
30 June 2004 30 June 2003 Dec 2003
£'000 £'000 £'000
Operating (loss)/profit (109) 505 (2,876)
Depreciation 406 376 1,519
Amortisation of goodwill 566 584 1,167
(Profit)/loss on sale of fixed assets (2) 34 35
(Increase)/decrease in stock (1,745) 568 2,399
(Increase)/decrease in debtors (976) 3,909 4,388
(Decrease)/increase in creditors (214) (3,293) 3,462
(Decrease)/increase in provisions (887) (94) 1,730
Net cash inflow from operating activities (2,961) 2,589 11,824
7. DEBTORS
Debtors include deferred tax assets of £1,241,000 (30 June 2003 - £933,000 and
31 December 2003 - £1,241,000).
8. APPROVAL
This report was approved by a committee of the Board of Directors on 1 September
2004.
Independent review report to Vislink Plc
Introduction
We have been instructed by the Company to review the financial information which
comprises the group profit and loss account, statement of total recognised gains
and losses, reconciliation of movements in shareholders' funds, group balance
sheet, summarised statement of cash flows and the related notes. 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 directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which 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 for use in the United Kingdom. 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 United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
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 30 June 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
Bristol
1 September 2004
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