Interim Results

RNS Number : 5662Q
Vislink PLC
02 September 2014
 



Vislink plc

(the "Company" or "the Group")

 

Half year results for the six months ended 30 June 2014

 

Vislink plc, the global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage, today announces its half year results for the six months ended 30 June 2014.

 

Results for the six months ended 30 June 2014

2014

2013

£m

£m

Order intake

33.3

33.6

Revenue

27.1

28.0

Adjusted operating profit1

1.7

2.0

Adjusted operating margin1

6.3%

7.2%

Adjusted profit before tax1

1.7

2.0

Reported operating profit and profit before tax

2.0

1.4




Adjusted earnings per share1

1.2p

1.8p

Reported earnings per share

1.7p

1.3p




Cash generated from operating activities

5.5

1.6

Net (debt)/cash

(0.3)

7.2

 

1 Adjusted to exclude the amortisation and impairment of goodwill and acquired intangibles, and other non-recurring costs (note 6). 

 

Key points

 

·     Adjusted operating profit of £1.7m (H1 2013: £2.0m). On a constant currency basis, adjusted operating profit up 3.4%

·     Cash generation from operations of £5.5m (H1 2013: £1.6m)

·     Orders received during the period of £33.3m

·     Continued strong performance of the software division expected in the second half. Our software division will represent a significant proportion of operating profits in FY14

·     Software division trading ahead of expectations

·     Uncertain broadcast market and delayed surveillance contracts impacting hardware division 

·     Order book has strengthened significantly in Q2, closing at £13.2m

·     Hardware division restructured with significant cost savings in FY14  

·     Achieved Wideband Global SATCOM ("WGS") certification, enabling the Group to benefit from recovering US security markets

·     The Group continues to trade in line with market expectations for the year as a whole

 

Post period end

 

The Group will announce separately today:

 

·     An OEM agreement with Harmonic Inc (Nasdaq: HLIT), a worldwide leader in video delivery infrastructure for emerging television and video services. The partnership will enable Harmonic Inc to sell packages, integrated with Pebble Beach Systems' software, to the international broadcast market

·     The partnership will result in Harmonic Inc placing an initial order valued at £2.0m in 2014 and sees Harmonic Inc subscribing for 4,000,000 new ordinary shares in the Group priced at 50p per new share by way of a direct subscription

 

John Hawkins, Executive Chairman of the Group, said:

 

"Whilst the broadcast market has been challenging for our hardware business, overall, we are encouraged with these results. We have taken timely action to reduce costs in our Hardware Division and we have seen an improved trading trend, the order book strengthened in Q2 and the orders to sales ratio is better than 1.

 

We are delivering on our software strategy with Pebble Beach Systems performing ahead of expectations. The Group's revenue has benefitted from the change in revenue balance, with software providing longer term visibility. The partnership with Harmonic Inc, which is being announced later today, represents further excellent opportunities for the Group.

 

2014 represents a transitional and transformational year for the Group and with the increasing focus on our software division, we believe that this will enhance the Group's overall quality of earnings in 2014 and beyond.

 

The Group continues to trade in line with market expectations and the Board remains confident for the future prospects for the Group."

 

A copy of the half yearly report will be available from the Group's website www.vislink.com. 

 

 

 

-     ends  -

 

 

 

 

Enquiries:


Vislink plc: John Hawkins, Executive Chairman

+44 (0)1488 685500

Vislink plc: Ian Davies, Finance Director

N+1 Singer: Shaun Dobson

+44 (0)1488 685500

+44 (0)20 7496 3000

Hudson Sandler: Charlie Jack/Katie Matthews

+44 (0)207 796 4133

 

                                               

 

 



 

Executive Chairman's Statement

For the six months to 30 June 2014

 

The Group achieved an order intake of £33.3m for the six months ended 30 June 2014, with order intake strengthening in Q2 leading to an order book of £13.2m at the end of the period.

 

Revenue in the first half was £27.1m, which on a constant currency basis was in line with the same period last year.

 

Adjusted operating profit was up 3.4% on a constant currency basis.

 

In our core markets of the US, the UK and Europe, our hardware business found market conditions challenging and we continued to witness longer decision making cycles.

 

Against the backdrop of a low opening order book and a relatively low order intake in Q1, hardware revenue improved towards the end of the first half. Nevertheless, we took decisive action to reduce costs in the hardware division and the benefits of this are expected to be seen in the second half.

 

We have retained our strong engineering base and channels to market, which are also being strengthened by our strategic partnerships.

 

Our hardware surveillance business continues to see good opportunities.

 

Early in 2014 we won a multimillion pound contract in public safety in the UK which will significantly contribute to our operating profit for the full year.  

 

The aforementioned longer decision making cycles have resulted in some key surveillance hardware opportunities moving into the second half. We have already begun to see some of these key orders convert post the period end.  

 

Amplifier Technology performed in line with management expectations for the first half of the financial year. The earn out required targets to be achieved which included six months in 2013, two months of which were prior to acquisition. The targets were not achieved and therefore the deferred consideration of £2.0m was not payable. However, the Group sees good opportunities for Amplifier Technology which added RF jamming technologies to the Group's portfolio.

 

Our Mobile Satellite ("MSAT") satellite communications system has achieved WGS certification. This provides significantly improved opportunities for revenues in the defence and security markets and effectively doubles the size of the available market that is now open to this product as a result of this approval.

 

The first half saw continued development of our cellular and IP solutions and the launch of new additions to the successful MSAT range of satellite communications solutions.

 

We were also pleased to announce during the period a key strategic partnership with TVU Networks. This partnership gives us the unique ability to combine best-in-class cellular, satellite, microwave, mesh and Ethernet transmission solutions with a powerful back end distribution, delivering equally powerful end to end video solutions.

 

In March 2014 we were delighted to announce the acquisition of Pebble Beach Systems. The acquisition transitioned the Group into a market leading full service video capture and playout provider for the broadcast industry.

 

Since acquisition, Pebble Beach Systems has performed ahead of expectations, achieving revenue of £3.1m and adjusted operating profit of £1.1m in the three and a half months to 30 June 2014.

 

Our software strategy is on track, providing the Group with improved margins, cash generation and visibility of earnings.

 

We are also pleased that the Group will be announcing later today the launch of a new strategic partnership with Harmonic Inc, which will provide significant new channels to market for our software solutions. As part of the deal, Harmonic Inc will place an initial order for software licences of £2.0m, receivable in 2014, to secure Pebble Beach Systems' products for onward sale in its integrated package. The agreement should contribute to improved profitability and penetration of Pebble Beach Systems software globally in the second half.

 

Financial Results

 

Group revenue for the six months to 30 June 2014 was £27.1m (H1 2013: £28.0m). Orders received in the period were £33.3m (H1 2013: £33.6m) with improved order intake in Q2.

 

The order book at 30 June 2014 was £13.2m (31 December 2013: £5.6m) which includes orders and deferred revenue for Pebble Beach Systems.

 

The Group's gross margin improved by 1.2 percentage points to 42.8% (H1 2013: 41.6%) as we see the benefit of the introduction of software products in Q2.  

 

Overheads remain in line with expectations. Total overheads increased slightly to £9.9m (H1 2013: £9.6m), being 36% of sales compared with 34% in the first half of 2013. R&D overheads show a small increase whilst sales expenses decreased by £0.7m. Administrative expenses increased reflecting the negative impact of movements on translation. The total overheads include those of Pebble Beach Systems.

 

The adjusted operating profit was £1.7m (H1 2013: £2.0m) before charging £0.9m in respect of the amortisation of acquired intangibles (H1 2013: £0.7m) and crediting £1.3m of non-recurring items (H1 2013: £nil). The profit before tax was £2.0m (H1 2013: £1.4m). Net finance costs were not material.  

 

At the half year, the Group held inventory of £12.1m down 8% on the same period in the prior year (H1 2013: £13.2m).

 

The Group held cash of £7.7m at 30 June 2014 and taken together with the outstanding debt of £8.0m, there was a small net debt position of £0.3m (31 December 2013: net cash of £3.7m). There was a net cash inflow from operating activities in the period of £5.5m (H1 2013: £1.6m).

 

The Group continues to view investments in the development of new products as key to future growth. The cash outflow from investing activities amounted to £9.4m (H1 2013: £2.6m) which comprised £7.0m (net of cash acquired) for the acquisition of Pebble Beach Systems Limited , net of £6.1m cash acquired with the business and £2.4m in respect of net capital expenditure and the capitalisation of development costs (H1 2013: £2.2m).

 

Earnings per Share

 

The adjusted earnings per share for the period was 1.2p (H1 2013: 1.8p). After charging non-recurring costs and the amortisation of acquired intangibles, the reported earnings per share from continuing operations was 1.7p (H1 2013: 1.3p).

 

Dividends

 

The final dividend of 1.25 pence per share in respect of the year ended 31 December 2013 was paid to shareholders on 18 July 2014. As in previous years, the Board is not declaring an interim dividend.

 

 

Business Performance

 

The table below sets out the key performance indicators that are used by management to measure the performance in the business.

 

2014

2013

Change

FY 2013









Orders received (£m)

33.3

33.6

(0.9%)

60.2

Revenue (£m)

27.1

28.0

(3.2%)

59.9

Book to bill ratio

122.9%

120.0%

(2.9 pts)

100.5%

Gross margin

42.8%

41.6%

1.2 pts

40.7%

Total operating costs (£m)1

13.2

13.0

1.5%

26.7

Adjusted operating profit (£m)2

1.7

2.0

(15.0%)

4.3

Adjusted earnings per share 2

1.2p

1.8p


4.2p

Net cash generated from operating activities (£m)

5.5

1.6

243.8%

4.2

 

1 Operating costs comprise sales and marketing expenses, administrative expenses, the costs associated with logistics (presented within Cost of sales) and R&D and excludes amortisation of acquired intangibles and non-recurring items.

2 Defined as operating profit/(loss) before the amortisation of acquired intangibles and other non-recurring costs. Adjusted EPS is calculated on the same basis after taking account of related tax effects.

 

Our Markets

 

Orders received from our broadcast market were down 22.9% to £21.5m (H1 2013: £27.9m). Surveillance orders were up 107% to £11.8m (H1 2013: £5.7m).

 

Broadcast revenues declined by 10.2% to £21.1m (H1 2013: £23.5m). The hardware revenue performance was disappointing, but was against the backdrop of a low opening order book brought forward from 2013, offset by satisfactory performance in challenging economic environments throughout Western Europe and the US, and supported by the start of the UK Government contract. The software revenue was ahead of expectations in the period. Surveillance revenue increased by 33.3% to £6.0m (H1 2013: £4.5m). 

H1 2014

H1 2013

Change

FY 2013

£m

£m

%

£m

Broadcast:





UK & Europe

8.3

5.9

40.7

11.6

Americas

7.4

9.1

(18.7)

18.3

Middle East and Africa

2.7

6.4

(57.8)

12.1

Asia/Pacific

2.7

2.1

28.6

6.1

Broadcast

21.1

23.5

(10.2)

48.1

Surveillance

6.0

4.5

33.3

11.8

Total

27.1

28.0

(3.2)

59.9






Regional operations

H1 2014

H1 2013

Change

FY 2013

 £m

£m

£m

Revenues





UK business

21.7

19.1

13.6

42.3

US business

8.8

11.8

(25.4)

24.6

Inter-segmental

(3.4)

(2.9)

17.2

(7.0)

Total revenue

27.1

28.0

(3.2)

59.9

Adjusted operating profit





UK business

3.3

3.1

6.5

6.4

US business

(0.4)

(0.3)

(33.3)

0.4

Central income/(costs)

(1.2)

(0.8)

(50.0)

(2.5)

Total adjusted operating profit

1.7

2.0

(15.0)

4.3






Principal risks and uncertainties

 

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 37 of the 2013 Annual Report, a copy of which is available on the Group website at www.vislink.com. The Board considers that these remain a current reflection of the main risks and uncertainties facing the business for the remaining six months of the financial year. The Group notes that this is not an exhaustive list. The Group's risk management process remains unchanged from 31 December 2013 and is described in detail in the 2013 Annual Report. The principal risks considered by the Board relate to global economic conditions and those associated with the Group's markets, reputation, overseas operations, customer defaults, senior management and foreign exchange. The principal exchange rates used in the preparation of this condensed consolidated half year financial information are provided in note 14.

 

Strategy and Outlook

 

Our strategy is to continue to develop our core competence and to provide solutions for the broadcast and surveillance markets with new markets in broadcast cellular and playout automation.

 

We remain committed to our customer centric, solution-led and best-in-class products which enable the Group to successfully capture new expanding markets.

 

The Board believes that the Group is well placed to benefit from macro drivers, spectrum change, switch to HD and acceleration of IP technologies, although it believes broadcasters will want flexibility, hence our commitment to hybrid products. 

 

Our software business is developing very quickly and continues to trade ahead of our expectations at the time of acquisition. The partnership with Harmonic Inc, which will be announced later today, will add new routes to our expanded market with leading players.

 

We have an improved outlook for the broadcast market, with anticipated contract recovery in surveillance. These factors, combined with a significantly reduced overhead cost in our hardware division, will contribute towards improved trading in the second half.

 

Our strong order book underpins this outlook.    

 

Our move to AIM, announced in January 2014, has simplified and reduced the financial burden of making acquisitions, giving us continued benefits for bolt-on acquisitions.

 

2014 is a transitional and transformational year for the Vislink Group with the acquisition of our software division and the announcement of the strategic agreement with Harmonic Inc.

 

As the proportion of our business coming from higher margin software becomes more significant, the target revenue needed to generate our long stated operating profit target will change. The Company remains committed to its target operating profit of £8.0m through both organic growth and bolt-on acquisitions.

 

The Board remains confident of continuing to trade in line with market expectations and the future prospects for the Group.

 

 

John Hawkins
Executive Chairman

 

 

 

CONSOLIDATED GROUP INCOME STATEMENT

For the six months ended 30 June 2014

 








Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

Notes

£000

£000

£000

Continuing operations





Revenue

5

27,111

28,028

59,879

Cost of sales


(15,503)

(16,360)

(35,537)

Gross profit


11,608

11,668

24,342

Sales and marketing expenses


(4,300)

(5,036)

(10,273)

Research and development costs


(2,198)

(2,145)

(3,942)

Administrative costs


(3,391)

(2,458)

(5,791)

Other income/(expenses)


355

(622)

(1,258)

Operating profit

5

2,074

1,407

3,078

Operating profit is analysed as:





Adjusted operating profit


1,719

2,029

4,336

Amortisation of acquired intangibles


(906)

(656)

(1,420)

Non-recurring items

6

1,261

34

162

Finance income/(costs) - net


(51)

12

15

Profit before taxation


2,023

1,419

3,093

Taxation

7

(13)

73

384

Profit for the period being profit attributable to equity shareholders


2,010

1,492

3,477

Basic earnings per share

9

1.7p

1.3p

3.1p

 

 

Diluted earnings per share

There is no difference between basic and diluted earnings per share (note 9).

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2014

 






Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000





Profit for the period

2,010

1,492

3,477

Items that may subsequently be reclassified to profit or loss:




Exchange difference on translation of foreign currency net investments

(333)

800

(200)





Total comprehensive income for the period

1,677

2,292

3,277

 

 



 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended 30 June 2014

 


Share Capital

Share premium account

Capital redemption reserve

Merger reserve

Translation reserve

Retained earnings

Total

£000

£000

£000

£000

£000

£000

£000

Balance at 1 January 2014

2,848

4,900

617

30,565

3,954

6,718

49,602

Issue of share capital

117

-

-

1,883

-

-

2,000

Share based payments: value of employee services

-

-

-

-

-

198

198

Dividends payable

-

-

-

-

-

(1,471)

(1,471)

Transactions with owners

117

-

-

1,883

-

(1,273)

727

Retained profit for the period

-

-

-

-

-

2,010

2,010

Exchange difference on translation of foreign currency net investments

-

-

-

-

(333)

-

(333)

Total comprehensive income for the period

-

-

-

-

(333)

2,010

1,677

Balance at 30 June 2014

2,965

4,900

617

32,448

3,621

7,455

52,006









Balance at 1 January 2013

2,848

4,900

617

30,565

4,154

4,293

47,377

Share based payments: value of employee services

-

-

-

-

-

125

125

Dividends payable

-

-

-

-

-

(1,413)

(1,413)

Transactions with owners

-

-

-

-

-

(1,288)

(1,288)

Retained profit for the period

-

-

-

-

-

1,492

1,492

Exchange differences on translation of overseas operations

-

-

-

-

800

-

800

Total comprehensive income for the period

-

-

-

-

800

1,492

2,292

Balance at 30 June 2013

2,848

4,900

617

30,565

4,954

4,497

48,381









Balance at 1 January 2013

2,848

4,900

617

30,565

4,154

4,293

47,377

Share based payments: value of employee services

-

-

-

-

-

361

361

Dividends paid

-

-

-

-

-

(1,413)

(1,413)

Transactions with owners

-

-

-

-

-

(1,052)

(1,052)

Retained profit for the year

-

-

-

-

-

3,477

3,477

Exchange differences on translation of overseas operations

-

-

-

-

(200)

-

(200)

Total comprehensive income for the period

-

-

-

-

(200)

3,477

3,277

Balance at 31 December 2013

2,848

4,900

617

30,565

3,954

6,718

49,602

 

 



CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

As at 30 June 2014

 


Notes

Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000

Assets





Non-current assets





Intangible assets

10

43,885

29,561

33,033

Property, plant and equipment

10

2,579

2,467

2,430

Deferred tax assets


2,746

1,211

4,150



49,210

33,239

39,613

Current assets





Inventories


12,061

13,158

11,094

Trade and other receivables


11,670

13,302

11,907

Cash and cash equivalents

11

7,749

7,243

3,705



31,480

33,703

26,706

Liabilities





Current liabilities





Financial liabilities-borrowings

11

5,000

-

-

Trade and other payables


16,322

16,694

12,848

Current tax liabilities


184

129

12

Provisions for other liabilities and charges

12

846

1,040

638



22,352

17,863

13,498






Net current assets


9,128

15,840

13,208






Non-current liabilities





Financial liabilities-borrowings

11

3,000

-

-

Deferred tax liabilities


3,268

593

3,153

Provisions for other liabilities and charges

12

64

105

66



6,332

698

3,219






Net assets


52,006

48,381

49,602






Shareholders' equity





Ordinary shares


2,965

2,848

2,848

Share premium account


4,900

4,900

4,900

Capital redemption reserve


617

617

617

Merger reserve


32,448

30,565

30,565

Translation reserve


3,621

4,954

3,954

Retained earnings


7,455

4,497

6,718

Total shareholders' equity


52,006

48,381

49,602

 

 

Approved by the Board on 2 September 2014 and signed on its behalf by:

 

 

 

John Hawkins

Executive Chairman

 

 

 

 

Ian Davies

Group Finance Director

 

 

 

CONSOLIDATED GROUP CASH FLOW STATEMENT

For the six months ended 30 June 2014

 


Notes

Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000

Cash flows from operating activities





Cash generated from/(absorbed by) operations

13

5,610

1,619

4,352

Interest (paid)


(69)

-

(2)

Taxation (paid)/received


(81)

(39)

(114)

Net cash generated from operating activities


5,460

1,580

4,236






Cash flows from investing activities





Interest received


14

12

19

Acquisition of subsidiary (net of cash acquired)

4

(7,004)

-

(2,031)

Deferred consideration in respect of previous acquisitions


-

(433)

(405)

Proceeds from sale of property, plant and equipment


-

29

64

Purchase of property, plant and equipment

10

(440)

(170)

(473)

Expenditure on capitalised development costs

10

(1,999)

(2,010)

(4,453)

Net cash used in investing activities


(9,429)

(2,572)

(7,279)






Cash flows from financing activities





Net proceeds from new bank loans

11

8,000

-

-

Dividend paid to shareholders


-

-

(1,413)

Net cash generated/(used) in financing activities


8,000

-

(1,413)

Net increase/(decrease) in cash and cash equivalents


4,031

(992)

(4,456)

Cash and cash equivalents at beginning of period


3,705

8,131

8,131

Effect of foreign exchange rate changes

11

13

104

30

Cash and cash equivalents at end of period

11

7,749

7,243

3,705

 

 



 

NOTES TO THE HALF YEAR FINANCIAL INFORMATION

For the six months ended 30 June 2014

 

1.   GENERAL INFORMATION

 

Vislink plc ("the Company") and its subsidiaries (together "the Group") is a global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage. Vislink provides solutions to the broadcast market for the collection of live news, sport and entertainment events and to the surveillance market including defence, law enforcement and public safety. With offices in the UK, USA, UAE, and Singapore and manufacturing operations in the UK and the USA we employ over 300 people worldwide and have net assets of £52.0m. Our hardware and software products offer a complete wireless solution from scene (video contribution) to screen (video playout and automation). Our solutions deploy IP, cellular and more traditional microwave radio and satellite transmission and our studio software solutions deploy the latest software innovations.

The Company is a public limited company, which is listed on the AIM Market of the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is Marlborough House, Charnham Lane, Hungerford, Berkshire, RG17 0EY.  The registered number of the Company is 4082188.

 

This condensed consolidated half year financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 were approved by the Board of Directors on 26 March 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

This condensed consolidated half year financial information has been subject to a review in accordance with ISRE (UK and Ireland) 2410 by our auditors but has not been subject to an audit.

 

This half year results announcement was approved for issue by the Board of Directors on 02 September 2014.

 

2.   BASIS OF PREPARATION

 

This condensed consolidated half year financial information for the six months ended 30 June 2014 has been prepared in accordance with the AIM Rules for Companies and with IAS 34, 'Half year financial reporting' as adopted by the European Union. The condensed consolidated half year financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRSs as adopted by the European Union.


The preparation of the financial information requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.

 


The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2013, as described in those annual financial statements.

 

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

 

Taxes on income in the half year periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.

 

 

BUSINESS COMBINATIONS

 

On 18 March 2014, the Group acquired 100 per cent of the issued share capital and voting rights of Pebble Beach Systems Ltd, a company based in the United Kingdom that operates within the Broadcast segment providing software solutions for playout with advanced software technology.

 

The acquisition of Pebble Beach Systems will move Vislink into the provision of software solutions for playout with advanced software technology. The Company's existing capabilities of offering broadcasters wireless communication systems for the capture of live TV coverage of news, entertainment and sports events will now be complemented with world class television automation and media management services for broadcast studios.

 

The goodwill arising on the acquisition reflects the expected integration benefits and the market-leading product offering. Furthermore Pebble Beach Systems will gain from access to significantly increased sales channels through the global network of over 900 broadcasters that Vislink works with as well as its international network of offices. Along with its existing hardware product portfolio, Vislink will now be able to offer broadcasters a complete 'scene to screen' solution.  

 

 

BUSINESS COMBINATION

Fair value

£000

Recognised amounts of identifiable assets acquired and liabilities assumed:


Cash and cash equivalents

6,089

Property, plant and equipment

162

Acquired intangibles - intellectual property

3,350

Acquired intangibles - customer relationships and brands

4,494

Inventories

84

Trade and other receivables

1,509

Trade and other payables

(2,304)

Net deferred tax liability

(1,591)

Total identifiable net assets

11,793

Goodwill

3,076

Total consideration

14,869



Consideration transferred settled in cash

12,869

Equity shares issued

2,000

Total consideration

14,869

 

 

Pebble Beach Systems has contributed £3.1m of revenue and an operating profit of £1.1m since acquisition. If the acquisition was applicable from 1 January 2014 the Group would have reported revenue of £28.7m and operating profit of £2.4m.

 

Acquisition-related costs of £0.3m are included in other expenses in the income statement and are considered to be non-recurring (note 6).  The total initial cash outflow associated with the acquisition, net of cash acquired, was £7.0m.  £0.9m of the cash consideration disclosed above was paid after the period end.

5.   SEGMENTAL ANALYSIS

 

The two markets in each of the UK and US regions are Broadcast and Surveillance.  As the regions manage and control the markets directly, costs are shared across markets in certain regions which means that any allocation of costs to markets would be arbitrary.  The focus of management is to ensure that the appropriate material margins are being achieved in each market as a sub analysis of the regional performance.

 

The segment information provided to the Executive Management Board for the reportable continuing segments for the period ended 30 June 2014 is as follows:

 


UK


US


TOTAL CONTINUING OPERATIONS

H1 2014

H1 2013

FY 2013


H1 2014

H1 2013

FY 2013


H1 2014

H1 2013

FY 2013

£m


£m


£m

£m

£m

Revenue:












Broadcast

14,170

15,129

30,931


6,953

8,439

17,188


21,123

23,568

48,119

Surveillance

4,729

1,401

5,241


1,259

3,059

6,519


5,988

4,460

11,760

External revenue

18,899

16,530

36,172


8,212

11,498

23,707


27,111

28,028

59,879

Inter-segmental

2,815

2,542

6,112


576

333

839


3,391

2,875

6,951

Total revenue

21,714

19,072

42,284


8,788

11,831

24,546


30,502

30,903

66,830

Inter-segmental









(3,391)

(2,875)

(6,951)

Reported revenue









27,111

28,028

59,879

Operating profit:












Adjusted operating profit/(loss)

3,284

3,080

6,408


(369)

(232)

407


2,915

2,848

6,815

Central costs









(1,196)

(819)

(2,479)

Group adjusted operating profit









1,719

2,029

4,336

Amortisation of acquired intangibles

(750)

(175)

(572)


(156)

(481)

(848)


(906)

(656)

(1,420)

Non-recurring items

(374)

34

330


(69)

-

(42)


(443)

34

288

Central non-recurring items

-

-

-


-

-

-


1,704

-

(126)

Group total operating profit

2,160

2,939

6,166


(594)

(713)

(483)


2,074

1,407

3,078

 

 

GEOGRAPHIC REVENUE ANALYSIS BY DESTINATION

Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

£'000

(Unaudited)

£'000

(Audited)

£'000

UK & Europe

12,773

6,912

15,248

Americas

8,687

12,088

24,745

Middle East and Africa

2,716

6,847

13,619

Asia/Pacific

2,935

2,181

6,267


27,111

28,028

59,879

 

The amounts reported to the Executive Chairman with respect to total net assets are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset

 



 

NET ASSETS

Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

£'000

(Unaudited)

£'000

(Audited)

£'000





UK

32,056

26,438

30,579

US

19,340

20,334

18,741

Segment net assets

51,396

46,772

49,320

Group net assets

610

1,609

282


52,006

48,381

49,602

 

 

The following items of unusual nature, size or incidence have been charged to operating profit during the period and are described as non-recurring.

 

  

Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000





Rationalisation and redundancy costs

443

143

-

Provision release against contractual issues

-

-

(330)

Acquisition related costs

296


168

Deferred consideration release

(2,000)

(177)

-

Total non-recurring items

(1,261)

(34)

(162)

 

The release of deferred consideration relates to the acquisition of Amplifier Technology Limited in 2013 where the post-acquisition performance criteria which would have triggered payment were not met.

 

 

 


Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000

Current tax:




UK corporation tax

76

46

-

Foreign tax

5

-

21

Total current tax

81

46

21

Deferred tax:




UK corporation tax

(148)

(28)

(144)

Foreign tax

80

(91)

(261)

Total deferred tax

(68)

(119)

(405)

Total taxation charge

13

(73)

(384)

 

The tax charge for the six months ended 30 June 2014 is based on the effective tax rate of 1%, which is significantly lower than the standard rate principally due to the utilisation of tax losses. Deferred tax is calculated in full on temporary differences under the liability method using a tax rate appropriate to the country in which the deferred tax liability or assets has arisen.  Deferred tax assets have been recognised in respect of all tax losses and other temporary differences to the extent that they are regarded as recoverable against future profits.

 

 

No interim dividend is proposed for the period.  In respect of 2013 there was no interim dividend and the final dividend of 1.25 pence per share was approved at the Annual General Meeting on 21 May 2014 and paid on 18 July 2014. The total cash cost of the dividend was £1.5m.

 

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding those held in the employee share trust which are treated as cancelled. Earnings per share is calculated by reference to a weighted average of 115,803,000 ordinary shares in issue during the period (30 June 2013: 113,063,000 and 31 December 2013: 113,070,000).

 

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the company's ordinary shares during the period.  At 30 June 2014 there were 170,000 dilutive share options (30 June 2013: 156,000 and 31 December 2013: 278,000). The effect of dilutive shares was not material and therefore there is no difference between basic earnings per share and diluted earnings per share.

 

Adjusted earnings

 

The directors believe that the adjusted operating profit, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles, impairment of goodwill and non-recurring costs and their related tax effects.

 

The reconciliation between reported and adjusted earnings and basic earnings per share for the continuing business is shown below:

 

 

Six months to


Six months to


Year ended

30-Jun-14

30-Jun-13

31-Dec-13


Pence per share



Pence per share



Pence per share

£000

£000

£000

Reported earnings per share

2,010

1.7p


1,492

1.3p


3,477

3.1p

758

0.7p


621

0.5p

1,336

1.2p

(1,420)

(1.2p)


(67)

(0.0p)


(124)

(0.1p)

Adjusted earnings per share

1,348

1.2p


2,046

1.8p


4,689

4.2p

 

 

 



 

 

 


Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000

Property, plant and equipment




Opening net book value as at 1 January

2,430

2,695

2,695

Additions

440

170

473

Acquisitions through business combinations

162

-

124

Disposals

-

(57)

(67)

Depreciation

(431)

(397)

(790)

Exchange adjustment

(22)

56

(5)

Closing net book value

2,579

2,467

2,430





Intangible assets




Capitalised development costs



Opening net book value as at 1 January

7,569

5,439

5,439

Additions

1,999

2,010

4,453

Additions through business combinations

-

-

-

Amortisation

(800)

(1,149)

(2,189)

Impairment Charge

-

-

-

Exchange adjustment

(161)

234

(134)

Capitalised development costs closing net book value

8,607

6,534

7,569





Goodwill and acquired intangible assets




Opening net book value as at 1 January

25,464

23,237

23,237

Additions

7,844

-

-

Additions through business combinations

3,076

-

3,752

Amortisation

(906)

(656)

(1,420)

Exchange adjustment

(200)

446

(105)

Goodwill and acquired intangible assets closing net book value

35,278

23,027

25,464





Total closing net book value of intangible assets

43,885

29,561

33,033

 

 



 

 

The movements in cash and cash equivalents (net of overdrafts), borrowings and loans in the period were as follows:

 

 


Net cash and cash equivalents

Other borrowings

Total net cash



£000

£000

£000

Six months ended 30 June 2014





At 1 January 2014


3,705

-

3,705

Cash flow for the period before financing and acquisition of subsidiary  


3,035

-

3,035

Purchase of subsidiary


(13,093)

-

(13,093)

Cash acquired with subsidiary


6,089


6,089

Movement in borrowings in the period


8,000

(8,000)

-

Exchange rate adjustments


13

-

13

At 30 June 2014


7,749

(8,000)

(251)






Six months ended 30 June 2013





At 1 January 2013


8,131

-

8,131

Cash flow for the period before financing


(992)

-

(992)

Movement in borrowings in the period


-

-

-

Exchange rate adjustments


104

-

104

At 30 June 2013


7,243

-

7,243






Year ended 31 December 2013





At 1 January 2013


8,131

-

8,131

Cash flow for the period before financing and acquisition of subsidiary


(1,012)

-

(1,012)

Purchase of subsidiary


(2,093)


(2,093)

Cash acquired with subsidiary


62


62

Repayment of borrowings


-

-

-

Dividend paid to shareholders


(1,413)

-

(1,413)

Exchange rate adjustments


30

-

30

At 31 December 2013


3,705

-

3,705

 

 

The Group held cash of £7.7m at the period-end and taken together with the outstanding debt of £8.0m, there was a small net debt position of £0.3m.  

 



 

 


Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000





Warranty provision

340

345

345

Property provision

323

367

359

Rationalisation provision

247

103

-

Other provision

-

330

-


910

1,145

704





Amounts due within one year

846

1,040

638

Amounts due after one year

64

105

66


910

1,145

704

 

 

 

Warranty provisions are made in respect of the expected future warranty costs in certain businesses based on historic actual costs. Warranty periods on products are generally between one and two years.

 

The property provision is in respect of vacated leasehold properties acquired as part of the Gigawave acquisition and represents the estimated future liabilities associated with the properties.  The provision has been reduced as a result of a recent lease surrender for a vacated property.

 

Rationalisation provisions are in respect of future liabilities for committed reorganisation costs at the statement of financial position dates.

 

The Group has since released the other provision that was in place at 30 June 2013 that represented an on-going dispute with a distributor regarding contractual obligations.  The provision represented the potential liabilities associated with the costs incurred in resolving the dispute.

 

 



 

 

Net cash flow from operating activities comprises:

 


Six months to 30 June 2014

Six months to 30 June 2013

Year ended

31 December 2013

(Unaudited)

(Unaudited)

(Audited)

£000

£000

£000

Profit before tax

2,023

1,419

3,093

Depreciation

431

397

790

(Profit)/loss on disposal of property, plant and equipment

-

29

3

Acquisition related costs

227

-

93

Release of deferred consideration no longer payable

(2,000)

-

-

Amortisation and impairment of development costs

800

1,149

2,189

Amortisation of acquired intangibles

906

657

1,420

Share based payment expenses

198

125

361

Finance income from continuing operations

-

-

(19)

Finance costs from continuing operations

-

-

4

Increase in inventories

(1,092)

(3,298)

(1,478)

Decrease/(increase) in trade and other receivables

1,563

(2,730)

(1,676)

Increase in payables

2,344

4,161

365

Increase/(decrease) in provisions

210

(290)

(793)

Net cash inflow from operating activities

5,610

1,619

4,352

 

 

 

14.  FOREIGN EXCHANGE RATES

 

The principal exchange rates used by the Group in translating overseas profits and net assets into GBP are set out in the table below.

 

Six months to 30 June 2014

Six months to 30 June 2013

Year ended 31 December 2013

(Unaudited)

(Unaudited)

(Audited)








Average rate for the period




US dollar

1.6690

1.5438

1.5645

Period end rate




US dollar

1.7097

1.5167

1.6528

 

 



 

Independent review report to Vislink plc

 

Introduction

 

We have been engaged by the company to review the condensed consolidated half-year financial information in the half-yearly financial report for the six months ended 30 June 2014, which comprises the Consolidated Group Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Shareholders Equity, Consolidated Group Statement of Financial Position, Consolidated Group Cash Flow Statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies 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.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

 

PricewaterhouseCoopers LLP
Chartered Accountants
2 September 2014

Bristol

 

Notes:

 

(a)  The maintenance and integrity of the Vislink plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

 

(b)  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


This information is provided by RNS
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