Preliminary Results

RNS Number : 1799D

Vislink PLC

26 March 2014

 



Vislink plc

Results for the year ended 31 December 2013

Vislink plc (The "Group"), the global technology business specialising in solutions for the collection and delivery of high quality video and associated data for the broadcast and surveillance markets, has today announced its final results for the year ended 31 December 2013.

Financial Headlines

	2013	2012	% Change
Order intake	£60.1m	£50.1m	+20.1%
Revenue	£59.9m	£57.2m	+4.7%
Adjusted* operating profit	£4.3m	£3.1m	+40.3%
Adjusted* earnings per share	4.2p	2.5p	+68.0%
Adjusted**earnings per share normalised for tax effects	3.2p	2.2p	+45.5%
Operating profit	£3.1m	£2.2m	+39.5%
Profit from discontinued activities	-	-
Profit attributable to shareholders	£3.5m	£2.1m	+64.0%
Basic earnings per share	3.1p	1.9p	+63.2%
Net cash	£3.7m	£8.1m	-54.4%
Total dividend per share (pence)	1.25p	1.25p	+0.0%

*Adjusted operating profit is operating profit from continuing operations before the amortisation and impairment of acquired intangibles, and other non-recurring costs. Adjusted earnings per share is calculated on the same basis after taking account of related tax effects.

** Adjusted earnings per share normalised for tax effective rate of 20%.

Highlights

·      Adjusted operating profit up 40.3% to £4.3 million (2012: £3.1million).

·      Order intake up 20.1% on the prior year. 

·      The Group remains debt free at year end, with net cash of £3.7million.

·      Proposed full year dividend of 1.25 pence per share (2012: 1.25 pence per share).

·      Good performance from Broadcast and Surveillance divisions, with both delivering revenue growth.

·      Ongoing investment in R&D enabled strengthening of product portfolio with the launch of 'Motorised MSAT' Man Portable Data System and the L1700 wireless transmitters.

·      Increased market share in growth markets such as the Middle East and Africa region.

·      Amplifier Technology acquired and successfully integrated into the business. 

·      Our strategy for the Group, announced in November 2011, is on track.

Post balance sheet event

The Board were pleased to announce on the 19 March 2014 the acquisition of Pebble Beach Systems Ltd a world leader in the provision of software for play out automation (including 'channel-in-a-box'), and content management solutions for broadcast, cable and satellite operators.  Please refer to the announcement on 19 March 2014 for further information.

John Hawkins, Executive Chairman of Vislink said:

"2013 was another year of sustained profitable growth for the Group. We achieved our objective of sustaining half-on-half growth in revenues and profits. We continue to deliver on our short term objectives of profitable growth whilst delivering against our plan, set in 2011, of achieving revenues of £80m and adjusted operating profit of £8m.

We are wholly in line with executing our strategy and remain completely aligned to our shareholders' objectives of delivering short and long term profitable growth."

- ends -

For further information please contact:

John Hawkins, Executive Chairman	[phone]
Ian Davies, Group Finance Director	[phone]
Andrew Hayes / Charlie Jack / Katie Matthews Hudson Sandler	[phone]
Shaun Dobson N+1 Singer	[phone]

About Vislink plc

The Vislink 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, Australia, UAE, South Africa, Singapore and Brazil manufacturing operations in the UK and the USA we employ over 250 people worldwide and have net assets of £50m. Our solutions include the design and manufacture of microwave radio, satellite transmission and wireless camera systems.

The Company is fully listed on the Aim market of the London Stock Exchange (AIM:VLK).  For further information, visit www.vislink.com.

Forward-looking statements

Certain statements in this announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.

Introduction

The core competence of Vislink is the collection of high quality live video, wirelessly, from the scene to the screen. We provide solutions to two core markets: the broadcast market for the collection of live news, sport and live entertainment events, and the video, secure communications and surveillance markets such as military, law enforcement and public safety.

2013 was another year of sustained profitable growth for the Group. We achieved our objective of sustaining half-on-half growth in revenues and profits.

The year saw a substantial investment in new products as we launched the new miniaturised wireless camera back, extended our range of new lightweight satellite terminals and began the introduction of new hybrid systems, integrating cellular and microwave technologies allowing our customers the flexibility of capturing high definition video or data wirelessly anywhere in the world from one device.

The acquisition of Amplifier Technology in the summer allowed us to increase our product range into military applications. Amplifier Technology produces amplifiers and jamming technology which prevents unmanned incendiary devices being activated by using mobile signals. It is vital in the protection of citizens, equips the modern soldier with protection, and complements the world-class lightweight communications offered by our lightweight MSAT man portable data system. The integration was successfully completed during the year and we are already benefiting from the military product synergies created through the acquisition.

We were also pleased to announce a global strategic partnership with C-Com Satellite Systems Inc, which enabled Vislink to start cross selling their respective satellite products, provides benefit from R&D cooperation and enables Vislink to extend its product range and open new market sectors.  The partnership is progressing well with new opportunities being presented to the Group.

As we stated in our November 2011 strategy document, Vislink is the market leader in the broadcast market with its range of wireless video contribution products representing around 20 per cent of the available market. Not only have we maintained this leading position, we were delighted to build on it in March 2014 with the acquisition of the software business, Pebble Beach Systems.

Pebble Beach Systems is a world leader in the provision of software for automation, channel-in-a-box and content management solutions for TV broadcasters, cable and satellite operators.

The key benefits of Pebble Beach Systems are:

-     Leading software technology within the sector as demonstrated by its worldwide customer base

-     Next generation products recently developed

-     Growing customer base - 50 per cent of its top ten customers last year were new

-     Strong cash generation and growth prospects

The acquisition fits perfectly with Vislink's desire for growth, recurring revenues, extending its reach and providing customers with synergies, from capturing video to interactive programming, including acquisition and revenue generation. Vislink plans to grow its software capability around the Pebble Beach Systems and management team.

Pebble Beach Systems was acquired in March 2014 for a total consideration of £14.9 million comprising £12.9 million in cash and £2 million represented by the issue of new Vislink Ordinary Shares. The cash consideration was funded out of existing Group resources and a new £10 million debt facility. The facility has a three-year tenor and is split into a £3 million amortising term loan and a £7 million flexible revolving credit facility.

Included within the net assets of Pebble Beach Systems was £5.9 million of cash retained within the business on acquisition.

The acquisition transitions Vislink into a market leading full service video capture and playout provider to the broadcast industry.

Early in 2014 we have won a multimillion pound contract in public safety in the UK which will significantly contribute to our declared strategy of having at least 25 per cent of our revenues being derived from the secure communication and surveillance markets by the end of the financial year 2014.

Our markets continue to be tough but as long as we continue to balance our revenues and maintain our product leadership, the Group will grow profitably.

Financial Results

Group revenues were £59.9 million (2012: £57.2 million) which were up 4.7 per cent on last year (including four months' contribution from Amplifier Technology of £0.6m). Order intake for the year was £60.1 million and the opening order book for this year stood at £5.6 million (2012: £5.2 million).

The reported adjusted operating profit was £4.3 million (2012: £3.1 million), a 40.3 per cent increase compared to 2012.

The Group has maintained a strong balance sheet throughout the year and remained debt-free at the year end.

Working capital increased during the year as a result of our growth and investments in new products.

Earnings per share

The reported basic undiluted earnings per share for the year was 3.1 pence (2012: 1.9 pence).

After adjusting for amortisation and impairment of acquired intangibles the Group's adjusted earnings per share was 4.2 pence (2012: adjusted earnings per share of 2.5 pence).  The adjusted earnings per share benefited from a £0.4m deferred tax adjustment which resulted in a tax add back to profit.

Dividends

The Board is proposing that the full year dividend be maintained at 1.25 pence per share (2012: 1.25 pence per share).  This would represent a cash payment of £1.5million (2012: £1.4 million).

Acquisitions

In 2013 we primarily concentrated on organic growth, although we did add the 'bolt on' acquisition of Amplifier Technology which we funded from operating cash flows. The total consideration for Amplifier Technology was £4.0 million (£2.0 million on completion and a further £2.0 million if the company achieves earnings before interest, taxation, depreciation and amortisation (EBITDA) of £3.0 million by June 2014, and achieves cash generated from earnings of £2.4 million).

The acquisitions of Pebble Beach Systems (completed in March 2014) and Amplifier Technology (completed in August 2013) will contribute to the strategy of achieving higher recurring services revenues and achieving our financial objectives of £80 million revenue and £8.0 million adjusted operating profit by the end of FY 2014.

Strategy

Move to Alternative Investment Market (AIM)

On 20 January 2014 the Group moved from a listing on the main market, to AIM. The primary reason for this, as announced in our circular, was to simplify and reduce the financial burden of making acquisitions. As part of the transformation of the Group, 'bolt on' acquisitions were a key part of our three year plan spanning 2011 - 2014.

We will continue to seek growth opportunities both organically and through acquisitions, whilst with a clear underlying objective of continuing to grow shareholder value.

We will continue to develop our core competences in wireless video contribution for both broadcast and surveillance and secure communications markets.

We will expand our capability in delivering recurring revenues by exploiting our newly acquired software capability in video playout and will grow our services offering by developing our network capabilities in cellular and hybrid application areas.

We will also actively seek opportunities to expand our military, law enforcement and public safety presence both organically and through acquisitions.

The Board, management and employees

We continue to see a strengthening of our capabilities and expertise as we acquire new businesses.

On behalf of the Board I would like to thank all our people both newly joining us through acquisition and those that have got behind our vision for growth and who have all contributed to our success in 2013.

Current outlook trading

Our markets continue to be challenging. However, the Group enters 2014 with renewed confidence buoyed by the introduction of new products and the added momentum which has come from the synergistic 'bolt on' acquisitions.

We are confident of the opportunities that will come from our enlarged footprint in both broadcast and the secure communication and surveillance markets.

We are wholly in line with executing our strategy and remain completely aligned to our shareholders' objectives of delivering short-term and long-term profitable growth.

John Hawkins

EXECUTIVE CHAIRMAN

Executive Chairman's Statement

For the year ended 31 December 2013

OPERATING AND FINANCIAL REVIEW

For the year ended 31 December 2013

Regional Operations

	2013 £'m	2012 £'m	Change %
UK business	42.3	37.8	+11.7%
US business	24.5	25.3	-2.9%
Inter-Segmental	(6.9)	(5.9)	-17.6%
Total Revenue	59.9	57.2	+4.7%
UK business	6.4	4.9	+29.7%
US business	0.4	0.4	+2.5%
Central	(2.5)	(2.2)	-10.2%
Total adjusted operating profit	4.3	3.1	+40.3%

The UK has achieved revenue growth of 11.7 per cent in 2013 supported by large growth in the Middle East region.

The UK has also benefited from strong inter-segmental sales, with strong demand for satellite products in South America.

In September key new products were launched at the IBC exhibition in Amsterdam, which received a favourable response from customers and distributors.

UK revenue increased to £42.3 million for 2013. UK adjusted operating profit increased to £6.4 million.

The US has seen a small overall revenue decline by 2.9 per cent to £24.5 million.  The US Broadcast market place typically sees a reduction in spend in a post presidential election year. New products launched in H2 will provide a strong portfolio to customers.  Lower costs enabled the US to deliver an adjusted operating profit of £0.4 million in line with the previous year.

Revenue by Market

	2013 £'m	2012 £'m	Change %
Revenues by region
UK	5.7	6.7	-14.9%
Rest of Europe	9.6	8.9	+7.1%
Americas	24.7	26.7	-7.5%
Middle East and Africa	13.6	8.2	+66.7%
Asia / Pacific	6.3	6.7	-6.1%
Total Revenue	59.9	57.2	+4.7%

Broadcast

Total revenue in Broadcast was £48.1 million (2012: £47.1 million).

The Group achieved strong revenue growth in the Middle East & Africa region and the rest of Europe region during the financial period.

The Americas region remains the largest market for our broadcast business.  South America remains a key market, with the World Cup in 2014 and the Olympics in 2016 in Brazil providing an impetus for further investment in both Broadcast and Surveillance in the region.

Surveillance and Secure Communications

Total revenue in Surveillance and Secure Communications was £11.8 million (2012: £10.1 million).

The USA is still the largest market for the Group for Surveillance products, with the US Government both directly and indirectly being a key customer. Sales cycles can be long, but the Group is well positioned on a number of initiatives and programmes and expects this to be an increasingly significant source of revenue going forward.

The acquisition of Amplifier Technology and the development of the MSAT product range will add further revenue streams for the Group and provides channels to military market places and higher tier supplies.

Business Performance:  Technology

The Group's continued profitable growth has enabled it to generate the funds we need to deliver innovative products and solutions that add value for our customers. The investment in the development of industry leading products is a key part of the organic growth strategy.

The business has invested in capitalised development costs of £4.5million, which shows an increase over last year (2012: £2.8 million). Amortisation and impairment of development costs was £2.2 million (2012: £2.9 million) and this is included in the reported Research and Development expenses in the consolidated Group income statement. For 2013, these Research and Development expenses were £3.9 million (2012: £5.1 million) representing 6.6 per cent of revenues (2012: 8.8 per cent).

At the IBC Broadcasting show in Amsterdam in September, Vislink launched three new key products. The Gigawave INCAM-G, the Link L1700 and the Advent motorised MSAT man portable data system.

Following the successful launch of the Sony system, the new Grass Valley INCAM-G system meets growing demand from broadcast industry professionals for in built transmitter and camera control technology. Our collaboration with Grass Valley brings the wireless benefits of our INCAM system to a new breed of camera equipment, creating a range of additional opportunities for both sports events and broadcast scenarios.

Smaller and lighter than previous models, the Link L1700 enhances the modular design that has made the Link series so popular with broadcast professionals, it also has a range of new features that confirm the position of Link's wireless transmitter technology as a leader in its class.

Vislink's motorised MSAT man portable data system is a fully integrated satellite data terminal, capable of supporting either a 90cm or 120cm antenna and designed to meet growing demand from the global Satellite News Gathering (SNG) market for more portable systems with improved data throughput and ease of deployment. It was developed in response to growing demand from broadcasters for an automated version of our successful MSAT man portable data system product. It is ideal for first on scene reporting, providing the perfect balance between the functionality of a full vehicle mounted satellite terminal, and the speed, mobility and versatility needed to make sure you can deliver the first high-definition video images.

In October 2013, The Society of Broadcast Engineers' Technology Award was given to the NewStream, the newest product from Vislink's LiveGear brand. NewStream is a state-of-the-art vehicle system combining Electronic News Gathering (ENG), Cellular News Gathering (CNG), and SNG in one compact rack mounted unit. This new multi-mode system is the most comprehensive mobile broadcast system available today and is a first-in-the-industry product that redefines the standard in streaming video solutions.

FINANCIAL REVIEW

The Group's reported trading performance is summarised as follows:

	2013 £'m	2012 £'m	Change %
Continuing business
Revenue	59.9	57.2	+4.7%
Gross profit	24.3	22.5	+8.0%
Gross margin %	40.7%	39.4%	+1.3pts
Research and development expenses	(3.9)	(5.1)	-22.0%
Other expenses	(16.1)	(14.3)	+11.5%
Adjusted operating profit	4.3	3.1	+40.3%
Amortisation of acquired intangibles	(1.4)	(1.6)
Non-recurring items	0.2	0.7
Reported operating profit	3.1	2.2	+39.5%
Net finance costs	-	-
Profit before tax	3.1	2.2	+39.5%
Taxation	0.4	(0.1)
Profit after tax - continuing business	3.5	2.1	+64.0%
Profit attributable to equity shareholders	3.5	2.1	+64.0%
Basic earnings per share - continuing operations	3.1p	1.9p	+63.2%
Normalised earnings per share1 - continuing operations	3.2p	2.2p
Adjusted earnings per share2 - continuing operations	4.2p	2.5p	+68.0%

¹      Adjusted earnings per share normalised for tax effective rate of 20%.

²      Adjusted EPS is calculated on operating profit before the amortisation and impairment of acquired intangibles, and other non-recurring costs after taking account of related tax effects.

Goodwill impairment

In accordance with the requirements of IAS 36 'Impairment of assets', goodwill is required to be tested for impairment on an annual basis, with reference to the value of the cash-generating units in question. The goodwill relating to the Surveillance market was fully written down in 2010.  The Group acquired Amplifier Technology in 2013 which is a separate cash generating unit.  Impairment reviews were undertaking in respect of both the Broadcast market and Amplifier Technology.  The carrying value of goodwill at 31 December 2013 is £21.6m (2012: £20.1m).

Having reviewed all the relevant calculations and the sensitivities the Board concluded that there had been no impairment in the current year (2012: no impairment).

Non-recurring items

The Group credited £0.2 million of non-recurring costs to the consolidated income statement. The credit comprised:

·      £0.3 million credit associated with a contractual dispute; and

·      £0.1 million charge in respect of acquisition costs.

At 31 December 2013 tax there was a tax credit of £0.4 million (2012: tax charge of £0.1m).

Working capital

Our key metrics for managing working capital are days sales outstanding (DSO) for trade receivables and net inventory days. The table below shows that trade receivables have increased to 82 days whilst inventory days have increased to 122 days.  Inventory levels were unusually high at year end due to a number of projects which were fully or partially complete awaiting shipment in Q1.

Trade receivables included a delayed payment from a Middle East customer, the majority of which was paid in March 2014.  There are no significant adverse trends in debtors.  The small increase in day's sales outstanding is impacted by the mix of sales from different regions.

Days (source: Group management accounts)	2013	2012
Trade receivables - days sales outstanding1	82	72
Inventory days2	122	119

¹ Trade receivables at the end of the financial year divided by quarter 4 revenue multiplied by the number of days in quarter 4

² Net inventory at the end of the financial year divided by quarter 4 material costs of sales multiplied by the number of days in quarter 4

Cash flows

The Group held cash and cash equivalents of £3.7 million at 31 December 2013 (2012: £8.1 million). The table below summarises the cash flows for the year.

£'million	2013	2012
Cash generated from operating activities	4.2	3.7
Net cash used in investing activities	(7.3)	(4.3)
Returns to shareholders	(1.4)	(1.4)
Effects of foreign exchange	0.1	(0.1)
Net decrease in cash and cash equivalents	(4.4)	(2.1)
Cash and cash equivalents at 1 January	8.1	10.2
Cash and cash equivalents at 31 December	3.7	8.1

There was a net cash inflow from operating activities in the year of £4.2 million (2012: £3.7 million).

The cash outflow from investing activities amounted to £7.3 million (2012: £4.3 million) which comprised £0.1 million in respect of proceeds from the sale of property, plant and equipment (2012: £0.1 million); £0.4 million of deferred consideration paid in respect of previous acquisitions (2012: £1.3 million); £2.0 million paid out in respect of the acquisition of subsidiaries (2012: £nil million) and £4.8 million in respect of capital expenditure and the capitalisation of development costs (2012: £3.1 million).

Returns to shareholders were in the form of a dividend payment of £1.4 million (2012: £1.4 million).

Returns to shareholders

It is the Group's stated strategy to only recommend a final dividend. The Board is recommending that the dividend be maintained at 1.25 pence per share (2012: 1.25 pence). The payment of the dividend will absorb approximately £1.5 million of cash. Subject to the approval of shareholders, the dividend will be paid on 19 July 2014 to those shareholders on the register at 28 June 2014. 

Pensions

The Group operates defined contribution pension schemes, where it contributes a pre-determined amount proportionate to the salaries of the participating employee to the scheme.

Principal risks and uncertainties for the Group

The Group places great importance on the identification and effective management of risks.  Our approach to enterprise risk management helps us to deliver our objectives and maximise the returns to the Group

The following table describes the risks that the board considers to have the most material potential impact on the Group.  They are specific to the nature of our business notwithstanding that there are other risks that may occur and may impact the achievement of the Groups objectives.

Risk Description	Trend	Potential Impact	Mitigation
Global economic conditions	Positive	Strained global economic conditions and volatility of international markets could result in a general reduction in business activity and consequent loss of income for the Group.	The Group is mitigating its reliance on its core markets in the UK, US and continental Europe by expanding its activities in the Middle East and Africa and Asia/Pacific. The Group is developing new relationships and partnerships through expanding its international presence and focus on its existing customers.  Improving operational efficiency of the Group combined with cost reduction already undertaken will help underpin the performance of the Group going forward.
Markets and competition	Positive	The markets in which the Group operates are mature and highly competitive with respect to price, geographic distinction, functionality, brand recognition and the effectiveness of sales and marketing. Due to price pressure the Group may experience fluctuations in operating results.  Competition could be intensified due to companies entering certain markets with new products or favourable cost structures.  In such events Group sales, margins and or market share may decrease.	The Group focuses on accessing and developing key technologies and service offerings which differentiate us competitively. The Group is responsive to our customers and continuously improving the quality, delivery and reliability of our products. The Group ensures it reviews, and develops its key partnerships with suppliers, distributers and customers.  In addition it is developing long term strategic partnerships with others effectively.
Reputational risks	Neutral	Many of the Group's products are for mission critical services, such as ensuring live news is available in real time or that mission critical video surveillance is uninterrupted.  There is a risk that product failure will cause loss of services to Vislink's customers, bringing damage to the Group's reputation.	Customer service and support is a key part of the Group's offering to customers to mitigate such damage.
Research and development	Neutral	Loss of market share resulting from product obsolescence and failure to innovate to meet customer needs.	The Group makes significant investment in new product Development and best practice is shared between Group companies. The Group believes this investment enables it to deliver clear "product leadership" and "complete customer solutions". Large R&D projects that are capitalised require approval from senior management to ensure that projects are in line with the Groups overall technology strategy.
Senior management and senior personnel	Neutral	The Group is dependent on members of its senior management team and skilled personnel.  Its future success will depend in part on its ability to attract and retain highly skilled management and personnel.  If the Group does not succeed in attracting and retaining skilled personnel, it may not be able to grow its business as anticipated.	The Group has over 250 staff including 50 engineers and 30 sales employees. The Group regularly surveys staff to assess the alignment of individuals with Group values. The Group recognises that our people are key to its ongoing success and invests in attracting, developing and retaining key staff.

Foreign exchange

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily between the US dollar and GBP. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

Foreign currency bank accounts are maintained to minimise exchange risk by trading currencies into sterling only when forecast surpluses or deficits are expected to arise. Approximately 30 per cent of the US business's cost of goods sold comes from its fellow subsidiaries in the UK and is priced in US dollars. The flow of cash from the USA to the UK businesses is managed by central treasury in order to minimise the risk to the Group.

The exchange risk to the Group in terms of its reported results lies in the translation of the results of the US business from US dollars to GBP. The Group's accounting policy is to translate the profits and losses of overseas operations using the average exchange rate for the financial year and the net assets and liabilities of overseas subsidiaries at the year-end exchange rate. It continues to be the Group's policy not to hedge the foreign currency exposures on the translation of overseas profits or losses and net assets or liabilities to sterling as they are considered to be accounting rather than cash exposures.

The Group's exposure to market risk, liquidity risk, credit risk and cash flow interest rate risk remains largely unchanged from the position at 31 December 2012.

In 2013 the net assets of the Group increased by £0.1m on the translation of foreign currency net investments (2012: decreased by £0.1 million) as a result of the strengthening of the US dollar against sterling.

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

Rate compared to £ sterling	Average rate 2013	Average rate 2012	Year end rate 2013	Year end rate 2012
US dollar	1.565	1.585	1.653	1.617

If the results for the year to 31 December 2012 had been translated at the 2013 average rate then the translation impact would be to increase prior year revenue by £0.3 million and increase the loss before tax by
£0.02 million.

Risk management

The Board regularly reviews the full range of business risks facing the Group. The approach adopted is to identify, evaluate and manage the likely impact of risk on the Group's business objectives. Where the risks are unavoidable they are managed through business controls and where appropriate through insurance and treasury activities.

The Group has a programme of regular risk assessment, which incorporates internal control reviews of both a financial and non-financial nature. A process of continuous review has been in place throughout the year at an operating company level to consider the risk environment and the effectiveness of controls. The results of reviews, initiatives and progress on implementing control improvements are regularly reported to the Board.

John Hawkins, Executive Chairman

Ian Davies, Group Finance Director

25 March 2014

CONSOLIDATED GROUP INCOME STATEMENT

for the year ended 31 December 2013

		2013	2012
	Notes	£'000	£'000
Continuing operations
Revenue	3	59,879	57,203
Cost of sales		(35,537)	(34,655)
Gross profit		24,342	22,548
Sales and marketing expenses		(10,273)	(8,654)
Research and development expenses		(3,942)	(5,053)
Administrative expenses		(5,791)	(5,751)
Other expenses		(1,258)	(883)
Operating profit	4	3,078	2,207
Operating profit/(loss) is analysed as:
Adjusted operating profit		4,336	3,090
Amortisation of acquired intangibles		(1,420)	(1,589)
Non-recurring items	3,4	162	706
Finance costs	5	(4)	(4)
Finance income	5	19	29
Profit before taxation		3,093	2,232
Taxation	6	384	(112)
Profit after taxation		3,477	2,120
Profit for the year from discontinued operations		-	-
Profit for the year being profit attributable to equity shareholders		3,477	2,120
Basic earnings per share:
From continuing operations	8	3.1p	1.9p
From discontinued operations		0.0p	0.0p
Total		3.1p	1.9p

Diluted earnings/(loss) per share

There is no difference between basic and diluted earnings per share (note 8).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2013

		2013	2012
		£'000	£'000
Profit for the year		3,477	2,120
Exchange differences on translation of overseas operations		(200)	(576)
Total comprehensive income for the year		3,277	1,544

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the year ended 31 December 2013

	Share Capital £000	Share premium account £000	Capital redemption reserve £'000	Merger reserve £000	Translation reserve £000	Retained earnings £000	Total £000
At 1 January 2012	2,848	4,900	617	30,565	4,730	3,398	47,058
Retained (loss) for the year	-	-	-	-	-	2,120	2,120
Exchange differences on translation of overseas operations	-	-	-	-	(576)	-	(576)
Share based payments: value of employee services	-	-	-	-	-	188	188
Dividends paid	-	-	-	-	-	(1,413)	(1,413)
Repurchase of own shares
At 31 December 2012	2,848	4,900	617	30,565	4,154	4,293	47,377
At 1 January 2013	2,848	4,900	617	30,565	4,154	4,293	47,377
Retained profit for the year	-	-	-	-	-	3,477	3,477
Exchange differences on translation of overseas operations	-	-	-	-	(200)	-	(200)
Share based payments: value of employee services	-	-	-	-	-	361	361
Dividends payable	-	-	-	-	-	(1,413)	(1,413)
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 31 December 2013

		2013	2012
	Notes	£'000	£'000
Assets
Non-current assets
Intangible assets		33,033	28,676
Property, plant and equipment		2,430	2,695
Deferred tax assets		4,150	1,211
		39,613	32,582
Current assets
Inventories		11,094	9,533
Trade and other receivables		11,907	10,214
Cash and cash equivalents	11	3,705	8,131
		26,706	27,878
Liabilities
Current liabilities
Trade and other payables		12,848	10,893
Current tax liabilities		12	70
Financial liabilities: borrowings	11	-	-
Provisions for other liabilities and charges		638	838
		13,498	11,801
Net current assets		13,208	16,077
Non-current liabilities
Deferred tax liabilities		3,153	700
Other non-current liabilities		-	-
Provisions for other liabilities and charges		66	582
		3,219	1,282
Net assets	3	49,602	47,377
Shareholders' equity
Ordinary shares	10	2,848	2,848
Share premium account	10	4,900	4,900
Capital redemption reserve	10	617	617
Merger reserve		30,565	30,565
Translation reserve		3,954	4,154
Retained earnings		6,718	4,293
Total shareholders' equity		49,602	47,377

CONSOLIDATED GROUP STATEMENT OF CASH FLOWS

for the year ended 31 December 2013

		2013	2012
	Notes	£'000	£'000
Cash flows from operating activities
Cash generated from/(absorbed by) operations	9	4,352	3,918
Interest (paid)		(2)	(4)
Taxation (paid)/received		(114)	(165)
Net cash generated from operating activities		4,236	3,749
Cash flows from investing activities
Interest Received		19	29
Acquisition of subsidiary (net of cash acquired)		(2,031)	-
Proceeds from sale of subsidiary		-	-
Proceeds from sale of property, plant and equipment		64	127
Deferred consideration in respect of previous acquisitions		(405)	(1,312)
Purchase of property, plant and equipment		(473)	(379)
Expenditure on capitalised development costs		(4,453)	(2,759)
Net cash (absorbed by) investing activities		(7,279)	(4,294)
Cash flows from financing activities
Repayment of borrowings	11	-	(37)
Dividend paid to shareholders	11	(1,413)	(1,413)
Net cash (absorbed by) financing activities		(1,413)	(1,450)
Net (decrease) in cash and cash equivalents		(4,456)	(1,995)
Cash and cash equivalents at beginning of year		8,131	10,184
Effect of foreign exchange rate changes	11	30	(58)
Cash and cash equivalents at end of year		3,705	8,131
Net cash comprises:
Cash and cash equivalents		3,705	8,131
Borrowings		-	-
Net cash at end of year	11	3,705	8,131

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2013

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, Australia, UAE, Brazil and Singapore and manufacturing operations in the UK and the USA we employ over 250 people worldwide and have net assets of £50 million. Our solutions include the design and manufacture of microwave radio, satellite transmission and wireless camera systems.

The Company is a public limited company, and up until the 20th January 2014 it was listed on the London Stock Exchange. On the 20th January 2014 the Company moved to the Alternative Investment Market. The Company is 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 preliminary announcement was approved for issue on 25 March 2013.

 

2.   BASIS OF PREPARATION

The Group financial statements have been prepared on a going concern basis in accordance with International Financial reporting Standards as adopted by the European Union (IFRSs), IFRIC interpretations and the company act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements inconformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise judgment in the process of applying the groups accounting policies.  The areas involving a higher degree of judgment or complexity, or areas were assumption and estimates are significant to the group financial statements are disclosed in note 4. 

During the current reporting period there were no new standards or amendments which had a material impact on the net assets of the Group. In addition, standards or amendments issued but not yet effective are not expected to have a material impact on the net assets of the Group.

The Group financial statements have been prepared on the historical cost basis of accounting.

3.   SEGMENTAL REPORTING

The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors are based on the geographical location of its businesses. These comprise two regions, the UK and the United States of America (US). Each business location has its own Managing Director who sits on the Executive Management Board under the chairmanship of the Executive Chairman to oversee the running of the Group. The chief operating decision-maker has been identified as the Executive Management Board.

The Management Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. The same information is provided to the Board of Directors of Vislink plc. Management has therefore determined that the operating segments for the Group will be based on these reports.

The UK business is responsible for the sales and marketing of all Group products and services outside of the Americas. It is also the product centre for the Advent satellite communication products, Link wireless camera systems and the Gigawave products. The US business is responsible for the sales and marketing of all Group products and services in North and South America and Canada. It is also the product centre for the MRC and PMR microwave product brands and the services business of WTS.

Group management are also focused on developing global revenue growth from the two main markets that the Group serves, Broadcast and Surveillance. Segmental reporting is therefore also provided by reference to revenue by market by geographic region.

The table below shows the analysis of Group external revenue and operating profit from continuing operations by business segment.

	UK	US	Inter segmental	Central	Total £'000
Year to 31 December 2013
Broadcast	30,931	17,188	-	-	48,119
Surveillance	5,241	6,519	-	-	11,760
External revenue	36,172	23,707		-	59,879
Inter-segmental	6,112	839	(6,951)	-	-
Total revenue	42,284	24,546	(6,951)	-	59,879
Adjusted operating profit/(loss)	6,408	407	-	(2,479)	4,336
Amortisation of acquired intangibles	(572)	(848)	-	-	(1,420)
Non-recurring items	330	(42)	-	(126)	162
Group total operating profit/(loss)	6,166	(483)	-	(2,605)	3,078
Year to 31 December 2012
Broadcast	29,227	17,845	-	-	47,072
Surveillance	3,390	6,741	-	-	10,131
External revenue	32,617	24,586	-	-	57,203
Inter-segmental	5,227	686	(5,913)	-	-
Total revenue	37,844	25,272	(5,913)	-	57,203
Adjusted operating profit/(loss)	4,942	397	-	(2,249)	3,090
Amortisation of acquired intangibles	(352)	(1,237)	-	-	(1,589)
Non-recurring items	(330)	-	-	1,036	706
Group total operating profit/(loss)	4,260	(840)	-	(1,213)	2,207

Geographic external revenue analysis

The sales analysis in the table below is based on the geographical location of the customer for each market that the Group serves. There are no individual customers that represent more than 10 per cent of Group revenues.

			2013			2012
	Broadcast £'000	Surveillance £'000	Total £'000	Broadcast £'000	Surveillance £'000	Total £'000
By market
UK	3,154	2,538	5,692	3,934	2,754	6,688
Rest of Europe	8,445	1,111	9,556	8,325	598	8,923
Americas	18,324	6,421	24,745	20,358	6,385	26,743
Middle East and Africa	12,055	1,564	13,619	8,085	87	8,172
Asia / Pacific	6,141	126	6,267	6,370	307	6,677
	48,119	11,760	59,879	47,072	10,131	57,203

Net assets

The table below summarises the net assets of the Group by their geographic location. Balance sheet reporting is disclosed by the geographic location of the assets and liabilities of the Group as this is consistent with the presentation of internal information provided to the Executive Management Board and the Board of Directors.

	2013 £'000	2012 £'000
By market:
UK	30,861	28,692
North America	18,741	18,685
	49,602	47,377

4.   OPERATING PROFIT

The following items have been included in arriving at the operating profit/(loss) for the continuing business:

	2013 £'000	2012 £'000
Depreciation of property, plant and equipment	790	915
Amortisation of acquired intangibles	1,420	1,589
Operating lease rentals	319	415
Loss on sale of property, plant and equipment	3	75
Repairs and maintenance expenditure on property, plant and equipment	118	162
Exchange losses/(gains) charged/(credited) to profit and loss	(65)	288
Research and development expenditure:
-       Expensed in the year	3,942	5,053
-       Capitalised expenditure	4,453	2,759
-       Amortisation and impairment of development cost	2,189	2,889
Non-recurring items
The following items of unusual nature, size or incidence have been charged in arriving at the operating loss for the year and are described as non-recurring.
	2013 £000	2012 £000
Rationalisation and redundancy costs	-	3
Provision against contractual issues	(330)	330
Adjustments to deferred consideration	-	(1,039)
Acquisition and business set up costs	168	-
	(162)	(706)

The Group has incurred rationalisation and redundancy costs of £nil in the year (2012: £3,000).

The Group has in the year released the provision that was in place relating to a contractual dispute (2012: expense of £330,000).

There were £nil adjustments to deferred consideration during 2013 (2012: £1,039,000).

The Group has incurred costs relating to acquisitions of £168,000 in the year (2012: £nil).

5.   FINANCE INCOME - NET

	2013 £'000	2012  £'000
Interest payable on bank borrowing	(4)	(2)
Finance lease liabilities	-	(2)
Finance costs	(4)	(4)
Finance income	19	29
Finance income - net	15	25

Finance income is derived from cash held on deposit.

6.   INCOME TAX EXPENSE

	2013 £'000	2012 £'000
Current tax
UK corporation tax	8	26
Foreign tax - current year	95	-
Foreign tax - prior year adjustment	(66)	163
Total current tax	21	189
Deferred tax
UK corporation tax	(144)	(474)
Foreign tax	(261)	397
Total deferred tax	(405)	(77)
Total taxation	(384)	112

From 1st April 2014 the corporation tax rate will be 21% and from 1st April 2015 will be 20%.  These rates were substantively enacted on 2 July 2013 and hence deferred tax assets and liabilities are calculated at 20%.

Deferred tax has been provided for at the rate of 20.0 per cent (2012: 23.0 per cent). There was not a material impact on the deferred tax charge as a result of the change in deferred tax rates.            

There is no tax impact for the Group associated with the dividend proposed (note 7).

7.   DIVIDENDS

The directors are proposing a final dividend in respect of the financial year ending 31 December 2013 of 1.25 pence per share, which will absorb an estimated £1.5 million of shareholders' funds. It will be paid on 19 July 2014 to shareholders who are on the register of members on 28 June 2014.

8.   EARNINGS PER ORDINARY SHARE

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 year, 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 113,063,000 ordinary shares in issue during the year (31 December 2012: 113,063,000).

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 year.

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:

	2013		2012
	Earnings £'000	Basic EPS Pence	Earnings £'000	Basic EPS Pence
Reported earnings/(loss) per share	3,477	3.1p	2,120	1.9p
Amortisation of acquired intangibles after tax	1,336	1.2p	1,508	1.3p
Non-recurring items after tax	(124)	(0.1)p	(788)	(0.7)p
Adjusted earnings/(loss) per share	4,689	4.2p	2,840	2.5p

 

9.   CASH FLOW FROM OPERATING ACTIVITIES

Net cash flow from operating activities comprises:

	2013 £'000	2012 £'000
Profit/(loss) before taxation - continuing operations	3,093	2,232
Depreciation	790	915
Loss on disposal of property, plant and equipment	3	75
Acquisition related costs	93	-
Amortisation and impairment of development costs	2,189	2,600
Amortisation of acquired intangibles	1,420	1,589
Share options - value of employee services	361	188
Finance income from continuing operations	(19)	(29)
Finance costs from continuing operations	4	4
(Increase)/decrease in inventories	(1,478)	(1,185)
(Increase)/decrease in trade and other receivables	(1,677)	(678)
(Decrease) in payables	366	(1,381)
(Decrease) in provisions	(793)	(412)
Net cash inflow/(outflow) from operating activities	4,352	3,918

 

10.  CALLED UP SHARE CAPITAL, SHARE PREMIUM AND CAPITAL REDEMPTION RESERVE

	Number of shares '000	Share Capital £'000	Share Premium £'000	Capital redemption reserve £'000	Total £'000
At 31 December 2012 and 2013	113,902	2,848	4,900	617	8,365

There were no share options exercised in the year to 31 December 2013 under any of the existing employee share option schemes (2012: nil).

11.  NET FUNDS

The movements in cash and cash equivalents and borrowings in the year are as follows:

	Cash and cash equivalents £'000	Other borrowings £'000	Total net funds £'000
At 1 January 2013	8,131	-	8,131
Cash flow for the year before financing	(3,041)	-	(3,041)
Dividend paid to shareholders	(1,413)	-	(1,413)
Exchange rate adjustments	28	-	28
At 31 December 2013	3,705	-	3,705

Ends.

 

END

 

 

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