Final Results
The Vitec Group PLC
07 March 2005
7 March 2005
The Vitec Group plc
2004 Full Year Results
The Vitec Group plc, the international supplier of products, services and
solutions to the Broadcast, Entertainment and Media industries, announces its
results for the year ended 31 December 2004.
2004 2003
Turnover from continuing operations £185.4m £170.4m
Adjusted, before exceptional items, goodwill amortisation
and impairment
Operating profit from continuing operations £17.8m £17.8m
Pre-tax profit £16.2m £16.1m
Basic earnings per share 22.9p 23.9p
After exceptional items, goodwill amortisation and impairment
Pre-tax profit £12.3m £7.8m
Basic earnings per share 15.6p 13.6p
Total dividend for the year 15.0p 22.7p
KEY POINTS
• Strong sales growth; 18% in constant currency, 8.8% in £ sterling
terms
• Profit before tax, exceptional items, goodwill amortisation and
impairment increased by 30% in constant currency, 0.6% in £ sterling terms
• Two businesses acquired during the year, both fully integrated
• Continued strong cash generation
• Enhanced financing arrangements in place
• Recommended final dividend of 8.9p per share, making a total of 15p
per share, in line with expectations.
Commenting on the results, Gareth Rhys Williams, Chief Executive, said:
'The year saw strong turnover growth as a result of a number of new products
being introduced into growing markets. Photographic continues to benefit from
an increase in demand for digital cameras, whilst the Broadcast market is slowly
improving.
'We started 2005 in a much stronger position than at the same time last year,
with higher order books and rising volumes. Going forward, Vitec remains exposed
to fluctuations in the US dollar, but, as a result of restructuring actions
taken over recent years, the Group is now in better shape. Overall the Board
views the outlook for 2005 with cautious optimism.'
Enquiries
The Vitec Group plc Gareth Rhys Williams 020 8939 4650
Financial Dynamics Rob Gurner 020 7269 7291
CHAIRMAN'S STATEMENT
Having joined the Board of Vitec in June, I succeeded Alison Carnwath as
Chairman in November. Alison retired from the Board at the end of the year
after almost nine years service and we thank her for her contribution to the
development of the Group. The initiatives taken under Alison's stewardship are
bearing fruit and I look forward to building on them.
I have visited many of the Group's facilities, met key staff and have been
impressed by the skill and effort they are bringing to tackling the issues which
face the Group. I would like to take the opportunity of thanking all our
employees for their contribution to the many changes and improvements they have
made - the underlying progress of the business is beginning to show through.
The Board has conducted a review of Group Strategy with the company's new
advisers and we are confident that the business is on the right path to generate
value for shareholders. The results for 2004 are encouraging in terms of
organic growth from new product development and from improving markets. We are
also benefiting from the reorganisation initiatives that have involved plant
closures and significant structural change, combined with improved financial
control. As a result, revenues from continuing operations grew 18% in
------constant currency terms and profit before tax, exceptional items, goodwill
amortisation and impairment grew 30% in constant currency.
Earnings per share, before exceptional items, goodwill amortisation and
impairment, were 22.9p (2003: 23.9p). As announced at the half year, we continue
to experience a high underlying tax rate as all of the Group's profits were
earned outside the UK. Nevertheless, tax payments in the year were very low as
the Group benefited from a significant tax credit arising from the sale of the
ALU business. The lowering of the Group's effective tax rate continues to be a
priority.
Cash generation continued to be strong, with net cash inflow from operating
activities of £22.5 million (2003: £28.7 million). Working capital increased as
a result of the sales growth, but stock and debtor ratios continued to improve.
Acquisition activity
To supplement the organic growth, two small businesses were acquired in the
year. As previously reported, our Photographic division strengthened its
in-house distribution activities with the acquisition of Multiblitz, its
long-standing distributor in Germany, in January 2004 for £1.4 million.
Multiblitz is now integrated and operates as part of Bogen Imaging. In March
2004 we acquired the US assets of Charter Broadcast, a competitor in the rental
arena, for a nominal sum which, with transaction costs, brought the total
acquisition cost to £0.1 million. That business was immediately integrated into
our US network of depots. Both acquisitions are performing well. We continue to
look for further acquisitions that will strengthen our existing position or open
up new avenues for growth in related areas.
Funding
On 25 January 2005 the Group agreed a new, enhanced loan facility, which has a
term of five years. The new facility, which is for an increased amount of £100
million, compared to £55 million previously, is for Group companies' current
requirements and for funding any potential future corporate activity.
2004 dividend
In line with the policy outlined in March last year, which stated that over a
period of two to three years we would move towards an average dividend cover
level of around 2 times, the Board is recommending a final dividend of 8.9p,
giving a total dividend for the year of 15p per share. Since last year, when our
new dividend policy was announced, foreign exchange has weakened against us.
However, subject to no further significant weakening in the US dollar, it is our
current intention to maintain the current level of dividend per share for 2005
and to seek to return to a dividend cover in line with our stated policy over
the next two to three years.
Outlook for 2005
We ended 2004 with the factory and structural reorganisations substantially
behind us. The benefits flowing from these, which will continue to be delivered
in 2005, have allowed higher spending on R&D and marketing in particular, which
in turn has resulted in much stronger product ranges.
We started 2005 in a much stronger position than at the same time last year,
with higher order books and rising volumes. Going forward, Vitec remains exposed
to fluctuations in the US dollar but, as a result of restructuring actions taken
over recent years, the Group is now in better shape. Overall the Board views the
outlook for 2005 with cautious optimism.
CHIEF EXECUTIVE'S REVIEW
2004 saw real progress in growing the business. For almost three years we have
been operating the 'Consolidate-Leverage-Grow' strategy. 2002 and the first half
of 2003 saw multiple plant and facility closures at a time of static sales,
while in the second half of 2003 we began to see growth returning. In 2004 we
delivered both operational improvements and significant revenue growth, most of
it organic, due to the multiple new products and services that we have launched.
While we expect to see further benefits from the consolidation actions already
announced and implemented, the emphasis on delivery is moving from 'Consolidate'
and 'Leverage', to 'Grow'.
Results
2004 saw revenues from continuing operations grow 18% in constant currency
terms, including a 4% contribution from acquisitions. Profit before tax,
exceptional items, goodwill amortisation and impairment, grew 30% in constant
currency terms due to the volume increases and the benefits of the plant closure
programme and other cost control measures, despite increases in UK pension
costs.
Foreign currency is a major factor in the performance of a worldwide business
such as Vitec, and the fall in the US dollar, particularly against the euro,
continued to have a significant effect, even after the hedging we have in place.
In £ sterling terms the sales growth was still strong at 8.8% (from £170.4
million to £185.4 million), while operating profit before exceptional items,
goodwill amortisation and impairment, was £17.8 million (£17.8 million in 2003),
after reflecting adverse transactional and translational impacts of some £4.8
million.
After a slightly lower interest charge, profit before tax before exceptional
items, goodwill amortisation and impairment was £16.2 million (£16.1 million in
2003). There was a net operating exceptional charge of £2.1 million relating
principally to the previously announced restructuring of the commercial
operations within Broadcast Systems.
Revenue growth
The growth in revenue is coming from a combination of new products and market
growth. In order to stimulate product sales we have, in the last two years,
launched new intercoms systems, new studio camera pedestal and head products,
new battery systems, new photographic tripods, and new lighting truss systems.
Every brand has reinvigorated its product portfolio and some have replaced their
range completely. We continue to win meaningful awards for these new products at
trade shows and in trade magazines, which is an encouraging indicator of future
prospects. Many of these new products are being patented which, together with an
ongoing R&D spend of roughly 5% of non-rental sales, reinforces our
market-leading positions. We believe continued innovation is crucial to Vitec's
future.
The market for our photographic accessories continues to expand, driven by the
uptake of digital cameras, which is particularly strong in the '35mm SLR'
segment, where we have targeted products for the keen amateur. In our broadcast
market, many of the major networks have moved rapidly into making programmes in
'High Definition' (HD), a digital format that greatly enhances the clarity of
video images, which is particularly useful for sports coverage. The US rentals
market is reviving somewhat and our Broadcast Services division has developed
greater capacity for HD productions in response. It has also been active in
coming forward with new service offerings: in particular for complex 'Reality
TV' shows. We also generated growth by entering new markets, in particular Air
Traffic Control, where we have installed several large intercom systems.
2004 also saw some major external and internal events that boosted revenues. The
presidential elections in the US lifted advertising expenditure, whilst the
Athens Olympics saw significant contracts for our rental business, as well as
product sales to broadcasters and freelancers. Internally, operational
improvements in Photographic reduced lead times to normal levels, converting
some backlog into sales. While there are no major sporting events in 2005, most
Vitec businesses entered 2005 with order books higher than at the start of 2004.
Restructuring benefits
We continue to improve the operational efficiency of the Group, exploiting our
manufacturing and purchasing scale in both product divisions, greatly reducing
the negative effect of the falling US dollar. The benefits from the
restructuring of our manufacturing, which although offset by mix changes and
some provisions for ageing stock, have underpinned the results for 2004. Our
manufacturing operations are now focusing on continuous improvement actions for
2005 and beyond, which enabled us to announce in July the rationalisation of the
commercial side of the Broadcast Systems business. A cost of £4 million to £5
million was anticipated, of which a net £2.1million was charged in 2004. This
process is also going well. Ongoing cost control and better use of our rental
asset base also improved profitability in Broadcast Services.
It was encouraging that most of our businesses showed a significant improvement
in the second half of the year over the first half, as the effects of earlier
actions came through.
Executive team
During 2004 we strengthened the management team in the Photographic business in
Italy and we recently made several key appointments within Broadcast Systems,
further improving the team there. With the scaling up of our plant in Costa Rica
behind us, Brian McCluskie, formerly Operations Director, has left the company
and we wish him well in his future career.
Photographic
2004 2003
Turnover £68.7m £61.5m
Operating profit* £12.3m £13.9m
Operating margin* 17.9% 22.6%
*before exceptional gain of £0.1 million (2003: £nil) and goodwill amortisation
of £0.2 million (2003: £0.1 million)
The Photographic division saw strong volume growth during 2004. In constant
currency terms, sales were up 23%, including 6% from the acquisition of
Multiblitz. This underlying growth was driven by the continuing launch of new
products and the demand for digital cameras, particularly in the digital SLR
segment. However the fall in the US dollar against the euro reduced that growth
to 12% in £ sterling terms, and also adversely affected margins.
The market for accessories for the professional photographer was stimulated by
innovations such as the new joystick head, whose ergonomically-shaped pistol
grip allows the user to position the camera and activate the shutter with one
hand, and the new 303SPH head which facilitates the composition of panoramic
shots, useful for capturing architectural images. Manfrotto also has an
important position at the lower end of the video camera support market, catering
to a different channel to our Broadcast brands, where the new 519 Pro-video head
generated a lot of interest. Also in the professional arena, Litec continued to
develop its presence across Europe; its lighting truss range was augmented with
new tower systems to support the Libera trusses launched last year.
The majority of the growth, however, came as a result of the boom in affordable
digital SLR cameras that are now being bought by keen amateur photographers. The
new Neotec tripod, which is targeted specifically at this user group, has been
selling well ahead of expectations, and there are other products planned for
this exciting segment.
Improvements in manufacturing operations have also helped increase volume in
2004. The closure of the small plant at Nove in Italy early in the year has
simplified work flow; the IT systems, now rolled out to all but one site across
the division, have given greater visibility to suppliers of our needs and,
together with efficiency improvements within the factories, allowed Manfrotto to
cut its lead-time substantially, converting several weeks of backlog into sales.
Manufacturing improvement activities are now focused more on cost reduction
actions and on further improving the health and safety culture.
Following the disposal of ALU at the end of 2003, the management structure was
changed, with several senior vacancies being filled from outside the Group. The
Campese offices were renovated, generating sufficient space to centralise the
operations and administration functions previously dispersed around the other
plants. This has already driven improved coordination and efficiency. In August
a representative office was established in Hong Kong in order to better support
our local third party distributors.
Broadcast Systems
2004 2003
Turnover £86.9m £81.9m
Operating profit* £3.9m £3.9m
Operating margin* 4.5% 4.8%
*before exceptional charges of £2.2 million (2003:£1.9 million), goodwill
amortisation of £0.8 million (2003: £0.7 million) and impairment of goodwill of
£0.4 million (2003: £nil)
The Broadcast Systems division also saw a year of growth, with sales up 13% in
constant currency, 6% in £ sterling. This was a marked improvement following
several years of stagnation due to the decline in the broadcast market. Each
unit has new products to promote - the new Quattro-S pedestal from Vinten is
particularly encouraging as it, and the family of new studio/outside broadcast
control heads based on the Vector 900, are generating sales in a part of the
market where we already enjoyed a significant market share. Our portable power
company, Anton Bauer, continued to take market share in Europe, winning orders
from TFI in France and RAI in Italy.
The Olympics acted as a catalyst for several purchasers, with many of the
Group's products used there, and it was a strong year for robotics products.
2004 saw the opening of a sales office in Beijing, which will strengthen our
position in China as local broadcasters gear up for the 2006 Asian Games and the
2008 Olympics.
In addition, non-broadcast applications also grew. 2004 saw significant
shipments of support devices for surveillance equipment, and of Air Traffic
Control intercoms systems to Korea, China and Vietnam, as well as the large
contract for the German Space Operations Centre. This will be used to monitor
the forthcoming Soyuz mission. Margins are improving in this area, as we
complete the product development work and are able to be more selective about
the projects for which we bid.
In September we announced that, with the manufacturing restructuring bedding
down, part of the commercial operations of this division would be rationalised.
The aim was to reduce internal duplication while ensuring we could maintain the
pace of innovation for which our brands are known. These projects are going
well, they produced benefits in 2004 and are expected to produce further
benefits in 2005, on top of those flowing from the plant closures. In Camera
Support we are optimising many of our back office operations in the US and
Europe, for which the new IT systems are an important foundation.
In Communications the two main companies, Clear-Com and Drake, have been
integrated and the brand repositioning exercise completed successfully. Both
brands now have access to all product families, and this has been well received
by customers. New distributors have switched from other suppliers to join the
Clear-Com network. As part of these changes, new managing directors have been
recruited for both the Camera Support and the Communications businesses.
During the year, Vinten celebrated 40 years at the site in Bury St Edmunds,
England, having moved from North London in 1964, and Sachtler relocated a short
distance to new facilities at Eching near Munich, where sales, marketing,
customer service, and most importantly R&D, will be based.
Broadcast Services
2004 2003
Turnover £29.8m £27.0m
Operating profit* £1.6m £0.0m
Operating margin* 5.4% 0.0%
*before goodwill amortisation of £0.4 million (2003: £0.5 million) and
impairment of goodwill of £nil (2003: £2.1 million)
Broadcast Services saw a 24% growth in US dollar sales, which translated to a
10% growth in £ sterling. Many of the drivers of this growth are expected to
persist in 2005. The ongoing strengthening of the market, first evident in the
latter part of 2003, continued, buoyed by the backdrop of improving US
advertising spend, and we have benefited from the uptake of High Definition (HD)
programming. Operating margin grew from breakeven to 5.4%, and the unit
continued to generate cash despite increased spend on new rental equipment.
Bexel has also captured an increasing number of reality shows as the technical
standards demanded by producers have steadily risen; examples are Survivor, The
Apprentice, The Osbournes, and most recently the latest series of American Idol
and Brat Camp. Many of these shows have also needed sophisticated audio systems
from ASG, our high end audio integrator. During the year, progress was also made
to widen the range of services offered; for example, Bexel can now help clients
fit-out facilities with fibre optic cabling that allows subsequent events to be
staged more efficiently.
The Charter acquisition has gone well, with additional contracts for the depots
in Chicago and Orlando that were taken over, as well as gains from the
elimination of surplus equipment. The expanded network of 10 depots means that
broadcasters can rely on us to support them with assets and technical support
throughout the country. In 2004 this led to a 'preferred supplier' agreement
being concluded with Disney, covering ABC and ESPN as well.
The second half saw the summer Olympics in Athens, with contracts won for AOB
(Athens Olympic Broadcasting) and with two German broadcasters, ARD and ZDF.
Both these prestigious contracts went smoothly, a testament to the high levels
of technical service within Bexel that customers have come to rely on. These
contracts will not repeat in 2005, but we continue to see underlying growth in
rentals.
Asset management is a major determinant of success in any rental business, and
the division's new IT systems have facilitated the production of more
sophisticated analyses of contracts, asset acquisition costs and revenue
generation, that enable utilisation to be optimised. This is reflected in an
improved ratio of revenues to net assets, 2.4 in 2004 versus 1.7 in 2003. The
application of these tools, and the continued use of sub-rentals, has allowed
higher levels of spending on new, frequently High Definition, equipment than in
the year before, while still generating cash. The business entered 2005 with an
asset base level better aligned to its needs.
During the year the New York and Dallas facilities were upgraded, and in
December the main Burbank office relocated from its old site with four small
buildings, to new premises where everyone is under one roof, which will yield
cost and efficiency benefits from 2005.
FINANCIAL REVIEW
Continuing operations
Turnover increased by £15.0 million (from £170.4 million to £185.4 million) or
8.8% in the year. There was underlying growth in all three divisions.
Photographic and Broadcast Services benefited from a contribution of £3.5
million and £1.8 million respectively from the acquisitions of the domestic
distribution activity of Multiblitz in Germany and Charter Broadcast North
America. Excluding the incremental effect of those acquisitions, underlying
sales growth was £22.6 million or 14%, but this was significantly reduced by the
effects of adverse FX rates on translation, £11.6 million, and transaction, £2.1
million. The balance of the growth, £0.8m, came from the full year effect of
acquisitions made part-way through 2003.
Gross profit margins fell from 43.6% to 41.3% reflecting a change in mix in a
number of businesses and the adverse effect of FX transactions, particularly in
the Photographic Division. Gross profits were £0.3 million higher than the prior
year before a contribution of £1.9 million from 2004 acquisitions.
Net operating expenses, before exceptional items of £2.1 million and goodwill
amortisation and impairment charges of £1.8 million, increased by £2.2 million
(3.9%) to £58.7 million. £1.2 million of the total increase related to 2004
acquired businesses, £4.1m to existing businesses and there was an offsetting FX
translation benefit of £3.1m.
Operating profit before exceptional items and goodwill amortisation and
impairment charges was unchanged at £17.8 million, including contributions of
£0.1 million and £0.6 million from the acquisitions of Multiblitz and Charter
Broadcast North America respectively. Operating profit margins were 9.6%
compared to 10.4% in 2003. The year on year effect of translating overseas
profits was £0.9 million adverse and the effect of exchange rate changes on
transactions after hedging, principally the weaker US dollar against the euro,
was £3.9 million unfavourable.
There is a net operating exceptional charge of £2.1 million relating principally
to previously announced restructuring plans within the Broadcast Systems
division which will enable the Camera Support and Communications businesses to
operate in a more integrated manner. It is expected that the overall charge will
be between £4.0 million and £5.0 million, in line with previous guidance.
Goodwill amortisation and impairment. The charge was £1.8 million (2003: £3.4
million including £2.1 million impairment charge against the goodwill of the US
Systems Wireless business).
Taxation. The effective taxation rate on operating profit before exceptional
items, goodwill amortisation and impairment has increased to 42.0% (2003 39.8%)
and includes £1.6 million (9.9% rate) of deferred tax. The tax charge is
relatively high because profits have arisen in high tax jurisdictions but the
Group has incurred net losses in the UK on which it has not benefited from tax
relief.
Cash flow and net debt. Cash generation remained strong. However, net debt
increased slightly from £10.4 million to £11.3 million after £1.5 million
acquisition costs and the £2.7 million cash cost of restructuring actions, of
which £1.2 million relates to the profit and loss charge in 2004.
Net cash inflow from operating activities was £22.5 million (2002: £28.7
million), equating to 55p per share (2003: 70p per share). Cash outflow from an
increase in working capital (principally due to a £1.2 million decrease in
creditors) was £1.4 million (2003: £4.0 million inflow). Capital expenditure and
financial investments were £10.0 million (2003: £10.2 million), of which £4.8
million related to rental assets and £0.8 million to IT projects, partly
financed by the proceeds from asset disposals of £1.6 million (2003: £2.4
million).
Working capital was increased by the effect of the two acquisitions and higher
volumes, partially offset by efficiency programmes. Stocks decreased by £0.6
million to £32.6 million, whilst stock days decreased to 109 (2003: 126
excluding Retail Display). Trade debtors at £26.2 million were £2.0 million
lower than last year with debtor days at 52 days (2003: 60 days excluding Retail
Display). Trade creditors at £15.7 million were £0.7 million higher than last
year (whereas other creditors were £1.6 million lower). Amounts recoverable on
long term contracts increased by £1.1 million to £2.1 million.
Tax paid in 2004 of £1.4 million reduced considerably from 2003 (£10.8 million).
The prior year included the settlement of an historic tax claim of £1.4 million,
whereas the current year has benefited from Italian tax credits arising from the
sale of the Retail Display business in 2003.
Treasury Policy. Financing, currency hedging and tax planning are managed
centrally. Hedging activities are designed to protect profits, not to speculate.
Substantial changes to the financial structure of the Group or treasury practice
are referred to the Board. In 2003 the Board approved the use of option
contracts for hedging foreign currency receipts.
As in previous years, a portion of the transactions of subsidiaries in foreign
currencies is hedged 12 months forward. Forward foreign exchange contracts at 31
December 2004 totalled £5.2 million (2003: £16.0 million). In addition, the
Group had simple option contracts, for the sale of US dollars for euros over the
period January 2005 to December 2005 totalling £9.3 million (2003: £8.4 million)
and for the sale of US dollars for £ sterling over the period January 2005 to
August 2005 totalling £0.9 million (2003: £ nil). Translation of foreign
currency profits and interest rates are not hedged. Foreign currency net assets
are not hedged other than by normal Group borrowings.
The Group operates strict controls over all treasury transactions involving dual
signatures and appropriate authorisation limits.
Financing Activities. The average cost of borrowing for the year was 4.8% (2003:
4.8%) with the upward trend in interest rates being offset by the transfer of
some of the Group's £ sterling loans into euros and US dollars. Net interest
cover (using profit before exceptional items, goodwill amortisation and
impairment) remained high at 11 times (2003: 10 times). The Group's £55 million
three-year bilateral credit facility agreements which were due to expire in
October 2005 were replaced on 25 January 2005 with a five-year £100 million
multicurrency revolving credit facility agreement, involving five banks.
UK pensions. The Group contributes to two UK defined-benefit pension schemes. At
the end of 2003 the Group closed both schemes to new members, replacing them for
2004 onwards with a Group personal pension plan, currently with Standard Life. A
full triennial actuarial valuation was undertaken as at 5 April 2004. At that
date, the schemes had assets with a combined market value of £28.3 million. On
the basis of the assumptions adopted, the value of the schemes' assets was equal
to 94% of the value placed on the benefits that had accrued to members allowing
for expected future increases in salaries. As a result of the valuation, and
following the increase of £0.1 million per annum in company contributions from
the beginning of 2003, regular contributions were again increased by £0.2
million per annum with effect from the date of valuation. In addition,
employees' contributions were increased from 1 January 2005. The Group's UK
pension charge to the profit and loss account under SSAP 24 has increased from
£0.9m in 2003 to £1.5m in 2004 after the effects of accounting for moving from a
previous surplus to a shortfall in scheme assets when compared to accrued
liabilities.
International Financial Reporting Standards ('IFRS'). The Group has completed
its initial investigation into the impact of adopting IFRS with effect from 1
January 2004. The areas currently identified as most affecting the profit before
tax and shareholders' funds are as a result of the adoption of IAS 19 Employee
Benefits (in respect of pensions), IAS 38 Intangible Assets (in respect of
capitalising major development costs), IFRS 3 Business combinations (in respect
of goodwill), IFRS 2 Share Based Payment and IAS 10 Events after the Balance
Sheet date (in respect of dividends declared after the balance sheet date). The
exact impact of adopting IFRS, as well as a full analysis of the impact on the
2004 published results, will be communicated in May 2005. The Interim results
for the six months ending 30 June 2005 will be prepared in accordance with IFRS.
Consolidated profit and loss account
For the year ended 31 December 2004
Before 2004 2003
exceptional
items,
goodwill
amortisation & Goodwill
impairment amortisation &
Exceptional impairment
items
Total Total
£m £m £m £m £m
Turnover
Existing operations 180.1 180.1 170.4
Acquisitions 5.3 5.3 -
Continuing operations 185.4 185.4 170.4
Discontinued operation - - 22.4
185.4 185.4 192.8
Cost of sales (108.9) (108.9) (111.4)
Gross profit 76.5 76.5 81.4
Net operating expenses (58.7) (2.1) (1.8) (62.6) (68.9) (1)
Operating profit
Existing operations 17.1 (2.1) (1.8) 13.2 12.5
Acquisitions 0.7 - - 0.7 -
Continuing operations 17.8 (2.1) (1.8) 13.9 12.5
Loss on disposal of discontinued
operation - - - - (3.0)
Profit on ordinary activities before
interest 17.8 (2.1) (1.8) 13.9 9.5
Net interest payable (1.6) (1.6) (1.7)
Profit on ordinary activities before
tax 16.2 (2.1) (1.8) 12.3 7.8
Tax on profit on ordinary activities (6.8) 0.9 - (5.9) (2.3) (2)
Profit on ordinary activities after tax
and for the financial year 9.4 (1.2) (1.8) 6.4 5.5
Dividends (6.1) (9.3)
Retained profit/(loss) for the year 0.3 (3.8)
transferred to reserves
Basic earnings per share 15.6p 13.6p
Diluted earnings per share 15.5p 13.5p
Adjusted basic earnings per share(3) 22.9p 23.9p
(1) Net operating expenses in the year ended 31 December 2003 included £1.0 million of exceptional
restructuring costs relating to the closure of Radamec Broadcast Systems' manufacturing facility at
Chertsey, UK, £0.9 million of exceptional costs relating to the unsuccessful acquisition of EVS
Broadcast Systems, and £3.4 million of goodwill amortisation and impairment. No related tax credit was
recognised on these costs.
(2) Includes a tax credit of £4.1 million in respect of the loss on sale of discontinued operation.
(3) Adjusted basic earnings per share is presented as the Directors consider that this gives valuable
additional information about the ongoing earnings performance of the Group.
There is no material difference between the Group's profit and loss account and the historical cost
profit and loss account. Accordingly, no note of the historical cost profit and loss for the period has
been presented.
Balance sheets
As at 31 December 2004
Group Company
2004 2003 2004 2003
Restated(1) Restated(1)
£m £m £m £m
Fixed assets
Intangible assets 8.2 10.1 - -
Tangible assets 33.9 34.5 1.9 2.0
Investments - - 206.5 154.7
42.1 44.6 208.4 156.7
Current assets
Stocks 32.6 33.2 - -
Debtors 38.5 42.2 3.2 2.8
Cash at bank and in hand 14.4 15.6 17.5 4.0
85.5 91.0 20.7 6.8
Creditors - due within one year (59.4) (37.3) (148.8) (52.6)
Net current assets/(liabilities) 26.1 53.7 (128.1) (45.8)
Total assets less current liabilities 68.2 98.3 80.3 110.9
Creditors - due after more than one year (0.1) (26.1) - (26.0)
Provisions for liabilities and charges (11.4) (12.4) (0.1) (0.1)
Net assets 56.7 59.8 80.2 84.8
Capital and reserves
Called up share capital 8.2 8.2 8.2 8.2
Share premium account 2.7 2.6 2.7 2.6
Capital redemption reserve 1.6 1.6 1.6 1.6
Revaluation reserve 1.4 1.5 0.9 0.9
Other reserves - - 53.7 53.7
Profit and loss account 42.8 45.9 13.1 17.8
Shareholders' funds - equity 56.7 59.8 80.2 84.8
(1) Shareholders' funds have been restated to show the investment held in respect of grants under share option
schemes as a deduction (see Note).
Consolidated statement of total recognised gains and losses
For the year ended 31 December 2004
2004 2003
£m £m
Profit for the financial year 6.4 5.5
Exchange rate movements on foreign net investments (3.5) (0.9)
Total recognised gains and losses relating to the year 2.9 4.6
Prior year adjustment for ESOP accounting (see Note) (0.5) -
Total recognised gains and losses since the last annual report 2.4 4.6
Reconciliation of movements in consolidated shareholders' funds
For the year ended 31 December 2004
2004 2003
£m £m
Profit for the financial year 6.4 5.5
Dividends (6.1) (9.3)
Retained profit/(loss) for the year 0.3 (3.8)
Exchange rate movements on foreign net investments (3.5) (0.9)
Goodwill previously written off included in profit for the financial year - 2.1
New share capital subscribed 0.1 -
Net decrease in shareholders' funds (3.1) (2.6)
Opening shareholders' funds (originally £62.9 million before deducting prior
year adjustment of £0.5 million - see Note) 59.8 62.4
Closing shareholders' funds 56.7 59.8
*
Consolidated cashflow statement
For the year ended 31 December 2004
2004 2003
£m £m
Net cash inflow from operating activities 22.5 28.7
Returns on investments and servicing of finance
Interest received 0.1 0.2
Interest paid (1.7) (2.0)
Net cash outflow from returns on investments and servicing of finance (1.6) (1.8)
Tax paid (1.4) (10.8)
Capital expenditure and financial investments
Purchase of tangible fixed assets (10.0) (10.2)
Sale of tangible fixed assets 1.6 2.4
Net cash outflow from capital expenditure and financial investments (8.4) (7.8)
Acquisitions & disposals
Purchase of subsidiary undertakings (1.5) (6.4)
Disposal of subsidiary undertakings - 2.6
Net cash outflow from acquisitions and disposals (1.5) (3.8)
Equity dividends paid (9.3) (9.3)
Net cash inflow before financing 0.3 4.8
Financing
Issue of shares 0.1 -
Repayment of loans (1.6) (1.9)
New unsecured loan(1) - 5.4
Net cash (outflow)/inflow from financing (1.5) 3.5
Decrease in cash in the year (1.2) (1.3)
(1) In 2003 new unsecured loans of £5.4 million were obtained by ALU srl prior to its sale and were
transferred as part of the disposal of that business.
Activity analysis
Profit before Turnover Net assets
interest and tax
2004 2003 2004 2003 2004 2003
Restated(5)
£m £m £m £m £m £m
Class of business
Broadcast Systems 3.9 3.9 86.9 81.9 38.2 35.9
Photographic 12.3 13.9 68.7 61.5 26.3 29.4
Broadcast Services 1.6 - 29.8 27.0 12.3 15.7
17.8 17.8 185.4 170.4 76.8 81.0
Goodwill amortisation and
impairment(1) (1.8) (3.4)
Exceptional items(2) (2.1) (1.9)
13.9 12.5 185.4 170.4 76.8 81.0
Discontinued operation(3) (3.0) 22.4 -
13.9 9.5 185.4 192.8 76.8 81.0
Group net liabilities(4) (20.1) (20.7)
56.7 60.3
(1) Goodwill amortisation relates to Broadcast Systems - £0.8 million (2003: £0.7 million), Photographic
- £0.2 million (2003: £0.1 million) and Broadcast Services - £0.4 million (2003: £0.5 million).
Impairment losses of £0.4 million (2003: £nil) relate to Broadcast Systems and £nil (2003: £2.1 million)
relate to Broadcast Services.
The net book value of goodwill relates to Broadcast Systems - £3.3 million (2003: £4.6 million),
Photographic - £2.6 million (2003: £1.8 million) and Broadcast Services - £2.0 million (2003: £3.2
million).
(2) Exceptional items relate to restructuring costs in Broadcast Systems (primarily severance in
connection with the actions taken to enable the business to operate in a more integrated manner) - £2.2
million (2003: £1.9 million) and a gain in Photographic relating to restructuring - £0.l million (2003:
£nil).
(3) The discontinued operation relates to the Retail Display business which was sold on 30 December
2003.
(4) Group net liabilities include net borrowings, capitalised goodwill, Group dividends payable and
central creditors and provisions.
(5) Net assets have been restated to show the investment held in respect of grants under share option
schemes as a reduction from shareholders' funds (see Note).
Activity analysis (continued)
Profit before Turnover Net assets
interest and tax
2004 2003 2004 2003 2004 2003
Restated(5)
£m £m £m £m £m £m
Geographic area by origin
United Kingdom (2.9) (2.8) 40.5 31.0 17.6 14.6
The rest of Europe 12.7 13.7 66.8 56.4 26.6 29.2
The Americas 7.8 6.7 78.1 83.0 31.5 35.9
Asia and Australasia 0.2 0.2 - - 1.1 1.3
17.8 17.8 185.4 170.4 76.8 81.0
Goodwill amortisation and
impairment(1) (1.8) (3.4)
Exceptional items(2) (2.1) (1.9)
13.9 12.5 185.4 170.4 76.8 81.0
Discontinued operation(3) (3.0) 22.4 -
13.9 9.5 185.4 192.8 76.8 81.0
Group net liabilities(4) (20.1) (20.7)
56.7 60.3
(1) Goodwill amortisation relates to the United Kingdom - £0.3 million (2003: £0.3 million), The rest
of Europe - £0.2 million (2003: £0.1 million) and The Americas - £0.9 million (2003: £0.9 million) and
impairment losses relate to the United Kingdom - £0.4 million (2003: £nil) and The Americas - £nil
(2003: £2.1 million).
The net book value of goodwill relates to the United Kingdom - £2.0 million (2003: £2.7 million), The
rest of Europe - £2.5 million (2003: £1.8 million) and The Americas - £3.4 million (2003: £5.1
million).
(2) Exceptional items relate to United Kingdom - £0.7 million (2003: £1.9 million) , The rest of
Europe - £0.5 million (2003: £nil) and The Americas - £0.9 million (2003: £nil).
(3) The discontinued operation is the Retail Display business which was sold on 30 December 2003.
Operating profit and in the Retail Display business relate principally to The rest of Europe and The
Americas.
(4) Group net liabilities include net borrowings, capitalised goodwill, Group dividends payable and
central creditors and provisions.
(5) Net assets have been restated to show the investment held in respect of grants under share option
schemes as a reduction from shareholders' funds (see Note).
Activity analysis (continued)
Turnover
2004 2003
£m £m
Turnover by destination
United Kingdom 9.9 9.1
The rest of Europe 52.6 44.7
The Americas 94.3 91.1
Asia and Australasia 22.9 21.5
Africa and Middle East 5.7 4.0
185.4 170.4
Discontinued operation(1) 22.4
185.4 192.8
(1) The discontinued operation relates to the Retail Display business which was sold on 30 December 2003.
In 2003, Turnover in the business related to The United Kingdom - £1.2 million, The rest of Europe - £8.0
million, The Americas - £11.9 million, Asia and Australia - £0.8 million and Africa and Middle East -
£0.5 million.
Note
Basis of preparation
The financial information for the years ended 31 December 2004 and 31 December
2003 contained in this preliminary announcement was approved by the Board on 2
March 2005. This announcement does not constitute statutory accounts of the
Company within the meaning of section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 December 2003 have been delivered to
the Registrar of Companies. Statutory accounts for the year ended 31 December
2004 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting. The auditors have reported on both these sets of
accounts. Their reports were not qualified and did not contain a statement under
section 237(2) of the Companies Act 1985.
The Urgent Issues Task Force (UITF) Abstract 38 changes the presentation of an
entity's own shares held in an Employee Share Ownership Plan (ESOP) Trust by
requiring them to be deducted in arriving at the shareholders funds instead of
showing them as an asset. Accordingly, the prior periods' balance sheets have
been restated to show shares held in respect of grants under share option
schemes of £0.5 million as at 31 December 2004 and as at 31 December 2003 as a
deduction from shareholders' funds instead of as a fixed asset investment.
Dividend
If approved by shareholders at the AGM on 18 May 2005, the final dividend will
be paid on 20 May 2005 to shareholders on the register at close of business on
22 April 2005.
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