Final Results
The Vitec Group PLC
05 March 2007
5 March 2007
2006 Full Year Results
A YEAR OF VERY GOOD PROGRESS
The Vitec Group plc, the international supplier of products, services and
solutions to the Broadcast, Photographic, Entertainment and Media industries,
announces its results for the year ended 31 December 2006.
Results from continuing operations 2006 2005 Change
Revenue £222.3m £194.9m +14%
Before significant items*
Operating profit £25.2m £20.0m +26%
Profit before tax £24.1m £18.4m +31%
Earnings per share 35.3p 26.0p +36%
After significant items*
Operating profit £23.5m £19.2m +22%
Profit before tax £22.6m £17.1m +32%
Earnings per share 32.6p 22.9p +42%
Total dividend recommended for the year 16.5p 15.5p +6%
*Significant items comprise restructuring costs, goodwill impairment and
negative goodwill, amortisation of acquired intangibles, profit on sale of
property and fair value adjustments relating to volatile financial instruments.
KEY POINTS
• Revenue growth of 15% in constant currency, of which 12% organic.
• Profit before tax** of £24.1 million, an increase of 35% in constant
currency, 31% as reported.
• Basic earnings per share** of 35.3p, up 36%.
• Cash generated from operations of £28.7 million.
• Imaging & Staging division sales up 24%.
• Two further significant acquisitions: Autoscript prompters and Tomcat
Global staging systems, both performing to plan.
** from continuing operations and before significant items
Commenting on the results, Gareth Rhys Williams, Chief Executive, said:
'The Vitec Group made very good progress in 2006, with strong revenue and profit
growth. We launched exciting new products into growing markets and are seeing
the benefits of our consolidated operational structure.
'2007 will not see any benefit from major events for our broadcast businesses.
However, given the increasing importance of Vitec's photographic and live
entertainment businesses, combined with the contribution from the acquisitions
made in 2006, and further operational improvements within Broadcast Systems, the
Board looks forward to further growth in 2007.'
Enquiries
The Vitec Group plc Gareth Rhys Williams, Group Chief Executive 020 8939 4650
Alastair Hewgill, Group Finance Director
Financial Dynamics Richard Mountain 020 7269 7121
Susanne Walker
This preliminary announcement should be considered to be part of the Directors'
report to be contained in the forthcoming Annual Report and Accounts and as such
has been drawn up and presented in accordance with and in reliance upon
applicable English company law (in particular section 463 of the Companies Act
2006 and section 90A of the Financial Services and Markets Act 2000) and the
liabilities of the directors in connection with that report shall be subject to
the limitations and restrictions provided by such law.
Notes:
1. The Vitec Group supplies a wide range of equipment and services to the
broadcasting, entertainment and photographic industries. Its products are
distributed in nearly 100 countries, either through dealerships or direct
to the end user or corporate customer. Vitec is based on strong, well
known, premium brands that professionals rely on. Vitec is organised in
three divisions: Imaging & Staging (formerly Photographic), Broadcast
Systems and Broadcast Services. More information can be found at:
http://www.vitecgroup.com.
2. As previously stated, whilst Vitec has significant production and sourcing
in US dollars and has hedging arrangements in place, movements in the $/£
and, particularly, $/€ rates can have a significant impact on reported
results. If current exchange rates continue throughout 2007, it is
estimated there will be an adverse impact of some £2.5 million on 2007
operating profit compared to 2006.
3. Current market exchange rates: £1 = $1.95, £1 = €1.49, €1 = $1.31
4. 2006 average exchange rates: £1 = $1.84, £1 = €1.47, €1 = $1.25
5. The Group's AGM will be held on 29 May.
CHAIRMAN & CEO'S REPORT
We are delighted to report another year of strong progress for The Vitec Group
in revenue, profits and earnings per share due to underlying growth in our
markets and continued operational improvements. Our efforts to find attractive
acquisitions were also successful, with four businesses joining the Group during
2006.
Results
2006 revenue grew 14%, to £222.3 million (2005: £194.9 million) of which around
11% was organic, reflecting Vitec's strong positions in markets that are growing
well, and the continued emphasis placed on new product development. Constant
currency organic growth was higher, at 12%, as the lower US dollar reduced
reported figures. While the first half saw particularly good progress, partly
due to the rental contracts for the Winter Olympics, it was pleasing that the
second half also showed significant growth over what had been a very good second
half in 2005.
Imaging & Staging (previously Photographic) grew 24%, of which 18% was organic,
with constant currency organic growth even stronger at 19%. This was driven by a
buoyant market for accessories for professional photographers and
cinematographers, with sales of lighting stands and bags also performing well.
We saw continued benefits from the significant and ongoing growth in sales of
digital SLR cameras to the keen amateur segment, which generates sales of our
accessory products. Our distribution arm, Bogen Imaging, which sells both Group
and other premium third party products, had a good year, and was augmented in
June by bringing our Japanese distribution in-house. The Staging Systems
business continued to expand and in November acquired Tomcat Global, bringing
significant scale and international reach to this part of the company.
Broadcast Systems saw revenues increase at each business unit. The ongoing
investment by broadcasters in High Definition TV is proving of benefit to us.
Following an excellent finish to 2005, overall sales growth in 2006 was 10%, of
which 8% was organic (10% in constant currency), with particularly good results
in Camera Dynamics. Petrol, acquired in January, performed very well during the
year. At the end of October we acquired Autoscript, whose advanced teleprompting
products we had already been distributing to several countries.
Broadcast Services, operating principally in the USA, saw revenue growth in US
dollars of some 1%, but flat revenue on translation to pounds sterling. This
division benefited from a successful set of contracts for the Winter Olympics
and FIFA World Cup.
With the further increase in revenue and continued progress on operational
improvement, Group profit before tax and significant items* increased 31% to
£24.1 million (2005: £18.4 million). In constant currency terms profit before
tax and significant items* grew 35% and, excluding acquisitions, the reported
profit growth was 28% in pounds sterling and 32% in constant currency.
The reported tax rate for the Group fell again by 2% to 40% and as a result
basic earnings per share before significant items* rose to 35.3p (2005: 26.0p),
an improvement of 36%.
After significant items* profit before tax was up 32% to £22.6 million (2005:
£17.1 million), and earnings per share rose to 32.6p (2005: 22.9p before
discontinued operations).
Cash generated from operations of £28.7 million (2005: £29.8 million) remains
strong. While working capital control remains good, 2006 saw increased
expenditure on acquisitions and on capital projects, including the expansion of
Camera Dynamics' Costa Rican facility.
Strategy update and future development
The Group's strategy is summarised in the phrase 'Consolidate - Leverage -
Grow'. After an initial phase, during which multiple locations and smaller
business units were consolidated into a divisional structure to give economies
of scale, the focus shifted to leveraging our skills and exploiting our routes
to market in pursuit of growth. While continuous improvement activities are
ongoing, the emphasis is on generating growth through ongoing research and
development. We continue to review a number of potential acquisition
opportunities, some of which are material and would hope that, as in the recent
past, a number would complete in the coming year.
We believe the consolidation of our individual brands into stronger businesses
provides a sound platform for future growth - each of them has the scale to
develop innovative products and services and to deliver them effectively
worldwide.
We aim to grow ever closer to our end-customer, providing them with better tools
and services to do their jobs, while at the same time looking for complementary
areas into which the Group can expand and utilise its industry-leading
expertise.
Research, development & engineering
An ongoing part of our success is due to continuous innovation by Vitec's staff,
developing both new products and new services.
Within Imaging & Staging and Broadcast Systems the Group spends approximately
4.5% of revenue on new product development, £8.7 million in 2006 (2005: £7.8
million). Vitec's businesses are known for the quality and reliability of their
products and there is an exciting pipeline of new ideas for the future. During
the year our businesses won a number of awards for innovation, a sign that the
Group's products remain very relevant to our customers, and a testament to the
strength of our R&D capability. Around 25% of sales in 2006 (2005: 19%) were
derived from products launched in the last three years.
Within Broadcast Services continued innovation of its video and audio services
is as important. 2006 saw the launch of the 'LTR' programme in the US. Bexel has
traditionally offered rentals - this Long Term Rental programme offers our
customers the advantages of a lease from a bank, but with the benefits of
additional service options from Bexel.
Acquisitions
During the year we made four acquisitions: Petrol broadcast camera bags in
January; Bogen Imaging Japan, a photographic distribution business, trading from
June; Autoscript prompting systems in October; and in November Tomcat Global,
the leading manufacturer of aluminium truss and staging systems, perhaps best
known for their projects for the Rolling Stones and U2 tours. These businesses
are all complementary to the existing activities of the Group and increase the
range of exciting products we can sell to our customers, often through in-house
distribution. We also acquired a minority stake in Media Numerics Ltd, which has
launched a revolutionary digital audio network for use at live events.
Post balance sheet events
There have been no significant post balance sheet events.
2006 dividend
With improved results and positive trends in our markets the Board is proposing
a final dividend of 10.1p per share, resulting in a full year total of 16.5p
(2005:15.5p), an increase of 6.5%. Subject to approval by shareholders, the
final dividend will be paid on 31 May 2007 to shareholders on the register on 4
May 2007.
Using adjusted earnings per share before significant items* the dividend is
covered 2.1 times (2005: 1.7 times), whilst after significant items* it is
covered 2.0 times (2005: 1.5 times).
Board changes
As previously announced, Sir David Bell will step down from the Board following
the AGM in May 2007. David joined the Board as a non-executive director in 1997
and has provided us with ten years of excellent service and wise counsel,
helping us navigate the Group through a period of considerable change.
We are delighted that Maria Richter joined the Board as a non-executive director
on 28 February 2007. Maria's background is in corporate finance in the US and
she has significant experience with deals involving companies, both in the US
and South America, which complements the skills of the Board, and will be of use
as the Group expands.
Our thanks
The continued success of Vitec is due primarily to the dedication and skill of
all of our colleagues throughout the world - the Group is now seeing the fruits
of the efforts they have expended over the past years, for which we thank them.
Outlook for 2007
2007 will not see any benefit from major events for our broadcast businesses.
However, given the increasing importance of Vitec's photographic and live
entertainment businesses, combined with the contribution from the acquisitions
made in 2006, and further operational improvements within Broadcast Systems, the
Board looks forward to further growth in 2007.
*Significant items are those items of financial performance that the directors
consider should be separately disclosed to assist in the understanding of the
underlying trading and financial performance achieved by the Group and in making
projections of future results. These items are quantified and explained in the
Financial Review and in Note 3.
IMAGING & STAGING (FORMERLY PHOTOGRAPHIC) DIVISION
Products for the photographic, video and live event markets
2006 2005
Revenue £94.6m £76.2m
Operating profit* £16.6m £13.6m
Operating margin* 17.5% 17.8%
*Before significant items. Significant items are amortisation of intangible
assets of £0.5 million (2005: £0.2 million) and profit on sale of property of
£nil (2005: £0.3 million)
Overview
The Imaging & Staging division operates in two main markets: manufacturing and
distributing products for the professional and keen amateur photographer and
videographer, such as camera supports and bags, and manufacturing lighting and
staging systems for the live entertainment market. Lighting supports ('grip')
are manufactured for both these markets and for cinematographers. It is
organised in three units: Imaging Accessories, Imaging Distribution, and Staging
Systems.
Strategy
The division's operations are highly interrelated - strengths in photographic
accessories and in their distribution are mutually supportive. A focus on
constant innovation in product development as well as the control of their
distribution in the key markets of the world, which allows us to work more
closely with the end-customer, is proving to be a winning combination.
Innovation is as important in Staging Systems, where the businesses erecting the
stage or lighting systems are looking for ever lighter, easier to use and more
elegant solutions to make their events look as good as possible.
2006 performance
2006 was another successful year for this division with revenue of £94.6 million
(2005: £76.2 million) up 24.1% and operating profit before significant items*
rising to £16.6 million (2005: £13.6 million), up 22.1%. Constant currency sales
and profit growth were £19.1 million and £3.5 million respectively. As in 2005,
each part of the business saw revenue growth.
Imaging Accessories continued to benefit from the continued uptake of digital
SLR cameras by keen amateur photographers, who also buy the Group's accessory
products. 2006 also saw a resurgence of sales of lighting stands to professional
photographers. The range of camera supports and bags sold under the National
Geographic brand (under licence from the National Geographic Society) has been
well accepted, as has the new Crosspole lighting suspension system, the new 501
HD video head and the new 190 series professional tripod. Continuous improvement
activities during the year included the relocation of lighting stand
manufacture, part of which was outsourced to China with the rest being
consolidated into the existing site at Feltre in Italy.
Imaging Distribution also had a good year - those customers who buy camera
supports and bags that are manufactured by the Group also buy other professional
products that we distribute to the retailer through Bogen Imaging, our in-house
distributor. Bogen is one of the largest photographic and video accessory
distributors operating internationally and has strengthened its position through
the creation of Bogen Imaging KK, which is based in Tokyo.
Litec and IFF, brought together in 2005, focus on the market for lighting
trusses and control systems. That area grew organically but the biggest step
forward was the acquisition of Tomcat Global, the worldwide leader in temporary
staging for live events, to create a new unit, Staging Systems. We believe the
combination of Litec's standard trusses and Tomcat's custom designs and
reputation for innovation will be very positive.
As a result of this acquisition, reflecting the increased importance of live
events in this division and that we now sell to a wider customer base than
purely 'photographers', we have renamed the division 'Imaging & Staging'.
BROADCAST SYSTEMS DIVISION
Products and systems primarily for broadcast applications
2006 2005
Revenue £100.5m £91.5m
Operating profit* £6.9m £5.2m
Operating margin* 6.9% 5.7%
*Before significant items. Significant items are restructuring costs of £1.5
million (2005: £0.9 million), amortisation of intangible assets of £0.1 million
(2005: £nil) and profit on sale of property of £0.4 million (2005: £nil).
Overview
The Broadcast Systems division provides equipment principally for professionals
engaged in producing live events or video content, frequently for subsequent
broadcast. The business units, Camera Dynamics, Communications and Mobile Power
sell their products worldwide, either direct to the end-customer or through a
network of professional dealers. The division's brands are frequently the
acknowledged leaders in their fields.
Strategy
The broadcast market has changed considerably in recent years with a dramatic
decline post-9/11. In the production area the market has recently been
invigorated by the move to make programmes in 'High Definition' (HD). This
involves the upgrading of cameras and the associated ancillary equipment, much
of which is provided by Vitec Group companies. We have responded to the changed
needs of the marketplace by managing the brands in groupings of similar
businesses, enabling us to achieve economies of scale in manufacturing and
distribution and to develop exciting new product ranges.
2006 performance
2006 saw a further significant improvement in the underlying result for this
division, with revenue of £100.5 million (2005: £91.5 million), up 9.8%, and
operating profit before significant items* rising to £6.9 million (2005: £5.2
million), up 32.7%. After a very strong first half, all business units showed a
year-on-year increase in revenue.
Volumes in Camera Dynamics continued strongly as we benefited from our
customers' increased expenditure on production equipment. Revenue growth was
particularly good in the US, Middle East and Russia and we have seen further
significant interest in our robotic camera control products, particularly
following the launch of the new Fusion system. During the year the acquisition
and integration of the Petrol bags business was completed, and in November we
were delighted to acquire Autoscript, the leading manufacturer and provider of
prompting systems and services, which are sold to customers Vitec knows well.
Like our existing businesses, Autoscript has a history of product innovation,
and won several awards during the year. During 2006 we expanded the assembly
facility in Costa Rica to include the machining of key components; we believe
this will both reduce costs and ease the introduction of new products.
In Communications, the market remained the toughest area for this division.
Clear-Com is the brand of choice for many of the outside broadcast vans being
built for the Beijing Olympics, and Clear-Com systems were used successfully at
the Asian Games, seen by many as a test for Beijing. During the year
considerable effort was spent updating the product range to comply with the new
EU lead-free regulations, which have also generated issues for many of our
electronics suppliers. With this now done, many new products will be launched in
early 2007 which will provide for improved networking, user flexibility and
ergonomics. The margins in this unit were unsatisfactory in 2006 and we expect
them to improve in 2007; some local management has been changed and we will
benefit from the outsourcing of some production to the Far East.
The Mobile Power business had a good year, one of record sales (in US dollars,
where the business is based). The Elipz system, consisting of camera battery,
on-board light, innovative grip and charger has been well received. It takes the
company's products into a new segment, that of the smaller, handheld cameras
often used by the professional news gatherers who have long been used to the
quality and service Anton/Bauer provides.
BROADCAST SERVICES DIVISION
Rental and technical support services, mainly for the broadcast market
2006 2005
Revenue £27.2m £27.2m
Operating profit* £1.7m £1.2m
Operating margin* 6.3% 4.4%
*Before significant items. Significant items are £nil (2005: £nil)
Overview
The Broadcast Services division provides rental equipment and technical support
for demanding outside broadcast events, mostly in the USA, from a network of ten
depots. Bexel people have a reputation for solving the most complex problems
that arise when these events are broadcast. The division also acts as an
integrator for sophisticated audio equipment and resells used equipment into the
aftermarket.
Strategy
Customers choose ASG and Bexel because of their reputation for designing
creative solutions, providing service excellence and because of their nationwide
footprint. With the most relevant equipment and the best technical back-up,
Bexel will continue to target contracts from customers looking for more than
simple equipment hire.
2006 performance
Revenue in 2006 of £27.2 million (2005: £27.2 million) was boosted by successful
contracts for the Winter Olympics and FIFA World Cup in the first half. In
constant currency revenue was up 1.1%, but was unchanged when translated into
pounds sterling. Operating profit before significant items* at £1.7 million
(2005: £1.2 million) was up 41.7% due to the Winter Olympics contract, better
equipment utilisation and continued good cost control.
With HD technology becoming widely accepted, the capital spending on new
equipment which resulted in the successful Winter Olympics contracts has also
led to significant customer commitments for the summer games in Beijing. In turn
this will enable Bexel to explore other contracts using similar equipment that
would not otherwise have been viable.
With the core US market relatively flat, the emphasis has been on finding
innovative new service niches to exploit. In the second half we were delighted
to announce that a joint marketing effort to promote longer-term contracts has
been launched in conjunction with the commercial arm of a Cleveland-based bank,
National City Commercial Credit Corporation (NC-4). They normally arrange
financing leases for their broadcast clients; the 'LTR' programme of long-term
rental will prove useful for those clients who are looking for more flexible
arrangements to acquire assets that need upgrading or other technical services
during the life of the lease. NC4 will provide the lease, with Bexel providing
the service and a route to market for the equipment at the end of the lease. The
first of these deals has been entered into in 2007 and we look forward to
finding more.
During the year it was determined that the Irvine facility was no longer viable
and it was relocated to the growing rental market in Las Vegas in mid-year. That
office has just supported the very successful NBA All-Star games.
FINANCIAL REVIEW
Revenue
Revenue increased by £27.4 million to £222.3 million, or 14.1% in the year. Of
this, £23.3 million (12.1%) was like-for-like, £2.1 million (1.2%) was due to
adverse foreign exchange and £6.2 million (3.2%) due to acquisitions (including
£1.2 million due to the Kata acquisition partway through 2005). Revenue growth
was particularly strong in the UK and the rest of Europe.
Operating profit
The table below sets out an analysis of the causes of movements in operating
profit before significant items* between 2005 and 2006 and helps to explain the
underlying changes in the business during the year. The variances are based on
management's best estimates and are not a statutory presentation.
Operating profit before significant items*
2005-06 Variance Analysis (£m)
2005 Operating profit* 20.0
Gross margin effects:
- Volume and mix 9.9
- Sales price less cost inflation 2.2
Operating expenses (6.7)
5.4
Acquisitions 0.5
Foreign exchange effects:
- Translation (0.2)
- Transaction after hedging (0.5)
(0.7)
2006 Operating profit* 25.2
Operating profit before significant items* was £25.2 million, £5.2 million or
26.0% greater than 2005. The Group's operating profit* margin increased from
10.3% to 11.3%. Despite hedging its foreign exchange transaction exposure, the
Group suffered from the weaker US dollar in the second half of the year. Before
adverse foreign currency effects of £0.7 million, the increase in profit was
£5.9 million or 29.8%.
Restructuring costs of £1.5 million (2005: £0.9 million) are included in
significant items*. This is the last part of the previously-announced
restructuring plans within the Broadcast Systems division. No further costs will
be charged and the cumulative total cost is £4.5 million, within the £4.0-5.0
million originally forecast. There was an operating profit on the sale of a
building of £0.4 million (2005: £0.3 million)
Amortisation of acquired intangibles increased to £0.6 million (2005: £0.2
million) due to the recent acquisitions and has been included in significant
items*.
Net financial expense
Net financial expense before significant items* totalled £1.1 million (2005:
£1.6 million) and reduced principally because of an increase in the IAS 19
pension credit to £0.5 million (2005: £0.2 million). Finance expenses included
in significant items* consisted of a £0.2 million gain (2005: £0.2 million loss)
due to currency movements on loans not accounted for as net investment hedges
and £nil (2005: £0.3 million loss) arising from a reduction in the value of
foreign exchange options due to foreign exchange market volatility.
Taxation
The effective taxation rate on operating profit after net finance expense but
before significant items* was 40% (2005: 42%). The reduction in the tax rate is
due principally to progress made in rationalising the Group's legal structure.
The Group's tax charge is relatively high because the significant majority of
its profits arise in overseas high tax jurisdictions. We are targeting a rate of
38% in 2007.
Acquisitions
Acquisitions totalled £15.8 million (2005: £4.6 million). The Group completed
four acquisitions in 2006: Petrol, a manufacturer of high-end broadcast camera
bags; ALC Broadcast Ltd (Autoscript), a leading provider of prompting hardware
and software to the broadcast industry; Tomcat Global Corporation, a leading US
manufacturer of aluminium trusses for live events; and Bogen Imaging KK, which
acquired the businesses of Imaging's two Japanese distributors.
Business Division Acquisition Acquisition Maximum Maximum Earnout
date consideration(1) potential potential period
£m earnout £m consideration £m
2006 acquisitions
Petrol Broadcast 16 Jan 2006 1.8 1.8 3.6 2006
Systems
Bogen Imaging Imaging & 1 Jun 2006 0.9 - 0.9 -
KK Staging
ALC Broadcast Broadcast 31 Oct 2006 5.0 2.0 7.0 2007-08
Ltd Systems
Tomcat Global Imaging & 7 Nov 2006 7.1 3.6 10.7 2007-08
Corp Staging
Earnout payments for previous
acquisitions
Kata (re 2005) Imaging & 31 May 2005 1.0 n/a n/a 2005-07
Staging
Total acquisition cost in 2006 15.8 n/a n/a
(1)Including acquisition expenses and net cash acquired
In addition, in May a minority stake was acquired in Media Numerics Ltd, a
company that has developed a digital network product targeted at the live
entertainment industry. The planned investment is £1.0 million, with £0.7
million invested in 2006.
Cash flow and net debt
£m 2002 2003 2004 2005 2006
Net Debt 11.9 10.4 11.3 5.4 18.9
Free Cash Flow(2) 21.1 2.9 11.1 17.3 10.5
(2)Free cash flow is the cash generated from operations less interest, tax and
capital expenditure on property, plant & equipment and capitalised IT costs.
Net debt increased to £18.9 million (2005: £5.4 million) mainly because of the
two acquisitions we made towards the end of the year.
Despite higher profits, free cash flow reduced to £10.5 million (2005: £17.3
million) as a result of higher capital expenditure, increased working capital
and higher tax payments.
Cash generated from operations was £28.7 million (2005: £29.8 million). Capital
expenditure and financial investments totalled £13.9 million (2005: £11.7
million), of which £4.1 million (2005: £5.4 million) related to rental assets,
partly financed by the proceeds from rental asset disposals of £1.4 million
(2005: £1.2 million).
Whilst working capital increased, as a percentage of revenue (before
acquisitions) it was 22.0% (2005: 23.1%) at the year end and averaged 23.1% in
2006 (2005: 25.9%). Inventory increased by £9.8 million to £41.1 million,
reflecting higher revenue, the new acquisitions and deliberately increased
inventory levels in Imaging and Camera Dynamics in order to reduce delivery lead
times. As a result, inventory days increased to 116 (2005: 99 days). Trade
receivables were only slightly higher than 2005 at £31.2 million (2005: £30.5
million), despite higher revenue, which lowered debtor days to 51 (2005: 57
days).
Tax paid in 2006 of £5.5 million was significantly greater than 2005 (£1.6
million). 2005 benefited from Italian tax credits arising from the sale of the
ALU business in 2003, as well as a £0.7 million UK tax rebate, whereas 2006
payments returned to more normal levels.
Treasury
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.
The Group operates strict controls over all treasury transactions involving dual
signatures and appropriate authorisation limits.
As in previous years, a portion of the transactions of subsidiaries in foreign
currencies is hedged 12 months forward, as set out below. Some cover was also
taken out for the first quarter of 2008.
Currency millions December 2006 Average rate December 2005 Average rate
US dollars sold for Euros
Forward contracts $9.6 1.23 $22.9 1.22
Options(3) $23.6 1.25 $17.7 1.24
US dollars sold for Sterling
Forward contracts $17.3 1.85 $15.5 1.78
(3)Includes cylinder options, where the mid-point of range is taken
The Group does not hedge its foreign currency profits. A proportion of the
Group's foreign currency net assets are hedged using normal Group borrowings and
forward contracts.
Financing activities
The Group's principal financing facility is a five-year £100 million committed
multicurrency revolving loan agreement involving five banks, expiring on 24
January 2010. At the end of December, £26.3 million (2005: £17.2 million) of the
facility was utilised.
The average cost of borrowing for the year was 5.4% (2005: 4.6%) reflecting the
worldwide upward trend in interest rates. Net interest cost (consisting of net
interest payable and commitment fees) was £1.4 million (2005: £1.3 million). Net
interest cover (using operating profit before significant items*) remained high
at 18 times (2005: 15 times).
UK pensions
At the end of 2003 the Group closed both of its UK defined benefit schemes to
new members. Since 2004 a Group personal pension plan has been made available
for new employees with Standard Life. In November 2005 the defined benefit
schemes were merged. As at 31 December 2006 the number of active members in the
merged scheme had reduced by 7% to 192 (2005: 206). Total scheme members are 662
(2005: 662).
A triennial actuarial valuation was undertaken as at 5 April 2004. On the basis
of the assumptions adopted, the value of the schemes' assets (£28.3 million) 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, employers' and employees' contributions were increased. In November
2005 the Group contributed £2.1 million to fund the deficit highlighted by the
2004 triennial valuation and, also, to facilitate the merger of the two schemes.
Following the funding actions set out above, the Group's UK defined benefit
pension liabilities under IAS 19 (amended) as at 31 December 2006 were estimated
by the Group's actuaries to be £43.5 million (2005: £42.0 million) and the
deficit £1.0 million (2005: £3.1 million). The deficit has reduced principally
because of an increase in the corporate bond interest rate used to calculate the
present value of future liabilities, partially offset by an increase in
liabilities arising from an assumption of greater longevity for scheme members.
The principal assumptions used for recent valuations are set out below.
2006 2005 2004
Inflation rate 3.0% 2.8% 2.8%
Expected rate of increase in:
- Salaries 5.0% 4.8% 4.8%
- Pensions and deferred pensions 3.0% 2.8% 2.8%
Discount rate 5.2% 4.8% 5.3%
Long term rates of return
- Equities 7.8% 7.8% 7.9%
- Bonds 4.7% 4.3% 4.8%
- Property 6.2% 6.3% 6.8%
Longevity
- Pensioners currently aged 65 86/89(4) 84/87(4) 84/87 (4)
- Non-pensioners currently aged 45 88/91(4) 86/89(4) 86/89(4)
(4)male/female
PRINCIPAL RISKS AND UNCERTAINTIES
US market
Forty eight per cent of the Group's 2006 revenue was from the Americas,
principally the USA. This percentage has reduced in recent years, mainly due to
the weakness of the US dollar, but the Group remains very susceptible to any
major deterioration in demand for its products and services from US customers.
It is difficult to mitigate this risk but the Group is seeking to reduce its
dependence on the US by actively widening its sales and distribution activities,
particularly into Asia.
Foreign exchange
The great majority of the Group's profits is earned in overseas currencies and
is therefore subject to translation risk if sterling strengthens. To mitigate
this, a proportion of the Group's foreign currency net assets are hedged using
normal Group borrowings and forward contracts.
Also, many of the Group's businesses sell worldwide from various countries of
manufacture, so the Group is subject to transaction risk, particularly that of a
weaker US dollar. The Group partially hedges its major foreign exchange receipts
by selling currency 12-18 months forward on a rolling basis. In addition the
Group seeks to outsource parts, where appropriate, to low-cost countries, which
are frequently dollar-denominated.
Broadcast market
The Group's two broadcast divisions are at risk from a reduction in the capital
expenditure requirements of its broadcast customers and, in the US, their rental
requirements. This dependence is changing as broadcasting moves from TV to
delivery by other modes such as internet and mobile services. To mitigate this,
the Group markets its products and services to all of these producers of
broadcast video material, as well as to the religious, corporate and government
sectors.
Low-cost competition
The Group is at risk from low-cost competitors who may sell similar products at
lower prices, particularly for higher volume items such as the simpler
photographic tripods. While the Group also sources those cheaper products from
lower-cost countries, it combats this threat by patenting its technologies
wherever possible and taking action against any infringement, continuously
innovating its products and employing its significant marketing and distribution
capabilities.
Cautionary statement
This announcement contains forward looking statements that are subject to risk
factors associated with, amongst other things, the economic and business
circumstances occurring from time to time in the countries and sectors in which
the Group operates. It is believed that the expectations reflected in these
statements are reasonable but they may be affected by a wide range of variables
which could cause actual results to differ materially from those currently
anticipated.
Consolidated income statement
For the year ended 31 December 2006
2006 2005
Significant items (1) Significant items (1)
Before Total Before Total
significant significant
items items
Amortisation Restructuring Amortisation Restructuring
of acquired costs and of costs and
intangibles property acquired property
and other profits intangibles profits
financial and other
expense financial
items expense
items
£m £m £m £m £m £m £m £m
Revenue
Existing operations 217.3 217.3 193.2 193.2
Acquisitions 5.0 5.0 1.7 1.7
Continuing operations 222.3 222.3 194.9 194.9
Cost of sales (129.1) (129.1) (115.6) (115.6)
Gross profit 93.2 93.2 79.3 79.3
Other operating income - - 0.4 0.4 - - 0.3 0.3
Operating expenses (68.0) (0.6) (1.5) (70.1) (59.3) (0.2) (0.9) (60.4)
Operating profit
Existing operations 25.1 (0.3) (1.1) 23.7 19.8 - (0.6) 19.2
Acquisitions 0.1 (0.3) - (0.2) 0.2 (0.2) - -
Continuing operations 25.2 (0.6) (1.1) 23.5 20.0 (0.2) (0.6) 19.2
Interest payable on bank (1.5) (1.5) (1.5) (1.5)
borrowings
Interest income 0.1 0.1 0.2 0.2
Pension scheme:
Interest charge (2.1) (2.1) (2.0) (2.0)
Expected return on assets 2.6 2.6 2.2 2.2
Other financial income/ (0.2) 0.2 - (0.5) (0.5) (1.0)
(expense)
Net financial expense (1.1) 0.2 (0.9) (1.6) (0.5) (2.1)
Profit before tax 24.1 (0.4) (1.1) 22.6 18.4 (0.7) (0.6) 17.1
Taxation (9.6) 0.4 (9.2) (7.7) - - (7.7)
Profit from continuing 14.5 (0.4) (0.7) 13.4 10.7 (0.7) (0.6) 9.4
operations
Profit from discontinued - - 0.4 0.4
operation
Profit for the year 14.5 (0.4) (0.7) 13.4 11.1 (0.7) (0.6) 9.8
(attributable to Equity
Shareholders)
Earnings per share
Continuing operations:
Basic earnings per share 32.6p 22.9p
Diluted earnings per 32.2p 22.7p
share
Total :
Basic earnings per share 32.6p 23.9p
Diluted earnings per 32.2p 23.7p
share
Dividends per ordinary
share
Prior year final paid 9.4p £3.9m
Current year interim paid 6.4p £2.6m
Current year final proposed 10.1p £4.2m
(1) See note 3
Consolidated statement of recognised income and expense
For the year ended 31 December 2006
2006 2005
£m £m
Actuarial gain on pension obligations 2.2 0.5
Currency translation differences on foreign net investments (7.0) 2.4
Net gain/(loss) on hedge of net investment in foreign subsidiaries 1.3 (0.2)
Cash flow hedging reserve:
Amounts released to income statement 0.6 (0.8)
Effective portion of changes in fair value 1.4 (0.7)
Net (expense)/income recognised directly in equity (1.5) 1.2
Profit for the year 13.4 9.8
Total recognised income for the year 11.9 11.0
Consolidated Balance Sheet
As at 31 December 2006
2006 2005
£m £m
Assets
Non-current assets
Property, plant and equipment 35.1 33.6
Intangible assets 34.1 19.9
Investments 0.7 -
Deferred tax assets 4.7 5.8
74.6 59.3
Current assets
Inventories 41.1 31.3
Trade and other receivables 38.6 37.0
Derivative financial instruments 2.3 0.2
Current tax assets - 0.9
Cash and cash equivalents 9.4 12.7
91.4 82.1
Total assets 166.0 141.4
Liabilities
Current liabilities
Bank overdrafts 1.9 0.9
Bank loans 0.1 -
Trade and other payables 37.1 31.5
Derivative financial instruments - 0.9
Current tax liabilities 9.9 7.6
Provisions 5.0 1.2
54.0 42.1
Non-current liabilities
Bank loans 26.3 17.2
Other payables 0.2 0.2
Post-employment obligations 5.0 7.5
Provisions 3.0 2.7
Deferred tax liabilities 0.7 1.1
35.2 28.7
Total liabilities 89.2 70.8
Net assets 76.8 70.6
Equity
Share capital 8.2 8.2
Share premium 3.2 2.7
Translation reserve (7.5) (1.8)
Other reserves 2.9 0.9
Retained earnings 70.0 60.6
Total equity 76.8 70.6
Consolidated cash flow statement
For the year ended 31 December 2006
2006 2005
£m £m
Cash flows from operating activities:
Profit for the year 13.4 9.8
Adjustments for:
Taxation 9.2 7.7
Depreciation 8.9 8.9
Amortisation of intangibles 1.7 1.2
Net gain on disposal of property, plant and equipment (1.5) (1.6)
Fair value losses on derivative financial instruments (0.2) (0.4)
Cost of equity-settled employee share schemes 1.2 0.3
Financial income (2.7) (2.4)
Financial expense 3.6 4.5
Operating profit before changes in working capital and provisions: 33.6 28.0
(Increase)/decrease in inventories (9.2) 3.0
Increase in receivables (2.1) (0.8)
Increase in payables 4.4 3.1
Increase/(decrease) in provisions 2.1 (3.4)
Adjustments for foreign exchange losses (0.1) (0.1)
Cash generated from operations: 28.7 29.8
Interest paid (1.7) (1.8)
Tax paid (5.5) (1.6)
Net cash flow from operating activities 21.5 26.4
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 2.0 2.1
Purchase of property, plant and equipment (12.0) (11.1)
Software costs capitalised as intangible assets (1.2) (0.6)
Interest received 0.2 0.5
Acquisition of investment (0.7) -
Acquisition of subsidiaries, net of cash acquired (15.8) (4.6)
Net cash flow from investing activities (27.5) (13.7)
Cash flows from financing activities:
Proceeds from the issue of shares 0.5 -
Purchase of own shares (0.9) -
Borrowing/(repayment) of bank loans 9.1 (8.2)
Dividends paid (6.5) (6.1)
Net cash flow from financing activities 2.2 (14.3)
Decrease in cash and cash equivalents (3.8) (1.6)
Cash and cash equivalents at 1 January 11.8 13.4
Exchange rate movements(1) (0.5) -
Cash and cash equivalents at 31 December 7.5 11.8
(1) Exchange rate movements result from the adjustment of opening balances
and cash flows in the year to closing exchange rates.
Segment reporting
Primary format - by business segments
Imaging & Broadcast Broadcast Corporate and Consolidated
Staging Systems Services unallocated
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m £m £m £m £m
Revenue from external
customers :
Sales 94.6 76.2 100.5 91.5 4.0 7.8 - - 199.1 175.5
Services - - - - 23.2 19.4 - - 23.2 19.4
Total revenue from external 94.6 76.2 100.5 91.5 27.2 27.2 - - 222.3 194.9
customers
Inter-segment revenue (1) 1.1 1.3 1.7 1.2 - - (2.8) (2.5) - -
Total revenue 95.7 77.5 102.2 92.7 27.2 27.2 (2.8) (2.5) 222.3 194.9
Operating profit before 16.6 13.6 6.9 5.2 1.7 1.2 - - 25.2 20.0
significant items
Amortisation of acquired (0.5) (0.2) (0.1) - - - - - (0.6) (0.2)
intangibles
Profit on the sale of - 0.3 0.4 - - - - - 0.4 0.3
property
Restructuring costs - (1.5) (0.9) - - - (1.5) (0.9)
Segment result 16.1 13.7 5.7 4.3 1.7 1.2 - - 23.5 19.2
Net financial expense (0.9) (2.1)
Taxation (9.2) (7.7)
Profit for the period
Continuing operations 13.4 9.4
Discontinued operation(2) - 0.4
13.4 9.8
Segment assets 67.6 48.6 63.3 52.1 18.1 20.3 2.9 1.0 151.9 122.0
Unallocated assets
Cash and cash 9.4 12.7 9.4 12.7
equivalents
Current tax assets - 0.9 - 0.9
Deferred tax assets 4.7 5.8 4.7 5.8
Total assets 166.0 141.4
Segment liabilities 24.2 19.4 19.2 16.4 3.7 4.6 3.2 3.6 50.3 44.0
Unallocated assets
Bank overdrafts 1.9 0.9 1.9 0.9
Bank loans 26.4 17.2 26.4 17.2
Current tax liabilities 9.9 7.6 9.9 7.6
Deferred tax liabilities 0.7 1.1 0.7 1.1
Total liabilities 89.2 70.8
Cash flows from operating 13.9 17.9 6.3 9.2 3.8 6.6 (2.5) (7.3) 21.5 26.4
activities
Cash flows from investing (6.1) (7.6) (4.0) (2.2) (2.6) (4.0) (14.8) 0.1 (27.5) (13.7)
activities
Cash flows from financing (0.7) - - - - - 2.9 (14.3) 2.2 (14.3)
activities
Capital expenditure
(including assets acquired
within acquisitions)
Property, plant and equipment 5.8 3.3 3.0 2.4 4.0 5.4 0.1 0.1 12.9 11.2
Intangible assets 4.2 2.0 2.2 - 0.1 - - - 6.5 2.0
(1) Inter-segment pricing is determined on an arm's length basis.
(2) In 2005, income from discontinued operation of £0.4 million arose on the
release of a previous provision of £0.4 million for the upgrade of retail
units relating to the Retail Display segment that was divested in 2003.
Segment reporting (continued)
Secondary format - by geographical segments
United The rest of The The rest of the Corporate and Consolidated
Kingdom Europe Americas World unallocated
2006 2005 2006 2005 2006 2005 2006 £m 2005 2006 £m 2005 2006 £m 2005
£m £m £m £m £m £m £m £m £m
Revenue from
external customers:
By location of 13.1 9.7 69.6 56.9 107.0 98.1 32.6 30.2 - - 222.3 194.9
customer
Segment assets 30.6 23.5 45.8 40.4 55.9 47.2 15.1 9.9 4.5 1.0 151.9 122.0
Unallocated assets
Cash and cash 9.4 12.7 9.4 12.7
equivalents
Current tax assets - 0.9 - 0.9
Deferred tax assets 4.7 5.8 4.7 5.8
Total assets 166.0 141.4
Cash flows from 2.3 1.5 15.3 17.3 7.6 14.6 (1.2) 0.3 (2.5) (7.3) 21.5 26.4
operating activities
Cash flows from 0.1 (1.6) (4.9) (3.2) (3.7) (4.3) (4.2) (4.7) (14.8) 0.1 (27.5) (13.7)
investing activities
Cash flows from (0.2) - - - (0.5) - - - 2.9 (14.3) 2.2 (14.3)
financing activities
Capital expenditure
(including assets
acquired within
acquisitions)
Property, plant and 2.9 1.7 4.8 3.3 4.8 5.8 0.3 0.3 0.1 0.1 12.9 11.2
equipment
Intangible assets 2.0 - 0.4 0.5 3.0 0.1 1.1 1.4 - - 6.5 2.0
1. Basis of Preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) adopted for use in the
EU in accordance with EU law.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2006 or 2005. Statutory
accounts for 2005 have been delivered to the registrar of companies, and
those for 2006 will be delivered in due course. The auditors have reported
on those accounts; their reports were (i) unqualified, (ii) did not include
references to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports and (iii) did not contain
statements under section 237 (2) or (3) of the Companies Act 1985
2. Basis of Segmentation
Segmental data in this statement is analysed on the basis of the divisional
management structure (Imaging & Staging, Broadcast Systems, Broadcast
Services) that the Group operates under.
3. Significant items
Significant items are those items of financial performance that the
directors consider should be separately disclosed to assist in the
understanding of the underlying trading and financial performance achieved
by the Group and in making projections of future results.
Amounts taken account of relating to operating items include the costs of
major restructuring programmes, the amortization of acquired intangibles
and profit on disposal of property.
The Group uses options as part of its hedging of future cash flows. As such
options are held to maturity, the ultimate net amount charged to the income
statement in respect of any one option will always equate to the initial
premium paid for that option. However, as a result of the time value of
such options being marked-to-market at each balance sheet date, volatile
income and expenses can be introduced between periods and such amounts are
therefore identified as significant other financial expense.
Currency translation differences arising on long-term intra-group funding
loans that are similar in nature to equity are charged/credited to
reserves. Amounts relating to the currency translation differences arising
on certain other intra-group funding balances that do not meet this strict
criteria but that are very similar in nature are included in significant
items within other financial expense.
Significant items comprise restructuring costs of £1.5 million (2005: £0.9
million), profit on disposal of property of £0.4 million (2005: £0.3
million), amortization of acquired intangibles of £0.6 million (2005: £0.2
million), volatile premium on option of £nil (2005: £0.3 million) and
currency translation gains on intra-group funding balances of £0.2 million
(2005: £0.2 million loss)
4. Earnings per share
Basic earnings per share of 32.6 pence (2005: 23.9 pence) is based on
profit for the year attributable to equity shareholders of £13.4 million
(2005: £9.8 million) and the weighted average number of shares of
41,107,593 (2005: 41,084,054). Basic earnings per share relating only to
continuing operations of 32.6 pence (2005: 22.9 pence) is based on profit
for the year attributable to equity shareholders but before profit from
discontinued operations. Basic earnings per share before significant items
and discontinued operations of 35.3 pence (2005: 26.0 pence) is based on
profit for the year attributable to equity shareholders but before the
impact of significant items and before profit from discontinued operations.
5. Dividend
The directors have declared a final dividend of 10.1 pence per share, which
will absorb £4.2 million (2005: 9.4 pence absorbing £3.9 million). The
dividend will be paid on 31 May 2007 to shareholders on the register at the
close of business on 4 May 2007.
6. Key Exchange Rates
Weighted average Year end
2006 2005 2006 2005
EUR / USD 1.25 1.24 1.32 1.18
GBP / USD 1.84 1.82 1.96 1.72
GBP / EUR 1.47 1.46 1.48 1.46
This information is provided by RNS
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