Half Yearly Report

RNS Number : 2452V

The Vitec Group PLC

06 August 2015

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

6 August 2015

The Vitec Group plc

Half Year Results to 30 June 2015

Investing for growth in a focused Broadcast & Photographic business

The Vitec Group plc ("Vitec" or "the Group"), the international provider of products and services for the Broadcast and Photographic markets, announces its results for the half year ended 30 June 2015.

Results	H1 2015	H1 2014	% Change	% Change
				at constant exchange rates
Revenue	£155.9m	£152.9m	+2.0%	+0.3%
Operating profit*	£16.4m	£19.2m	-14.6%	-6.9%
Profit before tax*	£14.6m	£17.5m	-16.6%	-9.1%
Adjusted earnings per share*	23.0p	27.4p	-16.1%
Operating profit	£13.8m	£16.6m
Profit before tax	£12.0m	£14.9m
Basic earnings per share	18.9p	23.1p
Free cash flow+ Net debt	£3.3m £81.5m	£3.8m £68.0m
Interim dividend per share	9.5p	9.3p

Key Points

●	First half results in line with our expectations
●	Benefits from new products, acquisitions and IMT disposal offset by anticipated headwind from FX and non-repeat of Sochi Winter Olympics and FIFA World Cup
●	Growth in revenue and operating profit* at constant exchange rates excluding prior year impact of large events
●	Broadcast Division performing satisfactorily in variable market conditions. Sales of higher technology products growing well and offsetting lower large camera supports sales
●	Photographic Division outperforming a challenging market which is showing signs of stabilisation
●	Net debt reflects Paralinx acquisition and Teradek earnout payment

* Before restructuring costs and charges associated with acquired businesses. Restructuring costs in H1 2015 were £nil (H1 2014: £0.9 million) and charges associated with acquired businesses were £2.6 million (H1 2014: £1.7 million). The charges associated with acquired businesses are described in Note 1 below.

+ Free cash flow: cash generated from operations in the period after net capital expenditure, net interest and tax paid.

Commenting on the results, Stephen Bird, Group Chief Executive, said:

"As expected, our first half results reflect investments in future sales growth, the non-repeat of the 2014 Sochi Winter Olympics and FIFA World Cup and an anticipated negative impact from foreign exchange. There was growth in revenue and operating profit* over the prior period excluding these items.

We are pleased to have grown sales despite challenging markets by investing additional resources in driving new product sales in line with our strategy. Good progress continues to be made across the Group on new product development.

The Broadcast Division performed satisfactorily in variable market conditions. Good sales performances from our higher technology product businesses including wireless products partially offset lower sales of large camera supports and the non-repeat of the Olympics and World Cup. In order to maximise the opportunity in these changing market conditions, the Group is investing in its higher technology products while taking action to streamline certain activities with lower growth prospects. We continued to grow our offering of wireless products to independent content creators with the acquisition of Paralinx, which has been fully integrated into the Teradek business.

The Photographic Division is benefitting from the continued success of launching new products and delivered broadly similar sales to the comparative period in the first half of the year. The business is continuing to outperform a challenging market which is showing signs of stabilisation.

Although we see some signs of stabilisation, our markets are still uncertain. The Board is focused on delivering an acceptable performance for FY 2015 in this challenging environment. Looking forward to 2016, we should benefit from further growth in new product sales and major sporting events."

Enquiries:

The Vitec Group plc	Telephone: [phone]
Stephen Bird, Group Chief Executive
Paul Hayes, Group Finance Director
FTI Consulting
Nick Hasell / Susanne Yule	Telephone: [phone]

Notes

1.  Charges associated with acquired businesses were £2.6 million (H1 2014: £1.7 million). These consisted of £2.5 million for the amortisation of acquired intangible assets (H1 2014: £1.5 million) and £0.1 million of transaction costs relating to acquisitions (H1 2014: £0.2 million).

2.  This statement is based on information sourced from management estimates.

3.  Current market exchange rates as at 4 August 2015: £1 = $1.56, £1 = €1.42, €1 = $1.10, £1 = Yen193.

4.  H1 2015 average exchange rates: £1 = $1.53, £1 = €1.37, €1 = $1.12, £1 = Yen183.

5.  H1 2014 average exchange rates: £1 = $1.67, £1 = €1.22, €1 = $1.37, £1 = Yen171.

Vitec is a global provider of premium branded products and services to the Broadcast and Photographic markets. Vitec is listed on the London Stock Exchange with 2014 revenue of £309.6 million.

The Group is organised in two Divisions:

The Broadcast Division designs, manufactures and distributes premium branded products for broadcasting, film and video production for broadcasters and independent content creators. It also provides premium services including equipment rental and technical solutions to TV production teams and film crews.

The Photographic Division designs, manufactures and distributes premium branded equipment and provides dedicated solutions to professional and non-professional image takers.

More information can be found at: www.vitecgroup.com.

Vitec will present its results to analysts at 8.30 am on Thursday, 6 August 2015.  An audio recording of the presentation, along with the presentation slides, will be available on our website after the meeting. Users can pre-register to access the recording and slides using the following link: www.vitecgroup.com/half_year_results_2015

Forward-looking statements

This announcement contains forward-looking statements with respect to the financial condition, performance, position, strategy, results and plans of The Vitec Group plc (the "Group" or the "Company") based on Management's current expectations or beliefs as well as assumptions about future events. These forward-looking statements are not guarantees of future performance. Undue reliance should not be placed on forward-looking statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. The Company undertakes no obligation to publically revise or update any forward-looking statements or adjust them for future events or developments. Nothing in this announcement should be construed as a profit forecast.

The information in this announcement does not constitute an offer to sell or an invitation to buy shares in the Company in any jurisdiction or an invitation or inducement to engage in any other investment activities. The release or publication of this announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements.

This announcement contains brands and products that are protected in accordance with applicable trademark and patent laws by virtue of their registration.

H1 2015 Management & Financial Review

Vitec's first half performance was in line with our expectations. Reported revenue increased by 2.0% to £155.9 million (H1 2014: £152.9 million) and operating profit* decreased to £16.4 million (H1 2014: £19.2 million). These results reflect the benefit from new product launches, recent acquisitions and the disposal of the IMT business in 2014, offset by investing for future sales growth, the anticipated foreign exchange headwind and the non-repeat of the 2014 Sochi Winter Olympics and FIFA World Cup.

The Broadcast Division performed satisfactorily in variable market conditions. The Division's results included strong sales of higher technology products including: wireless transmitters and receivers, SmallHD monitors, and the recently launched mobile power and LED lighting products. This was partially offset by lower broadcast service revenue due to the non-repeat of the Olympics and World Cup, and also lower product sales of large premium supports. The Group has continued to invest in higher technology products including the acquisition of the wireless products business, Paralinx, for a net cash consideration of $6.2 million (£4.0 million) in February 2015.

The Photographic Division delivered sales at a broadly similar level to the prior year. It continues to benefit from the release of new ranges of tripods and bags and the recently launched iPad based Manfrotto Digital Director. The full integration of the bags business into other Photographic activities, announced at the year-end, was completed in the first half of the year.

The gross margin* % was lower than the prior period at 41.2% (H1 2014: 43.0%) mainly reflecting a 160bps adverse impact from foreign exchange, and the non-repeat of the Olympics and World Cup. 

Operating expenses* were £1.3 million higher than in H1 2014 including the net effect of increased expenses from acquisitions offset partially by the disposal of IMT. Vitec has also invested in new product development and other resources to drive future product sales. The investment in new product development was higher than the prior year at 4.6% of Group product sales (FY 2014: 4.1%).

Net finance expenses totalled £1.8 million (H1 2014: £1.7 million), broadly in line with prior year.

As expected, there was a £1.5 million adverse year-on-year impact on operating profit* from foreign exchange in the first half, principally reflecting the unwinding of previous cash-flow hedges that are part of the Group's well-established hedging policy. Revenue increased by £2.6 million year-on-year from the benefit of translational exchange gains and therefore revenue at constant exchange rates was 0.3% higher while operating profit* was 6.9% lower. The unwinding of previous cash-flow hedges will also impact operating profit in the second half of the year. If exchange rates remain at current levels, Vitec will have a modest net FX benefit from 2016 onwards with a stronger US Dollar, partially offset by a weaker Euro and a weaker Japanese Yen.

Profit before tax* at £14.6 million was £2.9 million lower than the first half of last year (H1 2014: £17.5 million). Adjusted earnings per share* was 23.0 pence per share (H1 2014: 27.4 pence per share). Group profit before tax of £12.0 million (H1 2014: £14.9 million) was after £2.6 million of charges associated with acquired businesses (H1 2014: £1.7 million). There were no restructuring costs in the period (H1 2014: £0.9 million).

Free cash flow⁺ of £3.3 million (H1 2014: £3.8 million) is reported after £1.4 million of cash outflows on previously announced restructuring activities (H1 2014: £2.1 million). There was a total cash outflow of £12.1 million (H1 2014: £8.1 million) after investing £8.6 million in acquisitions, including £4.6 million of deferred consideration on Teradek following its strong performance in 2014 and £6.5 million of dividend payments.

Net debt at 30 June 2015 was £81.5 million (31 December 2014: £70.9 million) including a £1.5 million benefit from foreign exchange on foreign currency denominated borrowings. This was in line with our expectations and reflects the seasonality of Vitec's business. The Group's balance sheet remains strong with a net debt to EBITDA ratio of 1.5 times (30 June 2014: 1.3 times; 31 December 2014: 1.2 times).

The Board has declared an interim dividend of 9.5 pence per share, an increase of 2.2%, giving a dividend cover of 2.4 times on adjusted EPS*. The dividend will be paid on Friday 23 October 2015 to shareholders on the register at the close of business on Friday 25 September 2015.

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

⁺ Cash generated from operations in the financial period after net capital expenditure, net interest and tax paid.

Driving profitable growth in a changing market

Vitec's higher technology product ranges are growing strongly partially offset by lower sales of some more mature product ranges. In order to maximise the opportunity in these changing conditions, the Group is investing in its higher technology product businesses while it has decided to streamline certain activities with lower growth prospects. These planned actions are anticipated to incur one-off cash costs of up to £6.0 million spread over 2015 and 2016 with an approximate two year payback. Going forward, Management will continue to review the Group's cost base on a proactive basis.

Strategy

The Group continued to successfully execute its strategy of focusing on its core Broadcast and Photographic markets and investing and growing sales in new technologies and regions. Vitec has been streamlined and strengthened over the last four years and is well placed to drive sales growth as its markets recover. These core markets remain challenging but are showing some signs of stabilisation and are expected to grow in the medium-term.

The strategy is to grow the Group's core business by leveraging the premium brands and strong market positions supported by new product development. This includes launching new premium products and services particularly for the growing number of independent content creators. There was good progress with a number of recently launched higher technology products including: a new innovative range of camera monitors; batteries and LED lights for broadcasters; innovative camera supports and the iPad based Digital Assistant for photographers.

Vitec continues to have a broad geographic spread. In H1 2015, 45% of our revenues by destination came from North America, with the remainder split between Europe 31%, Asia-Pacific 18% and Rest of World 6%. Only 10% of our revenue was derived from the UK. We believe that the Asia-Pacific region is a particularly important medium-term growth market with good opportunities. We have continued to make investments in this region including the introduction of a new direct distribution model in China for the Group's photographic business.

The Group continues to identify and make value-adding acquisitions. The recent acquisitions have met or exceeded our pre-acquisition expectations and allowed the Group to introduce leading edge products to the market which attract significant customer interest. During the period, Vitec was further strengthened by acquiring Paralinx, a leading provider of high quality wireless radio transmission systems, for a net cash consideration of £4.0 million. This acquisition complements the Group's existing range of wireless broadcast equipment and has been fully integrated into the Teradek business.

Broadcast Division

The Broadcast Division designs, manufactures and distributes products for broadcasting, film and video production. It also provides premium services including equipment rental and technical solutions to TV production teams and film crews. It offers a complete one-stop solution for producers globally, enabling customers to deliver the most demanding projects.

Broadcast Division (excluding IMT. H1 2014: Sales £5.8m; Operating loss (£1.1m))	H1 2015	H1 2014	% Change	% Change at constant exchange rates
Revenue	£92.5m	£83.0m	+11.4%	+7.5%
Operating Profit*	£9.7m	£11.7m	-17.2%	-11.2%
Operating Margin*	10.5%	14.1%	-360 bps	-250 bps

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

The broadcast market has seen variability in demand in the first half of the year with a more positive US market offsetting more challenging conditions in EMEA. There has been continued growth in the independent content creator segment where Vitec provides an increasing range of higher technology products.

Revenue for H1 2015 was £92.5 million, an increase of 11.4% on prior year after excluding the IMT business that Vitec exited in 2014. After excluding IMT sales of £5.8 million, the £7.1 million benefit from acquisitions and £2.9 million increase as a result of foreign exchange, organic constant currency sales were down by 0.6%. Underlying sales increased after excluding the benefit of the Winter Olympics and FIFA World Cup in the prior year.

The operating profit* at £9.7 million was £2.0 million below last year reflecting the 2014 benefit of the Winter Olympics and FIFA World Cup, the benefit of acquisitions and new product launches, and a £0.6 million adverse impact from foreign exchange. We also invested in product development in the period while maintaining tight cost control. This included transferring LED lighting manufacturing into our existing facility in Shelton, US which was completed during the first half of this year.

Our broadcast mobile power and LED lighting businesses grew following the launch of new product ranges at the end of 2014. Our prompter business experienced revenue growth compared to the prior year, largely including the benefit from the acquisition of Autocue in October 2014. In the camera supports business, we experienced decreased sales due to a lower level of investment by studios in larger supports.

Teradek, the wireless products business, continues to grow strongly and benefitted from the integration of the recent acquisition, Paralinx. We continue to invest in engineering resources to support the future development of the business.

SmallHD, the camera monitor business acquired in December 2014, is performing in line with our expectations with the new products launched in the first half of the year being well received by the market. As anticipated, this business is currently delivering low margins as it invests in developing and launching new products.

The equipment rental and services business saw a decrease in revenue as a result of the non-repeat of the Olympics and FIFA World Cup, partially offset by an increase in lower margin rentals. We continue to focus on driving sales and securing attractive pricing for our premium services. It will benefit from supporting the Olympics in Rio de Janeiro in 2016.

Photographic Division

The Photographic Division provides premium branded photographic and video equipment and dedicated solutions to professional and non-professional image takers. The photographic and video equipment consists primarily of camera supports, tripods, camera bags, lighting supports, LED lights and lighting accessories. We also supply a range of tripods, bags, lighting and other photographic products to the consumer segment.

Photographic Division	H1 2015	H1 2014	% Change	% Change at constant exchange rates
Revenue	£63.4m	£64.1m	-1.1%	-0.6%
Operating Profit*	£6.7m	£8.6m	-22.1%	-13.2%
Operating Margin*	10.6%	13.4%	-280 bps	-150 bps

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

After several challenging years in the photographic market we can now see some signs of stabilisation including an increase in demand for compact system cameras. This is supported by data from the Camera & Imaging Products Association (CIPA) that indicates a flattening in the decrease in global shipments of interchangeable lens cameras after several years of sharp decline.

The Photographic Division's revenue decreased by 1.1% to £63.4 million, and was 0.6% lower than prior year at constant exchange rates. During the first half we achieved increased revenues through our owned distribution channels offset by lower sales through our third party distributors. We believe that we are outperforming the market supported by the launch of new products using the strong Manfrotto brand.

Operating profit* decreased by £1.9 million to £6.7 million including a £0.9 million adverse impact from currency. The decrease in operating profit* also reflects marketing investment in recently released new products and the exit from a third party distribution agreement.

The performance benefitted from recently launched products, including the BeFree and 190 tripod ranges and Manfrotto Off road range. We are also excited about the prospects for the Manfrotto Digital Director that was introduced this year at the NAB trade show in Las Vegas and received the "Videomaker Best of NAB 2015" award.

We have completed the full integration of the bags business into other Photographic activities and the Manfrotto branded bags continue to gain market share. In line with the Group strategy we have changed our distribution model in China and have moved to selling direct rather than through third parties.

Board Changes

At the Company's AGM on 12 May 2015, Nigel Moore retired as a Non-Executive Director of the Company having reached the end of his term of office and we thank him for his dedicated service and wise counsel. Mark Rollins then succeeded Nigel as Senior Independent Director and Christopher Humphrey became the Chairman of the Audit Committee.

Carolyn Fairbairn will be standing down from her position as a Non-Executive Director and Chairman of the Remuneration Committee on 31 October 2015 prior to taking up her new appointment as Director-General of the CBI. A further announcement will be made in due course on the transfer of Board responsibilities.

Outlook

Although we see some signs of stabilisation, our markets are still uncertain. The Board is focused on delivering an acceptable performance for FY 2015 in this challenging environment. Looking forward to 2016, we should benefit from further growth in new product sales and major sporting events. 

Going Concern

The Directors have made appropriate enquiries and consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

John McDonough CBE	Stephen Bird
Chairman	Group Chief Executive

Principal risks and uncertainties

The principal risks and uncertainties which may affect our performance are unchanged from those set out on pages 18 and 19 of the Annual Report & Accounts 2014. The Directors continue to regard these as the principal risks and uncertainties facing the Group. We have a well-established framework for reviewing and assessing these risks on a regular basis, and have put in place appropriate processes and procedures to mitigate against them. However, no system of control or mitigation can eliminate all risks. In summary, the principal risks facing the Group are around:

-	Demand for Vitec's products
-	New markets and channels of distribution
-	Acquisitions
-	Pricing pressure
-	Dependence on key suppliers
-	Dependence on key customers
-	People
-	Laws and regulations
-	Reputation of the Group
-	Exchange rates
-	Business Continuity Planning

Responsibility statement of the Directors in respect of the Half Year Results to 30 June 2015

We confirm that to the best of our knowledge:

•      the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The Half Year Results announcement report includes a fair review of the information required by:

(a)    DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

For and on behalf of the Board

Paul Hayes

Group Finance Director

5 August 2015

INDEPENDENT REVIEW REPORT TO THE VITEC GROUP PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the Half Year results announcement for the six months ended 30 June 2015 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Balance Sheet, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Half Year results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The Half Year results announcement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Year results announcement in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this Half Year results announcement has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the Half Year results announcement based on our review.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Year results announcement for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Robert Brent
for and on behalf of KPMG LLP
Chartered Accountants

15 Canada Square

London

E14 5G

5 August 2015

Condensed Consolidated Income Statement
For the half year ended 30 June 2015
		Half year to 30 June 2015	Half year to 30 June 2014	Year to 31 December 2014
	Notes	£m	£m	£m
Revenue	2	155.9	152.9	309.6
Cost of sales		(91.6)	(87.1)	(181.7)
Gross profit		64.3	65.8	127.9
Operating expenses		(50.5)	(49.2)	(100.3)
Operating profit		13.8	16.6	27.6
Comprising
Operating profit before restructuring costs and charges associated with acquired businesses		16.4	19.2	38.8
Restructuring costs	3	-	(0.9)	(2.7)
Charges associated with acquired businesses	3	(2.6)	(1.7)	(8.5)
		13.8	16.6	27.6
Net finance expense	4	(1.8)	(1.7)	(3.5)
Loss on disposal of business		-	-	(4.0)
Profit before tax		12.0	14.9	20.1
Comprising
Profit before tax, excluding restructuring costs, charges associated with acquired businesses and disposal of business		14.6	17.5	35.3
Restructuring costs	3	-	(0.9)	(2.7)
Charges associated with acquired businesses	3	(2.6)	(1.7)	(8.5)
Loss on disposal of business		-	-	(4.0)
		12.0	14.9	20.1
Taxation	7	(3.6)	(4.7)	(7.1)
Profit for the period attributable to owners of the parent		8.4	10.2	13.0
Earnings per share	5
Basic earnings per share		18.9p	23.1p	29.4p
Diluted earnings per share		18.8p	23.0p	29.3p
Average exchange rates
Euro		1.37	1.22	1.24
US$		1.53	1.67	1.65

Consolidated Statement of Comprehensive Income
For the half year ended 30 June 2015
	Half year to 30 June	Half year to 30 June	Year to 31 December
	2015	2014	2014
	£m	£m	£m
Profit for the period	8.4	10.2	13.0
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit obligation	0.9	1.4	1.1
Related tax	(0.2)	(0.3)	(0.2)
Items that are or may be reclassified to profit or loss:
Foreign exchange gain recycled to the Income Statement on disposal of business	-	-	(5.2)
Currency translation differences on foreign currency subsidiaries	(5.8)	(5.8)	4.5
Net investment hedges - net gain/(loss)	2.9	2.1	(2.0)
Cash flow hedges - reclassified to the Income Statement	0.6	(1.2)	(2.2)
Cash flow hedges - effective portion of changes in fair value	0.9	0.2	(2.0)
Related tax	(0.3)	0.3	1.3
Other comprehensive expense, net of tax	(1.0)	(3.3)	(4.7)
Total comprehensive income for the period attributable to owners of the parent	7.4	6.9	8.3

Condensed Consolidated Balance Sheet
As at 30 June 2015
		30 June	30 June	31 December
		2015	2014	2014
		£m	£m	£m
Assets
Non-current assets
Intangible assets		89.5	74.9	87.1
Property, plant and equipment		52.5	50.7	54.8
Trade and other receivables		0.6	0.4	0.5
Derivative financial instruments		1.0	0.1	-
Deferred tax assets		12.8	13.2	14.2
		156.4	139.3	156.6
Current assets
Inventories		59.0	59.5	55.0
Trade and other receivables		51.7	54.6	51.1
Derivative financial instruments		2.2	2.4	1.5
Current tax assets		0.5	0.3	1.0
Cash and cash equivalents		11.0	8.6	9.2
		124.4	125.4	117.8
Total assets		280.8	264.7	274.4
Liabilities
Current liabilities
Bank overdrafts		0.4	0.8	1.3
Interest-bearing loans and borrowings		0.2	0.1	0.1
Trade and other payables		43.7	46.4	46.3
Derivative financial instruments		2.4	0.1	2.5
Current tax liabilities		8.1	8.2	6.1
Provisions		2.6	2.5	9.2
		57.4	58.1	65.5
Non-current liabilities
Interest-bearing loans and borrowings		91.9	75.7	78.7
Derivative financial instruments		0.5	-	-
Other payables		0.2	1.1	-
Post-employment obligations		6.6	7.5	7.7
Provisions		2.2	1.2	2.1
Deferred tax liabilities		1.9	1.4	1.8
		103.3	86.9	90.3
Total liabilities		160.7	145.0	155.8
Net assets		120.1	119.7	118.6
Equity
Share capital		8.9	8.8	8.9
Share premium		13.5	12.8	13.4
Translation reserve		(9.9)	(8.0)	(7.0)
Capital redemption reserve		1.6	1.6	1.6
Cash flow hedging reserve		0.6	1.6	(0.6)
Retained earnings		105.4	102.9	102.3
Total equity		120.1	119.7	118.6
Balance Sheet exchange rates
Euro		1.41	1.25	1.29
US$		1.57	1.71	1.56

Consolidated Statement of Changes in Equity
For the half year ended 30 June 2015
	Share capital	Share premium	Translation reserve	Capital redemption reserve	Cash flow hedging reserve	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2015	8.9	13.4	(7.0)	1.6	(0.6)	102.3	118.6
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	8.4	8.4
Other comprehensive income/(expense) for the period	-	-	(2.9)	-	1.2	0.7	(1.0)
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(6.5)	(6.5)
New shares issued	-	0.1	-	-	-	-	0.1
Share-based payment charge, net of tax	-	-	-	-	-	0.5	0.5
Balance at 30 June 2015	8.9	13.5	(9.9)	1.6	0.6	105.4	120.1
	Share capital	Share premium	Translation reserve	Capital redemption reserve	Cash flow hedging reserve	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2014	8.8	12.1	(4.3)	1.6	2.3	99.7	120.2
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	10.2	10.2
Other comprehensive income/(expense) for the period	-	-	(3.7)	-	(0.7)	1.1	(3.3)
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(6.2)	(6.2)
Own shares purchased	-	-	-	-	-	(1.9)	(1.9)
New shares issued	-	0.7	-	-	-	-	0.7
Balance at 30 June 2014	8.8	12.8	(8.0)	1.6	1.6	102.9	119.7

Condensed Consolidated Statement of Cash Flows
For the half year ended 30 June 2015
		Half year to 30 June	Half year to 30 June	Year to 31 December
		2015	2014	2014
	Notes	£m	£m	£m
Cash flows from operating activities
Profit for the period		8.4	10.2	13.0
Adjustments for:
Taxation		3.6	4.7	7.1
Depreciation		6.8	6.8	14.2
Amortisation of intangible assets		3.6	2.5	5.3
Net gain on disposal of property, plant and equipment and software		(0.7)	(1.3)	(2.1)
Fair value losses on derivative financial instruments		0.3	-	0.2
Share-based payment charge		0.5	-	0.5
Fair value adjustment to contingent consideration since date of acquisition		-	-	4.2
Disposal of business		-	-	4.0
Net finance expense		1.8	1.7	3.5
Operating profit before changes in working capital and provisions		24.3	24.6	49.9
(Increase)/decrease in inventories		(5.8)	(5.9)	(2.1)
(Increase)/decrease in receivables		(1.9)	(7.3)	(2.7)
(Decrease)/increase in payables		(1.2)	(0.4)	(2.1)
(Decrease)/increase in provisions		(2.0)	(1.7)	(1.0)
Cash generated from operating activities		13.4	9.3	42.0
Interest paid		(1.9)	(1.7)	(3.3)
Tax (paid)/received		(0.2)	1.4	(3.5)
Net cash from operating activities		11.3	9.0	35.2
Cash flows from investing activities
Proceeds from sale of property, plant and equipment and software		1.9	2.6	5.2
Purchase of property, plant and equipment		(7.5)	(5.6)	(17.5)
Purchase of software and capitalisation of development costs		(2.4)	(2.2)	(4.7)
Acquisition of businesses, net of cash acquired	8	(8.6)	(4.0)	(13.3)
Disposal of business		-	-	(1.3)
Cash outflow on previous disposal (1)		(0.4)	-	-
Net cash used in investing activities		(17.0)	(9.2)	(31.6)
Cash flows from financing activities
Proceeds from the issue of shares		0.1	0.2	0.9
Own shares purchased		-	(1.9)	(1.5)
Proceeds from interest-bearing loans and borrowings		16.2	3.5	2.4
Dividends paid		(6.5)	(6.2)	(10.3)
Net cash used in financing activities		9.8	(4.4)	(8.5)
Increase/(decrease) in cash and cash equivalents	9	4.1	(4.6)	(4.9)
Cash and cash equivalents at 1 January		7.9	12.9	12.9
Effect of exchange rate fluctuations on cash held		(1.4)	(0.5)	(0.1)
Cash and cash equivalents at the end of period (2)	9	10.6	7.8	7.9
(1) £0.4 million was paid in the period primarily in respect of the onerous lease provision relating to the IMT business (sold in November 2014). Payments are expected to be completed by the end of 2016.
(2) Cash and cash equivalents include bank overdrafts in the balance sheet.

1 Accounting policies

Reporting entity

The Vitec Group plc (the Company) is a company domiciled in the United Kingdom.  These condensed consolidated interim financial statements as at and for the six months ended 30 June 2015 comprise the Company and its subsidiaries (together referred to as the Group).

Basis of preparation and statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of this interim financial information are consistent with the policies applied by the Group in the consolidated financial statements as at and for the year ended 31 December 2014 which were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. It does not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2014.

The comparative figures for the year ended 31 December 2014 do not constitute statutory accounts for the purpose of section 435 of the Companies Act 2006. The auditors have reported on the 2014 accounts, and these have been filed with the Registrar of Companies; their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2014.

These condensed consolidated interim financial statements were approved by the Board of Directors on 5 August 2015.

Changes in Accounting Policies

There are a number of new standards, amendments to standards and interpretations that are not yet effective for the half year ended 30 June 2015, and have not been adopted early in preparing these condensed consolidated interim financial statements. None of these are anticipated to have any material impact on these condensed consolidated interim financial statements.

2 Segment reporting
Reportable segments
For the half year ended 30 June 2015
			For the half year to 30 June
	Broadcast		Photographic		Corporate and unallocated		Consolidated
	2015	2014	2015	2014	2015	2014	2015	2014
	£m	£m	£m	£m	£m	£m	£m	£m
Revenue from external customers:
Sales	78.3	70.5	63.4	64.1	-	-	141.7	134.6
Services	14.2	18.3	-	-	-	-	14.2	18.3
Total revenue from external customers	92.5	88.8	63.4	64.1	-	-	155.9	152.9
Inter-segment revenue (1)	0.3	0.8	0.1	0.1	(0.4)	(0.9)	-	-
Total revenue	92.8	89.6	63.5	64.2	(0.4)	(0.9)	155.9	152.9
Segment result	9.7	10.6	6.7	8.6	-	-	16.4	19.2
Restructuring costs	-	(0.9)	-	-	-	-	-	(0.9)
Transaction costs relating to acquisitions	(0.1)	(0.2)	-	-	-	-	(0.1)	(0.2)
Amortisation of acquired intangible assets	(2.3)	(1.3)	(0.2)	(0.2)	-	-	(2.5)	(1.5)
Operating profit	7.3	8.2	6.5	8.4	-	-	13.8	16.6
Net finance expense							(1.8)	(1.7)
Taxation							(3.6)	(4.7)
Profit for the period							8.4	10.2
(1) Inter-segment pricing is determined on an arm's length basis.

Geographical segments
For the half year ended 30 June 2015
	Half year to 30 June	Half year to 30 June	Year to 31 December
	2015	2014	2014
	£m	£m	£m
Analysis of revenue from external customers, by location of customer
United Kingdom	16.0	13.7	27.6
The rest of Europe	32.9	37.5	69.7
North America	70.5	65.9	143.3
Asia Pacific	27.1	27.3	53.3
The rest of the World	9.4	8.5	15.7
Total revenue from external customers	155.9	152.9	309.6
The Group's operating segments are located in several geographical locations, and sell products and services on to external customers in all parts of the world.

3 Restructuring costs and charges associated with acquired businesses

Restructuring costs and charges associated with acquired businesses are excluded from key performance measures in order to more accurately show the underlying current business performance of the Group in a consistent manner. This also reflects how the business is managed and measured on a day-to-day basis. Restructuring costs include employment termination and other site rationalisation costs. Charges associated with acquired businesses include non-cash charges such as amortisation of acquired intangible assets, and cash charges such as transaction costs and fair value adjustments to contingent consideration since date of acquisition.

Restructuring costs and charges associated with acquired businesses comprise the following:
		Half year to 30 June	Half year to 30 June	Year to 31 December
		2015	2014	2014
		£m	£m	£m
Restructuring costs (1)		-	(0.9)	(2.7)
Fair value adjustment to contingent consideration since date of acquisition		-	-	(4.2)
Transaction costs relating to acquisitions		(0.1)	(0.2)	(0.9)
Amortisation of acquired intangible assets		(2.5)	(1.5)	(3.4)
Charges associated with acquired businesses		(2.6)	(1.7)	(8.5)
(1) One-off restructuring costs in 2014 related to the Group streamlining certain operations by downsizing selected activities mainly in the US and Israel.
4 Net Finance expense
		Half year to 30 June	Half year to 30 June	Year to 31 December
		2015	2014	2014
		£m	£m	£m
Finance income
Other interest receivable		-	-	0.3
Net currency translation gains		0.3	0.1	0.1
		0.3	0.1	0.4
Finance expense
Interest payable on interest-bearing loans and borrowings		(1.9)	(1.7)	(3.6)
Net interest expense on net defined benefit pension scheme liabilities		(0.2)	(0.1)	(0.3)
		(2.1)	(1.8)	(3.9)
Net finance expense		(1.8)	(1.7)	(3.5)

5  Earnings per ordinary share
Earnings per share ("EPS") is the amount of post-tax profit attributable to each share.
Basic EPS is calculated on the profit for the period divided by the weighted average number of ordinary shares in issue during the year.
Diluted EPS is calculated on the profit for the period divided by the weighted average number of ordinary shares in issue during the year, but adjusted for the effects of dilutive share options.
The Adjusted EPS measure is used by Management to assess the underlying performance of the ongoing businesses, and therefore excludes restructuring costs and charges associated with acquired businesses, both net of tax.
The calculation of basic, diluted and adjusted EPS is set out below:
					Half year to 30 June		Half year to 30 June
					2015		2014
Profit					£m		£m
Profit for the financial period					8.4		10.2
Add back:
Restructuring costs and charges associated with acquired businesses, net of tax					1.8		1.9
Earnings before restructuring costs and charges associated with acquired businesses					10.2		12.1

	Half year to 30 June		Half year to 30 June		Half year to 30 June
	2015	2014	2015	2014	2015	2014
	No	No	pence	pence	pence	pence
	Weighted average number of shares '000		Adjusted earnings per share		Earnings per share
Basic	44,331	44,129	23.0	27.4	18.9	23.1
Dilutive potential ordinary shares	141	196	(0.1)	(0.1)	(0.1)	(0.1)
Diluted	44,472	44,325	22.9	27.3	18.8	23.0

6  Interim dividend
After the balance sheet date, an interim dividend of 9.5 pence per share has been declared by the Directors, totalling £4.2 million (2014: 9.3 pence per share totalling £4.1 million). The dividend has not been provided for at half year and there are no tax consequences.
The dividend will be paid on Friday 23 October 2015 to shareholders on the register at the close of business on Friday 25 September 2015. The Company has a Dividend Reinvestment Plan that allows shareholders to reinvest dividends to purchase additional shares in the Company. For shareholders to apply the proceeds of this and future dividends to the plan, application forms must be received by the Company's Registrars by no later than Monday 28 September 2015. Existing participants in the Plan will automatically have the interim dividend reinvested.  Details on the Plan can be obtained from Capita Registrars on 0871 664 0381 or at www.capitaregistrars.com. Calls cost 10p per minute plus network extras, lines are open 8.30am to 5.30pm Monday-Friday.

7 Taxation
				Half year to 30 June	Half year to 30 June	Year to 31 December
				2015	2014	2014
				£m	£m	£m
Before restructuring costs, charges associated with acquired businesses and disposal of business
Current tax				3.2	4.9	7.0
Deferred tax				1.2	0.5	3.6
				4.4	5.4	10.6
Restructuring costs, charges associated with acquired businesses and disposal of business
Current tax (1)				(0.3)	(0.8)	(0.7)
Deferred tax (2)				(0.5)	0.1	(2.8)
				(0.8)	(0.7)	(3.5)
Summarised in the Income Statement as follows
Current tax				2.9	4.1	6.3
Deferred tax				0.7	0.6	0.8
				3.6	4.7	7.1
(1) Current tax credits of £0.3 million were recognised in the period which represents the tax impact of the amortisation of intangible assets.
(2) Deferred tax credits of £0.5 million have been recognised relating to the deferred tax impacts of the amortisation of intangible assets.

8  Acquisitions
On 27 February 2015, the Broadcast division of the Group acquired the assets of Paralinx, LLC ("Paralinx"), based in the US, through a business combination for a cash consideration of US$6.2 million (£4.0 million) after taking account of US$0.3 million (£0.2 million) of cash in the business at acquisition date. The fair value of the assets acquired excluding cash in the business at acquisition date was £1.9 million resulting in goodwill of £2.1 million. Paralinx is a leading provider of high quality wireless video transmission systems. The acquisition complements the Group's existing range of broadcast equipment and its products are marketed through the Group's global distribution network.
As at the date of this report the fair value of the assets and liabilities acquired are being measured. Based on provisional adjustments, an increase in goodwill of £1.0 million was recognised in the period in relation to acquisitions made in 2014.
The cash outflow during the half year ended 30 June 2015 of £8.6 million in respect of acquisitions relates to the following:
- In February 2015, the Broadcast division of the Group paid a net cash consideration of £4.0 million for the net assets of Paralinx.
- In April 2015, a contingent consideration of US$7.0 million (£4.6 million) in relation to Teradek (acquired in August 2013) was paid.

9  Analysis of net debt
The table below analyses the Group's components of net debt and their movements in the period:
		Half year to 30 June	Half year to 30 June	Year to 31 December
		2015	2014	2014
		£m	£m	£m
Increase/(decrease) in cash and cash equivalents		4.1	(4.6)	(4.9)
Proceeds from interest-bearing loans and borrowings		(16.2)	(3.5)	(2.4)
Increase in net debt resulting from cash flows		(12.1)	(8.1)	(7.3)
Effect of exchange rate fluctuations on cash held		(1.4)	(0.5)	(0.1)
Effect of exchange rate fluctuations on debt held		2.9	2.1	(2.0)
Effect of exchange rate fluctuations on net debt		1.5	1.6	(2.1)
Movements in net debt in the period		(10.6)	(6.5)	(9.4)
Net debt at 1 January		(70.9)	(61.5)	(61.5)
Net debt at the end of period		(81.5)	(68.0)	(70.9)
Cash and cash equivalents in the Balance Sheet		11.0	8.6	9.2
Bank overdrafts		(0.4)	(0.8)	(1.3)
Cash and cash equivalents in the Statement of Cash Flows		10.6	7.8	7.9
Interest-bearing loans and borrowings		(92.1)	(75.8)	(78.8)
Net debt at the end of period		(81.5)	(68.0)	(70.9)

 

END

 

 

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