Interim Results

VITEC GROUP PLC 3 September 1999 VITEC GROUP INTERIM RESULTS Vitec Group today announces results for the six months to 30 June 1999. Vitec Group operates, acquires and develops niche engineering and service businesses which have a high market share supplying high quality products to world-wide broadcast, photographic, retail and corporate markets. Six months ended 30 1999 1998 June Turnover £80.6m £80.0m Pre-tax profit £17.4m* £19.2m* Headline earnings per 24.7p 25.8p share Dividend per share 4.9p 4.3p * Before goodwill amortisation - Sales flat and profits slightly down when compared to record first half of 1998 - Interim dividend up 14% - Group highly cash generative, with operating cashflow of £25.7m - Tender offer for between 10% to 15% of Group's issued shares Commenting on the results Malcolm Baggott, Chief Executive, said: 'Despite having to report a slight fall from last year's record performance, Vitec has delivered yet another robust performance, characterised by strong cash generation and strong margins, in the face of the more difficult market conditions anticipated in many of our key markets. Whilst we continue to progress a number of investment and acquisition opportunities, the very nature of the Group's formidable cash generative capabilities has made our balance sheet increasingly inefficient. Accordingly, a major strategic initiative to return value to shareholders and reduce our cost of capital has been announced today by means of a tender offer for between 10% to 15% of the Group's issued shares.' Vitec Group plc Richard Green, Group Financial Director Malcolm Baggott, Chief Executive Tel: 01494 679 800 Financial Dynamics Charles Watson / Sarah Marsland Tel: 0171 831 3113 INTERIM REPORT 1999 CHAIRMAN'S STATEMENT Overview Vitec is announcing a slight fall in first half profits for 1999, compared with the record performance of the Group in the corresponding period last year. These profits are in line with our expectations in view of the softness in certain markets for broadcast products. Overall, Vitec has delivered yet another robust performance, characterised by strong cash generation and strong margins. Whilst we continue to progress a number of investment and acquisition opportunities, the very nature of the Group's formidable cash generative capabilities has made our balance sheet increasingly inefficient. Accordingly, we are announcing the intention to repurchase for cancellation of between 10% to 15% of the Company's shares. This represents excess capital in the business above that which is currently required and leaves the Group with ample scope to implement its acquisition plans. It is intended that all shareholders will have the opportunity to participate in the buy-back which is expected to take the form of a tender offer. Further details of the proposed tender offer will be announced and posted to shareholders as soon as possible. Results Group sales have been flat compared to 1998 whilst consolidated operating profits before goodwill amortisation have decreased by 9 per cent and headline earnings per share by 4.3%. Exchange rates, acquisitions and disposals have not had a material impact on results and comparatives. Turnover was £80.6 million (1998 : £80.0 million) and, with net margins at 22.0 per cent (1998 : 24.4 per cent), operating profits before goodwill amortisation are reported at £17.7 million (1998 : £19.5 million) Net interest payable was £0.3 million and the tax charge decreased by 3.4 percentage points to 31.0 per cent. Basic earnings per share are 24.2p compared to 25.7p for 1998. The Directors have declared an increased interim dividend of 4.9p (1998 : 4.3p), up by 14%. Cash flow was strong with net cash inflow from operating activities of £25.7 million (1998 : £21.0 million). After payment of tax, capital expenditure, interest and dividends, free cash flow was £11.7 million (1998 : £6.1 million). One small acquisition and the repurchase of shares cost £7.6 million leaving net cash balances at the end of June of £10.6 million. Photographic and Retail Display It was a good half year for the photographic and retail display businesses. Sales of £32.0 million (1998 : £29.7 million) generated a healthy profit of £9.5 million (1998 : £8.8 million). In April, Litec was acquired for £2.8 million; this business, based near Venice, manufactures specialist aluminium support structures for live events and exhibitions and will complement our other lighting suspension operations (IFF) in Italy. It contributed sales of £0.5 million and profits of £0.1 million in the period. Manfrotto photographic and video product sales showed steady growth over 1998; however, Gitzo, our French subsidiary, had disappointing results, principally due to poor sales to Japan. Bogen, our USA distribution business, continued its track record of solid growth. Alu, our retail display business, won several large projects in the USA and Europe and experienced strong sales of its retail fixturing products. Sales of this highly profitable activity have now grown to represent 27% of the division. Broadcast Products Divisional sales of £35.4 million were level with 1998 at £35.7 million, and operating profits decreased to £6.6 million (1998 : £8.6 million). The weak market conditions for broadcast products experienced in the second half of last year have continued, particularly for Vinten and Sachtler support products, and, to a lesser degree, Clear-Com. Broadcasters are suffering from cost pressures as they convert to the digital world and we have experienced a slowdown in projects which require our high-end camera supports. Anton/Bauer performed in line with 1998 and Drake performed well receiving good orders from both the broadcast and simulation markets. Broadcast Services Revenues for the broadcast services businesses increased by 2.4 per cent to £13.3 million (1998 : £12.9 million) but operating profit was down by 17.2 per cent at £1.7 million (1998 : £2.0 million). The 1998 figures included a substantial contribution from the Winter Olympics in Nagano. However, there were no major events of comparable magnitude in this period. The video rental market is facing considerable competitive pressures. As the leading company in the US market, Bexel is combating these pressures through cost efficiency improvements and a major investment programme in high definition and digital television equipment in order to be at the forefront of new technologies. The audio division performed satisfactorily, including a contribution from Systems Wireless, which was in line with expectations. Prospects Trading in the start of the second half is consistent with the market conditions which we have been experiencing over the past year. Our photographic and retail display businesses continue to enjoy healthy trading while certain markets for Broadcast products and services remain difficult. Recently, there have been encouraging indications that the economies of the Far East are recovering. Those businesses which have been adversely affected by weaker markets have taken appropriate action and continue to drive for improved profitability and cash flow. In line with our stated Group strategy, Vitec will continue to examine all means by which shareholder value can be increased, particularly given the financial strength and management capability throughout the Group. We remain confident in the Group's prospects. Alison Carnwath 3 September 1999 CONSOLIDATED PROFIT AND LOSS ACCOUNT Six months ended 30 June 1999 (unaudited) Audited Six months to Year June 1999 1998 1998 £'000 £'000 £'000 Turnover Continuing operations 80,080 78,379 159,881 Acquisitions 525 - - Discontinued operation - 1,576 2,403 ______ ______ ______ 80,605 79,955 162,284 ______ ______ ______ Operating profit Continuing operations 17,574 19,416 39,811 Acquisitions 125 - - Discontinued operation - 91 181 ______ ______ ______ Operating profit before goodwill 17,699 19,507 39,992 amortisation Goodwill amortisation (213) (30) (216) ______ ______ ______ Group operating profit 17,486 19,477 39,776 Loss on sale of discontinued - - (562) operation ______ ______ ______ Profit on ordinary activities 17,486 19,477 39,214 before interest Net interest payable (313) (343) (729) ______ ______ ______ Profit on ordinary activities 17,173 19,134 38,485 before tax Tax (5,390) (6,601) (10,846) ______ ______ ______ Profit on ordinary activities 11,783 12,533 27,639 after tax Minority interest - equity (13) (19) (46) ______ ______ ______ Profit 11,770 12,514 27,593 Dividends (2,349) (2,099) (7,861) ______ ______ ______ Retained profit 9,421 10,415 19,732 ______ ______ ______ Basic earnings per share 24.2p 25.7p 56.6p Diluted earnings per share 23.9p 25.4p 56.1p Headline earnings per share 24.7p 25.8p 58.2p CONSOLIDATED BALANCE SHEET As at 30 June 1999 (unaudited) Audited 30 June 31 December 1999 1998 1998 £'000 £'000 £'000 Fixed assets Intangible assets 9,377 7,254 6,931 Tangible assets 38,413 35,206 36,941 ______ ______ ______ 47,790 42,460 43,872 ______ ______ ______ Current assets Stocks 31,337 32,078 30,565 Debtors 32,800 34,033 33,225 Cash at bank and in hand 30,318 23,551 26,510 ______ ______ ______ 94,455 89,662 90,300 Creditors - due within one year (33,931) (38,755) (30,014) ------ ------ ______ Net current assets 60,524 50,907 60,286 ______ ______ ______ Total assets less current 108,314 93,367 104,158 liabilities Creditors - due after more than (16,496) (19,529) (16,175) one year Provisions for liabilities and (5,666) (6,015) (5,909) charges ______ ______ ______ Net assets 86,152 67,823 82,074 ______ ______ ______ Capital and reserves Share capital including share 11,383 11,480 11,506 premium Reserves 74,026 55,768 69,827 ______ ______ ______ Shareholders' funds - equity 85,409 67,248 81,333 Minority interest - equity 743 575 741 ______ ______ ______ 86,152 67,823 82,074 ______ ______ ______ STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES AND RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Audited Six months to Year June 1999 1998 1998 £'000 £'000 £'000 Profit for the period 11,770 12,514 27,593 Exchange rate movements on (576) (960) 3,115 foreign net investments ______ ______ ______ Total recognised gains and losses relating to the period 11,194 11,554 30,708 Dividends (2,349) (2,099) (7,861) Goodwill written back - - 686 Ordinary shares (4,769) 510 536 (repurchased)/issued Goodwill written off - (29) (48) ______ ______ ______ Net addition to shareholders' 4,076 9,936 24,021 funds Opening shareholders' funds 81,333 57,312 57,312 ______ ______ ______ Closing shareholders' funds 85,409 67,248 81,333 ______ ______ ______ CONSOLIDATED CASH FLOW STATEMENT Six months ended 30 June 1999 (unaudited) Audited Six months to Year June 1999 1998 1998 £'000 £'000 £'000 Operating profit 17,486 19,477 39,595 Goodwill amortisation 213 30 216 Depreciation 4,314 3,908 7,776 Working capital and other items 3,668 (2,390) (4,339) ______ ______ ______ Net cash inflow from operating 25,681 21,025 43,248 activities Returns on investments and (362) (349) (775) servicing of finance Tax paid (5,370) (7,362) (14,098) Net capital expenditure (6,152) (5,393) (10,546) Acquisitions and disposal (2,840) (9,541) (8,839) Equity dividends paid (2,100) (1,801) (6,830) ______ ______ ______ Net cash inflow/(outflow) before use of liquid resources and 8,857 (3,421) 2,160 financing Management of liquid resources Cash funds under management - 5,267 5,267 Financing (Purchase)/issue of ordinary (4,769) 510 536 shares Net repayment of loans (7) (836) (4,616) ______ ______ ______ Net cash outflow from financing (4,776) (326) (4,080) ______ ______ ______ Increase in cash in the period 4,081 1,520 3,347 ______ ______ ______ SEGMENTAL ANALYSIS OF TURNOVER AND OPERATING PROFIT Six months ended 30 June 1999 (unaudited) 1999 1998 1999 1998 £'000 £'000 £'000 £'000 Class of business Turnover Operating profit Photographic and retail 31,953 29,746 9,470 8,831 display Broadcast products 35,401 35,688 6,579 8,592 Broadcast services 13,251 12,945 1,650 1,993 ______ ______ ______ ______ Continuing operations 80,605 78,379 17,699 19,416 Discontinued operation - 1,576 - 91 Goodwill amortisation - - (213) (30) ______ ______ ______ ______ 80,605 79,955 17,486 19,477 ______ ______ ______ ______ Geographical turnover By destination By origin United Kingdom 3,794 3,525 11,361 10,395 The rest of Europe 20,768 17,940 32,638 30,318 The Americas 47,034 46,503 35,773 36,451 Asia and Australasia 7,714 8,518 833 1,215 Africa and Middle East 1,295 1,893 - ______ ______ ______ ______ 80,605 78,379 80,605 78,379 Discontinued operation - 1,576 - 1,576 ______ ______ ______ ______ 80,605 79,955 80,605 79,955 ______ ______ ______ ______ Notes 1. Basis of preparation The financial information set out above does not constitute statutory accounts for the Group. The interim financial statements have been prepared in accordance with accounting policies set out in the Group's audited accounts. The figures for the year ended 31 December 1998 are extracted from the statutory accounts on which the auditors issued an unqualified report and which have been filed with the Registrar of Companies. 2. Interim dividend The directors have declared an interim dividend of 4.9p per share, which will absorb £2,349,000 (1998: 4.3p absorbing £2,099,000). The dividend will be paid on 4 January 2000 to shareholders on the register at the close of business on 26 November 1999. 3. Copies of this statement will be sent to all shareholders on the share register as at 3 September 1999. Copies are available on written application to the Company Secretary.

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